Do You "Disclose" a Home's Obvious Deficiencies in Your Marketing?

By
Education & Training with Sell with Soul
https://activerain.com/droplet/6X2

Lean

Many years ago, I had a sweeeet little listing in Denver. A 1940's stucco Tudor, with all the fixtures and features Tudor-philes love - glass doorknobs, art-deco light fixtures, oak floors with inlays, decorative tile window sills, vintage fireplace... it was an easy house to fall in love with.

And buyers did... over and over again. Fell in love, that is... UNTIL...

<key spooky music>

...they reached the back bedroom. Unfortunately, the entire northwest corner of this sweeeeet little stucco Tudor was sinking. Not only did the floor slope alarmingly, there were 1"-2" cracks all along the back wall and across the ceiling.

Ouch.

How fast do think buyers ran screaming for the door?

(pretty fast)

Other than the minor issue of a quarter of the house falling off, the home was truly wonderful. It sat on an oversize lot, had a finished basement, an updated kitchen and 2 full baths. The price was great (since we knew we had an objection to overcome), it was staged and photographed beautifully.

BUT WE DIDN'T DISCLOSE THE STRUCTURAL DEFECT IN THE LISTING DESCRIPTION, hoping that buyers would fall so in love with the home, they'd be willing to overlook it.

Silly, silly Jennifer.

The house didn't sell. And didn't sell. And didn't sell some more, even though we had scads of showings.

It finally occurred to me that we were attracting the wrong buyer - the adorableness of the house was bringing in the Pottery Barn crowd by the dozens, but ... the Pottery Barn crowd ain't much interested in a house with a serious structural issue.

So, I could finish this story, but I'd rather hear your thoughts on the matter. Do you "disclose*" an obvious defect (e.g. high-tension power lines overhead, a highway behind the back fence, water in the basement, a strong offensive odor, structural damage, etc.) in your marketing, or let buyers discover for themselves it when they look at the house?

Please share your thoughts and experiences!

* by "disclose" I'm not referring to our and our sellers' legal obligation to disclose known defects; I'm asking if you mention the defect in your MLS description and other marketing.

 

Posted by

It's Here!

 

The More Fun You Have Selling Real Estate, the More Real Estate You Will Sell! 
(True Story)
Order Your Here!

 

 

 

 

 

 

 

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Real Estate Sales and Marketing
Groups:
Real Estate Rookie
Learn to be a Top Producing Listing Agent
Selling Soulfully
Silent Majority
Real Estate Professionals
Tags:
listings
sellers
all blogs

Spam prevention
Show All Comments
Rainmaker
484,057
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Thanks for all the feedback! And Irene - I love your "as-is" suggestion in the public remarks - it definitely puts the buyer on notice without taking up a ton of room in that precious comments section.

My concern with leaving the onus on the agent to warn or filter the listing from buyers is 1) if the agent somehow doesn't read the broker remarks or 2) the buyer is screening properties for the agent, then by advertising a house to the Pottery Barn crowd, you're likely to 1) make the agent look bad in front of her clients (which won't endear you to her) or 2) as  Donne mentioned, give the buyer (and agent) a reason to question your integrity - and the integrity of our industry overall.

I actually believe you CAN be upfront about deficiencies if you keep a sense of humor about it. For example, if a house is close to a highway, you could say "Close to the highway and a little noisy, so if that's a problem, pass this by. But if your buyer is looking for a great home at a great price, give it a look!" Okay, so that's a little wordy, but I think it would be effective at both catching the attention of buyers and agents, and preparing them for the deficiency so they aren't surprised - they might even get there and say "Well, this isn't so bad!" Of course, the house needs to be priced appropriately for the deficiency!

Mar 19, 2011 01:58 AM #34
Rainmaker
90,474
Edith Schreiber
Luxury Homes, Move Up Buyers, 1st Time Homebuyers, New Construction - Frisco, TX
Dallas Area Real Estate

Jennifer,

As one who works almost exclusively with buyers. I would definitely agree with a couple of your initial respondents (Martha & Susan).

The fear of the unknown can be greatly minimized by having the professional assessment by a foundation available, for those who are otherwise hopelessly in love with the property.

After all, things might actually be "less bad" than the conclusions the "nervous nellie" buyer might automatically jump to. Living in the north Texas clay soil, the foundations have either previously cracked, are currently cracked, or will almost certainly crack sometime in the future! :0)

Great thought-provoking post (as usual) !!!

 

Mar 19, 2011 02:12 AM #35
Rainmaker
484,057
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Edith - that is so important. Almost any problem can be fixed cheaper than someone imagines it can be. Maybe not CHEAPLY, but cheapER!

Just had another thought on the matter... if the Pottery Barn buyer does decide to overlook the deficiency based on the great price, his inspector will likely change his mind for him, thus wasting everyone's time, energy and money.

Mar 19, 2011 02:31 AM #36
Rainer
291,596
Phil Ormsby
Cabana Real Estate LLC - Parrish, FL
Cabana Real Estate - Live where you play!

It depends. If it's a relatively minor issue I put a note in the agent remarks and quotes for repair in the attached MLS documents with printed copies in the home so prospects can see that the repairs might not be as huge a deal as they will otherwise only imagine.

That said, if the home needs a new roof or a major repair, I would put that in the public remarks together with the estimated replacement cost. There is absolutely NO point in attracting a buyer who cannot afford the repair.

Best option is to have the owner make the repair before listing the home but that often isn't possible in today's economy.

 

Phil, Broker-Associate

 

Mar 19, 2011 03:05 AM #37
Anonymous
Joanne Crum

 

Jennifer,

 

I also list properties like this, sold as-is and get estimates for the work that needs to be done. I talk up all the positive features of the house.  I also go to local banks to see what funding programs are available for that particular home. In the agent only remarks section, I ask for all agents to call before showing so that I can share the info and give them a full picture.

Mar 19, 2011 03:11 AM #38
Anonymous
Ilona Baumhofer

I say be upfront and disclose in the marketing.  Isn't it better for buyers to know BEFORE they walk through the front door of the home?  If they are left to discover the defect on their own they will wonder about what else could be wrong with the property and walk away. 

If a potential 'Pottery Barn' buyer knows about the structural issue and still takes a look he/she/they might fall in love with the house.  So marketing it as somewhat of a fixer upper (one issue, maybe include an estimate to fix) AND emphasize the Tudor features.  Perhaps include in marketing informational materials on 203k loans...  People shy away from things they don't know.

Mar 19, 2011 03:13 AM #39
Rainer
17,496
Blake Farley
Real Living Hacienda Realty - Silver City, NM

Yes!  In this case, I would know that the price was going to give the listing a lot of attention.  Then, like you said, there would be a huge let down when the home was viewed and the obvious flaw was discovered.  It's VERY hard to recover from this emotionally and get excitement back. 

So, I would, in a short sentence, have said, "The low price reflects the fact that the home needs some structural work." Or something to that degree.  Then, I know the buyers (and agent) would be prepared before walking in the home and falling in love.  And, I would make available, any information I could about the flaw and any research we'd done about repairing it.  But I would definitely want to share this information---at the very least with other agents---BEFORE they took the time to bring their clients over. 

I have two main objectives when it comes to marketing property:

1. The whole purpose for marketing a property IS TO GET AN APPOINTMENT.  It's not to tell a potential buyer everything there is to know about a property.  The purpose is to entice a buyer to want to know more and want to see more.  I try to do this by keeping descriptions short and sweet and using lots of key words.  I also try to take photos that are attractive, clean, but not unrealistic.  This is also where I will disclose something that needs to be, but the disclosure will be very short and simple with a suggestion to call for more info. 

2. When the appointment is made, and the buyer sees the property, my goal is that the property IS BETTER IN PERSON than it was in the marketing.  So, here's why it's important not to overpuff or unintentionally mislead people.  It's also important that the photos were not too nice (nicer than the property).  I want the buyer walk away having had a positive emotional response to the property.

Mar 19, 2011 03:50 AM #40
Rainer
34,341
MaryJane Sheppard
The Van Dyk Group - Real Estate - Long Beach Island, NJ

I agree with Susan H. - address it as creatively as possible without scaring people away.  I have this issue right now with one of my listings - some of the people who have toured it "think" it's on a "busy" road so they've passed it over - I have since included in my MLS comments the fact that the road is filled more so with bike riders and joggers and also becomes one way in this particular area so the amount of cars is decreased.  I didn't go in to it too deep but, hopefully, enough to address it and move on.

Mar 19, 2011 05:23 AM #41
Rainer
21,374
Elizabeth Colton Walls
Fridrich & Clark Realty LLC - Nashville, TN

I had a listing a few years ago with a dodgy front porch--sloping, big cracks. We had a structural engineer conduct an evaluation and made his report available to prospective buyers. We also received some rough (non-binding) bids from various contractors about what it would cost to fix.

Turns out that the porch was not in immediate danger of falling off the house & in fact could have many yrs of use & the cost to make the repairs was not that expensive. By doing this, we just took the uncertainity out of the equation for buyers.

Mar 19, 2011 05:28 AM #42
Rainmaker
317,422
Sally Lawrence
Advantage Real Estate - Tehachapi, CA
Broker, CHS, e-Pro, SFR, REALTOR®

I try to let defects in my listings show in the pictures.  If something important can't be conveyed in a photo I use something like the statements already described to draw attention to it without trying to make it sound really scarey.  Too often I see agents' listings that have major issues that are not disclosed in the pictures or in the comments.  I get calls from buyers that say "This house is perfect!" only to respond that it isn't (for whatever reason I know about because I've seen the house).

Mar 19, 2011 06:02 AM #44
Rainer
73,167
Pat, Ben and Martin Mullikin
M3 Realty - Brookfield, WI

If the Seller disclosed it on the condition report, and that document is posted online, the agent shouldn't need to make remarks. If the problem can be shown in a photo as part of the property, that should clue the buyer in prior to them making the appointment. I would encourage the Seller to have an expert's report available to post online with the MLS listing and have copies available as well. Many times a buyer thinks a problem is 3 times more expensive than it actually is, and a qualified expert can put their fears to rest - if given the opportunity.

Mar 19, 2011 06:30 AM #45
Rainmaker
484,057
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

OMGoodness - Blake - that is brilliant!!!! I LOVE how you expressed exactly what I was trying to! When you disappoint a buyer, they get mad at the house, even if it's perfect for them. But if they go in with realistic expectations, they're SO much more likely to be pleasantly surprised.

Phil - I agree - there's no point in bringing in buyers who can't buy it. Especially in today's market where the lenders are fussier about condition and other challenges.

Here's the ending to my story...

We withdrew the listing from the market and while my seller and I were trying to decide what to do, I told one of my active buyers about it. I hadn't thought she'd be interested because she was definitely a Pottery Barn kinda gal, but for some reason, I brought it up one day, including the structural issue. She wanted to see it, so I took her over. She loved it, cracks and all. She even brought her parents over (warning them ahead of time about the structure) and they approved, and agreed to help her fix it. I Covered My A$$ by taking pictures of the cracks and asking her to sign the pictures that she was aware of them, along with the property disclosures of course - she bought the house, eventually fixed the problem and lived happily ever after there.

After that experience, I vowed to always do as Blake suggests - never overpromise; always pleasantly surprise. Not sayin' I was 100% successful in selling challenging listings, but I believe it was the right approach.

Mar 19, 2011 07:34 AM #46
Anonymous
Laura Tombline, Broker/Realtor, Valencia CA

I think there have been some great responses and my response is geared specifically towards the scenario presented (not cosmetic issues).

It's important that we represent the property in the best light; that being said, it's equally important to identify our target market and market accordingly.  When dealing with structural issues, the average homeowner is usually not prepared to deal with such issues so it would be more important to market to an investor who has the capacity to deal with structural problems.

If you/your seller have decided to market to the average homeowner I would not want to rely upon the buyer's agent for disclosure; 1) it assumes they will 2) it assumes they have the knowledge/expertise to appropriately address it.  It's not in the sellers best interest to get them into an escrow only to find the buyer didn't understand there might be significant defects until the inspection is done.  Sales 101 teaches us to overcome the objection before the objection is expressed so why not apply this strategy when dealing with a structural issue.  Overcome the issue by identifying the problem and providing an independant report on potential scope/remedy and disclose, disclose, disclose.  You certainly don't want to find out after the close that the homebuyer feels in over their head or mislead in any way.  I practice in California and selling a home with a known structural defect to the average homebuyer; even with all of the disclosures could easily be a lawsuit in the making. 

I think a great parallel is the financial investment world; there are certain types of investments with higher risks/rewards but the average individual would not be able to participate because they do not meet the minimum experiece/net worth. 

At the end of the day it's up to you and the seller to decide on the best strategy but I say you can still talk up the great points of the home and address the issue in the public marketing comments so you start dialog off on the right foot with prospective buyer's reaching out to you directly. 

Mar 19, 2011 07:44 AM #47
Rainer
86,251
Torgie Madison
Quicksilver Real Estate Solutions, LLC - Portland, OR
Websites and Contact Management

Thanks for giving us the ending to your story! I was wondering how it finished. I like the ideas of having it in the note section or speaking for itself in the pictures. Sounds like once you started bringing it up earlier you found more success.

Mar 19, 2011 07:51 AM #48
Anonymous
Jeff Pearl

You have to disclose it at some point, so might as well let potential buyers know up front so that you attract buyers that know how to handle things like that. The house can probably be jacked up close to level. I'm sure " This Old House" has a video on this repair.

Mar 19, 2011 11:32 AM #49
Rainer
17,496
Blake Farley
Real Living Hacienda Realty - Silver City, NM

I was just reading some of the previous posts and I like what you said about having a sense of humor.  I appreciate that when I'm reading marketing text.  We are in rural southwest New Mexico and these are some disclosures I've seen and written lately:

"Gorgeous views, but road is not for the faint of heart.  Call me if you need a 4 x 4 and I'll drive."

"Wonderful southern exposure.  Perfect for building your solar-powered home. No electricity available."

"Officially a 3rd bedroom, but might serve better as a utility room."

I could keep em' going, but I'll stop here.

Mar 19, 2011 02:00 PM #50
Rainmaker
484,057
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

LOL, Blake - I love that stuff! Creative descriptions definitely stand out from the crowd!

Laura - Wow - very very well said - yeah- exactly!

Been thinking about this situation more (not my example since it's a non-issue, but in general...) and it comes down to - as the listing agent, we are obligated to represent our seller's best interests. NOT to improve the perception of the real estate industry or to make friends with other agents or to ensure that potential buyers don't get mad at us, but to do whatever we can (within legal and ethical limits) to do what our sellers hired us to do, which is, in most cases, to SELL THEIR PROPERTY.

So, the real question is - does being upfront and transparent (in our marketing) about a property's material defect, thus potentially limiting the number of buyers who look at the house serve the seller better than NOT being upfront and transparent, thus NOT limiting the number of buyers who look at the house, but perhaps not attracting the RIGHT buyers? (whew, that was a mouthful). 

There probably isn't one right answer for every situation. We probably all have real-world examples that support both approaches, so it's hard to know in the beginning which approach will "work" on any given property.

How's that for definitive!?

Mar 20, 2011 01:33 AM #51
Rainmaker
1,419,081
Bill Burchard
3B Realty: 951-347-3818, CA - Murrieta, CA
Broker, Realtor, Representing Buyers and Sellers

Thanks for sharing your dilemma and solution, Jennifer. It seems that setting the proper expectation prior to viewing was the successful approach. (Congratulations on selling the home!)

Mar 20, 2011 07:00 AM #52
Rainmaker
232,679
Ken Barker Realtor® GRI, E-Pro Certified
Dilbeck Real Estate - Burbank, CA

Jennifer - I have not had the opportunity to have a listing like this, other than tough sellers like a probate client, but even at that I would put it in the agent remarks and state the obvious. Disclose disclose disclose.

I also would do as a few mentioned to market it as a contractors dream, or a fix-it to make it a dream home or an FHA203K opportunity.

Mar 20, 2011 02:48 PM #53
Anonymous
Teresa
I suppose I suolhd just shut down this blog, eh? Sigh. I wonder .A realtor DID fill me in on some things. They aren't supposed to publish personal info like that (the information I read wasn't by the realtor, but by something else), and if we buy a house again we suolhd do it using the trust name rather than our actual names. So I've learned a bit of info from her. I do occasionally have to remove myself from various white pages and the like. I just prefer that information not be quite so easy to find!
Jul 22, 2012 08:07 AM #54
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
484,057

Jennifer Allan-Hagedorn

Author of Sell with Soul
Ask me a question
*
*
*
*
Spam prevention