I recently shared in a (private) blog with other Real Estate professionals around the nation that I recently had the most complicated closing of my thirty-year real estate career. Even the real estate attorney closing the file said it was the most complicated file he had ever closed.
At the end of the day everyone was ecstatic that the house was sold and closed, from the buyers and seller right down to the closing coordinator in the attorney’s office because everyone felt as though they ‘got’ what they wanted. That is the happy ending that each of us was striving to achieve, especially the professionals handling the transaction. Most importantly, I have a very happy and loyal seller who realizes that he would never have been able to close this home on his own.
I've closed a lot of homes over the past thirty years, closing more than a thousand homes a year as a senior-level executive in the homebuilding industry. While this sale may have had more than its fair share of challenges ‘opportunities’ to overcome, most home transactions are not the ‘lay downs’ that the buyers and sellers perceive.Someone is making the process look easy, and that person is often a real estate professional (with the much appreciated help of an equally professional closing agent). Real estate closings are the dog show at the circus: there are hoops and someone has to be jumping through them.
Every day buyers and sellers try to go it alone, but buying and selling real estate has become more and more complicated with new lending laws, obligatory disclosures, and a maze of legal documents. We live in a litigious society, and ignorance is no defense in court. Even in new home closings between builder and buyer things "pop" up that have to be overcome.
After everything had been satisfactorily resolved, which by buyer account appeared smooth, I sat at the closing table wondering why anyone would want to put themselves through the aggravation of buying and selling a property without professional help? After this transaction, I needed professional help: help from Jack Daniels Captain Morgan, or Jim Beam.
I know people who have sold multiple homes, done it themselves, and all has gone (by all appearances) well. I know others, in fact one of my current sellers, who said that they would never do it alone again.
If the sale to closing process is so complicated, why do buyers and sellers choose to go it alone?
The main reasons:
1. The parties have not personally experienced ‘the’ closing from hell
2. The buyer hopes to get a better deal from the seller since there is no commission involved
3. The seller hopes to save the commission (which is in opposite polarity to number 2. above, thus both 2 & 3 occurring simultaneously are against all laws of physics and mathematics)
The truth of the matter is:
1. Countless unbiased studies show that FSBO homes are typically over-priced. Real Estate professionals use data collected on sold homes, current market conditions, knowledge of inventory levels, and more to fairly and more accurately predict what price the market will bear, and more importantly at what value the home will likely appraise.
2. Buyers tend to pay too much for FSBO homes and probably could have gotten a better ‘deal’ on a home marketed through a professional in a comparable neighborhood if not the very same neighborhood. Homeowners, and I admit to this personally, believe their home to one of the best in the neighborhood and therefore worth more. Unfortunately, this perceived value is typically based on emotion. If the home doesn’t appraise the contract will need to be renegotiated, and, if negotiations fail, the buyer will have to look for another house, starting the home shopping process all over again. Sellers who have a firm price in mind, and many do, will have to either wait for the market to catch up to them or wait for an unsuspecting buyer with some cash to offset the difference between the appraisal and asking price.
3. Often things go awry between contract and closing that creates added stress for and between both parties, ruining the joy of the transaction for each party.
4. FSBO transactions often fail to make use of the proper inspections to both the buyer’s and seller’s disadvantage. Why bother with the added expense of inspections? No longer do the courts have an attitude of “Buyer Beware”. Other than some lender required inspections, inspections provide peace of mind to the buyer, and Sellers benefit by having documentation that the home is as represented thus adopting a proactive approach to avoid potential future litigation.
5. FSBO ‘contracts’ often lack clarity in the terms, thus opening the door for ‘misunderstandings’ and discord between the parties (Buyers and sellers have been known to not even be able to sit in the same room at closing together. Can you imagine moving into a home that ended in a bitter purchase?)
6. Federal, state & local laws require mandatory disclosures that protect both the buyer and the seller. Ignorance of the law is no defense when one of the
parties discovers something they don’t like and uses a missed disclosure as a legal out or cause for action.
7. Both parties may end up paying ‘non-customary’ fees and expenses. While all fees are negotiable, learning that they have paid for something that is not customary to the area can create ‘hard’ feelings between the parties, opening the door to suspect throughout the transaction.
8. Sellers and buyers often end up using valuable vacation days as days off to facilitate repairs, appraisals and inspections required by the lender. Professionals are used to juggling these items and often have a carefully selected team of professional trades and vendors on speed dial. As any homeowner knows, it is not uncommon to take a morning or afternoon off to wait for an inspector or repairman, only to have no one show or experience lengthy delays.
9. FSBO sales often have ‘contract’ breaches to the detriment of one party or the other. Professionals ensure that deadlines are met and the terms of the contract enforced.
10. Real estate professionals often sell a home faster than the FSBO. Agents are able to properly price and expose each home to a wider audience than the FSBO. It takes time, money, and effort to expose a property to a wide audience. The most likely buyer for any home is likely already working with a real estate professional. Real estate professionals don’t show homes that they don’t know. The professional’s agent’s role is to sell that home to other real estate professionals before it is sold to a buyer.
Fisher’s Law # 1: It is mathematically impossible for both the buyer and the seller to save the commission.
Fisher’s Law # 2: Every real estate transaction is within one challenge of never closing.
This morning, my seller called to wish me a Happy New Year and to thank me again for coming up with the numerous solutions to get his home sold and closed. What a great guy. It's nice being appreciated and I appreciate people who recognize how hard I work and how much effort I put into my work. You know, it really isn't just about the money. This is a job just like any other, and we all want to feel appreciated and feel good about each day's performance. When you are an over-achiever, good is never good enough. That's what's so great about real estate: every day there are new challenges and new opportunities, and on just about every transaction we get the opportunity to make it all happen.
I still don't understand why someone would want to buy or sell real estate without a real estate professional. All of the legal documents and disclosures aside, selling a personal residence is often emotional. On every personal 'homesteaded' residence I have sold, with the exception of one property, I have sold the property using another Realtor so that I can step back and let them deal with the sale to closing process. I want to move on from each property with as little inconvenience as possible, plus I want the highest dollar I can get for each, and I know that another agent who is not emotionally tied to the property will do a better job of negotiating on my behalf.
In October 2008, the National Association of Realtors released a recent study and profile of home buyers and sellers from data collected between July 2007 and June 2008. Their findings indicate that more than ever sellers and buyers are relying on professional Realtors to assist them in their home and sale purchase. In fact, the study showed that eight out of ten home buyers are using a Realtor to help them with their home purchase. (Consumer names and addresses were obtained from Experian, a firm that maintains an extensive database of recent home buyers derived from county records. Information about sellers comes from those buyers who also sold a home. )
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