Whether you’re a rookie agent, a rising team leader or an established veteran broker, we can all benefit from sharpening our skills. Follow our “Back to Basics” series to learn fundamental strategies, tactics, philosophies and more from real estate pros across the industry.
After several days (or weeks) of negotiating, an agreement between the buyer and seller is finally reached! The buyer is excited that they’ve found their new home, the seller is glad they will be able to move on to whatever is next and the agents are glad that their goals for that listing have come to fruition.
Contrary to what might be depicted on television or what many real estate agents think, when a contract is executed is not the time to begin celebrating. It marks the beginning of a long and uncertain process to a potential closing. There are almost always inspections to go through as well as an appraisal, if the buyer is getting financing. Much can go wrong with so many hands in the pot, and the fear of the unknown is real. Murphy’s Law is alive and well in real estate, and if the other shoe can drop, it will find a way.
The best way to increase a seller’s chances of crossing the closing finish line is to have a prelisting inspection done before ever coming on the market. Here are seven reasons why:
Knowledge is power, and surprise is never a good thing. It is easy for sellers to have a superficial and inflated view of their home. What could be wrong, they think? They’ve lived there for x years and if there was something seriously wrong, they would know it. Or, they just bought the home four years ago and had it inspected then — why would they need to do this now?You see, it is those very thoughts that can come back to bite sellers. When was the last time your sellers went on their roof, looked in their chimney, crawled around in their attic or basement or under the foundation? Do they know how old their water heater and HVAC are? If they live in an older home, what about the plumbing and electrical systems?
This is exactly why you should have a pre-listing inspection. So you can get a grip on the physical health of your home.
Having a pre-listing inspection does not mean your sellers have to fix every item that comes up — but they do need to disclose everything. This is where you — the agent — come in to strategize with your seller on a plan of attack and what makes the most sense given the market, your competition, time frame for moving, etc.
Some things might need to be fixed in order to give comfort to a buyer or to qualify for the kind of financing they might be doing. For example, if there are buyers obtaining FHA or VA financing on homes in your area, any wood rot or termite damage will need to be fixed before the buyer can obtain the loan.
There might be items that are major vs. minor that you and your seller will need to take into account when pricing the home as they can definitely have an affect on what a buyer is willing to pay. Homes with older roofs, HVAC’s and water heaters on top of other repairs, coupled with a home that needs cosmetic updates can be viewed as “a money pit” in the eyes of a buyer.
If you are faced with a multitude of expensive items nearing the end of their life, you might need to consider replacing at least one and be willing to offer a home warranty to provide some coverage to the buyer for the first year of their ownership. The 15-year-old HVAC might be working great now, but that does not mean it won’t fail in the near future.
Many sellers fear that by having an inspection, they will then have to disclose everything to a buyer which may cause them to pay less for the house. The truth is, a buyer is going to find out anyway, but it will be after they’ve already agreed upon a price and terms that they might not want to pay after the outcome of that inspection.
Avoid buyer’s remorse by shifting the knowledge of the home’s condition to the front end of the transaction rather than after the negotiation. Although a buyer will still have the property inspected by their own inspector, the information found will not be a surprise.
All houses have “things” that are found on an inspection. Even new homes that are under construction or nearly complete have items that need correction by the builder after they are inspected — this despite having a project manager who oversees the subcontractors working on the house.
Back to the “surprise is never a good thing” concept, when you leave discovery of the home’s condition entirely to the buyer is when problems arise. The seller has already agreed upon a price and terms and depending on your home and the time of year it is on the market, the actual time to go under contract may have taken longer than what you thought.
You will have grown weary from numerous showings, second showings and “almost offers” that have never materialized. Now, you finally have a buyer and the transaction may be in jeopardy because of the outcome of the inspection.
The buyer wants to renegotiate the purchase price and/or ask for all repairs to be made or a huge concession to account for what was found. The sellers don’t feel like giving anymore, especially when they might be selling for less than what they thought (which is how most sellers often end up feeling). They could be paying closing costs on behalf of the buyer in addition to agreeing to leave certain appliances, such as the refrigerator and/or washer and dryer.
Everyone goes into full-on crisis mode trying to obtain estimates for the repairs and it is a hurry-up-and-wait game trying to get contractors over to look at the findings and then even more waiting to get their written quotes.
Keep in mind that buyers and their agents don’t always have a realistic handle on the true cost of repairs found from an inspection and might inflate or over-exaggerate the potential costs on purpose as a way to beat down the agreed upon price or force the seller to make repairs. Buyers might seek opinions from overpriced vendors trying to upsell, and sellers will find themselves running interference with this information trying to get their own quotes.
All of this chaos ensues while the clock keeps ticking on the inspection time frame as set forth in the purchase contract. Most contract time frames never take into account the real world of waiting on repair specialists.
Although most transactions are handled this way, it doesn’t mean that they should be. By being proactive, you can help your sellers avoid the stress of the unknown and level the playing field between them and the buyer by recommending a pre-listing inspection. Wouldn’t it be better to have done your homework, know what you will or won’t fix (or in some cases have already tackled it) and obtained estimates on all else?
What is unknown is simply an excuse most times for not taking the time to find something out ahead of time rather than after the fact. Sticking your head in the sand like an ostrich and being in denial of any inspection issues is not going to help get the home sold.
This one is starting to become a serious problem in our industry. Just as the swell of real estate agents has increased as the market has improved over the last few years, so have the number of home inspectors.
What is required to become a home inspector varies from state to state and just because some states require licensure does not automatically grant that inspector sound judgement and the ability to legitimately diagnose/interpret a home’s condition. A license is never a substitute for competence — ask any seasoned real estate agent who has listed properties the amount of times they have had to run interference with an inspector’s report that was full of misdiagnoses.
The prospect of rookie inspectors who have only been functioning as an inspector barely a year or two — and who are running their own shop with virtually no support system and a more experienced inspector to mentor them — is cause for concern. They are crawling through someone’s largest investment and they don’t know what they don’t know and only know enough to be dangerous.
Newer inspectors often discount their fees as a way to build their business, and so what looks like a bargain compared to what more experienced and savvy inspectors charge is often at the expense of the transaction. Buyers might shop by price alone or an agent gives them a “coupon” that the inspector sent out in an email blast to agents hoping that it would generate some referrals. The agent might be newer and might have not vetted the inspector and doesn’t realize all inspectors, like agents, are not the same.
I have run interference with incompetent inspectors more times than I care to remember. It has been as simple as claiming a microwave in a newer home was not operable to the more serious: an allegation that a metal roof was improperly installed on a home that was located across from the ocean and was literally one good storm away (inspector’s wording) from being blown off. The roof was installed when the home was built, and it was a newer home.
After that buyer walked away, a few months later a category 2 hurricane hit(it was projected to be much larger on impact to the area) and the home sustained no damage whatsoever, and the roof was still standing. A roofer came to examine the roof after the first inspection and determined it needed some minor repairs but was properly installed.
An inspector with little knowledge of metal roofs made a bad judgement call. This not only scared the buyer but also the seller who was in “shock and awe” by the discovery and went into a tailspin calling the original builder, the county building department, etc.
My favorite inspector misdiagnosis was an inspector who had barely been licensed about a year claiming a nine-year-old house with a three-tab shingle roof, located 20 miles from the ocean and a 40 minute drive away, needed the roof replaced, because in Florida, those roofs have a shorter life. After that happened, two other home inspectors checked the roof along with a roofer and concluded no such thing.
There were some shingle repairs that needed to be made largely as a result of solar panels that had been installed on the roof about two years ago. That buyer walked after wanting to find a way to claim “hail damage” as a way to get a new roof installed, trying to push the seller to contact their insurance company. We did get another buyer and the second buyer did their own inspection, after which their inspector determined the roof did not need to be replaced.
Although buyers have the right to choose whatever inspector they want, having your own inspection done by a vetted, experienced, adequately insured and credible inspector can be a huge asset when you run into situations like this. That inspector will be available to consult with you during the home sale process and can assist with running interference should an incompetent inspector cross the home’s path.
All parties want a purchase and sale process that is free of hitches and can close within a reasonable period of time. By getting a pre-listing inspection, the risk of the unknown is eliminated and the parties will enter a negotiation feeling confident and empowered.
If a seller is unable or does not wish to take on repairs, the property can be priced accordingly. At the same time, if a seller has replaced a big ticket item, like a roof or HVAC, it might help the home sell faster as the buyer might be willing to make an offer and pay a higher price because of it.
A significant portion of time that is normally eaten up by the inspection period and all of the back and forth trying to resolve repairs is reduced since everyone is aware of the issues and has a handle on what will or will not be done.
Some repairs might have to be made for the next buyer to get insurance or they will likely need to have them done within the first 30 days of owning the home in order to get a lower insurance rate. If a seller has an an older home with knob and tube or aluminum wiring, for example, a buyer might run into a snag getting insurance or the quote might be much higher than anticipated.
The seller might have lived with older electrical or plumbing and not had any issues, however, this can become an issue for the next buyer. It is easy for sellers to become numb to issues that don’t concern them. Unfortunately, real estate transactions don’t work like that, and these are serious concerns any buyer would have before sealing the deal.
Buyer’s are often hesitant to take on significant projects, like a whole house rewire or re-plumbing, unless they can get it at the right price or a seller is willing to pay a significant portion of their closing costs to offset the amount such a project will cost.
Why risk a seller’s home sale while an unknown inspector could potentially wreak havoc on the home’s condition and ultimately thwart the entire transaction? Knowledge is power. Just as a buyer needs to do their due diligence, a seller needs to do theirs so that bad judgement calls don’t derail their deal.
One of the most asked questions I get from clients and friends when considering a kitchen remodel is, “what is the best refrigerator to buy”? A good question with no great answer. Do you want built-in, free-standing, french doors, side by side, water/ice dispenser in door, counter dept, and on and on and on? Some swear by SubZero while others confess that they only splurged on a Sub because that’s what hot and what sells in resale. Some people believe all appliances should be consistent in brand, while others think that each one should be top of the line no matter what label is prominent. Whether it be KitchenAid, Thermador, Viking, SubZero, Bosch, Jenn-Air, or a vintage gem, ask yourself key questions and then determine what suits your needs. How will you use it? What are your daily needs? What’s your long term goal in terms of living in the house? I will begin to photograph refrigerators in wonderful Santa Barbara and Montecito homes, as I caravan each week, and post them here. My guess is that the sheer number of choices will be staggering. I’m starting with this vintage beauty.
Electrical outlets, switches and USB ports need never again be eyesores in your home design. They grace your walls and floors by the dozens so why in the world would you settle for the same old unattractive plug in. Here are couple of examples of stylin’ connections.
Yes, that’s right. It’s a toilet paper rose for your viewing pleasure while you go. Makes a chocolate on your pillow seems rather drab, doesn’t it?Read more
We all know that first impressions set the tone for most things, and houses are no exception. Here is mature palm tree that guarded the entrance of a newly constructed home near Miramar Beach in Montecito. The clever builder/designer nestled beautiful succulents within this majectic palm creating the wow factor at the approach to the front door. I knew, I just knew, the house was going to be a gem…and it was!
When it comes to creative design ideas in a home, what’s under foot can be over the top fun. Flooring can have the wow factor just like this rug made of tile in this dining area, or this black and white painted wood kitchen floor.
There is a misconception that drought tolerant landscape is dull. Just look at this kaleidoscopic of living art and tell me if there is any truth to that. Simply gorgeous, smart and responsible.
California style homes are not just about the architecture. They are about lifestyle. We live inside and out most of the year so our outside space is as an essential part of our living space as is our living room and bedrooms. Outdoor rooms with a fireplace focal point not only add to the ambiance, but also add great value to your home.
Take a look at some of my favorites.Read more
This is a story with a difficult beginning but wonderful end.
First and foremost, I am very fortunate to have such great clients…clients that will be lifelong friends.
Here’s how it unfolded…
My clients were first time home buyers on a strict budge. Their price range was right there where so many first time home buyers are so we had some stiff competition in a market with limited inventory. We looked at house after house after house where we were outbid on some, fell to cash offers on others and were even deceived on others. My clients made a full price offer on one home that needed so much work that the garage was about to fall down. The listing agents reply to our offer was simply this…”we both know that this house will go over asking price”. What? Then why did he list it lower? My clients were not only devastated but they were utterly confused as to how this system actually works. Try after try my clients learned that the process of purchasing a home is not so black and white. There are egos and attitudes involved at every corner. My job is to help navigate those obstacles and get the client what they want. I was on top of every listing in their price range either before it hit the market or just as it came on. We finally found a house that they believed they could call their own. Our timing was perfect (we made our offer immediately after it hit the mls) and the listing agent was a real pro. The combination of those two things set the tone for the rest of the transaction. We (buyer, seller, listing agent and me) worked so well together in getting everyone where they needed to be and what they wanted in a timely manner. Toward the end, we all understood and trusted one another enough to have seller meet buyer (that doesn’t often happen). The stage had been set. They loved one another. After meeting the seller, my buyers felt that this house was truly meant to be for them. They knew that this was the home they were waiting for. The last week before close of escrow, I met my clients at the house to do their final walk-through. The seller had moved everything out of the house except the wonderful brand new shabby chic couch and coffee table which my clients asked to purchase. The seller had left the two items as a house warming gift along with the flowers and the note in the photo below.
Just when you think you’ve been defeated by the system, this happens…
Adding a bit of whimsy can turn a quality, yet ordinary, housing design into something more notable.
Here is a 15 million dollar home that pulled it off:Read more