One Price; Three Opinions

Ideally all sellers will select an asking price that attracts “ready, willing and able” buyers and meets appraisal standards. If selling Real Estate were that easy, Realtors would be fleeing to easier avocations! Even when the “ideal” happens, buying Real Estate is NOT a retail transaction so there are a number of potholes along the way as part of many transactions. Fortunately, an experienced Realtor knows where many lay and how to avoid them as well as how to navigate the surprises. That being said, why are there often three opinions (perhaps more!) when it comes to discussing the price?

Sellers will arrive at any asking price in a variety of ways. Do they want a quick sale, perhaps being willing to offer the lowest-priced property in their market? Are they only willing to sell and move if they achieve the highest price? Do they need a down payment on their next home? Are they inflating the price so that reasonable negotiating will get them what they think “fair”? Have they over-improved OR, alternatively, done nothing to their home? The rationale that sellers will use, if they are willing to provide it, is usually interesting, sometimes hard to comprehend but too often centered on their needs without fully embracing the other opinions likely to intrude. Frankly, that is fine:  we are here to educate our clients and there are times when their logic proves correct!

Buyers look at pricing from their own point of view. Some absolutely refuse to pay full price. Many want a bargain. To what extent they can and will compare houses to arrive at a price to offer and to what extent they accept documented history depends on the buyer, their financial ability and, ultimately, how much they really like a house. One house can attract multiple offers and those offers can vary as widely as the ice cream selections available at your favorite store. Whether we reach an agreement depends on how the seller’s asking price and expectations can be negotiated with a buyer’s financials and their expectations. Then comes reality!

Most sales involve lender financing. While lenders make money by loaning money, they need to protect their investment and their investment is placed partially in the ability and diligence of the borrower and partially in the property being purchased, the latter securing the debt in the event of non-payment. A lender may think you are the nicest person they have ever met but they still need to be sure that, if something happens to you, the house can be sold to someone else to recover their initial investment. The process seems to involve some loss of their investment despite their best efforts. They protect their interests by hiring an appraiser to look at the “subject” property and to evaluate it compared to similar, local properties recently settled. Their analysis results in a “best guess” as far as what the “subject property” is most likely worth to the general public.

The appraisal process is detailed and complicated with many rules and guidelines. Many find it amazing that they can actually boil the process down to a single dollar amount that is either higher (this is GOOD) or lower (this is BAD) than what a buyer and seller agreed. While I highly respect the analysis process and the arrival at a finite number, I have always felt that the “number” was sanitized, devoid of emotion. How can any piece of real property be worth an exact number that a human being arrives at? Regardless, it is the ONE external factor in the process meaning that someone other than the buyer or seller gets to decide whether the selling price works or not. Even then, if the appraised value is less than the selling price, the “principals” have recourse as long as the seller or buyer is willing to adjust their positions. The seller can agree to a lower selling price and/ or the buyer can use more of their own money.

Unless a buyer or their agent solicit the owner of an unlisted property, the typical process starts with a seller putting their property on the market at some price, seeing how the market responds, making or not making adjustments (there are times when sellers raise their asking price), eventually getting one or more offers which may result in a transaction that continues until finalized at closing or that gets derailed by some disagreement (such as can happen after a property inspection) or financing issue or an appraisal issue.

As stated in the subject line, there are three opinions concerning price! Serious sellers and buyers need to understand the whole picture and …

HIRE WISELY!

Please read my other posts at WhyAndrewWetzel.com and visit my web site AndrewWetzel.com

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Your property has settled. Is that the end?

Technically speaking, settlement (or “close of escrow” as some areas call it) concludes the process of transferring ownership of real property from one owner (“the seller”) to a new owner (“the buyer”).  Does that really end the seller’s responsibility?  I am not a lawyer but I will quote what many have said in response to such a direct question:  it depends!

In most cases, a new chapter has begun and both parties move along their new paths.  However, I have seen situations that linger like gastric distress from a past meal.  I have asked the following question several times:  when does THIS buyer accept responsibility for their house?  Some act like tenants expecting someone else to handle whatever pops up.

As a Buyer’s agent I have not had any problems with any of my buyer-clients thinking that the person who sold them their house still bears responsibility for what happened after settlement.  However, as a Listing/ Seller’s agent, I have received several calls over the years, some well past settlement, from Buyers’ agents saying that their client had an issue and believed that my seller was responsible.  Please note that I am NOT referring to situations where a seller may have shall I say “overlooked” something on their property disclosure statement.  Whether the result of a mistake or outright fraud, that type of issue certainly merits attention.

On a related note, I feel that a seller is not responsible when a property inspector does not do their job or an agent/ buyer fail to do their “due diligence” such as when an inspector states that something merits further investigation and none takes place.  Our property disclosure law in PA is much better than in many states (some have none!) and most sellers are honest but simply do not know what lurks behind walls, floor and ceilings.  While many do “preventive” maintenance, too many only react and respond when there is a problem.

Let me offer a couple of my experiences.

I once received a call from a buyer’s agent more than 2 years after settlement.  They told me that a house I sold to his client had developed a roof leak.  He was upfront, acknowledging that he knew a long time had passed, telling me that he was calling me because his past client wanted him to.  The buyer/ now owner wanted to verify that my sellers had done the roof repairs they agreed to do.  I called my past clients and was told that they had done what was asked and provided receipts at the time.  In reviewing the sales file I was reminded that this had been an FHA sale which required a two-year roof certification which involved a minor repair.  After talking to the sellers, I called the buyer agent and reminded him about the details and stated that it was several months past the 2-year point.  While I felt badly that there was a roof leak, it was not related to anything my clients did.  Stuff happens when you own a home which is why some prefer to rent despite the never-ending rent payments.

Once I received a call several months after closing.  I sold a house in late spring and it was now mid-fall and the temperature had fallen so the new owner tried to turn on the heat in their house.  It did not come on.  They went into the basement to check the heater and found the side panel off and leaning against the wall.  Their agent called me to see what I could tell them so I called my past client.  The house had been an investment property which the sellers never lived in and they had no idea why the heater did not work.  I reviewed the file and found what had apparently taken place.

The sale included a typical settlement time-frame.  The inspections had been completed, a repair list agreed to and the buyer’s financing was in place.  For whatever reason, the buyer agent called to see if we could settle sooner than planned.  My clients agreed but mentioned that they had not yet completed all of the repairs.  The buyer agent said that that was fine, that the buyers would take a credit for whatever remained.  Both sides agreed to a credit amount and we settled early.  In reviewing the file I found THE now-obvious problem.  When their inspector was at the property they could not get the heater to turn on so they suggested that the buyer ask the seller to have the heating system cleaned and CERTIFIED to be operational.  The sellers got proposals for the work requested and they gave the buyers the amount on the proposal, including the cost of the cleaning/ certification.  Neither the buyer nor their agent realized that there was no protection in the event that the heater needed a repair or replacement.  Frankly, neither did my sellers or me but that was not our job to point out.  I told the agent that they should talk to their broker and explain the situation.  I told them that the buyer found the heater in the same condition their inspector had left it.  I had to assume that the buyers did not use the credit to address the repairs they had asked for and, presumably, never looked at the heater during the several months between their property inspection and that cold fall night.

There are other stories I could tell but they essentially involve similar circumstances.  Ideally there is a euphoria when buyers are shopping for their first or next home.  Sellers probably feel the same emotion.  I often like to remind my clients that selling or buying a home is a business transaction.  Despite all of the “human” aspects, it is probably the largest purchase someone will ever make and one that can get costlier if the process is not respected for what it is.  Sure, stuff happens but much of what I have seen or heard is avoidable.  The inspection process must be looked at for what it is:  a major opportunity for BOTH sides to re-evaluate their agreement.  I think that a buyer agent MUST attend the property inspection to best protect the interests of their client and no stone should be left unturned to ensure that there is nothing or very little missed.  The reports must be reviewed in detail and questioned.  While lender appraisals and pre-settlement walk-throughs will support the process, the property inspection, especially if it includes wood infestation, radon and other specifics, is the major point of analysis and typically the last chance for a buyer to express any concerns.

While I am sure that some buyers will refer to the property disclosure statement when a problem arises, the form is not perfect and a buyer has the “burden of proof” if they think something is amiss.  It is certainly not an expert opinion.  Hopefully a buyer does not try to save a few hundred dollars by waiving the option of having a property inspection, thinking themselves capable of assessing the true condition of a house.  That can prove BOTH co$tly and foolish!

Sadly, no matter how euphoric a purchase or sale may have been at the time, no Realtor likes to receive a post-settlement call about a problem.  Our service does not end at closing and hopefully we have not contributed to or caused the issue.  Regardless, those conversations are not the way to remember a sale.  As I said before, much of what I have seen is avoidable.  This is why I end every post with ….

HIRE WISELY!

Thank you for reading.  See my others articles at WhyAndrewWetzel.com!

 

 

Personal Property: Included or NOT?

Buying and selling Real Estate (often referred to as real property) can be complicated enough even when the process goes smoothly.  Too often, seemingly minor or avoidable distractions threaten to derail the process.  The topic of personal property is a perfect example.

Properties are either marketed when occupied or vacant and they may or may not have “personal property” in them when viewed.  What is being sold?  What is being purchased?  Generally speaking, the physical building and its fixtures are the product being offered to the public.  What the buyer is seeking may be a different but complicating matter.

In the PA Standard Agreement For The Sale Of Real Estate, in Paragraph 25 (“REPRESENTATIONS (1-10)“), it is assumed that the “Buyer has inspected the Property (including fixtures and any personal property specifically listed herein (meaning listed in the Agreement) before signing this Agreement or has waived the right to do so, and agrees to purchase the Property IN ITS PRESENT CONDITION….”.  In Paragraph 7 (“FIXTURES AND PERSONAL PROPERTY (9-16)“, a Buyer’s Agent should specifically list any personal property that the Buyer was requesting to be included or excluded from the Agreement.  Regardless of what was advertised as being “included” or “excluded” elsewhere, this paragraph IS the basis for both parties agreeing to whatever is noted.

The Buyer can request/ include something(s) the Seller did not intend to provide and/ or exclude something(s) the Seller intended to provide.  The Agreement/ purchase offer starts the negotiating process.  Admittedly, it may start off on strong footing or derail at the outset so an agent and their client have to discuss “the plan” which should factor into the equation the Buyer’s urgency, the type of “market”, whether there is likely to be competition and what it might take to compel the Seller to accept the offer or, at the very least, feel comfortable going back and forth.  Inclusions and exclusions can be an issue!

One of the distractions, frankly, is the “Sellers Property Disclosure Statement”.  The usage of the form itself offers a somewhat mixed message.  On the surface, Buyers expect that the Seller has completed the form as honestly and accurately as possible.  While inspections may determine that there are undisclosed or understated issues, it is generally hoped that the Seller reported what they knew so that the Buyer could rely on it.  On the other hand, Paragraph 16 (“OTHER EQUIPMENT AND APPLIANCES“) deviates from this general understanding.  There is specific language preceding a series of check boxes (“This section must be completed for each item that will, or may, be sold with the property”)  followed by language stating that the list is not conclusive and that the Agreement itself determines what is included in the selling price.  The paragraph concludes by asking the Seller to identify and explain any problems or repairs needed for the items in the check boxes.  Hmmm.

While I see the merit of listing some items that people may miss during a sale (such as items related to garage door openers), I respectfully wonder why the “fixtures” would not be included in their relevant sections in order to avoid having Sellers list things they have no intention of leaving?  I ask my Sellers to specifically circle the words “will, or may,” or, even better, do NOT list anything that is not meant to be included!

There always seems to be some confusion about the word “fixture” (read the paragraph to see what I mean).  We complicate this by what we list in the MLS, in property “highlight sheets” and on the disclosure form.  Sometimes those “sources” conflict, making us stop to ask questions which could put a Buyer at a disadvantage by delaying the preparation and presentation of their offer.

The “best practice” is to confirm the Seller’s intention if possible prior to writing an offer.  Either way, unless something is written into an Agreement and  executed by both parties, you have nothing.  Perhaps a Seller will ask their agent to contact the Buyer’s agent to see if they want one of more items to be left for them.  That too must be put into writing and fully executed.  Some Sellers will leave things they think the Buyer will want, only to find that the Buyer does not need or want them which may cause an issue at closing.

I have seen and heard of a number of situations where an otherwise uneventful property sale got complicated by miscommunication, poor communication and/ or assumptions being made by one party without the agreement of the other.  It is best that a listing agent discuss this with a Seller at the outset and then make the Seller’s wishes known.  If something changes, make sure that it is promptly communicated (people do change their minds!  Sellers may find that they need or do not need a particular appliance).  Buyer’s agents must discuss this with their clients as well to make sure that the Buyer’s wishes and the Agreement are in agreement.  Imagine doing a pre-settlement walk-through and finding that something you expected to see was not there?  Finding something you did not expect to see may also be an issue.

There is so much more to buying or selling Real Estate than simply identifying properties to see.  OUR job really starts after a buyer becomes interested!

HIRE WISELY!