The Real Estate Whisperer

703-669-3142

This is REASON #9 of the TOP TEN REASONS NOT TO HIRE A REAL ESTATE AGENT TO SELL YOUR HOME. (Click this link to see all posts in this series.)

You Might Not Need A REALTOR If... Reason #9

You Might NOT Need A REALTOR IF.... Reason #9

You Ain't Afraid of No Judge

I suppose, to a certain extent, that I am being a bit facetious with this post. Most people, even many attorneys, will tell you that if they can avoid going into a court room, they will. Why? Well, who knows how things will turn out if you go into a court room. Even if you win, you're likely to still feel like a loser. The judicial process itself is exhausting. But, maybe you don't mind, and if you don't, well then maybe, just maybe, you'll get lucky and your real estate transaction will get derailed and you'll end up there.

There are truly many opportunities for law suits. Keep in mind that we are talking about VERY BIG DOLLAR transactions, so the financial components exist that if something goes wrong it is financially "worth it" to sue in many cases. Add to that the emotions involved on both sides...each side relying on the others' promises, written and unwritten.... well, if things go wrong you have the makings of a good drama. All the ingredients good lawsuits are written about!

And, with real estate, there are many disclosure laws, and they vary depending on the property and seller. With no real estate agent to advise you, it will be VERY easy for you to fail to disclose something that you should have disclosed, a reason for a law suit sometimes even YEARS after the transaction itself. Your first court appearance will cost you enough in anxiety and money that you will surely wish you'd had an agent who could have helped you avoid it.....Unless, "You Ain't Afraid of No Judge."

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Stay tuned to the REAL ESTATE WHISPERER for the rest of the posts in this series.

In the meantime, if you need honest feedback about whether you should hire a REALTOR to sell your home, and if you're in the Loudoun/Dulles area, feel free to call me. I am happy to talk with you over the phone about some of the pros/cons of hiring a real estate agent.

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703-669-3142

This is REASON #8 of the TOP TEN REASONS NOT TO HIRE A REAL ESTATE AGENT TO SELL YOUR HOME. (Click this link to see all posts in this series.)

Friday, February 12, 2010

You Might Not Need A REALTOR IF....Reason #8

You Might Not Need A REALTOR IF.... Reason #8

You Know How To Deal With Low Appraisals

Don't let you're money go down the drain!

Although I briefly mentioned this in prior posts, it is critically important and therefore I am focusing on it as it's OWN separate issue. Appraisals. Ugh.

Appraisals are a key ingredient in most sales. While there will be some cash sales out there, even some of those sellers will want an appraisal, especially in a market like this one. No one wants to overpay for real estate today. But, the vast majority of buyers will be getting a loan and financing their purchase of your property. Their banks will REQUIRE an appraisal.

Some segments of the market are appreciating, while others are still on the decline, and still others have no activity at all. This makes it very hard to get a good appraisal. But, let me ask you this, Mr. Seller...."Honestly, would you know a good appraisal from a bad one? How?"

If your answer is you'd know because the appraised price was lower than your sales contract, well, you could soon find yourself in a pickle. No bank, no appraiser, can make a change based on that.

Maybe you think you'll rely on zillow, or tax assessments? Nope. Irrelevant. Sorry.

You'll tell them that your neighbor sold his house last year for $25K more. Nope again.

You will need to SHOW market knowledge to an "expert" in such a manner that it doesn't show bias. Good luck with that if you are the seller. I couldn't be unbiased if it were my property. I wouldn't be completely unbiased if I were your listing agent, but I could handle the matter in a way that seemed unbiased. I have resources to use to support the price, and market knowledge (as well as the collective knowledge of the agents around me).

And, what if the appraiser refuses to make a change? Can you get a new appraisal? Probably not, especially if you're on your own.

What if you cancel the contract all together and go with another buyer? Well, depending on the type of appraisal, it may be SIX MONTHS before you can get a new appraisal if the new buyer is using the same type of financing - EVEN if it is with another bank. Did you know that? Most people don't, but I promise it's true.

You see, there are "rules" and then "exceptions" to the rules. A true expert in their field can help you navigate your way through tricky situations like low appraisals. While ultimately, you may be forced to accept the low appraisal and even lower your sales price or provide another concession because of it; that should NOT be your only defense.

A strong listing agent will have many potential alternatives for dealing with appraisal issues. Market knowledge and resources are the first line of defense and with a strong argument, and with the right presentation, this is often all you need. Other times, it is a matter of getting to someone who will listen - and having those inside connections at the bank can help. But, even the best agent can't know the VP of every bank in the nation. So, then what?

The RIGHT agent will be able to answer this question as it pertains to YOUR property and YOUR most likely buyer.

If you are in the mortgage industry or are an appraiser, you may (or may not, depending on your experience level) know how to deal with low appraisals so that the vast majority of the time the purchase can move forward as planned, with no further concession by the seller. Otherwise, you might just need to hire a real estate agent to help you with the sale of your house.

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Stay tuned to the REAL ESTATE WHISPERER for the rest of the posts in this series.

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703-669-3142

This is REASON #7 of the TOP TEN REASONS NOT TO HIRE A REAL ESTATE AGENT TO SELL YOUR HOME. (Click this link to see all posts in this series.)

Friday, February 5, 2010

You Might Not Need A REALTOR IF.... Reason #7

You Might Not Need A REALTOR IF....Reason #7

you love stress, and can handle managing the 'contract to close' process.

Tick * Tock * Tick * Tock

Managing the contract to close part of the transaction is one of the more mundane parts of the process, thus the reason that real estate agents on both sides of the transaction delegate much of this tedious work to trained assistants and transaction coordinators. In a perfect transaction, it is a matter of going through a checklist prepared based on the contract provisions and ensuring that you 'check the boxes' as quickly as possible, and without missing any deadlines.

Sadly, there are very few perfect transactions; and there are critical components of this process that MUST be managed or the transaction may not be successful. The more complicated the contract, the more complicated the process. The more emotional the parties, the more difficult each step is and the longer it takes... meanwhile, 'tick, tock, tick, tock'.

There are usually multiple deadlines put into a contract. Many of them are quick, and some are confusing. Many deadlines read: 'X days after the date that notice is sent'.

The standard language in many contracts states if something is not delivered properly to the other party, or not completed within a particular time frame, the transaction is void. Understanding the contract is crucial, managing the contract is even more important. You've worked hard to get to this point. What if it falls apart now?

If you have one, the listing agent (in combination with the buyers agent and/or their assistants) will manage and coordinate this process. Assistants are trained to alert the listing agent anytime a 'caution' flag is flown so the agent can intercede and get things back on track before they become a problem.

Below are examples of common components that must be managed:

Immediately following the ratification, the lender begins (or hopefully, continues) the verification process for the loan. Buyers will be asked for an endless supply of documents.
Title work is ordered.
Inspections are completed as required. This may include general home inspections, pest and environmental inspections, and inspections by contractors, lenders, arborists, surveyors, soils consultants, etc. Following any and all of these inspections, more negotiations may be required, and these negotiations can be highly emotional, as they are completed when the buyers' euphoria is gone and buyers' remorse has set in. Meanwhile, sellers have emotionally moved on and started counting their proceeds thinking they are "done". It seems the smaller the issue, the harder the negotiations. I recently had a $500K+ transaction fall apart over a dispute about the cost of a repair - the disagreement was essentially over $1400. Again, refer to the tips on negotiating your real estate contract, which were written in a prior post (CLICK HERE).
If applicable, the property owner association documents are ordered. Ensuring proper delivery, understanding the required components of the resale packet, and the review period, are critical. Discovering that something about the home is out of compliance with POA requirements - existing architectural guidelines and maintenance requirements (a fence that needs to be moved or rebuilt); or learning about unusual requirements (i.e. neighbors' first right of refusal to purchase the property); or being advised of outstanding monies due are just a few of the potential issues. In Virginia, during the review period, the buyers can literally walk away from the transaction even if there are NO PROBLEMS, so it is a critical component of the transaction.
The appraisal is conducted. If it goes well, the owners and agents may have very little involvement other than providing access and answering the appraiser's questions. However, if the appraisal comes in low, you will really need an agent to assist you with providing information and in the appropriate ways to handle challenging the appraisal. If this is a government loan (i.e. FHA) a low appraisal could affect the price you're able to get for the property even if you find new buyers. Some segments of our marketplace are appreciating again, and so appraisal issues are increasingly common, especially when there are many comps that are distress sales.
Title work is reviewed by the lender and title insurance company and hopefully approved. Issues that come up include any number of things - unreleased or improperly recorded liens, deaths in the chain of title, earlier title defects, unrecorded quit claim deeds, judgements in the names of the buyers or sellers (even if it was someone with the same or similar name, but not the parties to the transaction), survey issues, easements, even trouble getting payoffs from lenders when mortgages have been sold. Admittedly, the vast majority of these issues can be resolved by a good title agent, but the listing agent may play a hugely supportive role in resolving some of these issues - perhaps just in keeping all parties calm and negotiating a delay in settlement to allow resolution; but perhaps in tracking down information that satisfies the concerns of the title agent or lender.
Once you've gotten through ALL of this stuff, and the loan has been approved, then the agent attempts to ensure that the closing company receives the loan package in a timely manner, reviews the preliminary HUDs (settlement statements), and compares the statements to the seller's expectations and ensures that everything is accurate.
The listing agent also coaches the seller on things like utility and insurance transfers, and ensures a final walk through is done by the buyers at closing, and a form to that affect is signed.

With so much going on in so little time, it can get crazy. In fact, it is not unusual for there STILL be negotiations going on between the parties at the settlement table or even afterwards.

If you are a seller and have decided to do this on your own, I wish you well. If it goes well, you'll think "see, that was a breeze" and if not, well, good luck.

I know that many sellers hire limited service agents to assist with certain aspects - marketing, and perhaps some negotiating, but coordinating the sale falls to the owner.... and since most of the time the owner is unfamiliar, often the buyers agent will take control of the process. While this is a nice courtesy and the owner probably feels that they are getting the best end of the deal - receiving services not paid for - they are sadly mistaken. A buyers agent will be processing the sale, with everything being tilted to the advantage of his or her clients... NOT to the interest of the sellers. Again, depending on the transaction and the parties, this may or may not result in a negative outcome for the sellers...but they really should be aware that the buyers agent's job is to "represent the buyer", at all times.

So, my advice to sellers managing the 'contract to close' part of the transaction by themselves: Pray that your buyers want to be fair with you, and keep the valium handy - just in case!

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Special Note About Agency:

Whenever I hear a customer (note: not a client, there is a big difference) talking about an agent who was 'dishonest' or 'unfair' the vast majority of the time the issue is the customer chose to be unrepresented - perhaps for convenience, perhaps because they didn't want to incur the costs - but the result is a party who is not represented. The outcome can be that the unrepresented party felt 'jilted' by the lack of service or getting caught off guard with an unexpected obstacle, which may cost them.

Please understand, we have a job to do, we are supposed to represent the party that hires us. This is why we have you sign a document that says you understand that we represent the other party. We won't tell you in what ways we will provide an advantage, anymore than you would tell any opponent your strategy. That's the deal. If it makes you uncomfortable, hire your own agent.

Otherwise, proceed with caution. Many of us are very good at our job, which is to maintain an advantage for our client, without alerting you. We are NOT being deceitful.

I do not provide this full and blatent disclosure to scare you, just to make things perfectly clear. There is a lot of misconception here. I have been in many transactions where a party was unrepresented. I always do my best to be fair, honest, and forthcoming. I advise my clients that is the best way to negotiate a transaction. However, if doing so provides them with a disadvantage, and if there is no law that requires disclosure, then client confidentiality requirements overrule my desire to be forthcoming with the customer. Again, just understand this is my job. Sometimes, agents don't like our jobs. But, we do them just the same.

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Stay tuned to the REAL ESTATE WHISPERER for the rest of the posts in this series.

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703-669-3142

This is REASON #6 of the TOP TEN REASONS NOT TO HIRE A REAL ESTATE AGENT TO SELL YOUR HOME. (Click this link to see all posts in this series.)

Tuesday, February 2, 2010

You Might Not Need A REALTOR IF.... Reason #6

You Might Not Need A REALTOR IF....

You know how to, and LIKE, negotiating.

I see people that have this WRONG more than they have this right. There are some core things to keep in mind when negotiating an offer.

• As a seller, you love your home. In this market, you are feeling pain and loss because the value is not as high as the perceived value a few years ago. Get over it. Your buyer is still likely spending more money than he EVER thought he would. It’s likely YOU never even spent this much money on anything, even the very house you’re selling.

• When you get an offer, if it is for $1 and has every contingency on the planet, and comes with a cover letter that insults you to your very core, don’t get insulted. I am not suggesting that you should take the offer, just that you should not get insulted and react emotionally. Let’s consider some potential reasons the buyer has presented the offer like this:

o He loves your home most of all, more than any other home in the world, and yet, it’s the best he can do.

o He loves your home most of all, hired the wrong person or got the wrong advice or whatever, and he thinks this is how you’re supposed to negotiate.

o He figures, “what’s the worst that can happen?”. I once had a buyer who did a home inspection and asked that everything on the inspection be taken care of by the seller. I don’t usually suggest this in a resale (it depends), but when I said to the buyer “you want to ask her to take care of ALL of this?”, he responded, “why not?”. In his case, we were successful, but it created undue stress on the sale. By adopting a “why not?” attitude, you could kill your sale – no matter what side of the transaction you’re on, so proceed with caution.

• Don’t play hardball. You’ll lose and then what? You may not be able to back up and accept what was previously on the table. Even if your contract position allows you to, trust me when I say that if you put unnecessary stress on a contract situation, it starts to wear on the other party. And, with each new stress, you’re adding more emotional, and perhaps financial or other types of pressure, and everyone has a breaking point. When you reach that, it is a point of no return and anyone who wants to get out of a contract bad enough will.

• Negotiating something to a successful outcome is actually the result of parties willing to work together. Remember the Golden Rule now more than ever: “Do unto others as you’d have them do unto you.” This applies EVEN when you are negotiating from what you feel is a position of strength.

• Maintain focus on what you have in common. OFFER flexibility where you have it. TALK through responses to the contract before you put them in writing… and talk nicely. Explain feelings but stay objective.

o “I appreciate your offer, but we simply can’t fathom accepting a price that’s $50K below our asking price. Am I right to assume this is just a ‘starting point’ for you in the negotiations?” , or

o “We’re likely going to counter on the closing date. Can you tell me why the buyer chose this date?” or,

o “We’d be fine with allowing a home inspection, but if we’re accepting this price, we don’t plan on making repairs, even if something is found. We’re willing to allow your buyer the option to ‘take it or leave it’ after the inspection, but we’ll want the right to continue marketing and accept back up offers until the home inspection contingency is removed, and we need that to be within 5 business days. Does that sound acceptable?”

You might be surprised at some of the answers you get.

Once you are comfortable with the general principles of successful negotiating, then it’s time to move on to the core issues.

What CAN you legally negotiate?
What clauses are you required to keep in the contract?
Do you truly understand the contract, each part separately and then cumulatively?

In Virginia, limited service brokers are supposed to give sellers certain disclosure forms and explain some of this to them. However, I am on the buy side of a deal right now where the sellers used a limited service broker (just to list in the MLS), and they had never seen those forms, and had no clue about the Lead Based Paint or other seller disclosure forms that were required. They didn’t know anything about the Property Owner Association laws, required disclosures, or costs associated… and they certainly wouldn’t know that you can’t, even by contract, waive these rights.

While in this case, I feel certain that the seller’s will get through this transaction fine, that my buyers WILL buy and all will be wonderful, that’s NOT guaranteed. I can tell you that if my buyers change their minds, I can get them out of this transaction without much effort. On the flip side, the sellers can not get out of this contract unless my buyers agree to let them. Because of my client's representation, and the lack of representation of the sellers, the buyers have the full contractual advantage.

If as sellers, you had thought you’d negotiated an air tight contract, and made decisions (like quitting jobs to retire, settling on a new home and moving half way across the country), and then ended up still having this house on your hands… well, that could financially devastate many people, and put a financial strain on most.

So what if the contract IS air tight? What if the buyer simply doesn’t do what he promises? Do you have any rights or recourse?

These are things you need to know.

If you are a real estate attorney, or have other relevant experience, and are comfortable with this kind of detail, then you might not need a REALTOR. I have found, however, most attorneys KNOW that they don’t know this stuff as well as a seasoned agent, and when coupled the other services offered by an agent on either side of the deal (buy or sell) they want an agent to assist them. I have several attorneys that are or have been clients, and they like when their agent can speak to the legal technicalities with ease, and in a manner they can relate to… while still giving good practical advice and explaining things to other family members in a more common language… so everyone understands the risks, the benefits, and the “what ifs”.

You can hire an attorney or an agent to represent you with negotiations, but keep in mind that attorneys and agents work best as a team if something is sticky. One has practical “industry standard” knowledge about how things are “normally” done and what “usually” happens, and how to AVOID the courtroom. The other often primarily has experience AFTER things have fallen apart, they don’t know how it could or should have been avoided… they just know what to do NOW, and it often involves a lawsuit. Do you LIKE being in a courtroom? Do you want to have things pending for months so it can wind its way through the system? You need to know your comfort level here before you decide. And, write it down, so you don’t forget later what you were thinking.

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Stay tuned to the REAL ESTATE WHISPERER for the rest of the posts in this series.

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703-669-3142