The 2020 real estate market is unprecedented. As COVID-19 hit the U.S in early 2020, there were many that questioned how the virus and the shutdowns would affect the real estate market. It would have been a reasonable assumption at the time that the evolving health crisis would likely have negative implications. Interestingly, the opposite has occurred, with available inventory not keeping pace with demand in most markets.
This surprising turn has led many sellers to contemplate selling their homes themselves without representation. On face value, that could sound like it makes sense -with multiple offers abounding, properties going under contract in a day, two, why not?
By selling For Sale by Owner, sellers are focusing on only one part of the selling process – marketing, and actually marketing that is specific to their home. The overall marketing that is done by Realtors and their brokerages and it’s impact on the real estate market as a whole is another discussion, but for sellers to focus solely on the fact that a property can just go on the market and get offers without considering the process of analyzing those offers with real time input from an experienced Realtor representing them, and then to have to navigate the inspection, financing, and settlement/title process can present many unforeseen problems.
To back up for a moment, before the seller even gets the property on the market, the actual pricing of the property can leave money on the table for sellers. The most common thing to happen as to pricing in the past was for unrepresented sellers to overprice their home, ultimately receiving less than market value when the property sells due to the property being on the market longer, as well as other factors. That can still occur, has always been on the “list of hazards of selling FSBO”. An interesting caveat to that, though, can be pricing under current market, which in this market can easily be occurring if an experienced Realtor is not providing real time information.
That said, once the seller puts the property on the market and the offers start coming in, the seller needs to know how to look at those offers. It’s not all about price. In multiple offer situations, buyers are putting in offers thousands, maybe tens of thousands, of dollars over asking price. That sounds great, right? However, if there is financing, sellers need to understand that the property has to appraise, or they could be left selling at a price that is the equivalent of one of the other offers if the buyer is not in the position to, or refuses to make up the difference in contract price, with possibly more contingencies than the other offer/offers. A Realtor can assist sellers with looking at all of the contingencies, the associated timelines, in conjunction with pricing and help the sellers to reach an achievable outcome that meets the seller’s goals.
The one contingency in contracts that is extremely important to the contract process is when a buyer is contingent on financing.
- Realtors know local lenders, as well as have experience with “big box lenders” and can relay their experiences as to how it might affect the seller’s transaction. They also understand the different loan programs and how those programs, loan to value (buyers equity investment), and deposit will affect the contract.
- Realtors will be able to facilitate the loan process by obtaining loan processing statuses- this aspect would be very challenging for an unrepresented seller, and most importantly, will act on the seller’s behalf in dealing with the appraisal. With values increasing, having existing comps that support those rising values creates other hurdles A Realtor can be your best advocate in differentiating properties with appraisers with real time familiarity with the comps.
- Realtors know signs of when the loan process may be hitting obstacles that could delay or prevent going to closing to help a seller adjust accordingly if necessary.
Even in a cash transaction, it will be incumbent upon a seller to verify funds to close, to coordinate and negotiate inspection issues, to coordinate settlement with the title company.
Realtors will be able to assist sellers with analyzing how inspection contingencies will affect the contract and to help with negotiation and working out any issues found in the inspection. Again, taking another step back, a Realtor can help sellers with proper market preparation and provide sellers with common inspection issues prior to going on the market so that a seller can head off mid-contract negotiations.
In the event that a buyer breaches the contract or there is a contract dispute, it becomes incumbent on the unrepresented seller to obtain legal representation at their expense for any remedy. Having brokerage representation can help avoid a seller having to deal with these unfortunate situations, should they occur, independently. Conversely, a Realtor can help a seller to understand seller disclosure requirements with regard to real estate transactions.
In the context of the 2020 real estate market, the importance of facilitation of the contract is compounded. Lenders, title companies, inspectors, and contractors needed to perform repairs are all inundated. A Realtor can help to coordinate all of the associated aspects of the contract to get the transaction to the table. A successful real estate transaction is not just about price and getting under contract. For a seller to be able to make informed decisions about the offers they receive, and to accomplish the successful progression of the process and contract provisions in this unprecedented challenging market is essential to sellers achieving their objectives.