The most dangerous words in real estate…

I believe that the words “I assumed” are probably the most danger-filled words in any contract-based scenario; yet I hear those words all the time in my real estate business. Real estate transactions are based upon the Purchase Agreement CONTRACT. That means that everything that is relevant to the transaction should be spelled out in the contract somewhere or should be verified within the context of the contract. Nothing should be left to assumptions. Yet time after time and law suit after law suit the defense of at least one party to the contract starts with the words “I assumed.”

It really doesn’t matter which side did the assuming. It was a mistake to assume anything. Examples – “I assumed that the house was hooked up to city water, since all houses in that area are.” “I assumed that the seller would leave the utilities on through the day of closing.” “I assumed that the title company would find any unpaid water bills.” “ I assumed that any special assessments would show up in the title search.” “I assumed that the bank had to pay all back taxes and assessments at closing.” “I assumed that I’d be allowed to use the shared driveway that the previous owner has ‘always used’.”I assumed that what my mortgage guy had been telling me would be what showed up on the closing documents.”

These are all statements that I’ve heard used (or heard about) in deals over the years. They also have one other things in common – they all caused problems with the deals – many times causing the deal to fall apart and occasionally resulting in law suits. They wer all bad, some might say stupid, assumptions made by a buyer or seller or even by real estate agents.
Here’s the bottom line. Don’t assume anything. If you don’t know for sure, check it out. Go ask the city, township, village, county, whomever, and be sure. If you don’t understand something ask and keep asking until you do understand the answer. If you don’t have a written good faith estimate from your lender, demand one and under stand what it says or ask questions. Never accept “trust me on this”, as an answer. Get it in writing and then read and work and ask until you understand the answer. NEVER ASSUME!

Buyers aren’t liars, they’re just overwhelmed and confused by it all…

One of the first insider phrases that I heard when I first got into real estate was the old hack – “Buyers are liars.” This bit of conventional wisdom on buyers in real estate came from the “old pros” in the office. The gist of the phrase was to say that potential buyers will lie to their real estate agent about what it is that they want and then turn around and buy something completely different – that they were lying to the agent all along – or that they will say that they are working with an agent and then go buy from a FSBO.

I haven’t found that to be true at all. What I have found is that buyers often don’t know what they want or at least can’t express what they want to their agent. Sometimes the most honest (and least helpful) comment that a buyer can make is, “I don’t know what I want, but I’ll recognize it when I see it.” The challenge for the agent is then to start restricting the searches based upon what he/she observes that the buyer likes or doesn’t like as they go out together. That’s not a very productive way to search, but then there is no rule requiring that the clients be productive for our benefit. The more observant the agent, the faster he/she will discern what the clients likes and dislikes are and make the necessary adjustments.

Some agents just don’t deal with this buyer confusion well and I have picked up more than one client who tried to work with another agent first, only to be put off by their reaction to their confusion about what they want. A part of the problem is that the current market is so perverted by foreclosures and short sales that would-be buyers are being tempted by homes that would have been easily identified as being out of their reach just a short while back. Another thing that causes problems is the huge inventory, which means that buyers can (and do these days) look at 30-40 houses with similar features in a price band, where they night have only had 10-15 to consider a few years back.

Today’s buyers read the stories in the newspapers and see the TV reports. They see the homes that used to be $200-300,000 now being offered down in their price range (or so they think) and quite naturally they want to grab for that brass ring. When the reality of the needed repairs or the high taxes or whatever else is unseen in the glossy ads sets in, they have to back off or withdraw and they have wasted their time and the time of their agent. Are they then liars? Did they somehow mislead the agent or lie to him/her? No! Perhaps they are innocent victims of both their own misunderstanding and a lack of good real estate advice from their agent and their mortgage rep.

Too many real estate agents and mortgage reps seem all too ready to let the unsuspecting buyer (especially first-time buyers) wander into the mine fields of short-sales and foreclosures, mainly in the name of making a quick buck. It is the agent who counsels those buyers about the risks and slows them down enough to give the decision a good thorough review who earns my respect. Letting buyers lob low-ball offer after low-ball offer in on short-sale properties is not fulfilling one’s obligations to the clients or the profession, in my book; any more than taking overpriced listings in hopes of getting later price reductions or just for the PR benefits of the signage placement. Both speak volumes about the character of the agents involved.

So, I’ve concluded after years of doing this that buyers aren’t liars, they just need help understanding and verbalizing what it is that they want and lots more help understanding and internalizing what it is that they can afford (both monetarily and in terms of their ability to deal with the issues and needs of the new house). Some agents are better equipped than others to provide that help and guidance. The best agents have the patience and the ability to listen and adapt that are required. Others will just walk around complaining about their clients, as if it’s the clients’ obligation to adapt to their needs. Funny how those agents are always losing clients, isn’t it?