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July 2011 Blogs
4 Question to Ask Your Home’s Buyer:
On today's market, some sellers struggle to get even a single offer -
much less an offer from a qualified buyer, at a reasonable price, on terms they can live with.
But just because the market is down doesn't mean sellers are utterly powerless. Proactively asking
prospective buyers the right questions can help put together the best possible deal, and stacks
the decks in favor of it closing, as well - so here are those questions!
1. Where's your proof? Real estate transactions fall out of escrow on today's market
more than ever (that just means that a contract is cancelled sometime between the time buyer and
seller sign it and the time it was supposed to close). This is a seller's worst nightmare - to
get your hopes up and your moving plans in motion then have to cancel it all because the deal
falls through. And that's just where the awful-ness begins; every seller fears pulling their home
off the market in reliance on a contract that later implodes because of the reality that they
might forgo other good buyers while your home is marked "pending."
Deals often fall apart because the mortgage lender fails to approve the short
sale, or the home appraises way below the seller's bottom line. But another common deal-killer
is when the buyer's financing falls apart. While nothing is bullet-proof, smart sellers have
their agents ask the buyers agent for robust proof that the buyer can actually do the deal.
If your home's buyer plans to use mortgage financing, you should get a pre-qualification letter
from a mortgage pro who has actually run the buyer's credit, seen their down payment money and checked
their income and assets - it's not overkill for your agent to call the buyer's mortgage contact and check
on how recent and how strong (or tenuous) this approval is. (The more recent the better - down payment
savings can be spent and even jobs can be lost between the time of the approval and the time of the offer,
if many moons have passed.)
If the buyer is using cash, the listing agent should insist on receiving a recent proof of funds,
like a bank account statement, documenting that the buyer has the cash they'll need to close on hand.
2. Is there anything you'd like? This question is all about personal property - the "stuff"
that's inside your home, from your furniture to your home electronics (not including the children - or the
in-laws, if you have some in residence). If you have things that are in great condition, are difficult to move,
are very well-suited or custom-made for the home or that you were planning to sell in the course of your
move anyway, you might want to ask your home's buyer if they are interested in them. Maybe you have a price in
mind, or maybe you are willing to give it away for the convenience of not having to move it - I've even seen
sellers who can't meet a buyer's counteroffer by reducing the price instead offer up a valuable item of property
instead, sealing the deal that way.
If you do agree to leave some things behind - whether for a fee or for free, make sure you explain to
the buyer in writing that you cannot offer a warranty on the item(s), and work with your broker or agent to
ensure that the paperwork doesn't run afoul of any lender guidelines.
3. For offers over the asking price: What's your plan if it doesn't appraise? Even on today's
market, a well-priced home in a great neighborhood can generate multiple offers, with the top offer usually
exceeding the asking price. The problem is that if the recent sales in the area aren't in that same price
range as your amazing offer, your home could very well fail to appraise for the asking price (low appraisals
are a very common problem these days - causing thousands of transactions to fall out of escrow). And the
other problem is that some crafty buyers count on this, strategizing to make a sky-high offer to beat the
others out, planning all the while to demand a price reduction when the property appraises low.
Before you accept an offer that is higher than you or your agent feels your home will realistically
appraise for, ask the buyer what they plan to do if the property appraises below their offered price.
Better yet, when it becomes clear that you'll be receiving multiple offers, let all prospective buyers
know that before you accept an over-asking offer, you will either (a) require that the winning buyer
waive the appraisal contingency, and/or (b) require an agreement that the successful buyer will make up
the difference between the appraised price and the purchase price, and proof that they have the cash on
hand to do so. This is a surefire shenanigan minimizer, and will cause people to make only offers they
will stand behind later. (Now, if the home appraises below the listing price, that's a horse of a different color.)
4. Did you read the reports? Some savvy sellers who know their homes need a little work here
and there (or a lot, as the case may be) take the smart step of having their home inspected or appraised
in advance of even putting it on the market. If they can't afford to do all the work indicated in the
report, many will adjust the list price to account for needed repairs, some even going so far as to obtain
repair estimates from local contractors and offer them up to prospective buyers in the home's disclosure packets.
In their excitement to find a property that meets their needs, some buyers barely skim the reports and may
not realize that the list price reflects a discount for the needed repairs. Best practices for sellers who have
advance reports is to require buyers to acknowledge them (as by signing a receipt), and to even call out - in writing -
the specific repairs for which the price is being discounted. Some listing agents in these situations even advise
their sellers to insist on an as-is contract, so that the buyer has a crystal clear understanding that the seller
cannot do any repairs.
That way, you don't get two weeks into the transaction when the buyer understands the condition problems
and (a) bails out of the deal, (b) asks for repairs or for more of a discount, or (c ) has their loan fall apart
because a previous FHA appraisal came in low or their lender will not allow the home to be sold with your home's
particular "issues."
5 Questions to Ask Your Home's Inspector:
Most home buyers feel like they are bona fide real estate experts after all the studying up on loans and
neighborhoods, online house hunting and open house visiting it takes just to get into contract on a home these days. But for all
but the most handy of house hunters, getting into contract and starting the home inspection process only surfaces how little you
actually know about the nuts and bolts and brick and mortar of the massive investment you're about to make: a home!
So, you hire a home inspector, but it seems like they're speaking an entirely different language - riddled with terms like
"serviceable condition" and "conducive to deterioration" - about your dream home! Here are 5 questions you can use
to decode your home inspector's findings into knowledge you can use to make smart decisions as a homebuyer - and homeowner.
1. How bad is it - really? The best home inspectors are pretty even keeled, emotionally speaking.
They're not alarmists that blow little things up into big ones, nor do they try to play down the importance of things. They're all about
the facts. But sometimes, that straight forwardness makes it hard for you, the home's buyer, to understand what's a big deal and what
isn't so much - the information you need to know whether to move forward with the deal, whether to renegotiate and what to plan ahead
for.
I've seen things categorized in home inspection reports under "Health and Safety Hazards" that cost less than $100 to fix, like
replacing a faucet that has hot and cold reversed. And I've seen one-liners in inspection reports, like "extensive earth-to-wood
contact" result, after further inspection, in foundation repair bids pricier than the whole cost of the home!
In many states, home inspectors are not legally able to provide you with a repair bid, but if you attend the inspection and simply
ask them whether or not something they say needs fixing is a big deal, nine times out of ten they will verbally give you the
information you need to understand the degree to which the issue is a serious problem (or not).
2. Who should I have fix that? I always ask this question of home inspectors, with dual motives. First, very often, the
inspector's response is - “What do you mean? You don't need to pay someone to fix that. Go down to Home Depot, pick up a ___fill in
the blank__, and here's how you pop it in. Should cost you $15 - tops." And that's useful information to know - it eliminates the
horror of a laundry list of repairs and maintenance items at the end of an inspection report to know that a number of them are really
DIY-type maintenance items. Even buyers who are really uncomfortable doing these things themselves then feel empowered to either (a)
watch a few YouTube vids that show them how it's done, or (b) hire a handyperson to do these small fixes, knowing they shouldn't be too
terribly costly.
And even on the larger repairs, your home inspector might be able to give you a few referrals to the plumbers, electricians or
roofers you'll need to get bids from during your contingency period, which you may be able to use to negotiate with your home's
seller, and to get the work done after you own the place. Dropping the inspector's name might get you an appointment booked with
the urgency you need it in order to get your repair bids and estimates in hand before your contingency or objection period expires.
And same goes for any further inspections they recommend - if neither you nor your agent knows a specialist, as the general home
inspector for a few referrals.
3. If this was your house, what would you fix, and when? Your home inspector's job is to point out everything, within the scope
of the inspection, that might need repair, replacement, maintenance or furthe inspection - or seems like it might be on it's last
leg. But they also tend to be experienced enough with homes to know that no home is perfect. Many times, I've asked this question
about an item the inspector described as "at the end of its serviceable lifetime" and had them say, "I wouldn't do a thing to it.
Just know that it could break in the next 5 months, or in the next 5 years. And keep your home warranty in effect, because that
should cover it when it does break."
This question positions your home inspector to help you:
· understand what does and doesn't need to be repaired,
· prioritize the work you plan to do to your home (and budget or negotiate with the seller accordingly),
· get used to the constant maintenance that is part and parcel of homeownership, and
· understand the importance of having a home warranty plan.
4. Can you point that out to me? Often, when you attend the home inspection, you'll be multi-tasking, taking pictures of the interior,
measuring for drapes or furniture, even meeting the neighbors, or fielding several inspectors at a time. Worst case scenario is to
get home, open up the inspector's report and have no clue whatsoever what he or she was referring to when they called out the wax ring
that needs replacement or the temperature-pressure release valve that is improperly installed.
Your best bet is to, at the end of the inspection, while you're all still in the property, just ask the inspector to take 10 or 15
minutes and walk you through the place, pointing out all the items they've noted need repair, maintenance or further inspection. When
you get the report, then, you'll know what and where the various items belong. (One more best practice is to choose an inspector who
takes digital pictures and inserts them into their reports!)
5. Can you show me how to work that? Many home inspectors are delighted to show you how to operate various mechanical or other
systems in your home, and will walk you through the steps of operating everything from your thermostat, to your water heater, to your
stove and dishwasher - and especially the emergency shutoffs for your gas, water and electrical utilities. This one single item is
such a time and stress saver it alone is worth the lost income of missing a day of work to attend your inspections.
