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Thursday, March 30, 2017

My Realtor® called and we have an offer. What happens now?

 Understanding the Real Estate Process from A – Z – A Seller’s Guide to Real Estate – Part 7

This is the seventh post of a series in an FAQ format that I hope will help would be sellers better understand the real estate process that they are about to go through. There will be a follow-on series for real estate buyers.

FAQ – My Realtor® called and we have an offer. What happens now?
Great! Offers were what you set out to get. Your Realtor will want to “present the offer” to you,
which is to say to sit with your and go over the details of the offer and discuss with your how to react to it. Sometimes the buyers’ agent may insist on presenting the offer to you, so that he can elaborate on the buyers’ capability to get to the closing table. You can decide if you want that agent to actually present it to you or insist that he/she let your agent handle that.

This post and the next two will deal with how to react to an offer.

Low-ball offers – There will always be people out there posing as buyers who are really out to see if they can steal your house for some ridiculously low offer price. Many of these people spend all of their time lobbing low-ball offers in on almost any house that they see. I don’t know why any Realtor would continually waste their time with those people, but some do. Don’t get offended. Listen to your Realtor’s advice on how to handle the situation. He/she will have already talked to the buyer’s agent
and will probably have some idea whether this is an offer even worth making a counter-offer upon. In cases of it being a fishing trip by a serial low-baller, I usually advise that the seller just reject the offer. One good way to get across the sellers’ displeasure with the offer is to use a Sharpie or magic marker and have them print the word REJECTED across the front page of the offer and sign right below that. I then scan and email that back to the buyer’s agent.

Reasonable offers – Notice that I did not say that it is an acceptable offer, just one that is at least reasonable to entertain. Most offers will start lower than the asking price and lower than the buyers are actually willing to pay. You can’t fault them for trying to get a better deal, you would probably do the same thing. If you have listened to your Realtor and they have listened to theirs the offer probably will be close enough to consider and to make some form of counteroffer. It is important, however, to look at the whole offer and not just the price. Most offers these days may have terms and conditions specified in the Purchase Agreement (PA) that, when taken into consideration (even on a full price offer), may make the offer unattractive for the sellers. Many buyers (and their agents) got used to some practices during the Great Recession that no longer seem reasonable, but which are still in common use today.

Here are a few things to look for in the offer, other than price:
  •       Low Earnest Money Deposits (EMD) were one thing that has been slow to correct to the current market. The days of putting only $500 down in EMD are gone and sellers should demand more. The traditional EMD before the Great Recession was 3% of the offer price and that is still a good guideline today. Buyers who cannot afford to put more than $500-1,000 down in Earnest Money may be an indication of a lower probability of getting to the closing table.
  • ·         Sellers’ Concessions – It is quite common in this area for buyers to ask the seller for help with their closing costs by asking for a Seller’s Concession at closing. This means that the seller is giving back a portion of the sale price for use by the buyer to cover things like points, mortgage fees, taxes, insurance and other costs that would be due from the buyer at closing. Most mortgage companies will restrict how much those concessions can total, but it is not uncommon locally that they might range from 3-6% of the sale price. That money comes right out of the seller’ proceeds from the sale and will impact the sellers’ net from the sale. Since the cost of the sale is already about 7-8% of the proceeds, adding a Sellers’ Concession of 3% means that you are discounting the price of the house by about 11%. That is 11% that does not go into your pocket.
  • ·         Possession – Most buyers want to take possession of the house as soon as they can get it, so the offer may specify “At Closing” for possession. Most sellers would like a few days after the closing to get their stuff out of the house, so they may ask for a few days to weeks of
    possession after closing. This is an item that must be negotiated. Sellers must remember that they will become renters in the houses that they used to own as soon as closing is over. Sellers should pay attention to the daily rental rate specified in the PA. The norm in this area is to specify that the daily rental rate will be 1/30 of the buyers’ new mortgage amount, to include principal, interest, insurance and taxes. The seller should ask what that daily rate will be. The mortgage company for the buyer can supply that rate. Sellers may also see a damage deposit requirement in the amount that is retained out of the proceeds to cover post-closing occupancy. That damage deposit is just like the deposit that a renter makes on the front end of a lease and could be used by the new owners to cover any damage that is done to the place during the rental period after closing. Make sure you understand how that process will work and how any decision on damages will be negotiated. The process for turning over the keys at the end of the post-closing occupancy period should also be clearly stated.
  • ·         What goes with the house – Most often the seller will offer certain appliances and other things with the house. Those are usually listed in the MLS, as well as any exclusions - items that the Seller is specifically stating that they will be taking out of the house (which could include items like special drapes or light fixtures). Sellers need to make sure that the Buyers clearly understand any items that are specifically excluded and the best way is to make sure that those items are listed in the Purchase Agreement paperwork. Sometimes buyers will see other things in the house that they want thrown in on the deal, so they will list them in the PA. Often that will be the washer and dryer, which the seller might not have offered to leave.  Maybe it is the play structure out in the yard, which the seller may or may not have wanted to take anyway. It could be special or custom window treatments that go beyond the expected curtains. Whatever it is, the seller should carefully read and consider a response to anything that the buyers have added to the PA that they wish to be left in the house. This is another negotiated thing and is separate from any furniture or lawn equipment or other items that the seller may wish to offer to sell to the buyers.
  • ·         Prorating prepaid items – Most Purchase Agreements will specify how things like pre-paid taxes or association fees will be pro-rated at closing. The basic idea is that the Sellers will be given back money (be the Buyers) to cover the period that they pre-paid for services, but which they will not be able to use. In this area of Michigan, we pre-pay our property taxes, so those would be prorated. Association fees and other fees that may be assessed or paid on a quarterly or an annual basis will also be pro-rated.
  • ·         The type of Title Insurance required – All purchases, at least in Michigan, will require that two title Insurance policies be issued, one to insure the Buyer against future claims against the title and one that insures the mortgage company against those same claims. In Michigan it is customary that the Seller pays for the Buyers’ title Insurance policy and that the Buyer pays for the policy that insures the mortgage company. Many Buyers’ agents will insist that the Buyers ask for an “Eagle brand” or extended coverage policy, which costs a bit more than a standard title insurance policy. It is a small incremental amount to pay and covers a multitude of sins that the Seller may have committed over time, such as making home improvements without pulling permits or the presence of unrecorded easements on the property. It’s not worth arguing over and does give the Buyers peace of mind, so I recommend going along with that request.
  •       The closing date. This is usually a "target" date 30-45 days from the acceptance of the offer, but it, like everything else in the offer is negotiable. The Seller doesn't have to accept an offered closing date that is too close in or too far out; however, some attempt should be made to understand the needs of the Buyers that are driving that date. In general, it will take 30-45 days for the mortgage company to to be ready to close, so that is a somewhat standard timeline. This is a demand that the Seller should try to be flexible on because it might be a show-stopper for the Buyers, if their needs cannot be met. The Sellers should have done their move planning ahead, so that they can adjust and react to the requested closing date. The day you accept an offer is not the day that you should start thinking about where you will go and how you will get there.
  • ·         The “strength” of the offer. Your Realtor may indicate to you that one offer is stronger than another. What that means is that he/she has looked at factors like the buyers down payment, the
    mortgage type that they are going to use and the type of pre-approval that they submitted with the offer.
      A buyer who is putting 20% down, is pre-approved (not just pre-qualified) for a Conventional mortgage is a stronger buyer than one who submits the same offer price, but who is only putting 3% down on and FHA mortgage and who so far has just been pre-qualified (maybe a credit check run, but no underwriting approval, yet). Ask you Realtor who has the “strongest offer”, because that is the one most likely to actually get to the closing table.

Additional or special contingencies will be covered in the next post in this series and a post on the processes available to actually respond to an offer will follow. Your main role as the Seller at this point is to thoroughly read and understand what is in the offer. Your Realtor will go over it with you, but it is you who will be signing it and it is a binding contract, so know what you are signing up for. We’ll continue to look at the offer and how to react to it in the next two posts.

Tuesday, March 28, 2017

FAQ - My house is listed but we’re getting no visits; what's wrong?

Understanding the Real Estate Process from A – Z – A Seller’s Guide to Real Estate – Part 6

This is the sixth post of a series in an FAQ format that I hope will help would be sellers better understand the real estate process that they are about to go through. There will be a follow-on series for real estate buyers.

FAQ - My house is listed but we’re getting no visits; what's wrong? Should I consider firing my agent?

My initial response is that you should not panic; but, rather, listen to your agent, not fire them. Of course, that assumes that you followed my advice in the first post and got a GOOD Realtor® as your listing agent. If, instead, you got an agent who went along with whatever price you threw out to list the place, just to get the listing; maybe it’s time to have a heart-to-heart and this time listen to the
advice that the Realtor has been trying to give you about the market value of your house. If it was the Realtor that advised that you set the price that high, maybe it’s time to assert yourself a bit and insist that he/she get the price more in line with the market, so that you can attract some visitors. There are some Realtors who think so much of themselves that they think they can justify above market pricing, just based upon the strength of their name in the market. In those cases, your Realtor may need to listen to you. The single biggest issue that causers low or no showings is price. Listen to your Realtor.

Houses that are obviously overpriced just scare away would-be buyers because they don’t want to try to deal with an unrealistic owner/seller. It’s also time to stop bullying your agent about everything, including the price. You may be a very intelligent and successful person in whatever field it is that you work; however, unless you are also an active and practicing Realtor, you are not the expert in this situation. Let the expert give you advice and lead you in this transaction. Listen to your Realtor.

You might also pause and ask yourself if you are trying to micro-manage the process. Your Realtor will welcome your support for their marketing plan and would welcome your ideas so long as they don’t feel that you are looking over their shoulders and breathing down their necks all the time. Even if you are the Director of Marketing at some successful company, you are out of your element in the real estate world and have to trust the knowledge and experience that your GOOD Realtor brings to this process. Go ahead and make your suggestions, but remember to listen to your Realtor. Real Estate is a unique “product” to market and many of the marketing things that work for other products just don’t work well for real estate. Listen to your Realtor.

If you haven’t already had an open house, talk to your Realtor about doing one of those soon. If your Realtor presented a Marketing Plan before you chose him/her, ask what they have been able to accomplish from that plan so far and what they still have in the queue. It’s OK to try to be a helpful partner with your Realtor in the marketing of the property, but remember who is the pro here and listen to your Realtor.

Look back over the advice that the realtor gave you about things that needed to be done to help with
the marketing of the house, especially those things that might have been aimed at the exterior of the house. Curb appeal, or lack of it, can have a big impact on whether people who do drive-byes first actually ever visit the property. Go back and do the things that the Realtor suggested to clean up the lard and landscaping or to repair or paint things that can be seen from the curb. Listen to your Realtor.

Don’t wait too long. The Golden Time for listing is usually within the first 4-6 weeks. That’s when the visit traffic should be the highest and when quick offers usually happen. If you’ve gone 2-3 weeks with no showings, act now, before your listing goes “stale” on the market. Get with your Realtor and come up with a plan of action to make the changes that will be necessary to get traffic flowing through the house. Be bold, not wimpy. If you are overpriced by $20,000 or more, taking a thousand off at a time, in hopes that this will get things moving, is what we in real estate call “death by a thousand cuts”. It is better to bite the bullet and do a $10,000 reduction right away than to try to dribble the price down a thousand at a time to where the market will react positively. Listen to your Realtor.

Did I mention that it is important that you listen to your Realtor?

Saturday, March 25, 2017

I approved a showing request. What is my role in that?

Understanding the Real Estate Process from A – Z – A Seller’s Guide to Real Estate – Part 5

This is the fifth post of a series in an FAQ format that I hope will help would be sellers better understand the real estate process that they are about to go through. There will be a follow-on series for real estate buyers.

FAQ – I approved a showing request. What is my role in that? Also, my agent wants to do an open house this weekend; what do I do for that?

Great, you’re getting some showing activity and your Realtor is executing a part of his/her Marketing Plan by scheduling an open house. Your role during each event is the same –BE GONE! As I mentioned in part 4 of this series of posts, you have an ongoing role to maintain the 3-C’s for the
house – Condition, Clutter and Cleanliness.  That is true for either of these events. Since you never know when a showing request will come in, you need to leave the house in show-ready every day, especially if you are off to work for the day.

Having your house listed and being always ready for showings is extra work and a hassle for some, but it is a personal sacrifice that you have to be willing to make as part of the selling process. If you’re into self-pity, selling your house will provide you with a woeful field day of opportunities to lament your fate. If, instead, you tend to get angry at being inconvenienced by all of those inconsiderate buyers who are trying to see your house, just don’t take it out on your Realtor. Go to the gym and hit the big bag for a while.

If you have pets, they need to be provided for. If they can be crated for the day, that is a good way to keep them out of the way for showings. If they are too large to put in a crate for the day or that just doesn’t work for them, you may try a day care program at your local pet care facility or arrange for someone to go over and take them out for the time of the showings. Locking your pet into a small room, like a laundry room, for the day may not work out as well as you hoped. Some pets go stir
crazy ad start scratching or chewing on the woodwork or other things in those rooms.  Visitors are also put off by the barking that will occur, by not being able to see that space in the house and by their concern and empathy for the pet (which may translate into bad thoughts about you as the pet’s owner).

Before you leave, also turn on and leave on the lights in the various rooms of the house, especially those table lamps and other lights that do not operate off a light switch. Leaving the lights on for the day is not going to significantly run up your electric bill and will make the house more inviting and easier to show, especially in winter months when it might be getting dark out before you get home. Most Realtors will try to turn off as many lights as they can at the end of their showing appointment. If you have multiple showings scheduled leave a note for the Realtors to let the earlier showing agents know to leave the lights on for the next showing.

If you are going to ask visitors to remove their shoes (or use over-shoe booties) during the visit you should provide a chair or bench for the visitors to sit on while removing or putting on their shoes or putting on the removing the booties. It is also a nice, and considerate, touch to provide a rug by the front door for the visitors to leave their shoes on. Other nice touches that you might consider is putting out a plate of fresh cookies and some bottled water for your visitors. Your Realtor should provide flyers of the home for visitor and any other documentation that he/she thinks might help - a plat map or survey for houses on larger parcels, for instance. Most Realtors are required to make the Sellers’ Disclosure and Lead-Based Paint Disclosure available on the MLS, but having those available for visitors in the house is also a good idea. You don’t have to put the Association By-Laws out for these events, but be aware that they will be requested for review by any really interested buyer, so make them available to your Realtor. If you have a survey of the property that is a good thing to copy and leave out. Visitors will want to know what the lot boundaries are, especially for bigger parcels.

The preparation for an Open House is basically the same as for a showing, so far as the 3-C’s are concerned. I advise that owners/sellers make an extra effort to put valuables away or, at least, out of sight. Visitors at an open house are not normally accompanied by a buyers’ agent and there may
occasions where there are multiple groups in the house at the same time. Your Realtor will do his/her best to watch everyone and try to protect your stuff; however, if you leave small, but valuable items laying out where they can be seen there will always be a few bad eggs who might take advantage and may rip you off. Put your valuables away for the open house. That includes things like jewelry, game cartridges in the kids’ rooms, DVD’s, memory sticks for computers, prescription drugs, small religious items (crosses and rosaries) and anything else that someone could easily slip into a purse or pocket. Whether you read it or not in the listing contract there was probably a sentence or a paragraph that specified that the agent is not responsible for any theft from your home during showings and open houses.

Neither your Realtor or the showing agent is held liable for injuries that visitor may suffer while visiting your home. Those injuries would have to be covered under your home owners’ insurance policy (so make sure that is up to date and paid up). Many homes have hazards in them that the owners get used to dealing with, but which unsuspecting visitors may fall victim to. Falling is the most common hazard. That little 5-6” drop into your sunken living room is something that you are used to, but I have seen visitors miss that step down and fall into the room with disastrous results. I usually recommend marking that drop with caution tape on the floor. Missing hand rails on stairs are another hazard that your family might have learned to live with, but which pose a danger for visitors; and which, by the way, you will have to fix if the buyer is going to use an FHA or VA mortgage; so fix it before it becomes a health hazard or a mortgage issue. Another hazard for visitors can come from opening a closet door to peek inside and being hit by falling objects from the overstuffed closet. Make sure that your closets don’t attack your visitors. They will open the doors to see how big the closets are.

What about the smells in your house? Visitors will notice the smell of your house before they notice anything else. Most owners become nose-dead to the pet odors than may linger in the house or to the smell of a litter box. Owners who smoke (and smoke in the house) are nose dead to how nicotine reeks in the house; buy, non-smokers can tell instantly that the house is smoked in and for many that
is a show stopper. Some owners with ethnic backgrounds may also be nose-dead to the smells in the house that are left by cooking ethnic foods. There is certainly nothing wrong with any ethnic group or even their foods, but visitors may not wish to share the aromas that can linger. Special attention needs to be paid to that issue if you are the owner and enjoy strong ethnic cooking in the house. See if Febreze will work, otherwise you may need to take stronger steps to deal with this issue. For houses that have been smoked in it may take the drastic step of washing down all walls and ceilings with a strong cleaner and then painting them with Kilz, before painting them whatever color you choose.

Other odors that can cause concern for visitors include strong musty odors in the basement, any gas smells that indicate leaks, or even strong odors from cloths piled in a laundry room or hamper. Some home owners try burning scented candles to mask any odors; but, that can have just the opposite effect on visitors who may wonder what the home owner is trying to hide. Some visitors will even get ill from the smell of the burning candles, which can themselves become overpowering, especially if the home owner has used multiple candles. There is still merit in the old advice to bake an apple pie the day of a showing, but if the place is getting lots of showings you won’t be able to keep up eating pies. The best thing is if the house smells neutral, which most visitors will equate to being clean. If the visitor happens to notice a feeding dish or a litter box, the best compliment that you could get as a homeowner is for them to say, “Wow, I didn’t smell a pet at all in here.”

For showings you should plan on leaving 30 minutes before he scheduled tome and returning 30 minutes after the scheduled end of the visit. Realtors try hard to stay of the schedule of the visit, but that is sometimes impossible, especially if your house is one in the middle or near the end of a busy day of visits to multiple homes with a client. It is very easy to get off the schedule by ½ an hour or more sometimes. You need to be flexible and accommodate those reasonable changes to the showing times. Open houses are a little easier to control, so you only need to leave about 15 minutes ahead of the open house start time and you should be able to return within 15 minutes of the end time. You may still encounter those open house visitors who have lingered at the end, but that’s usually a good thing. Your Realtor may leave you a note or call you later to tell you how the open house went, how many visitors went through and whether any of them seemed interested. He/she should have picked up lots of valuable feedback which they will share with you and discuss any changes that may need to be made.

Showings and open houses should have been your goal when you decided to list; so these are good things. No one is going to buy your house sight unseen, so do whatever you can (and whatever your Realtor asks you to do) to make them a success.  Good Luck with your showings/open houses.

Wednesday, March 22, 2017

FAQ – I signed the listing documents and the house is on the MLS; what’s my role now?

Understanding the Real Estate Process from A – Z – A Seller’s Guide to Real Estate – Part 4

This is the fourth post of a series in an FAQ format that I hope will help would be sellers better understand the real estate process that they are about to go through. There will be a follow-on series for real estate buyers.

FAQ – I signed the listing documents and the house is on the MLS; what’s my role now?

There’s a tendency to think that you have no role in the marketing of your house; but, that is not CONDITION, CLUTTER and CLEANLINESS? That was not a one-time commitment on your part to get the house ready for the market; those three things must be maintained through the listing period and until closing. Success during the listing period is dependent upon the “three P’s” of real estate – PRICE, PERSISTANCE and PERSERVERANCE.
correct. Remember the “three C’s” from the second post in this series –

If you followed the advice that I gave in the first post you got yourself a GOOD Realtor® and during the listing process, he/she produced a Market Analysis that gave you good advice on the market value of your house. Hopefully you heeded that advice and have priced the house properly IN the market Price is not an issue. If he/she hasn’t already done so, you might assist them in taking the interior pictures. If it’s winter now, perhaps you might have some summer pictures that they could use. The main thing is that is be straightened up and neat for the pictures.
and not just thrown it ON the market at some overvalued price. So, let’s assume, for the moment, that

That leaves Persistence and Perseverance, which are things that the agent is counting on you for during the listing. You must persist everyday with the necessary straightening up and cleaning that are necessary to make sure that the house is show ready when you leave for work or start the rest of your daily tasks. The realtor is also counting on you to preserver through the persona hardships that may occur during the listing. Life cannot go on with “business as usual” when you rare listed. There will be showing request that conflict with something else that you or the family would like to do. Those requests must take precedence, since every showing request was made by the person who will want to buy your house (or at least that is the way you must think). 

Listing the house can be especially hard on families with small children or with pets. They don’t understand what is going on and it can be frightening and traumatizing for both children and pets.
Some families have turned the morning routine of straightening up and putting away toys and things into a game with their children to help make it easier on them. You will need to make a special effort to help children understand why you are selling the only home that they may have ever known and why it’s going to be alright, maybe even better, where you plan to live next. It’s also a time to get them used to packing up their stuff for the coming move. That will help de-clutter the place for showings, too. 

It is important that visitors be alerted by the Showing Appointment Center that there are pets in the house, if they are to stay in the house during showings. Some visitors may have severe allergies to the dander in the air from pets and need to be alerted. Don’t be surprised if some showings get canceled because of that issue. It may be necessary to arrange for pets to go to day care at a local kennel, if you can’t take time out to go home and remove them for showing or crate them for the day. Cats pose their own problems for Realtors and visitors (would they have it any other way?) and it may be necessary to confine them to certain rooms if they behave aggressively with visitors or may
aggressively try to escape when visitors open the door. Even docile cats who may run and hide when strangers come into the house and may surprise visitors later if they run out from under a bed or hiss at a visitor who gets too near. Certainly extra attention must be paid to cat litter boxes during the listing, so that the odor does not become an issue for visitors.

Many Sellers ask what their role in during showings and the answer is simple – BE GONE! I’ll cover that role of the seller in more detail in a follow-on post.

Another role for the seller during the listing is working with their Realtor to evaluate the feedback that they are getting and to take the necessary steps to adjust the listing. The adjustment recommended most often is to the price, but there may be other suggestions that come out of the feedback, perhaps about something that was missed during the preparation to list and still needs to be fixed. Perhaps the feedback will finally convince the seller to clean to replace the soiled carpeting or do something now about the cracks in the basement walls. It is likely that a GOOD Realtor would have already mentioned those items, but was initially ignored by the owner/seller.

Your Realtor will be executing his/her marketing plan, which will include publicity and exposure in a variety of media but that doesn’t preclude you from letting your friends and family know about it being listed. Quite often someone in that circle may have had a secret desire to get into your neighborhood for year, maybe they even wished they could be in your house. Help make their dreams come true by telling them it is for sale. They may have friends who have told them to keep an eye open for any homes that come up in the neighborhood.

One thing that you can be almost certain will happen is that would-be buyers will want to know what your utility bills run per month and for the year. If you haven’t already done so, save some of those bills and go back and see what you paid during the winter months for heating. Buyers will also ask to see the Master Deed and By-Laws, if you live in a condominium complex (including site condo developments in Michigan) or just the HOA By-Laws if you live in a platted sub with a mandatory HOA. You should have those or can get them from the association. Make a copy and get that to your listing agent.

Another thing that might help with buyers is a list of the improvements and updates that you have done within the last 2-3 years. Don’t go back 5-10 years because those improvements will be old by now. While a new roof or a new furnace are important, they are considered to be more about maintenance than upgrades. A new granite counter top or an updated bathroom will be more important to would-be buyers. A fresh coat of paint is not an update; it is just something that is almost expected when you go to sell a house.

So, your role, now that the house is listed is to be diligent about keeping it in great, show-ready shape, being patient and persistent, and working with your realtor to make it as easy as possible for buyers to go through. I’ll cover more on that in a later post.

Monday, March 20, 2017

FAQ – I’m ready to list. What does the listing process involve?

Understanding the Real Estate Process from A – Z – A Seller’s Guide to Real Estate – Part 3

This is the third post of a series in an FAQ format that I hope will help would be sellers better understand the real estate process that they are about to go through. There will be a follow-on series for real estate buyers.

FAQ – I’m ready to list. What does the listing process involve?

In some cases, all of the things that were in the first two posts will be condensed into one visit by the Realtor. I don’t like to do business that way, because things can get rushed and a client might feel pressured to sign the listing documents before they are ready. I will normally do at least two visits – one to look at the property and provide advice about getting it ready and a second to go over the Market Analysis that I have created, based upon that first visit and to go through the listing process and take care of the Listing paperwork, if the client is ready.

So, just what makes up the listing process? There are two main sets of paperwork to go over and get signed and some physical work that needs to be done during the listing visit. The most important
piece of paperwork is the listing contract itself. I usually go over each page of the contract line-by-line. Our contract is 4 pages long, but some other companies use even longer contracts. It is important that the sellers understand that this is a legal contract between them and the broker to sell the property. The contract has several obligations that they must agree to, not the least of which is they cannot discriminate in any way against anyone who may wish to visit or to make an offer to buy the property.

In the listing contract the obligations of the broker (and me as the agent) and the sellers is clearly laid out. By signing the contract, the sellers agree to those stipulations and to abide by the terms of the contract. In conjunction with the contract, a set of Agency Disclosure documents must be signed by the sellers, acknowledging that they understand the role defined in the listing contract of Seller’s Agent that the broker and I will be playing. In the case of my company, Real Estate One, there are also disclosures to the Sellers about the other ancillary companies that the broker owns – a title company, a mortgage company and an insurance agency – which they might also end up doing business with, but which they are not required to use for any of those functions. However, we are required to disclose that we own them and that the broker may receive compensation from those companies if the Seller does business with or through them. The agent gets nothing from that business.

A second set of documents accompany the contract and agency disclosures and constitute the Sellers’
disclosures of information about the condition of the property. One is the Seller’s Disclosures and One is the Lead-based Paint (LBP) Disclosure. Both are mandated by Real Estate Law in the State of Michigan and the Lead-based Paint Disclosure is required by the Federal Government. These are (and should be thought of as) legal affidavits being made by the Sellers as to the current state of the property. Both use questions, which the Sellers must answer truthfully about what they know about the condition of various systems and components of the house, the history of the house and, in the case of the LBP Disclosure, the presence or absence of paint with lead in it anywhere in the house. Owners/Sellers are expected and assumed to know about those things and to answer honestly. Failure to honestly answer the questions or falsely answering the questions can lead to legal problems later and/or charges of fraud. So we I go over those documents with the Sellers line-by-line and help them understand the questions. There can be no blank lines left on those documents when they are done.

The process of going through the listing contract and disclosure documents can take anywhere from ½ an hour to an hour or more, depending upon the questions that come up.

Next in the listing document packet is usually the MLS Data Sheet. The Multi-List Service (MLS) in each area or state may have slightly different data gathering requirements;, but, generally they all need to capture lots of information about the property, such as – when was it built, how big (in Square Feet) it is above grade and how big is the basement, what materials are using on the exterior, how
many bedrooms and bathrooms and lavatories (1/2 baths) are there, how is it heated and cooled, how big is the actual land that the house sits on, what size garage does it have, what school district is it in, and on and on. You get the idea. Our MLS Data Sheet is four pages long. In addition, at least in my MLS, there is a requirement to measure and record the size of each room and the floor covering for each room. In the old days (just a few years ago) I would ask the Seller to help me with the room measurements by holding one end of the measuring tape. These days I use a laser measuring device. We also record what floor of the building (or the basement) the rooms are on.

We may also discuss the Sellers requirements or restrictions for showing appointments at this time, or a little later. These Showing Instructions are given to the Showing Appointment Center (if the company uses one) or to the people who answer calls and set appointment at the listing office. Sellers have the right to define when they will allow showings and how much advance notice they need. They also define who needs to approve each showing request and what means of communications are required – voice contact via phone, messaging to a phone or email. Some Sellers have family or pet situations that require lots of advanced notice and may require that someone go home to remove a pet for each showing.

Obviously having showing instructions in place that are too restrictive can hurt the marketing effort and discourage would-be buyers. We may discuss this until we reach some agreed upon compromise and I make sure that the Sellers understand the consequences (intended and un-intended) that may result from any restrictions on showings. I also advise them that Buyers (and their agents) do not like to have the Sellers hanging around during showings. It makes the Buyers feel uncomfortable and they
feel like they can’t discuss things out loud while on the visit. Some would-be buyers won’t even visit a home if the seller is going to be there.

In some listing appointments I also arrange to take pictures of the house, both outside and inside; but in many that is another visit. It just depends if the Sellers feel ready for pictures or need more time to “stage” the house for pictures. The minimum that I need to place the house on the MLS is a picture of the front of the house from the street. The interior pictures, and any other outside pictures that I take, are used on the MLS and in the marketing flyer that I will create later. If I am to take pictures during the listing appointment, the appointment can take up to three hours. Without taking pictures that day, the appointment is usually over in about two hours. I usually take 60-70 pictures and chose to use 40-50 on the MLS.

The final things that I will usually do on this listing appointment is to put the sign on the front lawn and put a lock box on the front door, with a house key in it. It is surprising how many would-be sellers have to scramble around to find a front door key or may have to have one made because they can no longer locate one. Most sellers get used to entering and leaving their homes through the garage or a side door. I usually ask for a second key or go have a copy made of the one that is in the lock box. It is amazing how many times the key that is supposed to be put back into the lock box by the showing agent either gets lost or is locked into the house as the agent leaves the showing. There are a variety of different lock boxes, but the idea is the same with all of them. A code is given to showing agents when they make a showing appointment and that code allows them to get into the lock box and use the key that is stored there to get into the house. Sometimes (but rarely) a home may have a punch code lock already on it and we can just use that instead of a lock box.

Most agents in our company use what are called “pitchfork” signs which we can put into the ground by just stepping on the bottom of the sign, which drive the two tines at the bottom into the ground (thus the name pitchfork) to hold the sign up. Some of our agents and most other companies’ agents will order a wooden post to be installed on the front lawn, with a sign hanging on it. That takes a day or two to be installed by the sign service company and may leave a big hole in the front lawn when it is removed, since they dig the hole for the pole with a power auger. I will return within a day or so and also place a flyer box next to the sign to hold the flyers that will have created for the house.  I usually put some flyers in the house, too.

Some clients have requested that their homes be listed but that no sign be put on the lawn. They are apparently worried about nosy neighbors or just don’t want the general public to know that it is for sale, for some reason. It is certainly their call on the sign, but I always advise against that restriction. A significant number of real estate sales are kicked-off by the buyer seeing a sign on the lawn and calling on it. Buyers still cruse neighborhoods looking to see if they like the area and if any homes are for sale in the sub or development.

That pretty much take us through the listing appointment/process itself. Next we’ll start discussing the Sellers’ role during the listing. 

Thursday, March 16, 2017

FAQ - How can I determine the market value for my house?

Understanding the Real Estate Process from A – Z – A Seller’s Guide to Real Estate – Part 2  

This is the second post of a series in an FAQ format that I hope will help would be sellers better understand the real estate process that they are about to go through. There will be a follow-on series for real estate buyers.

FAQ - How can I determine the market value for my house?

The Market Value of Your House -

Hopefully you have already taken the advice from the first post in this series and found a GOOD Realtor® to help you understand what needs to be done to get the house ready to list. That same Realtor is the key to determining the best market value at which to list the property to assure a successful outcome. A successful outcome is one that gets the seller the maximum amount that the market will support, as quickly as possible and with the least amount of hassle.

So, how do you determine the market value for your house? Well, here are some things that do not play into that determination –

·         What your neighbor down the street got for his house last year.
·         What you Dad or Uncle Bob tell your they think it is worth.
·         What a friend at work sold his similar size house across town for last month.
·         What you saw in the paper that another house in town with the same number of bedrooms just sold for.
·         What the Zestimate says it’s worth on Zillow.
·         What you “need” from the sale.

None of those things can give you an accurate estimate of what you house is worth on the market right now. Why Because they don’t reflect the market that you will be competing in right now and they do not take into consideration what condition your house is in right now as compared to those houses that sold in the past.  If there have been several sales in your neighborhood over the last 3-6 months, that may give you a good ballpark idea of the potential value of your house, but it is only a ballpark. Only a Realtor can evaluate what your house might be worth today in the market in which it will be competing.

Just how big is the house?

One of the factors that plays a big role in determining the market value is its size in square feet. There are many differences within the various groups who may try to determine the size of houses for a variety of reasons. The original builder, local tax assessors, insurance agents and realtors may all come up with different figures for the square footage of the same house. The original assessment visit may be the only time that the house was measured for the Public Records Database (PRD) which is what most people (including most Realtors) use when ask about the size of a house. One other thing that happens often is that owners add square footage over time (some with and some without building permits) that don’t get recorded in the Public Records Database. If there is any doubt as to the size or differences between what the PRD record says about the house and what the owner says, your Realtor should take the time to measure the house. 

A GOOD Realtor will know how to measure the house properly and probably will ask you to help
(you can hold the other end of the measuring tape). Even then, the Realtor will have to make some judgement calls about things such as how much of the second floor space to include, if the house is a
Cape Cod style, with dormers and slanted roof line ceilings in the upper floors. The Realtor should almost never include any of the basement square footage in the stated size of the property. There are exceptions to that rule, if three of the four side of the basement are above grade; however, that is rare and just because the basement may be a walkout and may be fully finished, it should not be included in the stated square footage of the house. There is a place in the comments to talk about the finished square footage of the basement. Bedrooms that are located in the basement are also not officially counted as bedrooms in most places. In many places they would be considered to be illegal anyway.

Comps – really?

Your Realtor should do a thorough analysis of the local market and look at houses that are similar to yours that have sold within a reasonable distance from your address, as well as homes that are currently on the market. They will try to find sold examples that are within 3 miles of your home and that have sold within the last 3-6 months. Usually they will try to find similar sold and active homes in the same school district. You will hear the word “Comps” used by some agents. That stands for
houses that are Comparable to your home. I tend to use the word “similar” instead of Comps because neither I, nor most other Realtors, do the level of detailed analysis or site visits that an appraiser goes through to insure that a house is really comparable to the house that I’m listing. I use factors like the square footage, number of bedrooms and baths and other amenities like garage or no, finished basement or no, materials and finishes, and the 3-C’s from yesterday’s post – Condition, Clutter and Cleanliness. If I’m lucky, I may have been through some of the similar homes that are on the market, so that I have a better feel for the competition; but, many times I just have to depend upon the MLS listing information and the pictures that might be posted on line about those homes. I do generate a bunch of statistics so that I can see the average and median sold and active prices. Those statistics help define the “ballpark” that your house will likely play in and the competition that it will face.

What adds and what detracts from Market Value?

When I visit a home that is a potential listing I look for the things that I know will add to the market value or may detract from that value. I usually include a Franklin Chart in my Market Analysis report back to the owners. That chart lists the Pluses and Minuses that I saw and that I believe that potential buyers will see in the house. Those pluses and Minuses obviously add or subtract from the perceived value of the house. I go over those pluses and minuses in detail with the would–be seller. Many of the minuses are things that the seller might be abler to correct before putting the house on the market; however, some minuses are so “baked-in” to the house that they cannot be changed. The architecture
of the house is one such item. Houses that are ranch style or colonial never seem to go out of style and these days the Cape Cod style house is the builders’ and buyers preferred style. But, what about split level houses or raised ranch styles. Those style 60’s and 70’s and into the 80’s; but they have fallen way out of favor with both builders and buyers. So, if a house is a tri-level or quad-level or maybe a raised ranch (also called a bi-level), it starts with one strike against it in the modern market. That is a negative that the owner cannot do anything about, but which does factor into the market value. Things like fresh paint, crown molding, granite counter tops, new flooring, updated windows, new furnace and/or water heater and other improvements/upgrades and updates all add to the value. Conversely, if those things have not been done, they detract from value.

The most common mistake that sellers make –

Overpricing is the most common issue that Realtors into and usually it’s based upon bad advice that the seller has gotten from someone else or from the seller’s belief that they “can always come down, but they can’t go up in price.” That is not only not true in many cases, but it actually hurts them, because they scare off good buyers by being overpriced. Seller will say that they want to leave themselves some “wiggle room”, so that they can negotiate; however, they end up just wiggling away on the market while other, well-priced homes are selling. Eventually they come down in price, but usually not before the listing has become stale and buyers have become suspicious that “there must be something wrong with the house, because it has been on the market for so long”.

The market doesn’t care what you need.

Sometimes I hear the phrase “I need this much out of the sale”; maybe because of the need to pay off a mortgage, or because the seller is trying to get enough from this sale to allow them to buy another home. In either case, I have to tell them that the market really doesn’t care what they “need” from the sale. The market only cares about what this property is worth relative to other, similar properties in similar condition.  If you really can’t afford to sell your home unless you get that sale price that you “need” and it is significantly different than what your Realtor is advising you on the market value, perhaps you really can’t afford to sell right now.

Don’t make those mistakes; listen to your Realtor on pricing. He or she has you best interest at heart and is trying to advise you on a price that will result in a successful outcome. And if you put it in the market and it sells in the first week, it was not because it was underpriced; it was because it was
properly priced. In many cases a properly priced house may attract multiple offers which will drive the final sale price up. An overpriced house will just attract crickets which the owner can listen to as they sit there.

IN the Market vs. ON the Market –

A well-priced house will find its place IN the market, occupying a position where its price matches the perceived market value for the property. The first 3-6 weeks that a house is listed are considered to be “the Golden Time” for the listing, the time when the “newness”of the listing draws attention and the majority of the buyers who have been looking at similar houses will flock to see it – if they perceive that it is priced right. The goal should be to delight those visitors and not to disappoint them. An overpriced house will be ON the market at a price that draws poor reviews and feedback and possibly even drive would-be buyers away. You want the reaction of buyers to be Wow and not Whoa.

Buyers leave every visit to a house with a mental list of things that they saw that they think they will need to fix or change. The buyers assign dollar and time values to those items and make a quick determination of whether they want to take on the cost and time commitment necessary to complete those projects. Today’s buyers are often very busy people and the prospect of spending lots of time and money after they have bought a new place is just a big turn-off. Those who may be willing to take on the projects will add up the costs that they have mentally calculated and take that off their offer price. The key to being IN the market, instead of just ON the market is finding that listing price at which the perceived value that visitors will arrive at is equal to the asking price. At that price, there is nothing stopping the buyer from making an offer and the best way to find that happy price is to listen to the advice of a good Realtor. If you find a Realtor who agrees to list your house at whatever price you want, no matter how outrageous; run, don’t walk, away from that person. That is not a good Realtor. 

The bottom line…

A GOOD Realtor will get you IN the market at a price that will immediately attract would-be buyers;

so, find a GOOD Realtor and listen to his/her listing price advice. Remember that Realtors (especially the GOOD ones) are acting as fiduciaries for you, which means that they are acting in your best interests, not their own. They want to get you the most that the market will bear for your property in the shortest amount of time with the least amount of hassle – they want a successful outcome for you. You and they both know that a successful outcome for you will mean a payday for them and that is a win-win situation for both of you.

Tuesday, March 14, 2017

FAQ - What do I need to do to get ready to sell my house?

Understanding the Real Estate Process from A – Z – A Seller’s Guide to Real Estate - Part 1

This is a series of posts in an FAQ format that I hope will help would be sellers better understand the real estate process that they are about to go through. There will be a follow-on series for real estate buyers.  

FAQ - What do I need to do to get ready to sell my house?

So, you’ve decided to sell your house. Great! Before you even get into the real estate process itself, you need to do a few things to get ready for selling your house. These next two posts will be about things that you need to do in order to get ready. While the order of doing these things could be reversed, I believe that there is great value in doing them in the order in which I will present them.

Find a good Realtor® agent to work with.

This may initially seem self-serving, since I am a real estate agent; however, most people don’t truly GOOD real estate agent; one who will work with you, and for you, weeks, sometimes even months, before you are ready to list.
understand al of the things that a good agent can do on the front end of the process, before the house is even listed. The value of having an agent list your house has been well proven over time to bring a higher sale price in a shorter amount of time; but what is the value before it is even listed? That pre-listing value does vary by agent, which is why I said to find a

What does he/she do ahead of the listing?

A good real estate agent will be willing to walk through your home and, based upon their observations, give you a list of recommendations of things that you may need to do to get the house ready for the market. Realtors look at your property the way that a buyer might and they see the things that you’ve become “nose-dead” to in the house. Not only may they be able to give you a to-do list of things that need attention, but most good Realtors can also supply some leads to tradesmen in the area who might be able to do the work, if it is beyond your DIY capabilities. A good Realtor will
be completely (some might even feel that it is brutally) honest with you about what needs to be done to get your home ready to list. They will normally explain the updates and deferred maintenance items that they see need to be done and give you some idea what the impact will be on the potential sale price of you chose not do the work.

What are the 3-C’s of Real Estate?

I use what I call the “3-C’s” of Real Estate as a mechanism to provide the advice that I usually give would be sellers about the things that they are responsible for doing to get ready for the market. The 3-C’s are:

Condition – This “C” deals with the state of the house as it compares with a house in the market area that is in an excellent, market ready state. This category covers both the deferred maintenance items that I might see and the updates, or lack thereof, that buyers will be looking for in the house. I will point out to you the things that you’ve gotten used to living with that need to be repaired or painted or replaced – the missing plug covers, the rusted old front porch light, the shabby looking front door that you never use or the overgrown foliage that started out as cute little shrubs. I will alert you to the missing handrails and the need for GFCI circuits in kitchens and baths that may not have been required when the house was built.

I will also go over with you’re the updates that may be missing from your house that will impact the
market value. It is probably not the time to put in granite counter tops or a whole new kitchen, now that you’ve decided to list; however, it might be, if the negative market value impact of not doing that will be great enough. Other things like flooring updates, new windows and new roofing can also be discussed. Usually I do not recommend major updating expenditures at this point, since the seller will not recoup the cost; but, again we will assess the negative impact of those updates being needed. Would-be buyers will almost certainly make lists of those same things and come to their own conclusions about the possible hassle and costs of making those upgrades later. They almost always come to conclusions that are higher than it might have cost you to just do it and that take those costs off their offer price. We will discuss the impact of the disappointment that buyers might have, at the price point that you will be at in the market, if your house does not live up to the expectations that they will come in with. Those expectations are set by visits to other listed homes and by people watching too many MTV shows.

Clutter – The second “C” is clutter, which almost always the biggest issue that I face with sellers, especially those who have been in the home for 320-30-40 years or more. People just naturally accumulate stuff; and that stuff is usually everywhere in the house. Walls may be full of family pictures.  Shelves are full of knick-knacks and vacation mementos. Rooms are full of furniture. Basements are full of everything that didn’t fit upstairs anymore, plus all of the stuff that the kids left years ago and some of the items that you got out of your mother’s house and all of the left over stuff from hobbies that were abandoned long ago.

My challenge is to get you to de-clutter. People need to be able to see themselves living in this house. They are not there to admire and share your family/vacation pictures. They need to be able to freely move through the rooms and imagine their stuff in them and not just see all of your stuff. They expect to be able .to open a closet door without being attacked by a cascade of your stuff tumbling out. They need to see the space in the garage for their cars, not how much stuff you were able to stuff in there. They need to be able to see how big the basement is and not just gaze at a wall of boxes of your stuff. They need to be able to SEE! So, I will be recommending that you de-clutter. Moving is a perfect time to get rid of stuff that you haven’t used in years. Don’t worry the kids will never come back for their old stuff – they’ve moved on and it is time that you did too.

Cleanliness – Even very meticulous housekeepers can probably use some advice and maybe some help with the deep cleaning that may be needed to get the house ready for selling. While would-be
buyers won’t be going through the house with white gloves on looking for dust; they will notice the corners that have been forgotten long enough to collect cobwebs or the dusty blinds or ceiling fans. When buyers see a house that is less clean they make a mental leap (right or wrong) that it is probably less well maintained too. This is an area that I can recommend that you do spend a little extra and hire a good cleaning company for a one-time deep clean prior to listing it. Hopefully the seller is still able to maintain the house clean during the listing; otherwise I might recommend a cleaning service at least once or twice a month until it sells.

In my next post I’ll go over the pre-listing market analysis work and the pricing decision that needs to be made before you list. Nothing is more important for a successful outcome that being properly positioned IN the market and not just ON the market. For now, there will be plenty of things for you to work on before we get to that step.