Making the Most Out of Open Houses

When you’re trying to sell your home, you want to engage in all the activities that encourage buyers and none of the activities that don’t. Common sense, right? Then why do I see so many sellers sabotaging the sale of their property when it comes to open houses?

Realtors have many marketing techniques to get your property in front of potential buyers. One of those is open houses. Like anything, there’s a right way and a wrong way to do open houses. The right way involves the following:

  • Remove a third of your furniture
  • Clean your house until it sparkles
  • Take Fido to your sister’s house (best not to have pets on the property)
  • Make the beds
  • Open the window treatments (curtains, blinds, etc.)
  • Make sure your valuables are in a safe place (Realtors will safeguard your home, but cannot be in all rooms at all times. Don’t leave out jewelry or electronics that someone could easily slip into their pocket.)
  • Mow your lawn and make sure your landscaping looks great
  • Clean the fireplace (If it’s winter, have a fire in the hearth. Otherwise, put a fern in the fireplace for decoration.)
  • Bake cookies before the open house (your house will smell amazing). If you don’t have time to bake cookies, put a drop of vanilla on light bulbs around your house. It will have much the same effect.

Now that you know what you should do, here’s what you shouldn’t do: as the owner, you should NOT be present when people tour your house (either during an open house or a showing). Be anywhere but home. Go to the movies. Go play with Fido at your sister’s house. Go to someone else’s open house. Go ANYWHERE but home.

Clear enough? If you’re wondering why it is so essential not to be present, here are a few reasons:

Your realtor can negotiate for you. Part of negotiation is the art of timing in asking and answering questions. If a potential buyer asks about whether a feature is included in the price (say, a hot tub), the realtor can ask, “Is that important to you?”  If you’re standing right there, the potential buyer will ask you directly and you’ll need to answer. Your realtor can legitimately say, “I don’t know, let me find out,” while probing about what the buyers really want.

Potential buyers feel more comfortable when the owner isn’t around. Many people feel weird rummaging through a closet or poking around someone else’s house when they’re right there.

Realtors are trained in how to respond to criticism, and are not emotionally tied to the property. This is probably the biggest reason owners should not be present during their own open houses. Prospective buyers should feel comfortable objecting to things about the home that they don’t like: a closet is too small or a room is too dark. When realtors hear these objections, they can often turn negatives to positives. If they don’t hear the objections because the property owner is hovering, the issues cannot be aired, and your realtor can’t address them. The last thing you want is a defensive homeowner defending a property’s shortcomings. That’s not a helpful negotiation tactic.

So, go somewhere fun for a few hours and let your realtor do his or her job. You’ll be glad you did.

As you can tell, there is no way for a seller to overcome these issues if they are selling the house themselves. I know this is biased in favor of working with a realtor, but it is also true.

If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

You Can’t Disclose Too Much. Really.

When you sell a house, you are legally obligated to disclose anything that would negatively affect the value of the property or a buyer’s interest in owning it. So, if you’re selling your home, you probably have quite a list to compile.

In Mendocino County, real estate agents typically use an 11-page document that covers a wide variety of issues. In addition, sellers must also complete a Transfer Disclosure Statement (TDS) that includes anything he or she knows (or should have known) about the property.

Typically, disclosures fall into three main categories. Property-specific disclosures include things like a leaky roof, a well that runs out of water each September, a septic system that has a swamp over it, or an addition for which there is no building permit. Proximity-specific issues can include things like whether a property is at the bottom of a hill with erosion problems, near a Superfund contamination site, or within earshot of a popular shooting range. And finally, regulatory disclosures include zoning and other issues. For example, is the property zoned for its current use or within 300 feet of land zoned for agriculture? These issues can affect how the property can be used and the owner’s quiet enjoyment of it.

If your head is already spinning, hold on because we’re not done yet. Some local sellers (especially in Willits) must also complete the Alquist-Priolo disclosure that warns buyers that the property is close to an active earthquake fault. And, your realtor must do a diligent visual inspection of all visually accessible areas (so, not necessarily the attic or under the house, but everywhere you can easily see).

After the visual inspection, the realtor has to describe the property in detail. The report doesn’t have to include explanations regarding the cause of the problems, just that they exist. For example, the realtor’s report may state, “There is a stain on the ceiling,” but not, “Looks like a leaky roof.” Or it may state, “The lawn over the septic system is green and soggy and smells like a sewer,” but not “The septic system clearly needs attention.”

If the sellers don’t hire a realtor, they must complete the disclosures on their own, so be sure to get all the appropriate forms. On the upside, this process is an excellent way to make sure you haven’t overlooked common issues. On the downside, it is time-consuming and a legal liability probably better handled by one accustomed to completing it.

There are a few exemptions, folks who do not have to complete some of the disclosures, most notably people who acquired property by foreclosure are exempt for the TDS requirement. If the owners did not have problems disclosed to them, they may have no way of knowing a problem exists. However, to the extent that the post-foreclosure owners knew or should have known about problems, they are on the hook. For example, if a neighbor repeatedly sends letters concerning a property line discrepancy and those letters are tossed in the trash, a judge will likely rule that the owner should have been aware of the problem.

If you’re trying to decide whether to disclosure something, your decision should basically come down to three rules:

  1. If you wonder, “Gee, should I disclose this?” The answer is almost certainly YES.
  2. If you would want to know about the problems, you should disclose it to the buyer.
  3. If you picture yourself in front of a judge explaining why you didn’t disclose something, is the judge likely to rule in your favor? If not, disclose.

Here’s the thing. When a potential buyer is walking around the empty living room picturing her couch next to the fireplace and her kids squealing with delight as they run around the backyard, that’s the time to disclose issues. Be up front. If you mention a minor issue that isn’t really material, no harm is done because the buyer will recognize it as minor. If an issue is material, then you are legally obligated to disclose it. So, just err on the side of caution. After all if the disclosure is going to kill the sale, wouldn’t you rather have it die before escrow closes than six months later when you hear from the buyer’s attorney?

I hope you are enjoying the holiday season. I wish you and your loved ones a happy and prosperous new year.

Next time I’ll write about some of the highlights from 2013 as we plunge into 2014. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

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What to Expect from a Real Estate Agent

For those of you who may not have noticed, the real estate market has changed recently. Prices are up, inventory is down, and buyers outnumber sellers. This makes it a seller’s market. Buyers are in the market because rates are still at historic lows (and have only one way to go in the future). Prices are still affordable, and the economy is looking stronger. If you are thinking of selling in the near future, you should consider starting right now.

Whether you’re thinking of buying or selling, the question is whether to employ a real estate agent to help you. Are they expensive? What do they do for you, exactly?

To answer those questions, I thought I’d define a real estate agent’s legal obligations, as well as the difference between a real estate agent and a realtor®. All realtors are real estate agents, but not all agents are realtors.

Licensed real estate agents have a fiduciary responsibility to deal honestly and in the best interest of the principal (you) — this is not just an ethical responsibility, but a legal one. Real estate agents must follow your instructions unless they are “patently frivolous.” But, as long as you are reasonable, your agent must represent you according to your wishes.

A realtor is a real estate agent who is a member of their local realtor association (which also affiliates them with their state and national associations). So, in addition to being well trained, realtors adhere to a strict code of ethics and standards of practice, higher than those mandated by law. Membership in the associations also makes it easier for realtors to stay up to date with the latest legal issues. The question remains, should I hire a realtor to help me buy or sell a house? I’d say yes, and here’s why.

First, it is in a realtor’s best interest to help you meet your goal. realtors only get paid if you get what you want – if you complete a buying or selling transaction.

Second, people in the real estate industry hire realtors – brokers and lenders with the knowledge to do the work themselves. They know the value of a good realtor. It’s kind of like when you find out your doctor goes to a specialist when he needs one. Don’t you want to do the same?

On the selling side, a realtor will assess your property to determine its market value and bring to light any issues that make it unusual (e.g., is it in a flood plain? Does it have historic value?). realtors advertise your property locally, online, and via the Multiple Listing Service (MLS), reaching thousands of potential buyers. realtors are also connected to other real estate professionals and can share information about your home via those relationships. And, the realtor doesn’t make a dime unless your house sells. As a mater of fact, they spend time and money marketing your property on the prospect of collecting a fee when it sells.

On the buying side, realtors can act as a buffer between you and a homeowner, so you don’t tip your hand. In negotiations, he who speaks first loses. However, if realtors communicate, they may act as independent parties, providing you with information without giving away your position. (This is true whether you’re a buyer or seller.)

If you’re a buyer, realtors can save you a ton of time. As long as you are clear and specific about your needs, a realtor can filter through all the properties for sale so you only see ones of interest to you. Also, realtors are likely to hear of properties coming on the market before the general public, putting you in a position to know sooner.

The idea of saving money with a For Sale By Owner (FSBO) isn’t really accurate. From a seller’s perspective, unless you’re a marketing genius, your property just won’t get the same exposure it would with a realtor. And, advertising can get expensive. If you are not well versed in real estate law, mistakes can also be very costly. Not surprisingly, most FSBO homes end up being listed with a realtor.

On the buyer’s side, you do all the work and receive none of the benefits of an agent. Without a realtor, you may not know what’s for sale or what legal rights you have, what sellers should provide and/or pay for, or other legal issues. And, real estate contracts have a lot of details. If you aren’t familiar with them, you may agree to things you shouldn’t.

Whether you are buying or selling a home, if you have a smart phone you can download a free app that will give you a lot of information about what’s for sale. Text “Selzer” to 87778 and you’ll be sent a link to an app that uses your location to identify all properties in the MLS (not just Realty World listings). It also offers recent sales so you can compare your property to others.

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Short Sales and SEOs

You may have heard about people being “upside down” on their mortgage. When people owe more than the value of their home it can lead to a short sale. If they cannot afford their mortgage payments anymore, it can lead to an REO (Real Estate Owned) sale.

A short sale occurs when a home is sold for less than is owed on it – for example, if the buyer owes $275,000, but the home will only sell for $250,000. An REO occurs when the property is already foreclosed on, and the lender (who now owns the property) is the seller. A short sale is preferable to a foreclosure for several reasons. I’ll explain both sales in more detail, and I think you’ll see why.

If you’re a seller, a short sale is better because it’s less damaging to your credit (and your privacy) than a foreclosure. Clearly, you won’t be too motivated to sell your home since you’re not making any money on the deal, but at least you’re not digging a deeper hole financially. Be aware that this must be an “arm’s length” sale – you can’t sell to your sister or son or best friend.

Another word of advice, don’t try to make an under-the-table deal with the buyer to get some cash. It’s called fraud, and it can get you in big trouble. Recently, a buyer agreed to buy an heirloom oriental rug for $60,000 (one that was worth about $500). The buyer and seller got caught and sent to jail.  Sometimes the bank will allow the seller to get some cash out of the sale—as long as all parties agree, you’re good to go.

REOs are the end product of a foreclosure, which is a public process (must be published in the newspaper), and they are devastating to a person’s credit. If you’re a seller, try to avoid foreclosure if at all possible. Adding insult to injury, a foreclosure can result in a deficiency judgment against the seller, where they not only take your house but require you to pay the unpaid portion of the loan. Rough deal.

As a buyer, short sales are also preferable to REOs, generally speaking. In a short sale, the seller is obligated to complete a Transfer Disclosure Statement (TDS). This document discloses physical problems with the property as well as other known problems (e.g., a neighbor’s dog has bitten several people or a neighbor has been cited for several noise violations as a result of his garage band jamming until the wee hours of the night). In an REO, the bank isn’t expected to know about these issues and is exempt from the TDS requirement.

Again, looking at this from the buyer’s perspective, a significant downside to REOs is that buyers frequently must work with the lender’s escrow company and use the lender’s sales contract. Many of the lenders that have found themselves stuck with properties to sell are banks or federal lenders like the Federal National Mortgage Association, referred to as Fannie Mae. As a rule, these are bureaucratic organizations that are not customer-centric The process can get burdened with intractable inspection time frames, and doesn’t allow for contingencies.

Really, the only advantage to the REO is that anything that was going to get taken from the house has already been taken. Sometimes, when a buyer views a home before a short sale, they are horribly surprised later to find that everything that could be removed from the house has been.

Short sales and REOs often involve emotional trauma for the person who lost his or her home. As a result, I’ve seen houses with the following things removed – no exaggeration: wood stoves, “built-in” hot tubs, kitchen cabinets, wall-to-wall carpet, toilets, light fixtures and more. This goes way beyond taking the light bulbs to be frugal. This is an emotional response to the loss of a treasured home.

Apart from that, short sales are definitely preferable—whether you’re a buyer or a seller. Either way, I’d highly recommend going through the process with a Realtor by your side. In REOs, banks know the value of listing with a broker. They want to work with a competent Realtor that’s familiar with state and local real estate law. You should have a similar expert on your team.

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How to Buy a House

I’ve talked about why renters should consider becoming homeowners. The market is still a buyer’s market, for the most part, so this week I’ll share some information on how to buy a house.

The most important way to prepare is to get your finances in order. This means getting a credit report, collecting financial documents like your tax returns and W2 forms to demonstrate your reportable income, printing bank statements to show your cash reserves, and making an itemized list of your monthly obligations (rent, car payment, insurance payment, utilities, etc.). Gathering this data will allow you to figure out how much house you can afford.

The next step is to figure out how much house you want to afford. Do you want to have a little money left over at the end of each month, or are you investing all you can in your new home? Is there growth potential in your job? Does your spouse plan to go to work and increase your household income next year? Or, are you a young couple planning to start a family and have one of you quit your job to stay home with the baby? Be honest with yourself about what kind of payment will allow you to live the way you want to.

Remember, owning your own home means a mortgage payment, tax and insurance payments, and maintenance expenses. On the bright side, it also means building equity in your own property instead of paying rent to someone else so they can build equity in theirs.

So, you’ve got your finances together and have decided on your price range. Now, you need a real estate agent—one you like and trust. Tell your agent how much you want to spend, what your new home must have and what you’d like it to have. Share your preferences about location, property size, home size, number of bedroom and bathrooms, and any special considerations (e.g., Americans with Disabilities Act-compliant, one-story, specific school district). Be as picky as you can up front so your agent doesn’t waste your time showing you homes you’re not interested in.

Be prepared to look at lots of homes, and do yourself and your agent a favor: be completely honest. Tell your agent what you like and don’t about each. You won’t hurt your agent’s feelings if you share negative impressions. It’ll just speed up the process of finding homes that fit your needs. You should also be open with your agent about any contingencies. For example, you can only afford a home at this price after you receive the court settlement you’re expecting or as soon as you sign the contract for your new job that you’ve been promised verbally.

Once you’ve found the home you want, it’s important to be a savvy buyer. First, make sure all of the folks involved in buying the home are involved up front. If grandma is helping with the down payment and wants to approve the purchase, be sure to plan ahead. Sometimes buyers have to compete, and if you cannot make a timely decision, you could lose your dream home to a more organized buyer.

Then, work closely with your agent to make an offer that spells out exactly who is paying for what, and exactly what is included in the sale. Who’s paying for inspections? Repairs? Loan fees? Closing costs? What stays with the house? Hot tub? Window treatments? Pool equipment? Being a good negotiator means paying attention to the details. Your agent can help with this. They are familiar with real estate contracts and connected with local inspectors and service people (e.g., plumbers, contractors, electricians, pest and fungus companies) who can provide quality work.

I was recently asked, “When does an agent’s relationship with a buyer or seller end?” I said, “When one of you dies.” Smart real estate agents know that people typically stay in their homes for about seven years. After that, they’ll need a good agent to help them buy and/or sell their next home, and if that agent has been helpful during those years, they’ll be the first person that the buyer or seller calls. So don’t hesitate to ask for help from you agent even after the sale, they will be happy to be of service, it means you will remember them.

If you’re short on cash, see whether the seller is willing to work with you by paying for some of the closing costs or loan fees. This allows you to use the cash you have towards the down payment or for repairs. If you are pre-approved for a loan, sellers are more likely to help you out because they know you are a serious buyer able to complete the purchase.

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