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Seller Services Guarantee This Seller Services Guarantee is my commitment to offer the services stated below as part of your representation agreement.
Helpful Articles on Selling Your Home
For Sale by Owner Once you reel in the buyers, we can be of great assistance to you! As a full service Real Estate office we can offer many services to you. Finding a buyer for your property is the first step in getting your property sold. Working with a competent Broker with years of experience has great advantages to you. We can guide you through the vast disclosures, make sure that all the details of the transaction are outlined in your earnest money agreement, refer you to competent inspectors for pest and dry rot inspections, septic inspections, well flow and pot ability tests, siding inspections, whole house inspections, and any additional inspections required by your buyer. We can guide you through the escrow process, the lending process (is your buyer qualified to purchase your property - I am sure you would rather find this out sooner than later - are all contingencies attended to up front or is there loopholes in your contract for the buyer to walk away just before close of escrow with no recourse, are you getting the best deal possible by sitting at the table and negotiating the transaction with your buyer or would a third party trained in negotiating obtain you more money for your property?) We all want to save on Real Estate commissions; this is why we offer limited services to our "For Sale by Owner" clients. Whether you just want the correct forms to complete your transaction, a scribe to write the earnest money agreement and provide the correct forms for your particular transaction or a competent Associate Broker to negotiate your transaction with your buyer and complete all the processes of your transaction with you. You decide the level of service you would like. Simply A No Lose Situation With The agreement works for both the REALTORS and the sellers who are trying to sell their own home. Essentially, it states, "The owner reserves the right to sell the property for a pre agreed upon period of time of the REALTORS listing period, without incurring any fee to the Broker." So during that time of the listing, you still have the right to market the property on your own, and if you procure the buyer and they agree to your contract terms and buy the house, YOU PAY THE REALTOR NOTHING. If Mike Smith or his associates sell your home, then the agreed upon commission would be paid, but only if the offer is acceptable to you. It's a NO LOSE SITUATION. You get to have all of the services of a TOP PRODUCING REALTOR along with Mike's extraordinary marketing, and at the same time you may continue to market the home on your own, for sale by owner. Call Mike Smith for complete details. Mike Smith can provide service to you when either Buying or selling a home. With Mike Smith you will maximize your return on the sale of your property, while knowing that all the details of your sale are complete, and save a lot of money in the process, this is always my goal even when I sell my own property. Let us know how we can be of service to you, or if you would like to obtain additional exposure for your property we will promote your property on this site absolutely FREE! Items to consider for the For Sale By Owner
Are you available to show the property? One of the difficulties sellers have when trying to sell their own home is being available at all times. It poses problems in that it interrupts work, family, and social schedules. When a buyer wants to look at a home, it must be available for them at that time. Most buyers are on some kind of a schedule and they are not flexible enough to look at the home when it is convenient for the Seller. The concept is similar to having a store open for business. There may be times when there are no customers in the store and other times, when several customers are in the store at one time. Is safety a factor? It may be a sad state of affairs to have to concern yourself with safety in your own home but it is a reality. There have been situations where criminals have posed as potential buyers in order to "case" the home to find out what personal belongings would be worth stealing. By asking casual questions of the seller, they can find out when the seller will be gone and whether there is a security system. Even more sinister criminals actually assault sellers in the sanctity of their own home. While a professional real estate agent is not totally exempt from such tactics, they are better prepared to handle them. Meeting a prospect at the real estate office where others can see the prospect will discourage them because they can be identified. Another common requirement some real estate agents make of prospects is to make a copy of their driver's license and keep it on file. Who really saves the commission, the seller or the buyer? If a buyer has to learn the process of buying on their own, identify the neighborhoods, find the homes, write and negotiate the contract, secure the financing, arrange the inspections, and coordinate the closing, on their own rather than using an agent, don't you think the motivating factor will be to save the commission? It is going to be hard for both the seller and the buyer to save the commission. Most buyers will need help obtaining financing. It would be important to be able to advise buyers what different loan programs are available and where they can be found. A familiarity with the requirements and limitations of these different programs is necessary to help advise the buyers. Having a financial software program or a financial calculator can help to make a variety of analyses that can make decision making easy for buyers. The forms would show a person how much they qualify for, what the tax advantages and investment potential are, and provide a comparison of different loans. Attracting potential buyers. The real estate professional has a collective of promotional efforts to attract buyers. They include all of their different ads in the paper, all of the different for sale signs, every open house they hold, past customers and clients, company contacts, agent contacts, institutional advertising, referral organizations, Multiple Listing Service, and the Internet. Homeowners without the benefit of a real estate professional are limited by placing a single ad in the paper, a single for sale sign, and their occasional open house. Methods used to purchase a home. The majority of buyers, four out of five, purchase their home through a professional real estate agent. In fact, less than one out of ten actually purchase directly from an owner. This means that assuming your marketing exposure is as effective as the entire real estate community, your market will only be 10% of the total. Attracting potential buyers is the number one problem encountered by owners selling their own home. Headaches experienced by For Sale by Owners:
Information about creating a Contract with a Seller 1. Always make the offer and all counter-offers in writing. In most states, verbal contracts involving real estate are not enforceable. 2. Include the names of all of the owners on the contract and make sure that the offer is presented to all of the owners whenever possible. If one owner individually approves the contract, it does not mean that the other owner is obligated to accept it. 3. Put up sufficient earnest money to make the seller know you are sincere about the offer. Have the earnest money held in an escrow account rather than allowing the seller to hold it. 4. Include any personal property in the sales contract that is involved and ask for a bill of sale. 5. It is very unlikely that a seller will make a serious counter-offer in response to an extremely low initial offer. You will tend to find out what the seller will really accept by making a fair offer first. 6. Being pre-approved will give you a firm loan commitment from a lender subject to an appraisal on the subject property. This can be a valuable tool in negotiating because it will remove part of the uncertainty from the contract. Experience shows that owners might take less because they know their home is really sold. 7. If you haven't seen a copy of the property disclosure statement prior to writing a contract, include a provision that allows you to see and approve it. 8. Once you know you want to write an offer on a home, do it immediately. You will stand a better chance of getting a favorable agreement if you are not negotiating against other offers. 9. Decide on what you feel is most important for the seller and try and give it to them in trade for something else. As an example, if you feel that allowing possession after closing is something the seller needs, maybe you can trade that for a lower price. 10. Most people find it is difficult to negotiate on their own behalf. That is why having an agent negotiate for you can be very valuable. That agent can present the reasons for your offer and might be able to say things that the listing agent or homeowner haven't thought of or considered. 11. Unless you are buying a property "as is", you need to include a provision in the sales contract allowing for a professional inspection. It should state what things are to be inspected, when the inspections are to be made, and who is to make repairs. It is not uncommon that if the repairs exceed a specified amount that the buyer has the option to void the contract. 12. If you or your spouse is out of town, a specific power of attorney can allow one of you to sign for the other. This can make negotiating a contract much more expeditious. 13. These are just some basics to an offer to purchase real estate, consult with an attorney or a real estate professional for additional details. Different properties and different property types have different requirements. Real Estate Agreements are contracts, it is cheaper and allot less stressful to do it right in the beginning rather than try to fix it later. Should I Sell My Home Myself? It's a question thousands of homeowners ask themselves every year. If you're one of them, you have some difficult decisions awaiting you. Because selling your home can be a long and complex process. So it's important to think about all the potential implications - both positive and negative - before choosing to go it alone. Your first responsibility as in independent home seller is assigning your home an accurate value, meaning the highest price a ready, willing and able buyer will pay. As part of that decision, you need to consider comparable properties in your area, current market conditions, as well as the cost of financing and its availability. Remember that your home should be in line with comparable properties and market trends - you don't want your home to linger on the market or sell for a lower price than you might have otherwise received. "For Sale by Owner" homes typically attract bargain hunters who may expect you to lower your price since they, too, are looking to save money on REALTOR® commissions. Independent home sellers must also market their properties to the public, that means, putting up signage that is consistent with local ordinances, developing and paying for display and classified ads in your local newspapers, holding open houses, working to ensure your home gets good word-of-mouth exposure among your friends, neighbors and community organizations. As an independent home seller, you would be responsible for all showings of your home. With that in mind, always encourage prospects to make an appointment, and discourage drop-ins. Work to screen the "buyers" from the "lookers" - curiosity-seekers are common at "For Sale by Owner" homes. You should also pre-qualify potential buyers to ensure they can afford to buy your home. When the time comes to negotiate, you'll need to be prepared and informed, try to resolve any doubts your buyers might have, work to keep their interest high and make a final agreement as quickly and efficiently as possible. Once an offer is made, agree on the price and terms, respond to objections and try to be responsive and flexible to legitimate concerns. Every independent home seller should have an attorney or another qualified individual to preside over all agreements. That individual will draw up the contract and manage the sale proceedings and closing. He or she might also help you set the closing date and time. You should be sure to include a list of items you want written into the contract, including any personal property that is to remain with the home (like the refrigerator, microwave oven, dishwasher, etc.), or items excluded in the sale. Also remember that as the seller, you are obligated by law to disclose any material defects in your property to the purchaser. Selling your own home takes a lot of hard work and know how. Making even a small mistake can spell serious trouble. By working with Associate Broker, Mike Smith, you gain the services of an experienced professional with advanced training in negotiations and sales. Not only does that free you from the time-consuming tasks involved with selling your home, it gives you the added expertise to help maximize the profit from your home. Associate Broker, Mike Smith, can help you sell your home faster and for the best price. Making sure you have the correct information to price your home accurately by conducting a Comprehensive Market Analysis. This research will help support the price with comparable facts and statistics. In addition Mike will advertise your home in the most visible outlets in our area, Access out-of-town buyers through the nationwide network of RE/MAX Integrity, suggest easy ways to make your home more attractive to potential buyers, Explore alternative financing methods that can help relieve a potential buyer's financing concerns, scan the Multiple Listing Service to locate active buyers through a special network of resources, acting as a third-party negotiator between you and the buyer, screen prospects so you don't have to expose your family to any stranger who knocks at your door. Think of the services of Mike Smith as an investment, one that immediately repays itself in the quick, efficient and successful sale of your home. Your property did not sell during the listing period! It is disappointing to put your home up for sale, expecting it to sell immediately. Then, after being on the market, it doesn't sell and you lose the home you want to purchase because you need the cash out of your old home and don't want to make two house payments. The longer the home stays on the market, the more likely agents and prospects will think something is wrong with it. The home will be shown less, making it more difficult to find the right buyer for the home. The reasons properties fail to sell include one or more of the following: price, location, condition, terms, and marketing efforts. To successfully sell, a correction in these areas will have to be made. You rarely get a second chance at making a first impression. To maximize the new marketing efforts, all factors must be considered. Price is the single most important factor in the successful sale. It can overcome a poor location, bad condition, or no terms. A price adjustment must exceed an invisible threshold to induce increased activities. For instance, if a home is priced at $107,500, a reduction will probably not encourage additional activity unless it brings the price below $100,000. If the location of the property is not favorable for a sale, an adjustment in one of the other factors must be made to compensate for it. The areas to be considered are price, condition, and terms. Most buyers, regardless of the price range they're in; spend everything they have for a home. They have to live in it the way they buy it until they can save enough to redo it. It is better to replace carpet and floor covering with something neutral than to give the buyer an allowance to pick their own. It is better to replace wallpaper and repaint with neutral tones than to give the buyer an allowance to pick their own. It is better to replace appliances that are needed, than to make an allowance. Buyers will always deduct more in their offer than it will cost you to make the repairs or improvements. Terms describe financing alternatives that include seller carried first and second lien notes, buy-downs for the purchaser to lower the costs of the payments in the initial periods, seller paid discount points, and the willingness to sell the home FHA or VA. If two or more homes of the same size are
on the market in the same area, for the same price, the one in the best
condition will probably sell first. One successful tactic is to position your home like it is new on the market. This will create excitement among the buying prospects and most importantly, the agents in the area. Your home must be exposed to the largest buying segments. Your home must appeal to different buyer segments, such as first time homebuyers, move up buyers, relocation buyers; move down buyers, and investors. Every home needs an exciting feature. The price of the home will determine what the feature needs to be. It could be things such as new appliances in the kitchen, a whirlpool spa, or a home entertainment center. If yours doesn't have an exciting feature, maybe that is the reason it hasn't sold. Pricing your Home to Sell! The seller sets the price of the home, but ultimately the buyer determines the value. My job as your Real Estate Broker is to supply you with facts about what has sold recently and what is for sale now to help you make a decision. The common pricing objections frequently heard from sellers, really have no relationship to value. Some of the most common ones are: "Another Agent said it was worth more." "Our home is nicer than those houses.", "People always offer less than asking price."," We can always come down on our price but we can't go up.", "We have to get that much out of our home.", "My neighbor was able to get his price.", "Let's try it at our price for a month or so.", "The buyers can always make an offer.", or "We paid more than that for our home." Obstacles to proper pricing include incompetent Agents who will accept a listing at any price the seller puts on it. Sometimes neighbors will lead the seller to believe they got more for their home than they did. Inflationary times can cause prices to go up rapidly because of economic factors. While recessionary times will cause prices to go down because of adverse economic conditions. You must know the current market conditions in order to price your home correctly; a competent Broker that tells you the way it actually is can provide that knowledge. Fear of making a mistake in pricing, which
could lead to losing a significant portion of their equity. Loss of
perspective due to the seller being emotionally involved and not necessarily
thinking objectively. A property is worth a value independent of the
motivations or needs of the owner. Overpricing can cause a myriad of problems
in selling a home in a pre-determined period of time. It can reduce sales
associates activity as well as reduce advertising response from both agents and
prospective buyers. Other missed opportunities of overpricing include losing
interested buyers, attracting the wrong prospects, eliminating offers, and even
helps sell the competing properties by making them look like a bargain. Houses sell quickly and usually for the most money when they are priced properly in the beginning. Things that don't affect value include your original cost, or the cost to re-build the home today. Your investment in the improvements does not indicate a market value either; they may improve the marketability but not necessarily the price. Personal attachment and sentiment make a house a home but they don't determine value. As difficult as it may be, personal feelings must be separated to arrive at a fair market value. REALTORS have buyers waiting who have seen what is currently on the market and are waiting for something new to be listed. Most activity will take place in the first 3-4 weeks of a listing. The excitement of a new property on the market will create urgency for both buyers and agents to see it as quickly as possible. In many instances the home will receive its highest and best offers during this time. After that initial period, the only people to look at it will be new buyers in the marketplace. Careful consideration must be given to positioning the home properly in the first few weeks of the marketing. The purest definition of value is what a willing buyer will pay from a willing seller without any undue forces involved. There are different values for specific purposes such as insurance, taxes, or to determine a sales price. An appraisal will use two basic approaches to value. The cost approach considers what it will cost to rebuild the home today and depreciate it for its age and condition. However, the more popular approach is market value. This looks at homes similar to the subject that has sold recently. Knowing that past performance is important to establishing value, supply and demand of the current homes on the market also play a factor. Many homeowners find it helpful to look at the similar homes currently for sale before putting a price on their home. Costly Mistakes You Can Make When Selling Your Home Mistake #1 - Pricing Incorrectly Mistake #2 - Failing to "Show case" the
Home If you were selling a car, you would wash it, or maybe even detail it to get the highest price. Houses are no different. Mistake #3 - Using the "Hard Sell" During
Showings Resist the temptation to talk the entire time a buyer is there, and let them discover things on their own. Try a tasteful sign to point out some hidden amenity that they might miss. Mistake #4 - Mistaking Lookers For
Buyers A qualified buyer is one who is ready, willing, and able to buy your house. We find that most people who go looking at For Sale By Owners are just starting to think about moving. They may be good buyers, but they're just 6-9 months away from being ready. They don't want to bother an agent yet, so they call the "By Owner" ads to get a feel for what's available. They may have a house to sell first, or may need to save some more, or may have credit that needs fixing. When everything is in place, that's when they go out looking with a Realtor. An agent will ask a buyer how much he can really spend for a house, how much he has to put down, how good his credit is, how much he can pay each month, how much he will realize (realistically!) when he sells his present home - and about a dozen other questions like that. But unless your Realtor finds all the facts first, you must ask all these questions before the buyer crosses your threshold. Otherwise, you may have a parade of Sunday afternoon shoppers with a dream of owning a home some day. Mistake #5 - Not Knowing Your Rights &
Obligations Mistake #6 - Signing a Listing Contract with No
Way Out Mistake #7 - Limiting the Marketing and
Exposure of the Property Advertising studies show that less than 3% of people purchased their home because they called on an ad. And if a machine answers, most callers just hang up without leaving a message. The right Realtor will employ a broad spectrum of marketing activities, emphasizing the ones he believes will work best for you. There are dozens of more effective ways to find buyers than just open houses and advertising. By the way, he or a trained member of his staff will be there every time the phone rings. Did you know that most calls come in during business hours when sellers are away at work, and most home showings are between 9:00 and 5:00 Monday through Friday? Mistake #8 - Believing that a Re-fi Appraisal
is the Market Value of Your Home I can't tell you how many ridiculous re-fi appraisals I've seen. Don't make the mistake of thinking that the value you were told 6 months ago when you refinanced is what a real buyer would pay. Ask your Realtor for ALL the "Solds" in your area, take a drive by the homes that have sold, then decide. Mistake #9 - Choosing the Wrong Realtor, or
Choosing Him/Her for the Wrong Reasons It's interesting that in the real estate business, someone with many successfully closed transactions usually costs the same as someone who is inexperienced. Bringing that experience to bear on your transaction could mean a higher price at the negotiating table, selling in less time, and with the minimum amount of hassles. The world is populated with Realtors who are wrong for you. For example, the housewife who sells an occasional house because she needs a little pocket change, or the insurance salesman who believes he can handle two careers. Or perhaps your cousin George, who really needs your business. The sale of your home could well be the most important financial transaction you have ever been involved with. The person you select can make it a satisfying and profitable activity, or a terrible experience. It's your home, and your money. The choice of your Realtor is up to you. Make that selection carefully. Common Reasons Why Sale Agreements Fall Apart & What You Can Do To Prevent It! There are probably thousands of reasons why real estate transactions fail, and describing them all would take a huge volume. This article was written so you can understand why things go wrong, and be able to successfully escape the traps. Why are real estate transactions so complicated? Why is there no consistency from one experience to the next? Why are so many people involved? These are good questions that address the root of many problems. The main reason is that each transaction has a different group of people involved. Imagine you're the coach of a baseball team, and for each game, a whole new set of players shows up on the field! That's a good picture of how the real estate industry works. Behind it is the Real Estate Settlement Procedures Act (RESPA), a well-meaning federal statute enacted in 1975. The intention was to separate all aspects of a real estate transaction (agency, lending, title, etc.) so that the consumer would have more choice, and there would be more competition in the marketplace. A good idea, but the result is that each player is now disconnected from the others. Each player involved is a separate company, with its own way of doing business. The agent is like the symphony conductor trying to make music by bringing all these different instruments together. But there are no standards. No one who can say, "This is how we do business here" and enforce that method across all the participants in the transaction. Customers today are demanding more convenience, more of a "one-stop-shopping" for the various services needed to complete a real estate transaction. But for now, our hands are tied by RESPA. Solution: The government is currently examining outdated RESPA laws. In the meantime, if your agent has other vendors that he knows, trusts, and works well with, you should seriously consider using those people. Many times I've seen people pick an escrow company because they can save $50, and end up regretting that decision. That amount is peanuts compared to the extra expense and sheer aggravation of a delayed closing due to poor service. The most important decision you will make is which real estate agent will represent you. As I mentioned earlier, the agent is like the musical conductor, making sure all the people involved play their parts. The real estate agent, not the company he works for, is the person with whom you have to rely on to provide you the information regarding how all the other parts really work together to have a successful real estate transaction. These are the major players that have to be coordinated by your agent: * Seller's Agent Since it's not very hard to get a real estate license, we frequently see people "jump in" when the market is good. They think all they have to do is put a buyer and seller together and then the escrow company handles the rest! That's like saying all the coach has to do is get the baseball players onto the field and everything happens automatically from then on. That's where the real work begins! There have been more "professionals" such as mortgage brokers or insurance agents telling consumers that they also have a real estate license so they can "help" you buy or sell a house. Many agents "try" the business for a while bungle a few transactions for people they know, and then quit. This gives all agents a bad reputation! You should think seriously before hiring a new agent or someone who only works at it part time, or whose interests are divided. How can they possibly keep up with all the changes in the law? How can they stay on top of the market? Will they spend the money to get the latest tools and technology working in your favor? The bottom line is this... if they haven't been in the business long, and then they haven't done enough transactions to represent you properly. Let the new guys make their mistakes on someone else... your transaction is too important. Solution: Hire an Associate Broker, This Professional designation is awarded those agents who have at least 3 years experience, have completed the stringent educational requirements and passed the State Examination needed to obtain this title. Your past transactions are no guide to your next one. Buyer(s) and/or Seller(s) should take the time to educate themselves regarding the entire process. Usually, one or both of the principals in the transaction don't understand certain parts of the process. Then, when the agent says that something should be done a certain way, the principal (buyer/seller) says, "that's not the way I heard it should be done" or "when I sold my house in Virginia 20 years ago, I didn't have to let the buyer inspect the property this way" or "I shouldn't have to do this or pay for this". The laws and real estate customary practices ARE CHANGING CONSTANTLY. In the last 10 to 12 years, real estate practices and laws have changed from "let the buyer beware" to "buyer consumer protection". More and more, the sellers have to disclose more and become responsible for more. When you hire a real estate agent, you must learn to trust that the agent knows what he is doing and that the agent will act in your best interests. If you don't understand the reasons why things are being done, you must either have the agent explain the process to you or take the time to learn about it yourself. Ideally, this should be done before you "dig in your heels" and say something like, "I'm not doing this or that". Solution: Read up on how to buy or sell real estate in this current market by getting a copy of our "Preferred Buyer Handbook" or "Home Seller's Handbook." These contain the latest information, strategies, and "street-smart" advice. No "one size fits all" useless information about basements and other Eastern stuff in these handbooks. Just straight talk about how to make the easiest purchase or sale ever. If you don't have time to do the research, listen carefully to your experienced Associate Broker and by all means don't hesitate to ask questions. Buyer has liens against him (known or unknown). These are "skeletons in the closet" that come out when someone decides to buy a house. Did you know that when a father doesn't pay his child support, a "Revenue and Recovery" lien is recorded against him? Then when that person goes to buy real estate, out of the closet it jumps! The buyer may not have known about it, or may not have known it would affect his purchase. Other liens include IRS liens, judgments for non-payment of rent, and many more! Solution: Every buyer should have a search run on him for recorded liens. Filling out a "Statement of Identity" or SI does this. Most agents will ask you to do this at the last minute, almost as an afterthought, and then the transaction blows up in everyone's faces. Why not do it up front and avoid a lot of hassle and pain? If you're serious about buying a home, ask your agent to run your SI as soon as you start looking. If you're a seller, get that SI from your potential buyer as early as possible in the transaction. Buyer cannot get financing. There are a multitude of sins that can show
themselves when the buyer asks a bank for HUNDREDS OF THOUSANDS of dollars.
People take this lightly sometimes, but let me ask you a question... what kind
of documentation would YOU require of someone before you gave them that kind of
money? Here are some of the things that can go wrong:
Solution: There's no reason that these problems have to surface while in escrow. A buyer should be "pre-approved" for his loan BEFORE shopping for a home. This means that all that's left to do is an appraisal on the house before the lender will loan the money. If you are a seller, you should insist on "pre-approval" from a buyer before you take your home off the market for any length of time. Keep in mind that "prequalified" is not the same as "pre-approval". "Prequalified" means that the buyer spent a few minutes on the phone with a lender who asked a few questions. Based on the answers, the lender pronounces the buyer "prequalified" and issues a certificate. Smart sellers are now aware that such certificates are WORTHLESS because none of the information has been verified. There's just no reason for a buyer NOT to get pre-approved. In the best case, this can be done in ONE HOUR! Show a W-2, a current pay stub, a bank account where the down payment is, and run a credit report. Done! Some pre-approvals take longer, but in any case it's better to wait a bit before finding a home you love than to lose it because of financing problems in escrow. The buyer screws up financing after being approved. Things can change during the escrow period, usually not for the better, which is why we always shoot for the shortest escrow possible. Some things can't be prevented, for example, the buyer loses his job. No amount of professionalism on my part can do anything about that... the transaction is more than likely dead. On the other hand, sometimes mistakes are made out of ignorance, for example, the buyer figures he has his home loan approved, so he runs out and buys a new car! The lender never told him that would screw up his "debt to income" ratio and now he can't get the loan. My point here is that things can go wrong even
with "pre-approved" buyers. Education can help avoid mistakes made out of
ignorance, but sometimes things happen that are outside of anyone's control.
Most contracts have a seller warranty/maintenance clause. In some areas, there are some things that the seller is obligated to fix, for example, leaking roofs or broken windows. But the buyer should realize that there is no perfect house, not even a new house, or a house you build yourself. I've had new homes, and I guarantee you this is true. Even people who buy million dollar homes go in and change things. How much the buyer can demand in repairs is going to be different for each transaction. It depends on whether you're in a seller's or a buyer's market, and the motivation and financial situation of each buyer and seller. Buyers and sellers should keep an eye on the big picture and try not to focus on the details. It's ridiculous to lose a quarter million dollar investment over an oven knob, but it happens. Sometimes a small thing is "the straw that broke the camel's back" and infuriates the seller to the point that logic flies out the window and emotions take over. Why risk it? Solution: The buyer needs to be sure he understands what the contract says, what's part of the seller warranty clause, and what is not. At the same time, the seller should be aware that at the very least he would have to fix the items included in the Earnest Money Agreement. Mentally, a seller should set aside several thousand dollars to repair problems or defects discovered during escrow. A much better way to control these expenses is for the seller to have all the property inspections completed BEFORE the property is placed on the market. That takes the guesswork out of it. Buyers listen to others and not their agent. Buyers will always have some "well meaning" friend, relative or associate who will create doubt in the buyers' minds. Sometimes they will "buckle" under the pressure and try to back out of a transaction. Such "advice" is usually wrong, and does not take into account the current realities of the marketplace. Another source of misleading information is the newspaper. Real estate articles in the newspaper are used as "filler" to make up for lack of advertising. I've seen articles geared to a buyer's market appear when we're in the middle of a seller's market! I think somebody at the paper reaches into a drawer marked "real estate articles" and just prints any old one. Believing what you read in the paper can be hazardous to your financial health! The seller has no equity. A transaction can fail if the seller cannot financially hold up their end of the bargain. If equity is tight, and the agent didn't calculate the seller's expenses accurately, the seller can be short on closing costs or money for necessary repairs. Solution: This situation could have been avoided if the seller had done his homework before putting the house on the market, such as termite, physical, hazards inspections, and a title search. Oddly enough, most agents don't recommend these inspections ahead of time. They're thrilled to get the listing, so why do anything to jeopardize it? So they do nothing and just hope everything will work out later. The seller's job transfer didn't go through. This is one of those "out of the blue" events that you can't guard against. Most people have heard of transactions failing because the BUYER lost his job, but the same kinds of tragedies can happen to the SELLER. Other examples are death, bankruptcies or other lawsuits ("Liz pendens") tying up the property so that it cannot be sold. The other agent does not do their job. The other real estate agent in the transaction might be a part-time agent, out-of-town agent or a "full-time" agent who does very little business and they ACT LIKE THEY KNOW WHAT THEY ARE DOING, WHEN THEY DON'T KNOW! Generally, I'm forced to "stroke these agents egos" so that they don't mess up the transaction and protect my client's rights at the same time. It is a difficult balance to maintain because there are usually tough points in the transaction where I have to try to figure out the best way to keep the transaction together accounting for the fact that the agent is either ignorant or incompetent. Usually, this problem is compounded by the fact that everyone is becoming emotionally frustrated. The best advice I can give when this occurs is to remember the primary objective is to move on with your life and get this transaction closed. Therefore, keep calm and just understand that we can't change an incompetent agent. Let's just be flexible and deal with the problems as they come up. If the other agent in the transaction is either lazy or disorganized, this means that I will have to pick up the slack. I will have to force the process to become as organized as possible without letting the other agent know that I'm compensating for his or her lack of professionalism or laziness. No one likes to be told that he is disorganized or lazy. I may have to "dance around" these fragile egos so that the transaction can keep moving forward with as few problems as possible. But don't worry; I've done it many times before. Seller discovers title problems. There are so many things that "pop up" during the preliminary title search that create a "cloud" on the title. Many times things show up such as mechanics liens, unrecorded easements, faulty trust documents, and judgments that can prevent the property from being transferred. Even if you didn't have a problem when you purchased the property, problems surface because of new technology that was not available in previous years. The only way to solve these issues is to open up escrow when the home is put on the market and obtain a preliminary title report. The seller must also fill out a "Statement of Information" (SI) to check for recorded judgments against them. Then, do all the things necessary to be able to clear these things up before a buyer makes an offer. If a seller does obtain a preliminary title report and the buyer does not use the title company that the seller used to obtain the preliminary title report, the seller may be required to pay a $300 to $350 cancellation fee. Most of the time the buyers will accommodate the seller by using the same title company. Therefore, it makes sense to start doing all the preliminary title work as soon as the house is put on the market. Buyer is unable to get fire insurance. Thanks to the earthquakes and fires in California, insurance companies are taking steps to limit their exposure in any one area. This means that when they've sold a certain amount of fire policies in any geographical area, they stop writing them. There's nothing wrong or risky about the area, just that they don't want to have too many policies in one place. Years ago, we would get the fire insurance a couple of days before closing escrow, no big deal. Nowadays the buyer should start looking for insurance as soon as he opens escrow. It may take a bit of shopping to find an acceptable price for fire insurance. Termite report is unacceptable to buyer or seller. A termite report is really a "Wood Destroying Pests & Organisms Report" and includes wood damage by termites and a fungus called dry rot. In order for the buyer to get a home loan, the house must be free of termites, other pests and dry rot. Here's what usually happens - the seller has found a buyer and has negotiated an acceptable bottom line figure. Then he opens escrow and must do a termite inspection. The bid comes in and he has a fit! It's way more than expected, and his bottom line is out the window! Then the seller decides to get a second opinion, because that bid can't possibly be right. The second termite inspector finds things the first one missed, and the bid is even higher! However, the buyer will want to see BOTH reports. The seller is worse off than before, and if there's no money left to do the repairs, the whole transaction could unravel. Solution: The seller should do a termite inspection as soon as he decides to sell, and BEFORE an offer comes in. This avoids unwanted surprises after negotiating a price, because all the expenses are known. In fact, he should have the work done that's recommended in the inspection. If it's done before the house sells, the seller can possibly save some money. For example, I've seen the case where the house had a wood deck down the whole side of the house that was completely rotten. The seller was able to replace it with gravel and stepping-stones for minimal cost, before putting the house on the market. Had a buyer seen the wood deck, he would have bought the house expecting the wood deck. When the termite report came in, the seller would have had to replace the entire deck with new wood at considerable expense. Another benefit of having the work done before selling is that the place will look better. When I'm working with buyers, especially first time buyers, I have to explain to them that the rotten wood they see will be replaced before they move in. But how many other agents didn't explain this? How many possible buyers didn't make an offer on the house because they thought, "I don't want to buy a house with rotten wood and do all that work"? If you're a seller, more than likely you're going to have to do the termite repairs anyway, so why not do it sooner rather than later? You'll avoid surprises, and probably see more dollars in your pocket. The home inspection company is too picky. Or the seller refuses to make reasonable repairs. After escrow has been opened, the buyer may hire someone to do a "physical inspection" to check out the house. Think about that for a minute... it's like negotiating a price for a used car, and THEN having it checked out by an auto mechanic. What do you think will happen after it's checked out? You're right - it's back to the negotiating table, because there are things wrong with the car that you didn't know when you decided on a price. That's doing it backwards you say? But this is normal in real estate transactions. Anyway, the buyer hires someone to do a physical inspection. I've seen the wrong inspector destroy a transaction by scaring the buyer out of their wits. A first time buyer is making a big step and is already nervous, we don't need an overzealous inspector terrifying him. Of course the inspector must call it as he sees it, and I would never advocate anything less than full disclosure of all facts. Never should anything be hidden from the buyer. But no house is perfect, and the building codes 10 years ago were different than today's. When you buy a house, it must be in good condition FOR IT'S AGE. The smoke detectors, GFIs, spaces between railings, etc., must be to code AT THE TIME THE HOUSE WAS BUILT. It is unreasonable to expect a 10-year-old home to be like a new one. If serious problems are discovered, these are definitely a cause for concern. But I've seen transactions fail over very minor repairs just because things were communicated poorly. The home seller must also be prepared mentally for some repairs, and to not unreasonably refuse to fix anything. I know that the seller thinks nothing is wrong with his "castle", but most people don't use everything in their homes. Some people never use the dishwasher, and then we discover that all the rubber is rotten from lack of use. Or many people with two ovens only use one of them, and then find out the other doesn't work. This can happen to you, so be prepared to do some repairs! The best way for a seller not to be surprised by these repairs is to do the inspection himself, before selling the house. That's being proactive rather than reactive. When the report is done up front, the seller can benefit in the following ways: A. Price the property based on "actual knowledge" of the true condition of the house. You are less likely to be surprised by the fact that the furnace is cracked, the fireplace box needs to be re-built, or an electrical box has been improperly wired. B. Get repairs done more economically because you have the option to downgrade the materials used from the most expensive grade to an acceptable standard grade of materials. Also, you will have time to get competitive bids on the work, and not be "under the gun" and have to hire the contractors who can get the work done quickly even though they cost more. C. Obtain cost estimates of the major items indicated in the report that the seller will not be able to or is unwilling to repair. Buyers usually have no idea what things cost, and will inflate the expenses in their minds. Having a written estimate of the work goes a long way in bringing the numbers back down to earth. D. Strengthen your negotiating position by providing the reports to the buyer before the buyer writes the offer. Therefore, a buyer is less likely to ask you to repair any items if you indicate that you are pricing the property based on estimated repairs that are indicated in the inspection reports. E. From a legal standpoint, protect yourself when selling your home because you are disclosing everything that you know about the property. With your own real estate property disclosure plus the other inspection reports, you are less likely to be found liable for hiding facts which could material effect the desirability or value of the property from a buyer's standpoint. So why would a seller NOT do the inspection before selling? Easy - because they don't want to spend the money. But for a few hundred dollars, you can save thousands and protect yourself and family at the same time. The appraisal takes too long or comes in too low. This happens more often in a seller's market where prices are going up. If you think about it, each house sells for more than the one before it... and yet the ones before it are the houses that appraisers use to determine value. They are looking at what happened in the past to decide today's value, and that's the problem. Most appraisers know this, and "build in" appreciation when deciding on a current value. But how much appreciation is a judgment call, and sometimes an appraiser will estimate on the low side. When the appraisal comes in low, the seller can reduce the price, the buyer can put a larger down payment, or both parties can split the difference. If there's plenty of time, perhaps the buyer can try a different lender and get a different appraiser. Another problem surfaces in a hot market when appraisers are swamped with business. The problem is that it takes forever to get an appraisal! What used to take a day now takes a week. So where it used to take 3 days to get an appraiser out to the property, now it takes three weeks. This could be a serious problem if escrow needs to close at a certain time, for example to keep a locked-in interest rate on a loan. The only solution here is to order the appraisal IMMEDIATELY after opening escrow. I've seen lenders wait two weeks before ordering the appraisal because "the buyer didn't send in the check." Make sure this gets taken care of right away or expensive delays could result. Buyer rejects the association documents. Many properties are part of a homeowner's
association, or maybe more than one association. The buyer of the property
will need to be given a copy of the association documents and approve them. The
documents include: Now the association, depending on its size, may or may not get to this as quickly as we would like. We've seen associations take 3 or 4 weeks to get the documents out. That means that at the last minute, the escrow can fail if the buyer is spooked by the association documents. Solution: sellers should get the latest documents from their association BEFORE opening escrow. The documents can be handed to the buyer as soon a purchase agreement is reached, eliminating that contingency. Why don't sellers do this? Because it costs money to pay for the documents. If the seller didn't get the documents ahead of time, the buyer should make sure they're ordered immediately after opening escrow. Escrow officer doesn't follow through. We've already talked about some of the documents that are critical to a transaction, such as the SIs, the CC&Rs, title report, termite report, association documents, etc. The escrow officer is responsible for making sure these are taken care of, but sometimes it doesn't get done in a timely manner. For example, the SI might be sent in for a judgment check, but the escrow officer "assumes" that since nobody said anything, it must be OK. These kinds of assumptions can really come back to haunt you. Everything must be followed up on to see that it gets done, and every disclosure, approval, report, and document must be in our file before the escrow can close. So the bottom line is that your agent is the one who is ultimately responsible for everything, and if the escrow officer is slow, incompetent, or too busy, your agent must pick up the slack so that your interests are protected. No one wants to accept the blame when something goes wrong because people want to save face and not be held liable for their mistakes. But we have learned over the years not to depend on anyone, but to check everything ourselves. The potential for mistakes is greater when escrow companies are very busy, such as in a hot market. There's no time to handle everything, and no time to train people to help. What happens then is that "crises" are handled first, and your file ends up on the bottom. After all, you're not closing for a couple of weeks yet, right? But since you've read this far, you understand that handling things ahead of time is exactly how you prevent a crisis later. So by putting things off to the last minute, you're almost GUARANTEED to have a crisis of your very own. It's your agent's job to stay on top of all the players in the transaction and to make sure your important transaction doesn't end up at the bottom of someone's pile. Lender does the old "bait and switch". There are many ways things can go wrong with the loan. Interest rates can go up, the mortgage insurance premium (PMI) can be more than the buyer expected, or the loan program can disappear. The fact is, unless the buyer "locks" his loan rate, anything can happen. Why don't buyers lock in their rates? Again, because it may cost money to do it or the buyer hopes the rates will go down so they hold out for the possibility of a better rate. And there are some unscrupulous lenders out there who will tell you one thing when you first meet and then change it at the last minute, knowing that you're too far along to change lenders. By the way, since interest rates will change from the time you talk to a lender until the time you actually close, how in the world can you pick a lender based on rates? You should choose a lender based on whether you trust him and believe he has your best interests in mind. Lender is a mortgage banker or mortgage broker. What's the difference between a mortgage banker and a mortgage broker? A mortgage broker takes your application, and then brings it to the wholesale department of any lender he chooses. In this way, you don't have to make applications at several lending institutions. You just apply once, and then your lender takes it to whatever bank has the best deal at the time. A mortgage banker lends his or her own money. You fill out the application, the loan officer walks down the hall to the underwriter, and you receive loan approval on the terms and conditions only that lender offers. When the market is busy, this can be a critical issue. Having your closing delayed can cost you much more than you thought you were going to save. And what about the "bait and switch"? If the lender pulls this trick, Don't hesitate to not accept the loan at this point, if the seller is willing to wait a few more days have the loan package transferred to a different lender all the work is already done they just have to repackage the loan and resubmit to their underwriters. Paperwork is not handled in a timely manner. There can be delays and hang-ups by any of the parties in the transaction. Usually we're dealing with a low-paid person who can care less that your transaction is critical. For example, the termite inspector does his inspection quickly, but then drops it off on this clerical person's desk to type it up and mail it out. And there it sits. Then she goes on vacation, and we're still waiting. Much of our job is following up with these people to make sure things get done when they're supposed to. We can't assume anything, because we're talking about hundreds of thousands of your dollars here. So we keep calling until we get what we need. Sometimes people have even gotten angry with us for insisting that they do their jobs. "I'll get around to it" isn't good enough. That's how things get screwed up. Even the buyer and seller can be slow on returning their paperwork. They'll get a package from escrow and drop it on the dining room table. "I'll get around to it," they think to themselves. If it wasn't important, then escrow wouldn't have sent it to you! Many times critical issues and deadlines are passed because the paperwork is sitting on the table. Contrary to popular opinion, escrow is not opened when two parties come to an agreement. Escrow is officially opened when escrow has signed instructions from both parties. The seller needs to know that the buyer's deposit money is not held in escrow until there is an escrow to hold it in! So they go for weeks into a transaction without sending in the escrow instructions, not knowing that there isn't a dime of the buyer's deposit holding the transaction together. The buyer can walk away at any time, for no reason at all, and escrow can't do a thing about it. In a real estate transaction, "time is of the essence". This means that all paperwork, reports, and disclosures need to be done as soon as possible. Nothing good can happen by waiting. As time goes on, people become more and more committed to the move. The pain is much less if the transaction falls apart sooner rather than later. So we put a lot of effort into getting things done sooner. Don't price your home by yourself! It's my job to analyze the Eugene, Springfield and Lane County market and determine the true value of your property. It's FREE and without obligation...
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