Archive for the ‘Home purchase’ Category
Friday, June 14th, 2013
Business is business, and oftentimes for many that means keeping emotions at bay and thinking with only a black and white palette. Real estate sales transactions are no exception, or are they?
There often comes a time in a real estate sale where the buyers discover information about their new home that they consider important, and as a result they appeal to the sellers for repairs, credit or a reduction in the purchase price. Most sellers are open to helping the buyers out in some way, but there are others who dig their feet in the dirt and refuse to budge. I have represented many buyers and many sellers, and I have seen both sides and understand where all parties are coming from. But there is something to be said about kindness and trying to understand viewpoints and concerns, and I think no matter what side you are on you can always be a good person.
Of course, each sale is very different and there is no way to formulate a plan that will apply in every situation. My best advice is to truly consider what is being requested and to try to weigh alternatives, then to make a compromise. Here are some tips on how to do just that.
1. Repair request compromises. When a buyer makes an offer on a home, especially for top dollar, and gets into contract s/he is unlikely to know of any problems with the home (unless of course they are obvious, as in a fixer-upper, or where the seller discloses defects prior to getting into contract). It is usually not until a buyer has a home inspection that s/he discovers issues that need to be addressed. At this point most buyers will ask the seller to either make repairs or credit money in escrow to fix items that need repair. In extreme cases, where the repairs are very high, a buyer might ask for a price reduction.
2. Price reduction compromises. These are harder for most sellers to swallow, and rightfully so. However, it is always imperative to look at the nature of the problem(s), and again to have an open mind. If your buyers are asking for a reduction in price because the home has old flooring or old appliances, that is something they knew when they made their offer, thus they had the opportunity to take that into consideration already. But if the buyer discovers something s/he could not see or did not know the extent of during investigations – like that the appliances had bad wiring that made them a fire hazard and have lead to their deterioration – that is an issue the seller should seriously consider.. Of course, it all depends on many factors and no two situations will be the same, so it is smart to have an open mind and imagine oneself on the opposite end of the transaction.
3. Avoiding pricey repairs or price reductions. A good solution for sellers in avoiding pricey repair requests or price reductions is to have a home inspection prior to listing. I do not suggest this to every seller, but only to those who are aware there may be issues OR who live in older homes. It is a good idea to gain an understanding as to what might need to be addressed – the seller can then take care of some items prior to listing to avoid surprises down the road.
As a seller it is important to fully understand where the buyer is coming from. Minor items are easy to fix, and if they are safely hazards I always suggest to my sellers to take care of them – this not only makes you a good person, but it makes a statement that you understand your buyers want to purchase your home and did not anticipate there were safety issues to be resolved. Sometimes it is important to be able to compromise, just as it is important to limit requests to items that are truly a safety concern or could lead to even bigger problems down the road. Of course, there are different factors in each case so every seller or buyer will need to discuss with their agents.
Buyers too need to understand where the seller is coming from. If a home is in contract for a reasonable price (i.e. the price is in line with the comparable sold properties), the buyers need to take that into consideration when figuring out a reasonable repair request or price reduction. If the buyer is paying a premium for the home then the buyer will undoubtedly expect a home that does not have tens of thousands of dollars of repair work added on top of the price premium – if the tables were turned the seller would feel the same.
The best advice when discussing repairs or price reductions between buyers and sellers of home, is to go into them with an open mind. Sellers who deny any type of aid without trying to understand why the request was presented could end up losing the sale – and don’t forget that anything a buyer discovers in a home or other type of inspection must be disclosed by the sellers to any subsequent buyers. Buyers could similarly end up walking away from a home they really love by getting caught up in minutiae, so it is imperative to carefully consider negotiation tactics after contract acceptance. Compromising can often lead to a successful close of escrow.
Monday, June 3rd, 2013
Many real estate markets across the country, including here in San Diego County, are currently experiencing seller’s markets, due to low inventory levels and increased demand for homes. Many homes receive multiple offers and are priced over neighborhood comparable sales values, and there are also many situations reported where buyers will remove appraisal contingencies in their offer (meaning they are willing to pay any value over the appraised value so that their offer has a higher chance of getting accepted).
With higher sales prices in many neighborhoods it is hard to make sense of the comparable sold properties, which may show values that are lower than the asking price of a home that buyers want to purchase. It is often difficult even for agents to counsel buyers on how to handle some situations, because no one wants to see her buyer overpay for a home, but at the same time we do not want to see our buyers lose out on home they love. What should buyers and their agents make of all this, and how do they know what to offer in order to get their offers accepted?
1. Comparable sold properties. Obviously the first place to start is with the comparable sold properties. If there have been recent sales in a neighborhood the task of coming to the right sales price is easier, because one usually will see an upwards trend in prices over the last several months or since the start of the year. As agents we really have to compare the recent solds to the subject property to see what similarities and differences the properties possess, then we need to balance them out and add on for price increases. Sometimes this is not as easy as it seems though, and we really need to dig in and do our homework.
For example, on a recent listing we asked for a price over comparable sold value in the neighborhood, but we knew there were a few homes pending in there for prices higher than what showed on the MLS, and those homes were never placed on the MLS, so the appraiser would not have seen them pending. We had to explain this to both the buyer and the appraiser. So sometimes you have to go beyond what is listed in the MLS and have a title representative pull listings that are being sold by owner or by out-of-area agents who might not have put the home on your local MLS.
2. Area Increases. If there are no recent sales in the immediate area, and no recently sold similar properties nearby, then the focus should be on older sales, taking into consideration price gains in the area or in the county. If you can show that prices have increased substantially in the area, say 10%, yet cannot find comparable sales in the immediate neighborhood, you can still apply the increased percentage in value to the home that you are trying to purchase.
Here in San Diego many areas have increased abut 10% since prices started rising, but there are specific neighborhoods where prices have increased more that that…it is important to get a good understanding of what values are doing in the neighborhood in which you wish to purchase a home.
3. Appraisals. Appraisers seem to be “with the program” lately. At the beginning of the year when prices were just starting to climb, many appraisers were not appraising homes with increased sales prices, or they were making it more difficult for buyers to move forward with the purchase because appraisals were not coming in at value. Now however, there generally are enough recent sales within or surrounding a community that allow the appraisers more room to see the growing values.
If an appraisal does not come in at value there are obviously choices – the buyer and seller can either renegotiate the sales price, or the buyer can choose to pay the difference between the sales price and the appraised value.
It is definitely not an easy task to find value in a home where there are no significant recent sales comparables, but it can be done and you can get your appraisal to come in if you do your homework.
Monday, May 20th, 2013
Deciding whether to purchase or sell a home is possibly one of the most important and expensive financial/emotional decisions you will make during your lifetime. It is one that has not only financial consequences, but also legal ramifications. If done correctly it can be the catalyst for your future – during your lifetime, for your retirement, and to take care of your family after you are gone. That is why choosing the right real estate agent is so important. So how do you do that?
I was inspired to write this article after an ad I saw in my local paper by a real estate agent. The ad focused on the quantity of sales he has completed this year, inferring that the quantity makes him a great agent with whom to work. I realized immediately that this is the mindset of the average buyer or seller – let’s find the agent who has the most sales, because s/he must be very experienced. Personally, I think there is a big gap here so I thought I’d break it down.
Sure, there are agents out there who sell a LOT of properties, many of whom are very skilled at what they do, and likely have many happy customers. Personally, I have had MANY calls from buyers and sellers who have worked with mass-production agents (2 just this month), and I hear a very different side of the story. Many of these people tell me they were treated like a number, that they rarely (if ever) got to speak with the agent after initial contact, and that they were not satisfied with the overall handling of their purchase or sale…these people wanted QUALITY treatment and did not feel they received it.
When choosing an agent to work with, here are some things you may want to investigate:
1. Contact person: Will you be dealing directly with the agent throughout your purchase or sale, or will there be others involved? Make sure you know who will be your contact person, and if it is not the agent then make sure you meet that person(s) before you start working with the agent (assuming you are ok with not being able to deal directly with the agent).
2. Workload: Ask the agent how many clients s/he is currently working with; if the agent has a multitude of clients you can follow up with setting your expectations throughout the course of the transaction, and finding out how the agent will be able to dedicate time to you and your needs.
3. Referrals: Get the names/contact information for at least 3 past clients, and find out how they rate the agent on communication, availability and overall quality of service
I do not have a personal goal to be a mass producer. My theory is to provide excellent service, so that my clients keep coming back and send all their friends, relatives and neighbors to me. This quality of service is more important to me than selling a higher quantity of homes. But there are agents out there who handle a multitude of clients at a time and are successful. It really comes down to what makes you feel comfortable, and finding the right agent to meet your needs.
Some people may like the quantity agents, and for them that is great (and you may even be able to find one who provides both quality and quantity). I believe the most important characteristics in a real estate agent are not only their experience, knowledge and ethical standards, but also the quality of their work and the way they treat their clients.
Thursday, May 16th, 2013
It feels great to be blogging again, and I am sorry I have not posted for over a week! I do have an excuse: the spring home sale season is well underway! I can’t remember being this busy in a long time – not since the early 2000s; it has been incredible! If you are wondering what is going on out there in the North San Diego real estate market here is an overview:
Slight rise in inventory. Although we still do not have a surge in inventory there have been increases, enough so that local agents are able to show several properties to buyers in most cases, rather than just one! According to Housing Tracker, inventory has increased on a national level 13.5% so far this year. In San Diego county there were about 7540 homes listed on the MLS as of the start of this week, which is about 100 more homes listed than the same time last month. The lowest inventory level we hit here in San Diego county was in February of 2013, and the last time we had inventory levels higher than right now was in December 2012…so although inventory is still low from a historical perspective, there is some comfort in knowing that it is rising slightly.
Multiple offers/quick market times still dominate. Yes, we are still seeing many new sales with multiple offers, and usually within days of listing. Buyers have to present their strongest offers in order to stand out from the rest of the crowd. Cash buyers are still in the game and often outbid those requiring lender approval. It can be frustrating, but there are always things that can be done to present the strongest offer possible, even in multiple offer situations (for more on this click here)
Prices are still rising, especially in some areas or neighborhoods. Prices continue to rise in most areas, and San Diego is no exception. The challenge with area appraisers to find higher values in pending property sales finally seems to be getting easier, as many appraisers are now applying the faster growing values into their analyses. For those who are afraid we are approaching another bubble, you can rest assured that will not happen so long as prices stop rising drastically at some point and level out. My guess is that this will happen by the end of the year. For more of my perspectives on the bubble possibility, click here.
Distressed inventory declines. According to market research firm Core Logic, the number of seriously delinquent mortgages has fallen about 33% since the peak (3.7 million) in January 2010. This is good news for buyers who are not finding as many short sales out there. But I must say that they are still out there, and that they are as painful as ever. I am personally awaiting for lender approval on two short sales that have been contingent for a long time – one since December of 2012. Lenders’ promises that short sales were going to get quicker never came to fruition and I don’t believe they ever will (but that is the subject for another blog…stay tuned!) More good news: foreclosure filings also fell to a 74 month low in April, according to RealtyTrac.
Loans may be a tad easier to obtain. There is growing demand for home loans, and application levels continue to rise. In order for banks to improve mortgage assets they will need to address the demands. Also, the Federal Reserve recently discovered that 8% of banks loosened mortgage credit conditions in the past 3 months (ending in April) – now you may laugh and say that 8% is not a big number, but it is a start. Also, according to Realty Times “27 percent of banks plan to up residential mortgage assets over the next year and know they can’t do that without taking on a little more risk.” Good news for borrowers.
All in all the market seems to be shaping up and we are well on the road to recovery. Luckily spring time came along right when the market started climbing out of the doldrums, and it seems we will have a strong spring and summer sales season.
Friday, April 26th, 2013
If you haven’t noticed, flippers are back in full force. It seems everyone wants to get into property flipping these days, even those who have never done so or may not have a good sense of what they are doing. If you are a buyer or know someone looking for property – whether a home, second home or investment property, you need to be careful when you come across flipped properties.
Let’s start with defining a “flip.” This is a property that has been recently purchased and then remodeled, oftentimes very quickly, in order to put back on the market and make a profit. There are all kinds of flippers – from experienced to do-it-yourselfers, and many different levels and degrees of remodeling. As a buyer you need to be very careful when considering writing an offer on these properties. There are several different types of flips, and I have categorized them to make it easier to understand:
Types of Flips:
1. Quick Flip or “Eye Candy” Flip: This is the most common type of flip that I see when showing property, and it is very easy to do and the cost is minimal. This type of flip often involves new paint inside and usually outside, a major cleanup, new (usually inexpensive) carpet in carpeted areas, new hardware to freshen up cabinetry, new light fixtures, and often new kitchen appliances. It gives the illusion of newness, but usually upon deeper inspection one finds that there are many items that need attention – furnaces and water heaters that need to be replaced, electrical issues, landscaping, and many others. If the home is older oftentimes the flipper does not replace the windows, which is an expensive job. Each home obviously differs in what is needed to make it look great to a buyer, and these quick flips often get the “oohs” and “ahhs” from buyers, but they may still need a lot of work.
2. Full Flip: These types of properties address replacement, or partial replacement, of most appliances and other issues, along with a remodel. They typically involve more than just painting and putting in baseboards and new kitchen appliances. Many flippers these days do not do this type of flip, because it is not cost effective. but for a buyer this is obviously the best kind of flip property to buy, because it is not just eye candy and things have been properly attended to. These flippers often address issues that quick flippers do not, like replacing old windows, flooring, cabinetry and sinks, appliances, landscaping, and any other issues that a quick flipper might pass over.
How to Avoid Making a Mistake in Buying a Flip that is a Lemon:
1. Get a home inspection: Keeping in mind that not all home inspectors are alike, it is a good idea to do your research – most real estate agents know inspectors who do a thorough job. If not, contact a few and get names of people who have used them. Talk to those people and see how well the inspector did. Also, check their credentials and make sure they are certified by either CREIA (California Real Estate Inspection Association) or ASHI (American Society of Home Inspectors); if you live in another state you can check with that state’s licensing board. My favorite inspector is a licensed civil engineer and a licensed general contractor as well, so I feel very confident my clients are getting the best inspection possible.
2. Get a home warranty plan. Home warranties are great for the first year, in case any appliances break or you have other issues that are covered under your policy. You can write this into your purchase contract and ask the seller to pay for it. You may want to ask the seller to include upgrades to the policy, like roof, pool (if relevant), air conditioner, etc. That way you are covered, and you can extend the policy at the end of the first year should you desire. Discuss this with your real estate professional.
In order to avoid having to waste time on a home that is a low quality quick flip, you should look beyond the “eye candy” that paint and fresh baseboards and appliances may present. Look inside cabinets, check the furnace and air conditioner (if there is one), as well as the water heater. Look for any signs of prior leaks (although paint usually does a good job of covering these up for a short time). Really take a good look at the home to see if there are other potential issues that may need to be addressed, either immediately or in the future. Have your agent ask questions of the listing agent if you need. If you feel comfortable in making an offer than you will find out more when you have your home inspection.
The bottom line is to hold off on getting excited about a flipped property until you have all the facts and can verify that the home will not end up in need of a lot of work soon after purchase. As always, if you do your homework you will likely avoid making mistakes…buying a flip home can be wonderful if you are careful. Happy home hunting!
Tuesday, March 26th, 2013
Monday, March 11th, 2013
Escalation clauses are becoming very popular again. Although controversial amongst those who work in the real estate field, they are not illegal nor prohibited. If you are a buyer or seller you should understand what they are and how they work…they could be a blessing or they could cost you in a big way.
An escalation clause allows a buyer presenting an offer to agree to pay a certain fixed amount higher than any other competing offers made on the property. Thus, the buyer has a huge advantage over other buyers. Usually there is a cap placed on the price overage.
Let’s look at an example. Say Mr. Seller puts his home on the market for $500,000. According to recent solds in the neighborhoods this is a fair price. He receives 3 offers, all for $500,000, and one with an escalation clause for $1,000 above any other bids, up to $510,000. Mr. Seller can either send out a multiple counter offer to all buyers, seeing if any of them will come up in price. If they do, the buyer with the escalation clause will still come in $1,000 higher, up to $510,000. If the comps do not support value over the $500,000 asking price, the only way any buyer getting a loan will be able to pay for this home is to agree to pay over appraised value, which many buyers will not or cannot do. Thus, the buyer with the escalation clause, who is presumptively willing to pay over appraised value, has an edge.
This sounds great for the buyer, who oftentimes cements his place as the winning bid in multiple offer situations. It also sounds great for the seller, who will undoubtedly sell his home over asking price. However, there are some major caveats when using these clauses, and you need to make sure you understand how they work in order to decide whether they are right for you.
1. Place a limit on your bid. If you are going to utilize an escalation clause, it is important that you do put a cap on your price increase, for obvious reasons. Do not put yourself in a situation where you could be taken advantage of.
2. Understand possible consequences if your escalated offer is accepted. You need to make sure that you understand will happen if your offer is accepted. If you are obtaining a loan with 20% down, for example, you will have several options. You can include the higher contract price in your 80% loan amount, if possible. If not, you will need to be able to pay the cash difference. Similarly, if you do not include the increased price in your loan amount and the home doesn’t appraise, you will need to be able to pay the amount in cash over appraised value…unless you have a contingency in your contract giving you the right to cancel should the home not appraise – but this would make your escalated offer not very desirable to the seller and really defeats the purpose of an escalation clause.
3. Seller could use your offer to her advantage. Consider this: if you submit an offer with an escalation clause, it is possible the seller could use that to solicit higher offers, just by letting other potential buyers know there has been an offer presented with an escalation clause. This could be detrimental, so you have to decide whether you want to put yourself in that position. Also, how long does the seller have to contemplate your offer? You want to discuss this with your agent, and possibly limit the time the seller has to make a decision.
4. How do buyers really know there IS an escalation clause on a submitted offer? You need to be careful, because even if a listing agent informs you that there is an offer coming in with an escalation clause, you want to make sure any offer you present is one you can afford, and one that you can afford the increased price should the home not appraise at the price you are offering. In other words, if you know there is another offer with an escalation clause and thus decide to make your offer up to $10,000 over comparable market value, you have to be comfortable with the possibility that you will need to pay the $10,000 cash above appraisal value if the home does not appraise.
If you are a buyer who has been told there is an offer on the table with an escalation clause, you should have your agent obtain proof of this offer before presenting an offer. The listing agent can do so without disclosing the name of the other buyer or the price offered, by whiting out specific terms (name and price) and showing you the offer form.
5. Do not waive your contingencies. Make sure you keep your loan and inspection contingencies when using escalation clauses…you always want to make sure you know if there are any issues with the home that could cost you lots of money, and similarly you never want to waive your loan contingency (unless you happen to have enough cash to cover the purchase price in the event your loan does not go through.)
1. Escalation clauses may not be in the sellers’ best interests and could backfire. If you are a seller who has received an offer with an escalation clause, and other potential buyers know about this, it could ruin your chances of getting other offers. If the buyer with the escalation clause does not qualify or backs out for another reason, you could be left with accrued market time and no other offers.
Let’s understand this using the above example. Say buyer 1 presented the offer with the escalation clause; buyers 2 and 3 know this and also know it is highly unlikely the home will appraise beyond a certain number. Not knowing what buyer 1 offered, nor the terms of his escalation clause, they may simply decide it’s not worth it to present an offer at all under the circumstances. If you accept buyer 1′s offer and down the road the contract is canceled, you now have to start all over marketing your home, as you have no backup offers. You go back on the MLS with the accrued market time, potentially causing other buyers question why your home has not sold.
The important lesson here is to really understand how escalation clauses work, whether you are a buyer or a seller. Buyers need to be sure they can accept the terms should their escalated offer be selected. Buyers and sellers should talk to their agents and brokers to make sure using an escalation clause is in their best interests, and I also suggest consulting an attorney before doing so. Escalation clauses can be beneficial if you are careful.
Thursday, February 21st, 2013
Sellers rejoice: it is finally a sellers’ market in many areas. For those homeowners who need or want to sell, this news has been a long time coming, after the last few years of the housing market collapse and bad news. There are some very positive market conditions that accompany this changeover:
Home price increases: If you follow the housing market in your area you may have noticed that prices are increasing in most areas (of course, you should check with your local real estate professional, as every area is different). The median national home price has increased 12.3% in San Diego county from this time last year, according to the National Association of Realtors (NAR).
The great news is that this will move many homeowners from being underwater, to being able to finally sell and move on. Many of these people were “stuck” in their homes because they owed more than their homes were worth. Zillow reported that over 2 million homeowners came out of the negative equity doldrums on their homes in 2012, and that is expected to continue this year. Over the next year we will see many of these underwater homeowners get out of negative equity situations, which will then increase the inventory levels and bring the market back into “normal,” aka healthy, status.
Increase in buyer demand: Also, according to NAR, buyer traffic has increased 40% from a year ago. There are many buyers out there ready to buy, and less inventory for them to see. This keeps prices climbing and leads to…
Multiple offers: Many listings are obtaining multiple offers, and many are also selling not only over comparable market value, but over appraised value. Lots of buyers are willing to pay cash out of pocket for homes where their appraisal has come in too low (they pay the difference between the appraisal and the sales price), thus driving neighborhood comparables upwards.
Market times have decreased: Due to all the above factors, market times have decreased and homes are selling more quickly. In San Diego county, average market times decreased for almost every city. The average days on market in North San Diego for detached homes was 36, down from 48 days in December 2012. Market time for attached homes similarly fell in the majority of San Diego county cities, some as much as 84%, with the median attached home market time all across the county at 48. (Source: HomeDex)
The market is improving and all signs are pointing toward a healthy 2013 for the real estate market. The biggest plus is that we will eliminate the negative equity situation for many homeowners, creating more inventory for buyers, and allowing many current homeowners to sell and purchase properties that are more cost-efficient for them. All this, of course, will create higher home values, which benefit neighborhoods.
All in all, this is a great time to be in the position to sell, so get your home in tip-top shape and enjoy the turn of the market. If you are thinking of selling your home, it is important to consult with an experienced neighborhood real estate agent.
Monday, November 26th, 2012
I recently came across a home that was for sale by owner. My client and I had been out looking at properties, and she later drove back through a neighborhood she particularly liked. She noticed a For Sale sign partially obscured on a home, which we had not noticed. I searched the internet for information about the home, but found nothing indicating it was for sale. I called the very nice owner, but when we finally connected my client had already flown back home and he did not want to cooperate with agents.
I know there are many agents out there who specifically seek out for sale by owner (or FSBO) properties, and many of them make it a priority to get those homes listed. But there are some big problems on both sides that need to be considered before hanging up a FSBO sign.
Issues Owners Must Consider
1. Exposure. As indicated in my example above, if you are going to sell your home it is extremely important to get exposure. The MLS is the number one place to showcase your listing, as thousands of property sites (where the buyers are looking) link to the MLS. Most active buyers have searches, oftentimes multiple searches, set up on agent sites and other house hunting sites like Zillow, Trulia and Redfin. If your home is not there, these buyers have NO idea it is for sale. In today’s market, where there is little inventory in most places, and where there ARE active buyers (and many multiple offer situations), it is simply silly not to have your home on the MLS.
If you still insist on trying to sell yourself, my best advice to you is to get your listing on the MLS. There are brokerages that will charge a small fee to do so, without doing any other work for you. It is well worth the expense.
2. Calls from LOTS of agents…who will want to know if you are willing too cooperate with them should they bring a buyer to your home. Most buyers DO work with agents, and if you are not willing to do so yourself you could be losing qualified buyers. An agent will not show your home if s/he will not get paid for making a sale and doing all the work involved in an escrow.
3. Unqualified buyer issues. If you do find buyers who are interested and not represented by an agent, you will be responsible for making sure they are qualified. This requires a lot of leg work, which most agents do before showing homes to their clients. You could take your home off the market for weeks assuming your buyers are qualified, only to find they are not. During that time you could have found other buyers, and then you will have to start all over.
4. Possibility of no showings, as many buyers are working with agents. This goes hand in hand with some of the above points.
5. Loads of paperwork and legal ramifications. If you are representing yourself in the sale of your home, you’d better be careful. You need to fill out a disclosure packet, and if you leave out crucial information it could come back to bite you down the road. An agent on your side is there to make sure you have filled out the disclosures correctly, and that all the paperwork is in order. Also important, if there ever is a legal problem down the road (and this is not a rare occurrence), it is nice to have the brokerage on your side to help you.
6. Other warnings. It is very important to note that if you are delinquent in your mortgage and are trying to do a FSBO, BEWARE. This is not something you should attempt on your own. You need to find a local agent who is experienced in delinquent properties so that you can discuss your options. If a short sale is an option I advise you to not even contemplate attempting one on your own. There are people who are experienced with short sales who can help you, providing a much stronger chance of approval.
Issues Buyers Must Consider When Purchasing a FSBO
1. No representation = Possible Legal issues. As discussed above, if you are a buyer purchasing a FSBO without an agent to represent you, you need to be very careful. If the owners do not fill out paperwork correctly and fail to disclose something, which later becomes an issue, you could be stuck with a legal dilemma. If you have an agent on your side to review all documentation and make sure you are legally protected, you will be in a much better position.
2. Escrow is a neutral party. It is important to know that the escrow officer can help you in some ways, telling you what paperwork you need. But keep in mind that escrow is a neutral party, and cannot give you any legal advice – they do not represent the interests of any single party to the sale.
3. Pricing. Make sure, if you are purchasing a FSBO property, that you have a copy of recent sold comparables in the area, and that you understand the prices and reasons for them. You obviously do not want to overpay for a home. This is not something you have to have an agent to do, but local area agents are usually very in touch with area sales and could explain to you why a particular home sold for more or less than the comps, and in doing so figure out the “right” price for a home you are thinking of purchasing. Most FSBO owners are savvy and know the neighborhood comps, but it is still important to study them yourself, especially if you are purchasing the property with a loan – lender scrutiny is rigid, and if the home doesn’t fit in with the recent comparables your loan will be denied (unless of course you renegotiate price with the seller at that point…something you need to be prepared to do well).
4. Must-Do’s in Buying FSBOs. If you are a buyer contemplating a FSBO purchase, it is imperative you do the following: get pre-approved with a lender first, get a good comparable market analysis – CMA (which you may be able to get from a local area agent even though they are not representing you), make sure you connect with escrow to understand what paperwork is needed, and have a home inspection.
Wednesday, June 20th, 2012
Are you still wavering on whether or not to buy a home? Here is some great information for you to consider..it is a great time to buy!
Infographic courtesy of California Association of Realtors