Every now and then in real estate, I run across things that are new to me, I just never encountered before (yea, isn't that hard to believe that after 14 years in the business you can still run into things you never encountered!), or changes that were made that just never got filtered my way. Below is a list of things that come to mind that I have run across and I will make this a continuing blog to inform potential buyers and sellers with updated blog posts. If you haven't sold or bought a house recently, you may be very surprised at some of the things that you will encounter during the process. Not all changes are bad or even difficult, but many are surprising or unexpected and can throw you for a loop or cost you money in some cases.
1. as a seller it is never a good idea to have a copy of the inspection report from the buyer's home inspection. Just make sure your agent requests a list of detailed items that the buyer would like to negotiate with the seller for repair. You can imagine the reason. First, it just opens a can of worms that can make your life difficult. There should be no reference to the inspection or inspection report in the amendment to address concerns with property. If the inspection report is mentioned, many underwriters will ask to see the report. Once they see the report, they will often require, yes, I said REQUIRE, that all or all major repairs be completed and approved prior to closing. I had it first come up literally two days before we closed a deal. The buyer presented a list of mostly cosmetic repairs. Seller decided to reduce the sales price by X amount in lieu of making those repairs. The amendment documenting this agreement stated in lieu of repairs. Big red flag for underwriting. My sellers had to have a substantial amount of siding replaced and painted prior to closing, at a substantial cost, and only a very small portion of that siding was really defective or damaged - most of it just needed to be painted or caulked as it wasn't rotten. Best course of action is to do an amendment to the agreement stating that the parties agree to reduce the sales price, period. No explanation required.
2. On an FHA or VA loan, expect and plan for the fact that the lender will want proof that the repairs were made properly and that the buyer approves of the repairs and agrees they were completed. Best to be prepared, as a seller, to have the repairs done at least a week prior to closing so that the buyer or his inspector can return to view repaired items. This is a major cause of closing delays when the repairs are not done in a timely manner or not done correctly.
3. Sellers, in a rapidly changing market, understand and be prepared for the fact that the comparable sales you are relying on to support your price when listing, may not be even close to the same comps used by an appraiser by the time you get a contract and the property is appraised. Say you go through a couple of buyers who are unable to close before you get your first appraisal and it comes in much lower than when you listed - don't expect the appraiser to use the same comps from those many months ago - he will be required to use "most recent" comparable sales in your neighborhood and is unable to skip over low sales in the same neighborhood to go outside the neighborhood for a higher priced comp sale. The lesson for sellers here, in addition to the eye opener about which comps will be used generally, is that selling as quickly as possible REALLY is in your best interest, always. You can gamble and say that prices are generally going up so taking your time is just fine - but, it will be just that, a gamble. A distress sale can happen next door tomorrow and there will be nothing you can do. List for a reasonable price that shouldn't present an appraisal issue and get on with it - sell as quickly as possible. Longer market time never helps you in valuation.
4. Sellers, don't expect a buyer to pay over appraised value. Under $200K the buyers typically don't have the extra cash and in some cases their lender won't allow it, depending on their overall financial picture. Over $400K buyers paying above appraised value is a more feasible scenario - I have had it happen 3 times in the past 12 months in fact. A 100% VA buyer is not going to be paying over appraised value.
5. Sellers, have you said to yourself or others, "I am in no hurry, I can wait to get my price,", or what about this one, "I am not giving my house away". . .in other words, again, you intend to stay on market until a buyer pays your price. 14 years of experience and also hearing other agents say the same thing, has proven to me one constant and that is that these are sellers that will indeed "give their house away" because they try to time the market and often end up passing up great offers and golden buyers because they are waiting for an uneducated buyer to fall in love and overpay for their home. Then they end up selling for less than they would have it priced properly from the start and contracted with a solid serious buyer in a short period of time on market. I don't know why it always happens, but it does. . .longer time on market usually means lower price and that applies to all price ranges, areas and condition of property. There is no trick to real estate - it's really all pretty much out there. Either a home is worth the asking price or not. If not, it is not very likely that it will sell anytime soon.
6. Did you know that in a rising market you can often get MORE from your home sale if you price it lower? It's the frenzy thing. . .multiple offers often means a higher sales price. At appraisal time be sure that your agent leaves a package for the appraiser with agent names and amounts of the multiple offers, dates, etc. If an appraiser can document market "demand" there is a very good chance that it will help your valuation come in higher. Been there, done that! Sold one in Roswell recently. . highest recent sale in neighborhood was $420,000. Other sales were much lower, some even in the mid to high 200's. We were really gritting our teeth because the home I listed was amazing, seriously, probably the best house in the area for the square footage. Priced it $40,000 lower than we really wanted to but knew that appraisal was a real concern due to the comps. Wanted to sell quickly because there was a house this couple wanted to buy and didn't want to take a chance of it getting away. First weekend had 12 showings and 6 offers, 3 over full price.
Sold over full price, $40,000 higher than highest recent comp sale. Sellers and I put together a thorough and detailed summary of all improvements, with dates and cost, and we gave the appraiser a list of buyer agents who made offers with their contact info so he could verify, and gave him copies of the offers that were same or above asking price. Had the package all pulled together waiting on the kitchen island for the appraiser when he arrived - large white flat envelope, black marker writing on front "APPRAISER, please take" just in case seller was not there when he arrived. It worked!
Sellers, you seriously don't have to give your house away. If your home is in great condition, in a desirable area, and you play your cards right, you might be very pleasantly surprised at the outcome. Just takes a bit of experience (a good agent) and working together to take "considered" steps along the way.
Watch for more tips and updates on market trends and tips in 2014. Happy new year and best of luck to sellers and buyers in the market for a new home this year - it's a great time to be out there.
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