I recently discussed my Cutting Corners blog post with Julie Schott in the Meridian, Idaho office of NexTitle She added insight from the perspective of the title companies, namely, that in this sizzling market they are seeing deals fall through for two reasons:
- Property appraisals are coming in below the selling price;
- Sellers are not willing to pay for repairing things that the inspections are uncovering.
I reached out to Shannon Armstrong, Realtor with the Woodhouse Group in Eagle, Idaho; Jeff Lake, a Boise-based Loan officer at Primary Residential Mortgage, Inc; and Dennis Conforto, Chairman & CEO of HouseCheck for their thoughts on how to prevent future heartaches of this sort. Their answers (edited for length) are below:
Yes, the Boise area market is moving at light speed these days. Buyers that have a knowledgeable Realtor who knows how to position an offer to stand out among the other 2-10 offers that are being presented to a seller have the best chance of buying a home. One of my responsibilities it to educate my buyers on the process and what to expect. The majority of offers being accepted right now are cash but not every buyer has that option so we discuss other options such as not needing to sell a home, having a sold loan package and being prepared to make the decision if they are willing and able to purchase above list price and appraisal value. Buyers, hire a savvy and quick Realtor.
The reason for the appraisal not coming in is usually the seller having unreal expectations of what their home is worth. The agent needs to have proper comparables to show the seller when they are doing the listing presentation. The other issue is that there are still some pockets of the valley that are not appreciating as quickly as others. The true valuation of a home is built first by square footage, next by the comparable sales of similar sized homes within a one-mile radius. The upgrades in your home will usually help with selling the home quickly but not much with value. That is why it is important to know that the upgrades that you make are mostly for your enjoyment while you live in that home. The best thing that a seller can do to avoid overpricing your home is to hire a seasoned Realtor that is familiar with your neighborhood.
Both of these issues are a result of the same root cause of waiting till the back-end of the transaction to deal with issues rather than dealing with known issues up front. The primary role of a realtor from the seller perspective is two-fold. It is to sell and then negotiate a great deal for them. The rule of all solid professional negotiations is deal with all the unknowns upfront and make them known and transparent to the seller and the sellers agent.
Buyers today make an offer on a home without a understanding most of the time the true value of the home, hence they have to buy an appraisal. They also don’t know the condition of the home so they buy an inspection. Those two events on the back-end invite cancellations on the back-end.
With knowledge upfront, a selling agent can have a more elegant strategy for selling the home. Think about it, the seller now has time to find the cost of the repairs which nationally averages $5,000.00. If they don’t have the funds for the repairs at least you have the knowledge to negotiate properly. You don’t have to discount greater than the cost of the repair. If they do have the funds they can make the repairs have it re-inspected and signed off on.
Both versions work for various reasons to the advantage of the entire transaction.
If you wait to have the buyer find concerns you shifted to the defense and will potentially give to the buyer a discount greater than the cost of the repairs.
Selling is a proactive process, and when you are placed on defense it means you are outside of the normal selling and negotiation process. When you are outside that natural selling process you have lost control and your rate of cancellations will naturally go up.
At HouseCheck we have thought a lot about the many scenarios a seller inspection can take. We provided to seller and buyer agents a series of selling points that are designed to reduce as much friction in the sales process as possible while reducing liabilities for agents as well as their clients. We provide a money back guarantee, we provide a 120-day home inspection warranty, we provide a $200 handyman coupon and free hook up services for utilities, garbage, cable and security. But then we added a 90-day buyback program for the buyer in case the house is a money pit. We do all that for only $399 for homes less than 4,000 square feet.
So we can shrink and compress time for buyer and seller agents, builders, HOAs, and property owners. Call HouseCheck this morning and we will do the inspection today and give you the report. Another way we get rid of friction by reducing time for the entire real estate market place.
I appreciate the willingness of professionals in the Greater Boise real estate industry to take time out of their very busy schedules to share some “ounces of prevention!”
Please note: the above post contains educational information. It is not intended as legal advice. Engage an attorney who is licensed in your state to get advice on dealing with any specific legal issue.
© 2018 Michael S. Oswald