Andrew Wetzel's Musings

March 14, 2020

Buying Real Estate “Sight Unseen”

When we experience a “seller’s market”, meaning that there are more buyers looking than there are properties available for them to buy, the competition often leads to frustration.  This is especially true when getting to see inside becomes an issue.  It is not unusual for a buyer to have to bid on several houses before getting an offer accepted.  At least they got to see inside and make an offer, right?

A new policy created by NAR, the National Association of REALTORS, and implemented by Bright MLS has added to the drama.  As a result, some are making offers to buy Real Estate “sight unseen”.  What does this mean and what are the implications?

We have experienced “seller’s markets” before and we will again.  Generally speaking, a combination of low mortgage interest rates and low inventory causes houses to sell quickly, making many buyers and sellers act differently than they might in a more balanced market.  Asking prices may be the “floor” rather than the “ceiling” when it comes to making an offer and a buyer, assuming they have an opportunity to see inside a house and make an offer, may not get a second chance so it may be wise to offer their “highest and best” from the beginning.  However, the regulations covering appraisals are stricter than in the past so offering above the asking price is not always the best answer.  What to do?

Many buyers, frustrated by competition, bidding wars and houses they cannot get in to see, are trying to be creative.  They have several options in addition to the amount of their offer such as:  offering a high deposit, being flexible with a settlement date and waiving inspections.  Some may give up or delay buying.  Many sellers are overwhelmed by multiple showings, multiple offers and, as unusual as this may sound, not knowing whether their highest offer will appraise and, if they get an acceptable offer, whether they will even be able to find their “next” home.  One of the ironies of this type of market is how a seller who has a lot of leverage when selling will react when they are buying without having the same leverage.  The shoe may literally be on the other foot.

Enter the new NAR policy called the “Clear Cooperation Listing Policy”.  It has caused confusion and frustration although most REALTORS understand why it was necessary.  Frankly, it is impossible to deny its purpose.  It requires brokers to upload property information to the MLS within 1 business day, excluding weekends and national or state holidays, of any public advertising which includes a “For Sale” sign and social media.  Violating the policy may result in a substantial fine.  Absent public advertising, we are required to upload the information to the MLS within 3 business days.

Some think the new policy a direct assault on a long-standing business model known as the company or office “exclusive listing” where listings were taken and “publicly advertised” but kept off the MLS because the listing broker would not offer to compensate buyer agents working for other “brands”.  Real Estate prides itself in having many different business models as long as we operate within our various rules and regulations.  However, some of this creativity may appear to conflict with our core principles.  I discuss “exclusive listings” in an article entitled “Coming Soon” and will mention that, while still a legitimate business model, they are no longer able to be “publicly advertised”.

The MLS platform is a member-only web site for sharing property information among members to “cooperate” with them for our mutual benefit.  We are “match makers”, meaning that we help bring buyers and sellers together.  A major aspect of this is that we sell each other’s property listings. The creation of the MLS platform made our jobs easier by increasing the effectiveness and efficiency of how we marketed and learned about property listings.  Before the MLS, agents and companies were on their own.

The goal is to expose Real Estate to the broadest possible market which should theoretically “protect and promote” the interests of both sellers and buyers as required by Article 1 of the REALTOR Code of Ethics.  Presumably, this should allow sellers to achieve the highest possible selling price and the best terms in the shortest period of time by ensuring that as many buyers and agents as possible would be able to access property information, schedule showings and, if a buyer liked what they saw, make an offer.  It essentially levels the playing field by making information and properties accessible to all.

Unfortunately, we still live in a society where some people or groups are excluded from opportunities to see and buy Real Estate.  Undercover investigations and complaints from the public still show this to be true even if not as obvious or pervasive as before.  It is unacceptable when anyone is prevented from being able to buy housing and live where they want to live when affordability is not an issue.

The reaction to any major policy change such as this one can be interesting and it remains to be seen how this one plays out.  Will any listing agent blatantly disregard the policy despite the MLS stating their intention to impose a severe fine for violations?  The public, including agents representing prospective buyers, also has options for responding.

What can a buyer or agent do when they cannot get the information they need about a property listed as “Coming Soon”?  The “Coming Soon” status means no showings are allowed to anyone but the MLS should provide information, shouldn’t it?  The concern is that some agents and their buyers, including the listing agent’s own buyer-clients, are being allowed to view these properties and make offers before they are made available to the public.  Instead of converting to an “Active” status many of these go right to “under contract”.  What are an agent and buyer supposed to do?  They will know the “projected” date when the listing status will change to active, allowing showings, and may even know when offers will be presented.  However, those dates can change without notice so should they wait and hope or take some other form of action?  Waiting may result in failure.  Some are making offers on houses without the buyer or their agent actually seeing inside.  This raises two concerns.

First, we have a fiduciary duty to represent our buyer-clients but what is our risk in preparing an offer on a home that neither of us has seen?  Suppose neither has actually visited the location to see the exterior or the neighborhood?  While I am certainly not a contractor or an inspector, I have seen a number of things both inside and outside houses that made me question the pricing or condition of a home and, when asked, I have offered my opinion on whether to pursue a house, how to negotiate the price and what to inspect.  Obviously an agent needs to make sure they are not exceeding their level of competence.

What options does a buyer have if they come to realize that a house is not as nice as they had hoped or expected based on the exterior or the MLS presentation including pictures and public remarks?  Suppose the listing has poor quality or no pictures and little or nothing in the way of a description?  Most agents will tell you that an inspection contingency provides a “way out” and, while it does, it has a cost to the buyer and it takes time.  Would they make an offer “sight unseen” without inspections?  I could go on.

Second, as a listing agent, as attractive as it may sound to sell a client’s house without their having the  inconvenience of showings, suppose a buyer uses a home inspection to terminate a sale when there is really nothing wrong or a seller would make any repairs they might request?  Perhaps they offered a low deposit and are willing to forfeit it to terminate a contract?  A failed sale stigmatizes a house, perhaps even worse than a lengthy time on the market.  If a house comes back on the market quickly after going under contract it generally means that something happened during the inspection contingency time frame.  That could negatively impact future interest as well as the eventual selling price.  Some listing agents do not report that a house is “under contract” to avoid all of this.

I have heard both sides and wish I had an answer.  There is no perfect solution and buyers and sellers, including their agents, will always have a different perspective.  If a buyer wants to make an offer without seeing inside, is this really the best option?  Where is the liability?  I am not sure.

Realistically, if I were a seller I would be reluctant to accept any offer without a showing especially if it contained a frivolous or easy way out unless there were a substantial, perhaps even a non-refundable, deposit.  If I were a buyer I would be reluctant to buy “sight unseen”.  At the very least I would want to walk the exterior to identify potential concerns and include them in my offer.  Otherwise, a seller might say a house was being sold “as-is”, another contentious term, and was priced accordingly or that any concerns should have been factored into the buyer’s offer.  The cost to inspect and potential time lost could prevent a buyer from seeing the best house.  Does it make sense to reduce buying Real Estate to essentially being like a “blind date” where neither side has any real obligation?

While “seller’s markets” will occur over and over again, the new “Clear Cooperation Listing Policy” has added a new twist to an old theme and time will tell how we all adapt to it.  The first fine for violating the new policy will have a major impact going forward.  A “buyer’s market” will change much of the drama.  Either way, there will always be another twist.

There is no time for inexperience, empty promises or false expectations!

HIRE WISELY:  We are not all the same!

January 18, 2020

Bright MLS December 2019 Residential Housing Report

Bright MLS has released their Residential Market Statistics for single family homes through December  2019.  In today’s podcast I will discuss 2019 results for Delaware County Pennsylvania.  If you would like information about this or any other County or any specific municipalities in the Delaware Valley, please contact me.  I am only a text, email or phone call away!  I respond promptly to all inquiries.

The report compares current results to one-year ago, same time period.  As with all Real Estate statistics, two things are true.  First, the performance within individual zip-codes can and will vary significantly from the overall County.  Real Estate is local and results can vary from neighborhood to neighborhood and even block to block.  There is no such thing as a “national” Real Estate market any more than there is a national weather forecast so, whether you may be thinking about selling or buying, please contact me for details about your areas of interest.  I can provide current information and keep you informed about the evolving market.  Deciding whether it is the right time to sell or buy is a personal decision typically involving a number of variables.  I can provide the knowledge and insight to help you decide what works for you.

My second point is that, unfortunately, all Real Estate statistics involving sold data is stale.  This is especially true if you are relying on Internet valuation models which use recorded data rather than up-to-date MLS information.  Even then, while a sale may be reported as settled or closed today, the real question is when was the offer negotiated?  Typically sales take 45 to 60 days to close so the market today may be different.  Up-to-date information, even if not perfect, is important!

As far as the statistics, there were 8931 units listed for sale through December 2019 compared to 8788 listed in 2018 with an end-of-month inventory level of 1022 compared to 1412 in 2018 with a monthly supply of inventory or MSI of 1.9 compared to 2.8.  6994 properties settled in 2019 with an average “selling price” of $289,411 and a “median” selling price, meaning that half of the sales were higher and half were lower, of $225,000 compared to 7057 settled in 2018, same time period, at an average price of $271,767 and a median selling price of $208,000.  The year-to-year change in settled properties declined less than 1% while the average selling price was up 6.5%.  The “days on the market” or DOM for settled properties was 42 in 2019 compared to 50 in 2018.  The MSI suggests a seller’s market with low inventory levels overall.  A 3-month supply of available inventory is generally considered a “balanced market”.  Again, these numbers vary:  the underlying data shows a wide range of results in all categories among the 49 different municipalities in Delaware County.

We can debate whether average or median numbers are more important but what really matters is how your property or one that interests you compares to those appraised and settled with similar location, features and condition.  Appraisers rely on nearby, recently settled properties so average or median pricing loses some validity but may provide insight for both the short term and the long term.

What about the properties that did not sell?  Many came off the market and still remain unavailable.  Did owners delay, change or give up their plans?  This happens more often as the holidays and year end approach which I find fascinating.  I tell my clients that I cannot guarantee that their house will sell if it is on the market but am fairly certain that it won’t if they take it off the market.  Anyone trying to sell now will have less competition and houses tend to show their best this time of year.  I understand that showing and selling a house during the holidays and winter-time can interfere with enjoying the season and it can be messier but buyers out looking now tend to be serious.  Of course, if a seller needs to buy their next house, the inventory level is much lower than normal.

Generally speaking, houses may get showings without generating offers unless buyers think they are priced within the range of their perceived “worth”.  Most property listings whose contracts are canceled or allowed to expire have asking prices considered high for their market and/ or they were poorly marketed, meaning that some buyers and agents may not have even known that a house was available to look at or purchase.  Of course this may well depend on the ratio of buyer and sellers so there is more to this than raw statistics.  If a market has a lot of inventory, some buyers may not be willing to look at houses priced high compared to the rest of the market:  why try to negotiate a price down when other similar properties are available at more competitive prices?  Many sellers open to negotiating their price will never get the chance.  I will happy to discuss specifics with you.

The overall economy is doing well with some adjustments here and there.  Statistics aside, what are you planning to do?  Real Estate is generally a long-term investment unless you are looking to fix and flip it or planning to move within a short period of time.  There are opportunities out there.  As with the stock market, it is very difficult to pick the best time to make a move.  All you can do is get the best available information, determine what is in your best interests and then start the process.  I am a phone call or email away and getting started is easy once you take action.

I hope you had a great holiday season and have a happy and healthy new year!  If you want or need to sell any type of Real Estate, whether you tried and did not succeed before or are planning for the first time, NOW is the time to plan for 2020.  Please do not wait for what you think is a better or the best time to start.  Buyers look all year long and can only see and buy properties that are available to see.

There is no time for inexperience, empty promises or false expectations! 

HIRE WISELY:  We are not all the same!

January 15, 2018

3 Signs that Buyer Remorse is Possible

Filed under: Uncategorized — awetzel @ 4:15 PM

In the “ideal world”, a Buyer will make an offer that either “seals the deal” or, at the very least, generates a fruitful negotiation.  Even if a Buyer and Seller cannot agree to terms, both should rest easy knowing they did their best.  The “ideal” does not always happen, leaving one party (or both) to wonder what happened.  This can affect their future planning (how soon will they resume doing what they were doing?) and even cause a client to wonder if their agent did their best.

Focusing on the Buyer, let’s assume that they have been financially pre-qualified and that they have spent time and effort really thinking about where they want to live and what they need and want in their first or next home.  In situations involving more than one Buyer this can get a little more complicated as the parties work to arrive at something that pleases everyone involved.  Knowing their financials puts a Buyer in a stronger negotiating position and provides parameters for their search.  Knowing where they want to live and what they need and/ or want in a house will help them focus their search on real “possibilities”.  That being said, there will still be “gray area” to discuss.

The reality of a Real Estate search is that sometimes the “best” or “perfect” property is unattainable OR the Seller is hard to negotiate with (this includes the Seller having a listing agent who makes the process more difficult than it needs to be).  If a Buyer finds it difficult to “check all of the boxes” when deciding which house to pursue, do they continue looking (maybe something better will come on the market later) or do they make on offer on the “best” of what is available?  Let’s look at “3 signs” of potential problems down the road.

(1) A Buyer keeps looking and looking, finding it hard to commit to a specific house.  For whatever reason, none seem to fit exactly what they are looking for.  Perhaps they feel that “the search” is NOT uncovering all of the possibilities.  Frankly, I often find incorrect information in the MLS and online:  too many entries are sloppy or incomplete, leaving someone who views the information unsure about what a house has.  This could mean that possible “matches” will not come out in the search results.  The best/ worst example of this is the listing without pictures or those that have no “remarks” as well as those that have the wrong features uploaded.  This happens!  An agent can help by making sure that a Buyer has realistic expectations as far as their financials, where they are looking and what they expect to find in the houses that are generated in their search results.  On a more basic level, an agent MUST know the limits of an online search so that they can  find properties others could not!

I have a time-tested process (the information is available on my web site under the Buying tab) that can put a Buyer in the best position as far as searching, evaluating and making a choice.  A haphazard process, which typically occurs when a Buyer is strong-willed and their agent is not assertive (I know the Buyer is the boss but a good agent is more than someone who opens doors!), will put a Buyer in the untenable position of finding something they like but fear pursuing because so many choices remain which have not been shown or perhaps even found.

Over time a Buyer should have seen enough to either “fall in love” with a specific house OR be able to decide which is the best even if not ideal.  Of course, some Buyers may delay taking action which is better than making a bad decision.  Sometimes Buyers have to plan to make a house into their very own “dream house” and that requires knowing what is possible when they see something that falls a little short.  Bringing a reliable contractor on a showing can provide insight (including the potential expense to address a concern) and go a long way towards knowing what to offer.  On the other hand, some Buyers seem to like multiple houses which really means that none of them may be “the one”.

Over time, which is more likely:  will something really nice come on the market or will those houses that interests a Buyer sold to others?  What happens to the Buyer who may have a house “under contract” or a lease expiring?  They need to find a new home.

(2) A Buyer is told that their offer was accepted and they do NOT seem thrilled!  I once had a Buyer cancel an offer before the Seller responded.  I never learned what changed their mind but was happy that that happened rather than dragging the process out only to be terminated later.  The residential Buying/ Selling process can emotional (generally speaking, investors tend to focus more on “making the numbers work”).  I compare it to “playing poker” in that the parties typically do not know what the other is thinking. Offering “full price” is no guarantee that tour offer will be accepted and you often have no way to know if there is any competition.

In terms of managing the process, when I write a purchase offer for a Buyer I want them to be able to sleep well that night, knowing that they are comfortable with their proposal. Buyers will NOT always be offered a chance to change their offer so, in some markets, they need to start with their “highest and best” and some will refuse to do that.  If/ when a Buyer ends up thinking they went too high, they may be able to walk that back a bit if the inspection results suggest that there were unknown issues with a house.  The thinking behind this is beyond this post but I would add that, if a Seller accepts another Buyer’s offer, you have to move on unless you want to wait to see if that one falls through.

(3) This is the most frustrating one:  the Buyer has had a house inspected and gotten “mixed results”.  While the “clock is ticking” as far as the time frame during which the Buyer has to decide if they will offer the Seller a chance to address “material” concerns or, unfortunately, to terminate a sale, some Buyers want to see more houses!  When this has happened to me, I ask what the Buyer what they are thinking. The obvious answer is that they are concerned about the inspection results however, there are times when a seemingly nice new listing has become available (Buyers can easily still search the Internet regardless of the state of a sale).  When this happens there is usually a specific house that interests them so I ask why they want to see that one.  During the conversation I review the inspection results and discuss how to handle them and the related costs and specifically remind them about the process we used to identify the house they bid on.  I remind them that no house is perfect and I tell them that, while a newly found house “appears” very nice, they do not know what the Seller expects as far as the selling price, we do not know if there is or will be any competition and, most importantly, we do not know how an inspection of that house will go.  In my experience, if we have done a thorough job identifying the house now under contract with my Buyer, they will usually stick with it.  However, when that process has been haphazard, there is no solid foundation and it should be expected that a Buyer will question how we got to this point and they may well have their eyes and mind drawn to what seems a better option for them.

There is far more to buying a house (or investment property) than looking on the Internet and writing an offer.  The cost to acquire a house, meaning the “closing costs”, is not cheap.  Buying a house that quickly turns out to be inadequate can be costly, meaning that you may not recover the closing costs, will have more costs if you buy something else and the price you paid may NOT be what the market thinks reasonable for what you are now trying to sell.

Looking at house is undoubtedly the fun part of the process because, at least at the outset, all things seem possible.  However, the best way to ensure a good outcome starts with preparation, sometimes well in advance of seeing inside any houses.  The Internet, both in terms of being able to access listing information 24/7 AND the ability to access what appears to be valuable guidance for buying/ selling, is too often a distraction rather than a benefit.  An agent’s job, in addition to providing guidance and support, now includes helping their client work through the overwhelming barrage of information too often presented as factual.  In and of itself, that can add to their being problems with the journey and how the agent and client interact.

Please visit my web site (AndrewWetzel.com) for a wealth of valuable content!

HIRE WISELY! 

 

January 10, 2018

Teams in Real Estate: Who Benefits?

Filed under: Uncategorized — awetzel @ 4:11 PM

“Teams”, meaning groups of two or more licensed agents working together within an office, have been around for as long as I have been an agent. Unfortunately, most of my experiences with teams have been very frustrating. In fact, several prospective clients have asked me if I was on a “team” before deciding to hire me. NONE of them wanted to hear “YES I AM”! They all had had similar bad experiences that influenced their plans going forward.

Real Estate teams are allowed although industry leaders have recognized that the practice, while making sense for some agents, may add potential risks for their clients. Regulations are being revised to ensure that a “client” is not adversely affected by working with a team. Frankly, poor representation can harm clients and poorly run teams can magnify the potential for problems.

Working in Real Estate is like driving on a multi-lane highway: we have many ways of reaching our destination with guard rails to keep us on track. The “lanes” represent different “business models” we can use to run our businesses while the “guard rails” represent the different layers of regulation. These include the Code of Ethics, RELRA (the PA real estate licensing and registration act) and the law itself. Newer agents, poorly trained/ poorly supervised agents and some who should not be representing others at all can all run afoul of the rules if they do not understand, care or lose sight of WHO IS THE BOSS (hint: it is the CLIENT!).

In my college years and beyond I extensively studied management and teams (Together Everyone Achieves More and there is “No I in team”!) and understand how partnering with others can have its benefits. Teamwork is essential to operating many businesses such as in sports. However, Real Estate is unique. We work for (as opposed to with) clients who expect us to “protect and promote their interests above all others”. They are likely making their biggest purchase or selling their biggest asset and depend on us to oversee, direct and lead the process. The “client” relationship is “special”, making “sharing” them with others them a challenge.

Briefly stated, here are a few of my experiences:

1) some 2-agent teams advertise that the client is hiring “two agents for the price of one”, so you can always reach one or the other. Interesting slogan but does it work? Suppose the team is a married or “involved” couple? I have found both agents on a team unresponsive or “busy”.

2) I have had both agents representing the same buyer call to schedule a showing of my same listing. The team concept only works if everyone involved is kept informed. Who is in charge?

3) I received an offer on a listing, discussed it with my seller-client and called the buyer-agent to provide a “counter-offer”. A different agent answered the phone and advised me that they were on a “team” with the agent I called but they were unaware of the offer. They asked me to tell them what my client said so they could relay the information. Later that day I received a call from the original agent, unaware that I had spoken to their “partner”. They asked to me repeat what I told the other agent since the second agent was not available. I told them I would do this ONCE and that, going forward, they had to decide who would be my contact.

4) I had a sale fall through which involved a buyer-agent who failed to terminate a sale within the property inspection time frame, resulting in the contingency expiring unresolved. As a result, their buyers had to forfeit their deposit. In trying to keep the sale going, I sent an email to the agent and their broker. The broker took more than a day to respond, told me that the agent was on a team and that the “team leader” would call me. That took another day. The agent never told me they were on a team and the broker in charge of the office did not seem to want to get involved. In the end nothing changed but terminating the sale took longer than it should have.

5) I had another sale fall through due to a buyer “defaulting” on the contract terms. In this case I knew the agent was on a team so I included the “team leader” in emails trying to keep the sale moving forward. Rather than taking charge, the team leader responded in a very unprofessional manner, asking why I needed to include them in an email since they met with their agent daily. I used email to keep my client involved while documenting the process. I advised the team leader that we apparently had different ideas about how a team should be run. My best guess is that team leader was preoccupied with “bigger fish” and the buyer agent had little or no supervision. I wonder how the buyer felt when they learned they lost the sale?

Several sellers have told me that they would never work with someone on a team again. They all told me basically the same thing: they got tired of talking to different people every time they called. Most thought they were hiring one specific agent only to learn that someone else was “their contact”. They felt uncomfortable NOT having an ongoing relationship with ONE SPECIFIC AGENT. This is a “service business”: can you imagine how that feels? I really have to wonder about the confidentiality aspect of their business relationship: who knew what?

While some agents form teams with people they like, many seem to do this when they are too busy to personally handle their own leads. I respect that. Clients may not be able to wait and referring them to other agents costs the lead-generating agent money so they build teams. As long as client-service is NOT sacrificed and the client agrees, there should be no problem! They may bring on experienced agents looking to grow their business or new agents learning the business. The team leader may focus primarily on generating business/ leads while delegating the details to others, perhaps doing little to supervise their group which can be problematic.

I understand that some brokers may like the team concept in the hope that the “team leaders” will properly hire, train, develop and supervise their own team members, making the broker’s job easier especially if they actively list and sell Real Estate. However, each office has ONE PERSON ultimately responsible for making sure that their staff, regardless if affiliated with a team or not, is PROPERLY SUPERVISED. As I learned years ago, “delegation without follow-up is abdication” and giving someone else a job to do does NOT relieve the person in charge of making sure that rules and regulations are followed.

Working with buyers and sellers requires creating an environment of trust which typically involves learning confidential information. Buyers do not want to share how much they like a property or are willing to pay for it; sellers do not want to share how much they want or need to sell a property or how much they are willing to accept to sell it. It is hard enough for many of us to share confidential information with one person. What happens with a team? Whether a team has agents acting as both listing and buyer agents or agents acting exclusively as one or the other, what assurances are there that any individual client’s confidences are PROTECTED AND PROMOTED ABOVE ALL ELSE??? The team concept would seem to allow a greater opportunity to inadvertently share otherwise confidential information, requiring added diligence.

As stated earlier, “teams” are perfectly legal as long as they are properly run and managed. They should not be an excuse for brokers or team leaders to abdicate their authority or responsibility. I have seen and heard of enough situations to make me wary of them and, apparently, so have some members of the public.

HIRE WISELY!

October 14, 2017

Property Tax Reduction: The Illusion

Filed under: Uncategorized — awetzel @ 12:50 PM

I think I can safely say the no one likes paying property taxes.  You save to buy a house. typically dependent on some “down payment” (your savings!), go through an often tedious and frustrating process, make 180 to 360 monthly payments, pay property insurance, incur maintenance costs and, hopefully, improve your “castle” to better fit your wants and needs to make it a home.  At some point your monthly payments end and you OWN your very own piece of planet Earth.  Then the tax bill comes.  There are several taxes but let’s focus on the largest one which pays for public education.  Those bills keep coming year after year and they go up and up regardless of whether your house is worth more or not.  Your assessed value may stay the same but the millage goes up to yield the revenue our elected officials say they need to meet their budget.  For years there seemed to be no control over how much they could raise YOUR tax bill but that has changed.  For better or not, we still are TOLD what THEY WANT!

Public education is a right, not a privilege so money has to be raised to pay for everything related to schools and education.  I will not debate specifics regarding salaries, the union or other topics often debated but I will express several underlying concerns.  They include:

  • some municipalities have tax levies that make the monthly tax payment look like a “principle and interest” payment.  This excludes some buyers!  In fact, many buyers are diverted from areas solely because they do not qualify when the school taxes are factored in.  I guess this kind of “steering” is acceptable;
  • properties are “assessed” relative to their local surroundings within their municipality.  There may be vast differences in assessed values for a variety of reasons such as between houses sitting on different sides of a municipal boundary, enhancing a home’s living space  (getting permits to do this may result in a higher assessed value), tax appeals and, frankly, inaccurate assessments (two similar houses may be reported differently in the tax records).  New construction is an anomaly as assessed values are based on a percentage of the selling price while other houses generally carry a stale assessed value.  County-wide reassessments make the system fairer and are generally intended to shuffle the deck without resulting in a tax windfall (if they want a windfall they have to raise the millage);
  • seniors and people on fixed incomes often have difficulty paying property taxes. Many feel that these taxes should be waived at some point;
  • while much has been made of switching some taxes to a “consumption” model, the school tax is not and that seems odd to me in terms of “fairness’.  Take three similarly assessed houses and all will pay the same tax regardless of whether the owners have no children, few children, many children or send their children to private school.  This does not seem fair, does it?

Over the years a number of suggestions have been made regarding how to address this topic since these taxes are the highest.  Some involve shifting how the revenues are distributed so that lower-performing schools can take measures to raise outcomes. Frankly, many do NOT want to see their tax dollars go out of their local communities. Some have suggested that regular reassessments will keep the system more equitable but the practice is expensive.  Another suggestion under consideration lately is eliminating property taxes altogether.  Sound good? The devil is in the details:  the revenue is still needed so another way needs to be employed to offset the lost revenue.  People being people want to know how a new system will affect them.  Will seniors and low-income folks need to be subsidized by younger, more affluent people regardless of who lives in the nicer home?  The devil is always in the details so when you hear about ANY proposal, you need to READ THE DETAILS!  I bet most people will not take the time and that those who do will not fully understand the details.  Have you ever read these resolutions?

Here is a novel idea:  ANY conversation about taxes MUST include some discussion about where the tax dollars are going and how they will be used.  We cannot keep “throwing money at problems” expecting that money solves everything.  It feels good in the short term but resolves little in the long term  At best it is addicting meaning that those receiving it become dependent on others; at worst it is debilitating to those who work hard only to see their income wasted.  Some of the worst performing school districts spend the most per student while many good ones operate more efficiently.  Frankly, perhaps we need to realize that some parents and their children are less devoted to meeting the standards that equate with taking responsibility for their own lives if and when they leave your parent’s home.  Perhaps emphasizing vocational training instead of pushing everyone to think college and expensive student loans a viable option.  There are some social issues that need more than money to be solved and taking more of our money will not serve the problem but will impact the lives of many who could better used THEIR hard-earned tax dollars.

I do not mean to make this an “us against them” argument but we need to stop wasting money that does not solve problems and we need to stop subsidizing bad/ inferior behavior.  As mentioned at the outset, I am ignoring a few topics that need to be better managed if we are to succeed.  Perhaps if property taxes were managed more effectively, some buyers could buy in “better” neighborhoods and that would help neutralize or cure some of our “hamster-wheel” social ills that seem to keep repeating themselves regardless of how much money we spend to make ourselves feel better.

September 12, 2017

Want to Buy a house? Think baseball!

Filed under: Uncategorized — awetzel @ 2:07 PM

Analogies are a great way to make complex topics seem simple. Buying (and selling) Real Estate are NOT “rocket science” but, unfortunately, too many underestimate what they think they know when making what is typically the largest financial decision of their life.

Why baseball? There is no time limit and it has four specific reference points. Let me explain. Home plate is where you start and, if you are successful, you will round the bases and return home as an owner. Home plate is the goal and you can get there two ways:  you can successfully navigate each base (one at a time!) or you can hit one out of the park. In this analogy the fielders are obstructions that can stop you in your tracks or delay your progress. The pitcher represents “life”, tossing you the ball which is the opportunity to buy. In order to succeed, you need to reach EACH base and satisfy some requirement to move forward. By the way, a HOME RUN means someone has given you a house so you do not need to do anything else.

First base:  to get here successfully, you need to get “pre-qualified” by a reputable lender to make sure that you know how to start your search. What a lender is willing to do may exceed your “comfort level” and that is fine. It does not work in reverse unless you find a real bargain. Unfortunately, some consumers will need to do some work to get to first base while others will be forced to sit on the bench, unable to buy at the moment. Knowing your situation will help you avoid wasting time. Ideally you will have hired or be in the process of selecting an agent. No matter how much sense this analogy makes, most buyers will need a trained professional to negotiate the process/ bases.

Second base:  the search is on! This is the fun part and, for many, the most time consuming and possibly the most frustrating. This is where hiring an agent really starts to pay off:  they should help you decide what you want to buy by asking questions and compelling you to make decisions. We cannot tell you where to live but we can help you narrow the choices so that you can get to see the best properties for your needs before they are off the market, sold to someone else. While looking at houses is fun for many, it can become a project in and of itself and many consumers find it difficult to make decisions. Where to live, what to buy, how much to offer and other questions must be answered! To reach third base you need to have a fully executed agreement of sale in place.

Third base:  now that you and a seller have agreed to “terms” (price, financing, contingencies and time frames), the two major aspects of getting to settlement/ closing loom large. They are the various property inspections and finalizing the mortgage approval. If you are not using mortgage financing you will probably find this phase easier. While the financing aspect depends on others, the inspection negotiation is where the principals, meaning the buyer and the seller, get to determine how serious they are about getting the deal done. I generally do not recommend waiving inspections!!! How do the results (what did the inspector(s) tell you that you did not know or expect?) compare with your expectations at the time you first saw the house, decided to make an offer and then negotiated and executed/ signed the offer? Do BOTH parties want to move forward? The inspection phase typically occurs before the mortgage is finalized so getting past this step does not automatically mean that a sale is going to close. Assuming that all of the details that need to be concluded are addressed, you move to HOME! Congratulations! Hopefully both parties are satisfied and can move on to the next phase of their lives without hesitation. That is not always the case as issues do arise after settlement.

The process leading up to and whatever happens after settlement often involve opportunities for disagreement and doubt, even in the smoothest sales. How they are managed depends on preparation and effort. You will get to re-evaluate the process from time to time so it is important to …

HIRE WISELY!

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

August 26, 2017

One Price; Three Opinions

Filed under: Uncategorized — awetzel @ 2:43 PM

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

August 11, 2017

Your property has settled. Is that the end?

Filed under: Uncategorized — awetzel @ 5:34 PM

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!

 

 

August 4, 2017

Personal Property: Included or NOT?

Filed under: Uncategorized — awetzel @ 1:06 PM

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!

July 28, 2017

I Showed Your House: To Give FEEDBACK or Not?

Filed under: Uncategorized — awetzel @ 5:03 PM

Real Estate is a unique profession in one specific way:  we alternate between cooperating and competing. We work together on committees, share ideas and attend classes in large groups and then we compete for clients! Knowing where and when to draw the line is what gets some of us into trouble. Let’s examine the underlying dilemma.

Before 1995 or so, at least in PA, EVERY agent worked for sellers either as an “agent” or a “subagent”. There was no such thing as legal “buyer representation”. As such, the profession was focused on working in the sellers’ best interests even if you showed a house to a potential buyer and wrote their purchase offer. The mere fact that many buyers thought the agent they relied upon was working for them as opposed to with them presented a problem which led to our Consumer Notice. This is a form, not a contract, that spells out the different relationships a buyer or seller can have with an agent. If they want to “hire” an agent they need to sign a representation contract.

It was both normal and expected that a subagent showing a house would tell the listing agent everything they knew as far as how the buyer felt about the house and why they either decided to make an offer or decided not to. This is called “feedback“. In its present form it is typically requested by email. There was no fiduciary duty of confidentiality so, essentially, BOTH agents and the seller(s) were a team with the buyer acting on their own. The subagent could not legally advise them on anything that might hurt the seller. I specifiy “legally” because I am sure that many agents felt naturally inclined to offer advice or suggestions especially if the buyer was their friend or relative.

Once “buyer agency” came into the marketplace, the focus shifted from protecting and promoting the interest of the seller to doing so for your own client. I use the analogy that buying and selling Real Estate is like playing poker in that, generally speaking, one side has no idea about the other:  are multiple buyers interested in a house or not, what is the level of urgency for either party, will the buyer offer more or the seller accept less, etc.

While client representation seems to be the natural inclination, there are still some vestiges of the past. One of these is “feedback” and there is an ongoing debate about whether a buyer agent should offer any since it may negatively affect their present or even a future client’s negotiating position. Some buyer agents refuse to offer any feedback at all; some will do so after getting their client’s permission (the latter is acceptable as long as the client truly understands any potential ramifications such as their later deciding to pursue a house). As alluded to earlier, an agent has to consider whether present “feedback” could hurt a future prospect for the same house.

Feedback, whether requested in a formal email or a phone call, generally includes several questions regarding the buyer and/ or agent’s perception of the asking price, the property itself and whether there is “further interest”. Frankly, a listing agent dependent on such feedback may need to re-evaluate their ability to provide client service:  shouldn’t they know if a property is over-priced or shows poorly? I agree that having a third party “report” this adds weight but most feedback seems to have negative comments which are difficult to judge as sincere. I have had a number of agents report that a house was priced too high and showed poorly and yet, miraculously, their client HAS INTEREST! My assumption is that they are laying the ground work for a low offer!

Aside from how a buyer agent handles feedback and how much stock a listing agent or seller attribute to it, the ONE primary benefit I see is that the showing agent may have insight or knowledge that I do not and I appreciate when they share that since there may be no other way for me to know what they know or saw. Such information will not likely impact a present or future negotiation but goes to the spirit of cooperation that exists among us as far as our desire to advance the concept of home ownership. It has been under assault since the market fell apart a decade ago.

So, what can you tell me that I may not know? Perhaps the seller was home during your visit (this happens especially when the weather is bad or when sellers are used to agents not showing up as scheduled), maybe the seller followed you around or were overly friendly or chatty (some sellers intrude on the privacy expected during a showing or make buyers uncomfortable which can undermine any interest), were there pet issues/ odors (cats!!!), how did the house look (exterior maintenance and general housekeeping may be a problem) and, most importantly, were there any MAJOR issues to report? I showed a house last that reeked of gas so I promptly called the listing agent. Years ago I showed a house that had such a pungent cat odor that it was evident from the street and caused my clients to promptly depart after about a minute in a house. I have been called about water leaking on a basement floor and other things that only a showing agent gets to see. Regardless of how an agent handles formal feedback, I think it professional to promptly report urgent issues. On a slightly different note, the feedback process is NOT where you should tell me that you did not show a house. Running late or canceling an appointment should be handled just as the original scheduling occurred so that owners/ tenants are not inconvenienced.

Feedback is a subset of “cooperation” and, while I understand that we may compete and we may have clients whose interests are in opposition, Real Estate is a vocation that demands professionalism. There are many things we can do to advance home ownership that do NOT conflict with our fiduciary duties owed our clients. Failing to do them reflects poorly on all of us as we are too often judged in the aggregate. While each little inconsiderate act may be like a pebble in the ocean, too often the minor ripples appear as one, unified reflection. We need to “raise the bar” and cooperate so that our profession will continue to grow in the eyes of the public rather than having a few bad acts or actors taint the many who are setting a good example. After all, a home is someone’s castle and, regardless of the expectation as to whether you will or won’t get an offer or feedback, allowing someone to enter your home is a BIG deal. I think we take that for granted. It is a necessary inconvenience but let’s handle it as best we can.

HIRE WISELY!

 

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