Archive for the ‘Home seller advice’ Category
Wednesday, September 20th, 2017
Flat fee brokerages have been around for a long time, and recently there have been a few additions to the real estate flat fee brokerage world. For those who do not know about these companies, they attract home sellers by promising to list homes for a set fee that is lower than what the average real estate agent will charge for the same work. This sounds great right? Many sellers agree and sign listing agreements excitedly, without considering the facts.
Here are some reasons to truly investigate flat fee brokerages prior to signing on the dotted line:
1.Service. There are new flat fee brokerages out there that promise to provide the same great service as traditional agents who charge more commission to do the same work. Make sure you understand what you are getting for the price you pay.
Flat fee agents tend to have a LOT of listings. I know from much personal experience that one listing alone requires a lot of my attention and availability. Personally servicing multiple listings will jeopardize service.
Also keep in mind that flat fee agents do not get paid much per listing – they make up for that in volume. Will that lead to lack of attention to your listing? You need to figure that out.
2. Paperwork. Many flat fee brokerages charge such low fees because they do not actually handle paperwork or showings. There are those who promise full service, but MAKE SURE you get an explanation of exactly what that means – if you have it in writing and the agent cannot deliver you should be able to fire him or her (see number 3).
3. Check the contract thoroughly. Many flat fee brokerages have clauses in their contracts that sellers may not understand, such as agreements to purchase replacement property only with the brokerage (remember, flat fee brokers make more money from buyer sales than from listings since they get paid full commissions for those), to only use affiliated mortgage companies, or to forfeit money if you cancel the contract. Be careful and make sure you fully understand what you are signing. It is also very important to make sure that you can fire your agent/brokerage if you are not satisfied – at any time – without being penalized or trapped in a contract. If you need help deciphering these contracts, seek legal counsel.
4. Check the brokerage client satisfaction history. It is always important to check testimonials and stories from clients who have used the services of any broker. Spend time researching not only the broker’s own site and third party sites (like Zillow or Yelp), but also check news stories online. You may be surprised at some of the negative press you find on the brokerage.
5. Legalities. Keep in mind that selling a home is a legal transaction – if you do not have someone to guide you it could be dangerous. In order to avoid being sued it is always a smart idea to work with a real estate agent who can help you with paperwork and deadlines, as there are many of both in every real estate transaction. Not to mention, brokerages have insurance to protect against many issues that may arise, IF they were representing you. Flat fee brokerages that just list your home on the MLS and have you do all the work may set up situations that are ripe for breaches of contract and non-disclosure issues, among others. Make sure you have someone guiding through the sales process, or hire an attorney to look over all your paperwork.
There are some new flat fee brokerages out there that are trying to change the way the flat fee business is handled by promising stellar service. This is a great intention, but if you are a seller make sure that you understand the contract you sign, as well as your rights. You may want to speak with traditional agents to compare services.
The bottom line is that commissions are not set in stone, but you do get what you pay for in most cases so make sure you understand to what services you are entitled for what you are paying. If you are not happy, you should be able to fire the agent.
Thursday, August 31st, 2017
I’ve seen a lot of changes in the real estate industry over the last 14 years, and one of the biggest has been the increase in the number of “teams.” A team is a group of real estate agents who work under one broker. For example, say John Smith works for Real Estate Company, and he forms a team of 10 agents. They all work for Real Estate Company, but they work together with John Smith as his team members; multiple agents may work together with a client during a home sale or purchase.
Many people wonder how a team can benefit them if they are a buyer or seller, and whether it makes more sense to hire a sole agent or a team. Needs and opinions will vary, but here are the reasons I feel that working with an experienced sole agent, rather than a team, can truly benefit buyers and sellers:
1. Facts and details. As a sole agent, my clients know they are working with ME. They will not have to deal with a slew of other agents, assistants, secretaries or other people. If they have a question, they will be able to reach ME. I always answer my phone and if I am with another client or in a meeting, I call back quickly. My clients love this, because I know what is going on at all times in regards to their sale or home search. In turn, it benefits me because I do not have to check in with someone else to find out what is going on before calling or visiting a client.
2. Relationship. I have ALWAYS said the real estate is not just about selling property – it is about forming a relationship with the person who is entrusted to handle a legal transaction on your behalf. Buying or selling a home or investment property is fraught with legalities – you need to know that the person you select to help you truly has your back. I believe (and my clients confer) that it is easier to form a relationship with one person who is dedicated to serving you.
3. Connections. Team members often claim that they provide superior service because they have a bevvy of “exterior” (not agents) experts – loan officers, escrow officers, title people, contractors, etc. Well, guess what? Sole agents have those too – in fact, I have a list with many kinds of referrals that I have compiled over the years, and my clients reap the benefits.
4. Numbers game. As a sole agent my goal is to be there for my clients. I don’t focus on how many sales I can make, but rather on how I can best serve each individual to the best of my ability. If I cannot then I will not take on new clients. The key is dedicated service, not a numbers game.
People have different opinions on how their needs can best be served when it comes to real estate transactions, and that is great. If you are planning on buying or selling real estate, it is important to figure out what you expect from your relationship with your agent or team, and to make that clear up front. Most importantly, make sure you find an area expert who has experience selling homes. A large percentage of agents have secondary jobs and do not think of real estate as their career – find one who is a professional.
Tuesday, May 30th, 2017
People are always asking me how they can save money on home purchases and sales, and legislation under California Propositions 60 and 90 is one of the best ways to do just that. BUT, you have to meet certain qualifications.
Proposition 60 and 90 help home sellers transfer their current residential tax base to the purchase of a new home, saving potentially thousands of dollars in taxes. Proposition 60 is for intra-county transfers (between the counties of San Diego, Orange Los Angeles, Riverside, Alameda, El Dorado, San Bernardino, Santa Clara, San Mateo, Tuolumne and Ventura. Proposition 90 allows for the same advantage with inter-county transfers.
This all sounds great, right? Here is the fine print…in order to qualify:
1. The home owner (only one of them) must be at least 55 years of age. Co-owners cannot both qualify.
2. The home being sold must be a principal residence
3. The present home must be sold and the new home must be equal or lesser market value to the original property
4. If the property is held in a trust the seller will need to be the beneficial owner of the trust, not merely the trustee
5. The replacement property must be purchased or built within 2 years (before or after) of the sale of the current property.
6. “Your original property must have been eligible for the homeowners’ or disabled veterans’ exemption either at the time it was sold or within two years of the purchase or construction of the replacement property.”
As an example let’s say you purchased your home many years ago for $400,000 and it’s current market value is $800,000. If you sell this home and purchase a home that is $800,000 or less, should you qualify under Proposition 60 or 90 you will be able to take your current tax basis (tax on the $400,000 home plus the increases that have accrued over the years) to a replacement home that is purchased for $800,000 or less. This is a huge savings because most counties tax about 1-1.25% on real estate purchases.
For more details on eligibility requirements to take advantage of Prop 60 or 90, click here.
Monday, May 22nd, 2017
Today Zillow announced that it has test-launched a new program called Instant Offers, which it claims will help home sellers and agents. But upon close inspection this program is full of legal caveats for home sellers and agents alike.
The new program claims to offer options to home sellers so that they can avoid traditional marketing such as open houses and photographs. Here is how it works, according to what I read: a seller decides to use the program, which offers 3 options –
1. Sell directly to investor buyers: Without placing the home on the MLS it is offered to investors for purchase – almost like a For Sale by Owner listing. The investors can make an offer. At that point the homeowner can decide whether to take the offer or list on the MLS with an agent the traditional way (Zillow will recommend the agent). Zillow will benefit financially from the agent referral as more agents will want to advertise with Zillow). It is not clear how Zillow will benefit financially when sellers do not want to work with agents, but maybe there will be some kind of agreement between it and the investors.
2. Sell to investor buyers and use an agent recommended by Zillow to assist with the sale: If the homeowner wants to list their home Zillow will recommend one of it’s “Premier Agents.” These are agents who pay Zillow for advertising. Zillow wins here (like above) because 70% of its revenue comes from these agents who advertise.
3. Reject offers and list on the MLS with an agent: Zillow will of course recommend one of it’s Premier Agents (note that Zillow is NOT a broker, rather these agents achieve this status by paying Zillow money to advertise their names and services).
Ok…so you may think this is good – it gives home sellers options. But here are the other points to consider for all home sellers:
1. Potential lower sales price – investor buyers typically do not pay high prices – they offer a quick sale but the catch is that they want to save money. For those who have to sell quickly this could be a good thing, but for those who want to realize top dollar this is not the answer. If you have a home that is a true fixer upper an investor buyer is great as well, but there may be competing investor buyers out there on the open market and you could end up getting more if you have multiple offers, so choosing the Zillow program really puts your back against the proverbial wall.
2. High Fees – People always complain about high fees for selling homes. This program appears to charge a 9% service fee to those who choose to sell to one of the Zillow partner investors. Rather than pay such a high fee for a likely lower net sales price, it’s better to interview professional skilled area agents. Standard commission rates in CA are around 5% but commissions are negotiable.
3. THE LEGALITIES – Selling a home is a legal transaction, with contracts, paperwork and deadlines that are imperative to get right in order to prevent a lawsuit down the road. Although Zillow says it will recommend the seller work with an agent to get through the paperwork process with the new program, sellers have the option to forgo this. This is problematic, to put it mildly.
If I can give you one piece of advice only when it comes to selling your home, it would be this: have a lawyer review all your paperwork, including seller disclosures. If you do not want to hire a lawyer, make sure your agent has a good broker and have that broker review all your paperwork (or better yet, find an agent/Broker who IS an attorney). There are also many highly skilled agents who know what they are doing – find one.
4. Errors and Omissions insurance and lawsuits – Every broker (at least here in CA) must carry errors and omissions (E&O for short) insurance. It protects them in the event of a lawsuit brought by a party to a real estate transaction. Here’s the biggest problem with Zillow’s new program – Zillow is NOT a broker. If a home seller opts into the program and elects not to work with an agent, who is going to assume liability for contractual paperwork? What happens if disclosures are not filled out correctly, or if there is a problem with the home that is discovered after closing? The seller is put in a very bad position.
Agents could be hurt by this new program if they do not advertise with Zillow, as they will not be recommended by the company program. This is a lose-lose for hard-working professional agents everywhere who do not choose to pay money to Zillow, as home sellers in their areas may not even come across those skilled agents if they opt for the Zillow recommended agent.
These and many other questions do not have clear answers and as an attorney I say this program is fraught with potential problems for home sellers. So while Zillow may think the Instant Offer program is a great new “thing,” in my opinion, or until I see otherwise, sellers should steer clear. This program is in a test phase right now and is only available in Las Vegas NV and Orlando, FL.
For more information on the legalities of selling your home please contact a skilled attorney or broker in your area, or feel free to contact me with any questions by responding to this post.
Tuesday, April 18th, 2017
Sellers get ready! Not only are we about to embark on the busy Spring/Summer selling season in real estate – which actually seems to be well under way – but according to Zillow we are entering the best 2 weeks out of the entire year to sell a home.
Zillow reports that the period between May 1-15 is the BEST time of the year in which to sell a home. The study found that homes which sell during this time sell on average 18.5 days faster and for more money (1% more than the average listing).
It is important to note that some areas may have different results, so I suggest contacting an experienced agent in your neighborhood/surrounding areas to find out when the best time to list your home may be, and how the market is doing.
In Carlsbad CA for example, the market is currently very hot. Many homes are getting multiple offers and inventory is historically low, so desirable homes are selling quickly. Buyers are waiting for homes to pop up in certain neighborhoods; I get many phone calls from agents asking if I know of any upcoming sales in a neighborhood in which I have sold many houses.
The bottom line is that if you are considering selling your home, now is one of the best times to do so. There is a healthy buyer pool out there so contact an experienced agent and find out what you need to do to be sale-ready.
Monday, August 8th, 2016
It is common knowledge that upgrades and improvements add value to homes, and of course most people know that there are some upgrades and improvements that add more value than others, such as upgrading kitchen counters and appliances, or bathrooms. But some improvements do not truly add value in the sense that they will increase your sale price potential. Let’s take a look at some of these.
1. Pool: Pools can be highly desirable or completely undesirable (for example, if the buyers have babies or small children they may be seen as a danger). If you have a pool then of course you will attract buyers who want one, and if you do not have one but have a yard that will accommodate one you may attract buyers who are interested in adding one. But if you do not have one, adding a pool will not usually help resale value (there may be an exception if your home is located in a very warm environment like the desert, where pools are coveted and oftentimes expected). Speak with your agent if you are considering adding a pool and know you will be selling down the road.
2. Yard improvements: These can be tricky. There are some improvements to yards that can actually add value, and some that may be a waste of money that sellers will never see at selling time (although they may make the home more appealing). For example, if you have a yard that is merely dirt and has no landscaping, it may make sense to put in sod and an inexpensive border with some greenery. But going overboard – fully landscaping and hardscaping – may not bring dollars to your pocketbook. There are ways to make yards look nice that do not involve spending lots of money.
3. New construction landscaping: Most newly built homes do not come with landscaped backyards, and often also come without landscaped front yards. It is always a question whether to landscape if the home has to be sold prior to any being completed. Many buyers will not want to pay top dollar for dirt front and back yards. BUT one has to be very careful when landscaping, as it can become very personal and if a potential buyer comes along who doesn’t have the same taste and feels the need to rip everything out and start over it can actually be a detriment to the sale, rather than a benefit. It is important to speak with a knowledgeable real estate agent who can take into consideration the neighborhood, prices and other factors. If it is decided that some type of landscaping is a good idea, try to keep it simple in case the new buyer wants to add more (built-in BBQ, firepit, hardscape, etc.) Keep in mind that just because you spend the money, it does not mean you will get it back at sale time – in fact, you likely will not…BUT having a completed yard could also make your home more marketable (I know that is confusing so speak with an experience local agent if you will be selling soon after purchase).
4. Garage conversions: These typically are on my “do not do” list, and if they exist I recommend converting them back prior to selling. Garage conversions require permits for one thing, and many people (at least in my years of experience showing these types of homes) do not obtain them. Most buyers want the garage space so unless there are many spaces in the garage if you have a 2 or 3 car garage it is preferable to NOT have one converted to a room. Most buyers will see it as something they have to “deal with” and may write your home off their possibility list.
5. Room additions: This is a tricky one because it all depends on the home, lot and what is being added. If you live in a tract neighborhood and want to add a room it could be ok if you have a large enough lot such that you are not making the outdoor space smaller. If your addition makes your home the most expensive one on the block you need to beware, as most buyers do not want to own the highest priced home in a neighborhood. There is a lot to take into consideration when adding a room, so speak with an experienced agent if you are planning to sell down the road and are contemplating an addition.
6. Other improvements: There are many other improvements that could add value to a sale. I suggest inviting an experienced local area agent over to discuss any potential improvements prior to sale. Adding a new furnace or water heater is great if the ones you have are old – that will add some value an peace of mind for new buyers. New windows may be good in an older home as they help with insulation. New flooring could be a charm under the right circumstances, and paint – often the cheapest and best way to make a difference – is a great improvement. What you “should” improve will really depend on many factors, so consult with an expert agent in your area before spending any money.
Friday, June 17th, 2016
There seem to be a a slurry of lockbox break-ins and subsequent home break-ins or attempts lately in the San Diego County area, so if you have a home for sale or are a listing agent, please read on so you can be informed and safe.
Several agents – including myself – have reported lockbox break-ins or attempted break-ins within the last few months. One agent group to which I belong had multiple agents telling stories of lockbox thefts, with subsequent break-ins or attempts. It seems there is a pattern: the thieves come in the middle of the night and use power tools to break the lockbox off doors or pipes. They then take it and return with the key the following day to attempt home robbery.
One agent reported that her seller noticed in the morning as he was leaving for work that that lockbox had been cut. He stayed home and had a locksmith come immediately to change the locks – the thief/thieves returned later that day and attempted to access the home, but luckily were unable to do so – they decided not to use another lockbox.
Another agent said her lockbox had been cut and the thieves returned and stole an oven from the home.
Last month my sellers heard someone tampering with their lockbox between 2-3 AM (Mrs. Seller happened to be up nursing the baby); when Mr. Seller ran to the door and opened it the thief jumped in his waiting car and sped away. We removed the lockbox.
I spoke with the Carlsbad Police Department and they have not had any reports of this from agents or homeowners. I encouraged my clients to report their incident when it happened, but they did not get a description of the man, nor could they tell the make or model of the vehicle or license plate number – it all happened so fast – so they did not report it. The police department recommended not using lockboxes.
After reading the other agent stories a few days ago I removed a lockbox from a listing of mine and made showings by appointment only. Obviously this is an inconvenience for buyer agents, because they and I have to find mutually available times to meet, but it is better that my sellers are protected.
Keep in mind that real estate lockboxes are very well-made and are supposed to be break-in proof, according to the local Realtor association, but with battery operated power tools it is obvious that this is not the case. Never use contractor lockboxes, as these are much more flimsy and easier to break open. Either way, if you are a listing agent or seller you may want to consider this information and decide how to proceed.
If you are an agent please let me know if you have a similar story to share – and please report it to your local police department. This effects our business and our clients…hopefully there will be a way to stop it from happening that will not inconvenience home sellers and agents.
Thursday, January 21st, 2016
The real estate business has definitely evolved over the last few decades, with the growth of technology being the main contributor. But when it comes down to it, working with a real estate agent is not just about finding a savvy salesperson, but rather it is about finding someone who truly has your best interests at heart and is willing to work hard to find the right property or sell your home, at the right price, with the best terms. It is not so much a sales relationship as it is a trusted adviser relationship. An agent plays many roles throughout the buying and selling process – researcher, chauffeur, adviser, negotiator, paperwork coordinator, and therapist – to name a few.
As they always will, many people try to come up with ways to find and convert “leads” to clients, from advertising to cold calling to handing out cards to people all day long and asking for referrals from past clients, friends and family members. In the last year I have seen some interesting attempts to woo potential buyers and sellers, and although I am impressed with those who are trying hard, I must say I have been surprised at some of these methods:
1. Recorded Calls: I received my first recorded sales call from a real estate agent last year. I was surprised because the agent, who had a lot of enthusiasm, sounded like he was trying to sell me a used car. He went on and on about how he could help me buy or sell a home, and about his strengths as an agent. Now, I must say that selling real estate is not difficult – anyone can do it. BUT not everyone can do a great job at taking care of the PEOPLE, the clients. I have always said that this business is not about houses, it is about people.
2. Print Marketing: Marketing via mail and email has always and will continue to be a very strong way for the real estate agent to get business – s/he creates a lovely flyer or brochure and lists skills and past sales and testimonials to make her/him look amazing. S/he even uses words like “Number 1 agent” and “Top agent,” “sold more homes than anyone else.” The trick is that many agents can say these things by putting a spin on the information, and these statements can be true.
Many of these advertisements actually constitute ethical violations in my opinion (and I have been trying to get the rules changed to prevent this, but that is another story). For example, if you are a broker who oversees say 30 buying agents, and among those agents your brokerage or team sold 100 homes last year, how is it ethical for you yourself to claim you sold over 100 homes last year – you did not do that personally, your agents contributed many of those sales. But to the average homeowner who receives your marketing piece, you look like you have done more business than anyone else. Glossy marketing pieces with claims to being “the top producer” do sway the average Jane and Joe many times. Like the political arena, I think that if agents are going to make claims like this they need to explain the truth behind the claims.
3. TV Commercials and movie theater advertising: These types of marketing can also be valuable, but again the time is limited and the agent has only a few moments to convince you of how incredible they are at their job. There is no fine print – but if it gets you to remember their name and call them then the piece has achieved the goal set by the agent. Again, anyone can make a great marketing piece that makes them look like the best agent ever – and of course that is what all salespeople try to do.
4. Broker Calls to Agents About Homes “Coming Soon” to the Market: This newest method is interesting, and is aimed at local area agents. A broker has an agent make calls to other agents’ voicemails, reading from a script about a home that is not yet listed on the open MLS but soon will be – they tell the agents (it seems agents are chosen based on who sells the most in a given area – not all agents receive these calls) that they are giving them a chance to show the property to their buyers before it hits the MLS. Now, if you happen to be an agent working with a buyer and get a call describing the perfect home, this could be a win-win for your client. But if you are an agent and do not get that call, or if you are a buyer looking online and waiting for the perfect home to pop up, you are truly at a disadvantage in such a situation. So this can be a good or poor method of advertising, depending on how you look at it.
5. “Coming Soon” Listings Posted on Third Party Sites: There are some third party sites (such as Zillow and Trulia) that allow agents to post “coming soon” listings. Not all agents can do this – they must pay to become an elite member of these sites, and then they have the “privilege” of posting such properties. It’s great for the agents – they likely get at least some calls from potential buyers – but for those buyers who are not looking on those sites they get the short end of the stick if the home sells before hitting the MLS. Similarly, agents can send out e-flyers or emails about listings that are coming to the market soon, and if this is done fairly (sent to ALL agents in a county), then that is a great advertising tool. It is not fair to the potential buyer who is not working with an agent and who waits for properties to list on the MLS, but of course this is just one of the many benefits of working with an agent (we tend to hear about up and coming listings from many industry sources – agents, appraisers, lenders, sellers, etc.).
From my perspective I believe that all agents should be able to advertise and “sell” their services and skills. But I think there are 2 rules that need to always be adhered to by real estate agents and brokers: 1. Keep it classy. 2. Be honest and ethical. If the local real estate associations who govern agents and make rules set out to make the rules stricter, I think it would be beyond valuable to potential buyers and sellers.
If you are looking for a real estate agent, remember to get the full picture – what can s/he do for you that is different from other agents? Make sure you will not be just a number – some agents have teams of people working for them and they represent many clients – if you like this than great, if not you may want to look for an experienced agent who treats you like you are the only client. Everyone has different needs, so make sure you get all your questions answered and find the person who is best able to help you; shiny materials and boasts about being a “top producer” should play into your decision minimally (although you do want someone who can sell your home with strong marketing and advertising abilities), but you need to feel comfortable with the person and what s/he can offer you.
Thursday, October 1st, 2015
Have you ever thought about your experience buying clothing, and compared shopping at say Nordstrom, to shopping at a discount clothing store? Did you notice the service difference – sure, the Nordstrom employee works on commission, but that is actually a benefit to you if you need help finding the right outfits. He or she will go out on a limb to pick the perfect shirt, slacks, tie or accessories to make you look your best.
Selling a home is the same. I always tell potential sellers when I meet them to discuss listing their homes that ANYONE can list a home – it is not rocket science. The part time mom/real estate agent who only works weekends, the new “green” 18 year old agent with his first client, or the experienced agent – they all can do it. But you have to make sure to ask the right questions and get the right information to assure that you truly get the best representation.
You may have noticed agents in your area who might boast that they will list your home for less than the competition – some for say a 1% fee, and others for flat fees. While this may sound great to you as a seller, make sure you interview a seasoned listing agent and compare what you will get from each – you may be surprised.
Here are the things you need to ascertain as a potential seller to make sure that your home will be marketed properly and survive the escrow process in order to close:
1. Responsiveness – Many discount brokers will take your fee and put your home on the MLS, but that is where the buck stops. If you have questions or concerns you may find it hard to ever reach them, let alone have issues responded to. Even “big” agents who list many properties have this issue – there are several of them in my area and I have helped clients sell homes who had worked with them before and were unsatisfied with their lack of responsiveness. This is important to you as a seller, because you need an agent who is your partner and can communicate both effectively and continuously throughout the entire process from listing to closing.
2. Marketing – Does the agent’s marketing budget mirror the commission you are paying? In other words, if the agent is taking a lower fee, is this going to cause your marketing to be less than superb? I can tell you that I get a LOT of real estate information in my mailbox, and about 90% of it is junk – poor quality, bad images/non-professional photography, grammatically incorrect/spelling errors. The way your home looks to potential buyers is what will drive them to want to see it – it is a feeling and a lifestyle that you are selling, not just a house with walls.
3. Communication with other agents and parties: Your listing agent needs to be able to effectively communicate with other agents, loan officers, lenders, escrow and title representatives throughout the sales and escrow process. This includes following up with showings and alerting agents of potential buyers of any changes or new developments with the property. Problems always come up that need to be addressed in order to stick to the time frames identified in the contract – make sure your agent knows how to do so and is willing to stay in touch on a daily basis.
4. Negotiations – This is a big one. Your agent must be a strong negotiator. Unfortunately many real estate agents are not strong in this regard, and many contracts do not come to terms or fall apart after agreement. Negotiation skills are needed not just at the start when a contract is received, but throughout the entire escrow period. Getting an offer is just one part – keeping those buyers excited about their new home until closing is another issue.
5. Paperwork – if you work with a discount agent/brokerage, make sure that your agent explains how the paperwork will be handled. Real estate transactions contain a LOT of paperwork, and they are all LEGAL documents! There are many consequences to filling out paperwork incorrectly, including law suits years after your home sells. You need to make sure your agent knows how to properly handle the paperwork and how to coach you in filling it out correctly so as to avoid legal ramifications.
The bottom line is that you usually get what you pay for – like comparing Nordstrom quality and service vs. Walmart quality and lack of service. Unlike buying a shirt however, selling a home comes with many legalities. Make sure you are protected and find an agent that will work hard for you to keep you informed, compliant and safe.
Friday, November 21st, 2014
Today on Twitter a follower made a comment about the benefits of having a home pre-inspection prior to listing a property. There are some agents who recommend doing so and it can be a good idea. However there are also agents who would not recommend doing so because it could open up a can of worms for the seller. I thought it would be a good idea to look at the benefits and disadvantages of having a pre-inspection.
Issues with the Home that the Seller may not Know About Could be Revealed in a Pre-Inspection
Benefit: A pre-inpsection gives sellers an opportunity to repair/remedy any defects or problems that are discovered, in order to present a home to the buyers that has been well cared for and has no deferred maintenance. This means there will not likely be any surprises when the buyers have their inspection. Oftentimes inspectors discover issues of which the sellers were not aware. Most buyers will ask the seller to repair such issues or credit them through escrow so they can do so after closing, or even reduce the price because of any issues. A pre-inspection could eliminate any surprises, but keep in mind that the buyers still may have their own inspection (something I always recommend), and it is possible that their inspector may discover other items.
Disadvantage: There could be some major issues discovered that the sellers did not know of, that could cost a lot of money to fix. If the sellers do not have the funds or do not choose to repair such issues prior to sale, they now are aware of these problems, which means they must disclose them to buyers. Disclosure of know factors affecting the property is required by law. One could argue that no matter whether the buyers are told via disclosures that there is a problem, or whether they discover it themselves through a home inspection, they will still likely seek repairs or a credit, so it may not matter either way.
The one problem I see with having a pre-inspection is that if something major is discovered, meaning the seller has to disclose it, it could affect the value of the home (depending of course on the issue). For example, say there is a crack in the swimming pool, or the roof needs to be replaced. These could be costly issues to fix, and could detract from the value of the home. The seller can turn it into a positive and deduct the repair costs from the value right off the bat if aware of issues, OR if not aware of such issues and presented with a repair request by the sellers, it is possible the seller may be able to negotiate a price under full repair costs.
A Special Note About Termite Inspections
It is important to note that this month there will be a big change to the California Residential Purchase Agreement (RPA) regarding termite inspections. The current contract has an addendum called the Wood Destroying Pest Addedum (WPA), which normally specifies that the seller is responsible for Section 1 items – damage caused by pests. This would include dry rot on wood and fumigation, which could be costly. The new RPA eliminates the WPA, so it will now become a repair issue. This means that the buyer will be responsible for paying for a termite inspection, and any issues discovered will need to be negotiated with the seller, along with any other non-termite repair issues.
Keep in mind that a buyer can write something different into the contract, such as sellers are to pay up to a certain amount, if necessary, for any termite work discovered. If sellers have a termite inspection prior to listing and discover any issues, they can inform the buyer up front in disclosures so that the buyer can negotiate those repairs or decide what action to take. I will be suggesting to my sellers to have termite pre-inspections, as I feel it could eliminate potential problems. It also allows the seller to choose a reputable termite company.
I suggest always to discuss the above with your agent before listing your home so that you are aware of your rights and can make an informed decision.