keeping real estate simple

“How much should we list the house for?” If I had a nickel for every time I have been asked that question…

If you read my “The only 4 things that matter when selling your home” blog post from a few months ago, one of the 4 things was price. Admittedly, price is everything when selling your home. The location, condition and marketing plan mean very little if the house isn’t priced appropriately. But wait, don’t confuse “appropriately” with less than other houses around or anything. Because appropriately can mean different things depending on the market.

When you go to set a price on your house, there are three options you can consider. Your Realtor should have lots of information that will help you determine which option makes the most sense for you and your situation.

Option 1: Price above fair market value

“Yep, let’s do that” I can hear you all saying. But let’s hold on a minute and see what that really means and what the pros and cons could be.

First, was does it mean. Simply put, it means that if the market is telling you the house will likely sell for instance, in the $195,000-205,000 range, that you would then set a price of say, $210,000 (or more). However, you have to determine if this is even an option for you by identifying a reason (or many) why your house holds more value. If you cannot reasonably explain why your house is definitively better than all of those other comparable houses, then this option isn’t the way to go. Additionally, let’s be clear that when we say it is an option to go above market value, we mean to do so realistically. If in the scenario above you want to do $225,000 that could be a problem.

The pros (or pro in this case), because I know that is what you want to see first…

1. You might just set a new value for your house and the neighborhood by finding that perfect buyer.

Taking the risk and getting more money for you is obviously nice. And sometimes worth the risk.

However, that is the only pro in this option.

The cons, which in this scenario are more abundant than the pros because this is a high risk, high reward option.

1. You might get a lot of showings from curious buyers wondering why yours costs more than the others in the neighborhood. But get no offers from those showings.

So, you will spend lots of time and effort getting ready for showings and getting nothing from it. Higher prices tend to bring out the “looky-loo” crowd who just want to see the most expensive house in the neighborhood.

The worst bi-product of this option is that you could watch the houses around you sell. Because you have made those the better value for the buyer.

2. Your house could take substantially longer to sell.

When the other houses in the neighborhood are selling, and yours isn’t, that is tough to stomach. And as your house sits, buyers see all of the other sales in the area and wonder what is wrong with your house? It may be nothing, but they don’t know that. So you must be able to be in for the long haul.

3. You might have to deal with low-ball offers.

If there is one thing you learn in real estate, it is that when a buyer thinks your house is overpriced, their reaction is to submit an even lower price than market value. It’s almost like they think the seller shouldn’t make a huge profit, but instead they should get a huge deal. It’s a strange concept, but it happens. So unless you are willing to sift through what could be some insulting offers and not take it personally (or blame your agent) then this probably isn’t for you.

4. The house still has to appraise for the purchase price for the buyer’s lender to approve the deal.

So, you found the perfect buyer willing to pay more for your house than the market indicates, that’s great. Problem could be that the appraiser for the lender doesn’t see the same value as everyone else does. And in most cases, what they say goes. Something to keep in mind.

Option 2: Price at fair market value

In the example from above, the market is telling you that your house needs to be priced between $195,000-$205,000 and you do exactly that. You find where in that range makes the most sense for your house, and price it accordingly.

Pros…

1. You will get showings mostly from those serious buyers who know the market and are ready to buy now and more likely to make an offer.
Serious buyers are going to know about what houses in your neighborhood should go for. So their searches are set up appropriately to find those houses. Pricing your house right in that range tells the buyers that your house is going to be like the others they have maybe seen in the neighborhood, and maybe missed out on. They are not coming to see why the price is so high (or low, more on that later) but coming to see it as a potential purchase.

2. Less negotiation needed as the house is priced appropriately for the neighborhood.

When you price your house right the first time, negotiations become much easier, because when the price is in line with the rest of the neighborhood, there doesn’t need to be the back and forth of trying to prove why the price should be this or that. Both sides should see the value and negotiate based on that.

3. Your house will sell typically in the average amount of time for the neighborhood.

Serious buyers, plus easier negotiations typically means your house will sell at the same pace as the average for the neighborhood. Which could be significantly quicker than if the house is overpriced as above.

There is really on one con for this strategy (if you can call it a con):

1. You may not get any more money than list price.

Again, not necessarily a con as getting what you are asking is hard to spin as bad. But the allure of getting more than list price is something all sellers want, but is not usually expected going with this option.

Option 3: Price below fair market value

Following the examples from above, this would be were you see the $195,000-$205,000 valuation but decide that you want to price the house at $190,000 (or less). But why would anyone do that, you ask? Fair question.

Pros…

1. Your house will likely sell much faster than the average for your neighborhood.

Remember those serious buyers who know the market value for your neighborhood and will go see the houses in that range? Well, think of your house as like being “on sale” to them. They will see it and want to immediately see it and if it measures up, they will buy. Making your time on the market very short.

2. A buyer frenzy could lead to a multiple offer situation driving up the price.

When lots of serious buyers see your house and the value it presents compared to the rest of the neighborhood, they are likely to want to buy it. When more than buyer thinks this, you as the seller win. Because there is a good chance the purchase will be above what you were asking. So, not only could you sell the house very fast due to high interest, but also get a price more in line with the market value of the neighborhood. If only all sales were that easy!

3. You will be in a better negotiating position when it comes to inspection repair items.

Don’t like the idea of having to go through a repair list from the buyer before they purchase it? Or simply don’t have the cash to make it all happen in time? Having the lower price is a good way to avoid having to do much (if anything) to your house before it sells. Your position is that the lower purchase price is in lieu of any repairs. Plus it lets the buyers do what they want to the house.

Con…

1. You could end up selling it at the list price, which is less than the market says you could get for the house.

Using this option needs to be done so with the understanding that this is possible and that if it does happen, it will be ok with you. Because sometimes, even in a multiple offer situation, that doesn’t guarantee those offers will be over list price. Perhaps your best offer is at list price.

So there you have it, the three options to consider when you want to sell your house. Again, the option you choose should be based on the information your Realtor provides showing how each looks for your specific situation and how much risk you are willing to take.

As a real estate agent, I see many prospective buyers unintentionally (at least I think) impede the buying process by setting unrealistic at best, foolish at worst, expectations on their search. They make a determination on how, what and for how much they are going to buy their house, whether that is set in reality or not. So if you are a prospective home buyer, here are 10 things I hope you never say or do when going through a home search.

1. “I will never pay full list price for a house.”

While I can certainly appreciate wanting to get a deal, and don’t like paying full price for something as much as the next guy, sometimes the reality is to get what you want, you might just have to do just that…pay full list price (or more in some cases).  Throwing out an absolute like that can set a road block between you and what could be the perfect house. Even though the asking price might actually be lower than the market says it should be, and you could be still getting a good deal at full price.

Best advice here is to be knowledgeable about the market and to whether it is realistic to have this expectation. If it isn’t, but you still cannot bring yourself to pay the list price, you might need to wait for an extreme buyer’s market when deals are more abundant.

2. “This listing doesn’t match any of our criteria, but let’s go look at it anyway.”

As an agent, I am a big advocate of buyers looking at houses that may not have something from their list, but has a feature they hadn’t considered before. That is because while the saying goes, “It isn’t important until it is important.” I believe the opposite is true as well, “It is important until it isn’t important.” Simply meaning that sometimes, buyers think they really need a feature, until another feature makes the other one less important.

For instance, a buyer may think a 3 car garage is important, until they see that all of the houses in their price range with 3 car garages have unfinished basements. But then find that they can have a house with a finished basement with a 2 car garage for the same price. The extra living space can then sometimes become more important than the garage space. So it can be good to look at houses with some different features.

But keep in mind, I am talking one or two things that are wants, not needs. If you have the need for a certain number of bedrooms for example, don’t go trying to substitute that for a want because you know it won’t work for you.

Best advice is to just not look at houses you know deep down are not serious contenders.

3. “This listing is more than my lender will give us for a house, but maybe we can negotiate the price down.”

If you are talking a few thousand dollars high, that is reasonable. In most cases if you need a few thousand more for a house you can find it from your lender, family member, etc. So that is ok. What I am talking about are those buyers who are looking at houses $10,000 higher (or more) than what their pre-approval letter indicates is their top price. Going that far beyond what your lender will give you is not something you should expect a good agent to do for a few reasons. For one, you are wasting their time, your time and the seller’s time looking at a house you cannot buy.

Additionally, an agent ethically shouldn’t be showing it to you anyway based upon the Realtor Association’s by-laws.

Just like with #2, it is best to only look at house that are serious contenders, including the price.

4. “This house is perfect, everything we want and more. But we should go see some more just to be sure.”

Um… Why? You are standing in what you view as the perfect home, do you think you are going to find a “perfecter” (I think I just made up a word) house? I don’t want to come off as wanting to push a buyer into something or not being a good consultant for them, but in a case like this, going to see more houses makes no sense. When you find the house that is “perfect” the search should end there.

Best advice, just write the offer. Think of how many people have to see numerous homes before finding a fit, or never do find the right one, and you didn’t have to. You won the real estate lottery. Take your winnings and be happy. Don’t muddle it up trying to see more houses.

Not to mention, in a hot seller’s market, while you are out looking at other houses “just to be sure,” someone else is writing an offer on your perfect house and you might miss out. Don’t take that chance.

5. “My relative is an agent in such and such state, and they say…

You can fill in the blank here with lots of things. Such as you shouldn’t pay over X amount for that house, or you should get this and that fixed for sure, etc.

With all due respect to your relative, you are working with a local agent who knows this area better than them. So their advice is more times than not going to be a detriment to you, not a help. Every single market in every city is different. How buying/selling works in your city is going to be different than where they are. Someone in another market is not going to know what works and doesn’t work in the one you are buying in. So don’t get trapped into thinking that everything is going to work the way they say it should.

Best advice in all honesty is to not even talk about your search with your relative. If that isn’t possible, just keep it casual with them. You can tell them about your search and everything, you just don’t have to give them every detail and invite them to give their input. Let your local agent handle it.

6. “The house needs to be move in ready, 3,000 plus square feet with 4 bedrooms, 3 baths, 3 car garage, granite counters and wood floors. Be in a nice neighborhood with great schools, and close to restaurants, shops, etc. And we can spend up to $100,000.”

Not a joke. Something like this statement has been said to every agent at some point in their career. Now, I don’t know all the markets in the United States, but I am guessing there are very few that this house exists in. I know it doesn’t in my market. Sometimes buyers come to us with expectations that just cannot be met. Don’t be that buyer. Be knowledgeable about the market and have realistic expectations of what you can afford in a house and what that looks like. You may not be able to get everything you want right away in a house.

If what you are getting in your price range doesn’t work, perhaps shouldn’t be buying right now. Maybe you set those extra “wants” aside for now, but add them over time to the house you can afford. Or live there for a while and save towards the better house in a few years. It is up to you.

6. “The property MUST have stainless steel appliances, fence, patio, large deck, etc.”

What do all of the features have in common? If you said, “they can be added on later”, you would be correct. As I mentioned above, sometimes you can’t get everything at once, but you can add it later. Yet some buyers will eliminate a property based on the lack of a feature like this. I realize that it is better to just have the house come with them, but it isn’t always possible to get everything in a house AND the nice patio, for instance. Save up some money and put one in. The nice thing about that is you can have it done the way you would want.

Best advice is just like the ugly carpet, paint and furniture in the house from the previous owners can be changed, so can these items be added. Just consider whether those things are necessities from day 1, or can they be something added down the line? If it is the latter, then keep this in mind when looking at houses.

7. “I only want a house in this elementary school area.” Or “I will take anything in the entire metro area.”

Both of these can be equally troubling to both you and the Realtor. The first statement is narrowing the search far too much. Matching up price, features, and a small area can be terribly difficult in most cases. Elementary school districts can be just a handful of neighborhoods, and there is no guarantee that school’s area will feature a neighborhood with the type of houses they are looking for. If your search absolutely HAS to be this narrow, be prepared for it to take a very long time possibly or being flexible with your criteria.

On the flip side, having an entire metro area is just too large of an area to be able to narrow down what listings to go see. There would be thousands of houses to go see, and new listings posted every day! Getting to them all would be impossible. Plus it would be hard to make a decision with so many different options out there.

Best advice is to pick an area of town to concentrate on. Whether that be by suburb, school district, near your job, etc. Narrow it down (but not too far!) and make the search easier.

8. “Is it ok if some of my family came along for showings?”

This is not always bad. In some cases this is most welcome and a good idea for someone who might need some guidance. I have had this go very well for buyers before as long as the family is there for guidance, not decision making. Having others there to help see the potential of a house, or point out a possible problem can be helpful. These people know you and what you like/don’t like. Where it tends to be trouble is when those family members are not advising, but meddling in the process and try to make the decision for the buyer when they are not the one buying the house.

If someone is coming along, pick them wisely. If your sister wants to come, but you know the two of you have very different tastes, maybe she isn’t one to bring along because her opinion will likely always be at odds with yours and that won’t be helpful to you.

The best advice here is to go see the houses on your own first, then once you have narrowed it down bring them by to see them and help you determine which one is best.  Just make sure that ultimately YOU are the one making the decision. After all, you are the one going to be living there and paying for the house.

9. “I have to win the deal.”

While this statement is not something a buyer actually says, it is something that becomes apparent when the negotiation bullets start to fly after they have chosen a house to put an offer in on. Some buyers think they need to win every aspect of the deal. Because they are willing to buy the house, the seller needs to give in on every point of the contract, otherwise they will walk. When in reality, that attitude is not going to make a deal possible.

I have seen buyers get caught up in winning so much that when a seller refused to leave a kitchen refrigerator; they nearly walked on the deal. They were so wrapped up on needing to win everything that they nearly lost the perfect house over something so trivial.

Be open to the fact that there is going to be some give and take. Keep the bigger picture in mind about the most important thing; getting the house you want. In the end, the enjoyment of the house will far outweigh any concession you might have to give during contract time. After all, can you imagine after 10 years of wonderful memories in the house still being upset that you didn’t get a refrigerator in the deal? No, probably not.

10. “I want to look at everything within the $100,000 to $200,000 price range.” Or “My price range is between $190,000 and $200,000.”

Just like being careful with the size of area you want to look in, the same applies to price. If your range is too big, there will be too many choices for you to consider. Too many houses in number, as well as everything from a fixer upper to move in ready. There will be far too much to consider and that makes the decision much harder.

Opposite of that, if your price range is too narrow, you will eliminate far too much of the inventory making it much harder to find what you are looking for. You will have to be ready for a long search, or being more flexible on the criteria.

Just like above with the search area, you need to have a practical price range for the type of house you are looking for. If your top end price is say, $200,000 then a good low end range could be $170,000 depending on your area. This would be something your agent can help you determine.

Hopefully, this list will help you avoid making some of the same mistakes previous buyers have made. This will help make your home buying experience that much more enjoyable. After all, it is supposed to be a fun and exciting time in your life. Let it be!

Ask any real estate agent how they feel about Radon testing and mitigation and they will tell you it depends on who they are representing.  If they are the listing agent, it is not something to be worried about and just another way for the buyer to take away from the net proceeds from the seller. A buyer’s agent will tell you that Radon is the 2^nd leading cause of Lung Cancer and the house isn’t safe if the Radon levels are too high. So who is right? Actually…they both are somewhat correct. Let’s take a closer look.

Is Radon really something a home buyer needs to worry about when it comes to buying a home? If you visit the Environmental Protection Agency website, you will find plenty of information about how Radon is bad (cliff notes version) and everything on that website makes you feel like your home is nothing more than a Radon containment unit. Based on the tone of every story on the website, you come away feeling like every breath you take is bringing in Radon to do its thing and kill you.

But, should you really be worried?

As the EPA says, Radon is the 2^nd leading cause of lung cancer. Scary, huh? If you lump both smoking and second hand smoke exposure and not separate them out, that statement is a fact, it is the 2^nd leading cause of lung cancer after smoke inhalation. After Radon, the next cause of lung cancer is exposure to asbestos, last is a family history of lung cancer.

To recap,

1. Smoking/Second hand smoke
2. Radon
3. Asbestos
4. Family History

No dispute on this, Radon can lead to lung cancer, and then death. However, before you run out of your house gasping for fresh air and vowing never to return indoors until the best Radon mitigation system in existence has been installed, let’s take a closer look at the numbers and see just how “at risk” you are.

Below are the actual numbers of deaths by each of the biggest lung cancer risks in a given year according to the Centers of Disease Control. In this case, 2015:

158,040 total deaths due to lung cancer in the U.S.

140,000 of those lung cancer causes were due to smoking

21,000 of those were as a result of Radon exposure

15,000 of those were a result of asbestos exposure

*Note- I don’t suck at math, I know these numbers don’t add up right. The numbers of each type of cause of lung cancer are skewed due to having combined attributable risks. For example, a smoker who also is exposed to radon. They would count in both categories. (And as far as I could tell, family history alone didn’t lead to enough deaths to be counted on its own, it was just lumped in with whatever the other exposure was for that person.)

To put the numbers into perspective, 2,626,993 people died in the U.S in 2015. So 6% of all deaths were caused by lung cancer. Radon exposure caused 21,000 deaths in 2015, for .007% of deaths, and asbestos had 15,000 for .005% of all deaths. So, out of all the ways one could have died in 2015, lung cancer caused by radon was not a very likely to be it.

In fact, in 2015 you were much more likely to die in the following ways rather than radon caused lung cancer:

Unintentional poisoning- 38,851 deaths

Car crash- 30,800 deaths

Unintentional falls- 30,208 deaths

Suicide- 26,869 deaths

So you were more likely to fall to your death trying to get that awesome cliff-side selfie than you were to Radon exposure lung cancer.

AND…all of that is assuming you are a smoker, which the Centers for Disease Control estimate to be about 16% of the U.S. population.

So for the other 84% of Americans out there that do not smoke, the risk of you dying from radon induced lung cancer is staggeringly low. Like .0001% of all deaths low. That equates to about 420 people per year. For comparison, just about as many people (400) died of Carbon Monoxide poisoning, another risk associated with your house, as did non-smokers exposed to Radon. However, with Carbon Monoxide, it can kill you over night. Which one would think would cause more people to be concerned with it. But I have never had a buyer ask a seller to install a Carbon Monoxide detector. Why would that be?

Now, part of that reason I offer up is that the Carbon Monoxide detector is much like a smoke detector in that they are very inexpensive and simple to install. In fact, most of the time all you have to do is plug it in. So there is ease of availability and use to consider. And that could account for why buyers never ask a seller for it. However, that doesn’t explain how one never hears home inspection company mention the need for a Carbon Monoxide detector in houses without them, nor do the buyers ask if the house has one before purchasing. Yet, nearly all inspection companies will offer Radon testing (and conveniently enough, mitigation services) and most all buyers ask about Radon and what they should do. The awareness level for Radon and Carbon Monoxide do not coincide with their similar risk levels.

So why is Radon testing and mitigation a big deal in real estate?

I am going to steer away from opening this up to becoming a hot button issue like I could very easily do by offering up a cynical or “conspiracy theory-ish” opinion. No thanks, I am good not having to go down that road.

I will say this though. Based on all the numbers I have supplied above, my simple opinion is that Radon testing and mitigation is not as necessary as people make it out to be. The risk level just doesn’t seem to be there. It doesn’t make it wrong for companies to offer it, or ridiculous for someone to want to take the precaution and have one installed. It is their house and money, and their choice. However, I don’t believe it is something a buyer should be asking a seller to provide for them. Simple as that.

There are tons of safety features with varying degrees of worth and necessity for a home owner. We have everything from security systems, water filters, air purifiers, fences and so on. One can find all kinds of products that will solve any possible health or safety issue in regards to a house. And each person will have a different view as to what is most important. Rarely, if ever, do those end up on the list of things a buyer asks a seller to install prior to the purchase. I am not sure where along the line the real estate industry drifted into this pattern with Radon systems. I do think it needs to stop though.

I think those of us in the real estate industry need to be better about presenting the facts and giving our clients enough information to make an informed decision about it. And this applies to both sellers and buyers. Both need to know this information. Not just one side of the story. In this case, they need to know that yes, Radon is the #2 cause of lung cancer. And also while that is true, the numbers say that the risks level is actually very low. Then let them determine how they want to proceed.

What do you think? Is this information enough as a buyer to not worry about Radon, or would you still test for it and potentially ask a seller to install a mitigation system?

When I am not working, one thing I like to do is golf. Unfortunately, the time to do so is few and far between with work and family responsibilities. So it is extra nice when I am able to get out and hit that little white ball around a little bit. The other day, I was able to kick out of work early and hit the course with a friend. Not long into the round, he said to me, “You are in real estate, what is it with these home warranties every buyer is asking for the seller to provide? Are they a scam?”

He went on to explain that a co-worker of his had recently bought a house for the first time, and had one of these home warranties. Unfortunately, not long after moving into his house issues with appliances and HVAC started to come up. And from the sounds of it, this particular home warranty wasn’t worth the paper it was written on. The company he is covered with continue to deny coverage for one reason or another. Or when they do fix something, it is done incorrectly, etc. So he (and the co-worker) are understandably skeptical as to why they are a thing in real estate if they are as worthless as they seem to them. Why are they recommended, do the agents get kickbacks on them, or what?

First off, let me be clear that, at least in the state of Missouri, ANY kickbacks from such companies to Realtors is illegal. We get absolutely nothing for signing our buyers up for these coverages. Other states may have different takes on this sort of thing, so you should find out how your state handles it.

So let’s take a look at these home warranties, find out what they are, and whether or not they are something that is necessary in a real estate transaction.

There are many different companies that offer home warranties. Some are local service companies that offer the warranty AND do the work themselves, others are national companies that only offer the warranty and then outsource the actual work to a contracted servicer in your area. Neither is necessarily right or wrong, but my feeling is the companies that do the work tend to be a little easier to work with in my experience. Mostly because I believe that local companies tend to care about their community and the people in it, so will be more customer focused rather than money focused. National companies sometimes don’t see it the same way. But that is just my opinion.

To start, what is a home warranty exactly and what does it cover?

For help with the “what is it,” I will pull a definition from the company that my brokerage has partnered with to provide the warranties for our clients. This is straight from their website. Feel free to get more information at http://www.abmay.com.

What it is:

A home warranty contract, also called a service agreement, provides for the repair or replacement of a home’s mechanical systems and major built-in appliances in the event of a breakdown due to normal wear and tear during the agreement period.

What is it not:

A home warranty is not the same as homeowner’s insurance. In fact, warranties exclude coverage on any damage to the home or its contents.  Furthermore, they are not designed to cover pre-existing conditions or to remedy building code violations.

Primary Benefits:

The primary benefit of a home warranty is the protection afforded to the home owner on a home’s operating systems. Home Warranty Plus is protection beyond the sale.

In short, at least with the home warranty company I am most familiar with, the warranty is protection against issues to the property’s heating and cooling, plumbing, electrical or appliances. It might be different with the company you use, and there are limits and exclusions to be aware of as well. It is best to read your warranty and understand what is and is not covered before you purchase it.

Additionally, you have to understand that the warranty is only as good as the company that is offering it. Some companies will go out of their way to ensure the best customer service experience possible, and well, others do not strive to do that. Just google it and you can find lots of examples of both.

As with anything, do your research on the company before to purchase it or ask the seller to provide it.

If I am going to be honest, I think the disconnect between my friend and his co-worker with the situation he is in, is likely the fault of his Realtor for not setting the correct expectations (which is a huge part of our job.) I believe that in most cases the buyer of a property assumes that the home warranty is going to cover them for any and everything that comes up for little or no money. And then are disappointed when this isn’t the case.

The best way I have heard it explained is this way… the warranty is given to you by a third party that agrees to help cover equipment they didn’t make. From that perspective, it makes sense that this wouldn’t be a full 100% warranty on anything and everything. Right?

So, my job as a Realtor is to make sure that my buyers understand that the warranty they are getting is there to help them in the event that something goes wrong. It is just like health insurance, if your doctor does something like an x-ray for example, it’s usually not free, but you do get some help with the cost of it. Same here in that if your oven stops working, the cost to repair or replace will not be free, but it will be less than it would be if you didn’t have the coverage.

Just like with any other insurance, there is bad with the good. Insurance/warranty companies base their business model on NOT paying out any claims. Otherwise, they wouldn’t be in business. So exclusions and limitation abound in the contracts. Kind of the nasty little truth of the insurance world…

Personally speaking, I have had dealings with both types of home warranty companies I spoke about above. And my feelings on how each has handled my claims admittedly has made me a fan of one, not so much of the other. I have worked with warranty companies that made things super easy, and fixed or replaced an item for little cost to me. Conversely, I have had a company try everything they could to wiggle out of doing what their contract stated. So I have been there. It makes me appreciate the company’s that put the customer first and know that maybe a little less profit now, could mean greater profits over the long haul by making a customer for life.

That said, I do have to offer up that there are plenty of people out there who have maybe had the exact opposite experience as me and have a different opinion on the matter. Since I am not here to tell you which one is best, I will move on.

Back to the question my friend had about why buyers are asking sellers to provide this warranty.

Aside from the obvious reason of it is free if you can get the seller to pay for it, here are my thoughts on why a buyer should ask for it.

Contractually speaking, the only thing a seller is liable to do in the transaction is to disclose any and all material defects of the house (that are known) and to sell you the house as the contract states. Nothing more, nothing less. There are no guarantees listed anywhere in the contract in case something were to happen after the buyer moves in. So for the most part, the contract is very pro-seller in that regard. And we are talking about buying something that is years, decades or even centuries old in some cases; and for a lot of money. So the buyer assumes all of the risk. A real estate transaction certainly lives up to the saying, “Buyer Beware.”  There is no way for that buyer to know that the components inside the house that are used the most frequently, have been used correctly and been taken care of by the previous owner. And unfortunately, a home inspection isn’t always able to tell either. So the buyer does come into buying the house fairly blind as to what issues might be inside.

Given that, I do believe that it is only right that the seller offer the buyer a home warranty that would help in the event that something were to occur in that first year. It is a small price (usually around $500) for the seller to pay to convey to the buyer that they in a sense “stand behind the sale” even though they will have no further dealings with the property. It gives the buyer some warm and fuzzies that if something happens, they will have some coverage. Therefore, I usually advise my seller to pay for one as a show of good faith to the buyer. As well as I would ask for one for my buyers depending on what side of the table I am on.

However, don’t confuse that with thinking that it is a “must” in a transaction. Because I do not think that it should be. There are times in a transaction when offering or asking for one doesn’t make sense. And from the buyer’s perspective, I certainly would not advise them to walk away from a house they love simply because the seller is not willing to offer the warranty to them. If it is that important to have the warranty, you can buy it as well. It doesn’t have to be provided to you by the seller.

In conclusion, I would say that for the most part, a home warranty is worth the money as long as you are with a company that is going to stand behind their promises within that warranty. The best thing to do is before you ask for or purchase warranty, check out the company and read some reviews on how others feel their service is just like you would with anything else you buy. Even if it is “free” to you, doesn’t mean you don’t have some choice into which company you go with.

I am a pretty simple guy. I hate complicated. I don’t want to read a common core math answer about how you go about figuring out what happens when you have 100 things and take away 50. No thanks, I will just use the knowledge in my head (or on the calculator) to tell you it’s 50. Simple things are always better in my world. See ball, hit ball as they say in baseball.

Throw everything else out, keep it simple, and know how these 4 things affect the sale of your house and you will be miles ahead of other sellers.

#1 is Location. Stop me if you have heard this one before. “It is all about location, location, location.” Yep, I bet you have. And I am keenly aware of the fact that this is the one thing you absolutely cannot do anything about when it comes to your home. It is where it is. Ok, you could move it, technically. But that is messy and expensive. Not to mention likely not allowed in some areas. So let’s scratch that.

The location of your home is the biggest factor in its value to a buyer. From the bigger things such as area of the city or school district it is in, down to the neighborhood or placement of the lot on the street. Literally every location is different in some way.

While there is no way to change the location of your house, it is important to understand how impactful it is to a buyer and plan your sale accordingly. For instance, if it is something to highlight, in the case of it being a great neighborhood, schools, etc. then highlight it. But, it could be something to try to overcome like when your neighbor is a Wal-Mart or a cemetery for instance. You cannot just ignore it and hope it goes away. It won’t, and it will hurt your sale. Plan accordingly.

#2 is Condition. Now here is something we can determine, within reason of course. The condition of your property is something the buyer will notice as early the pictures online. And is even more noticeable when they pull up to the house. Notice how I said property not house this time. This is because your entire property needs to be looking good. It all doesn’t have to be perfect, but take some time to make sure it doesn’t look bad. For instance, you don’t have to repaint the entire outside of the house, but cleaning off the siding with a power washer can go a long way. The lawn and landscape doesn’t have to “wow” the buyer, but it needs to be in good shape so that it isn’t a deterrent. The carpet doesn’t have to be new, but it should be clean. Like professionally cleaned. That bit of money you spend could be the difference in a buyer making an offer, or passing on it to another house.

Now, do not confuse condition with features. This is not a time to be taking on expensive projects to try to “upgrade” your home for the buyer if it isn’t necessary. The house for sale up the street may have granite counters and yours doesn’t, but spending the money to have it done may not be the best choice. Especially if that money is taking away money that would be better served to fix or replace some things that are in bad condition. A buyer would rather see a house that is in overall good condition without granite counters than they would a house with them but is falling apart elsewhere.

The key is, know what is important and makes sure your money and efforts go there.

#3 is Price. Ah yes, the price. The single most important item on the list. While location, location, location is the most important aspect to a home sale, let’s call price the “trump card.” The one thing that can overcome any shortcomings in location, condition or marketing plan. Pricing the home is the single most important thing to get right. I cannot stress this enough.

No, you cannot just “price it a little high and then come down if needed.” That doesn’t work. Why? Because by the time you have figured out that the high price isn’t bringing in buyers, those buyers have already purchased a properly priced home. And the next crop of buyers will wonder what is wrong with the house since it isn’t selling and dropping in price. They wonder if a previous buyer found a big problem. Point is, time on the market drives buyers away.

Once you have missed that few week window of the house being a “new listing” it becomes increasingly harder to sell the house in general, much less in getting the price you were hoping for.

As tempting as it is to go for the most money you can possibly get, you have to consider the consequences if that doesn’t work. Wouldn’t it be better to price it right the first time, take a bit less money but sell it faster and for the amount you are asking? After all, you are selling the house to move somewhere else right? The goal is the move, not the profit.

#4 is Marketing Plan. While maybe not something you were thinking of when you thought about the possibilities for this list, it is nevertheless very important. A good marketing plan and its execution can be the difference between you getting what you want out of the sale of the house.

Anyone can put a sign in the yard, post it to the Multiple Listing Service, and then hope that the right buyer comes along. Unfortunately, all too often this is the extent of the plan for some For Sale By Owners and (sadly) some agents. The marketing plan is sometimes an afterthought with everything else going on. But it shouldn’t be.

A marketing plan is much like a recipe, if you have one and follow it, you will get the results you want. If you don’t have one, or have one but do not use it, who knows what will come of your work?

The marketing plan is the “who, what, when, where, why and how” of the sale of your home. It answers such questions as; Who are you marketing to? How are you going to market to them? Where will they see your marketing? Why will they be interested in your home? And so on. Marketing isn’t an accident. It isn’t just getting lucky either. It is a plan that is carried out to expose your home to not only the most people possible, but also the most probable buyers for your home.

As you can tell, you need to be careful that the marketing plan is not an afterthought in your sale.

So, there you have it. The 4 most important things when it comes to selling your house. They are not a secret, so don’t treat them like it when it comes time to sell your home. For the most part, they are common sense but often forgotten at the same time. As you go out into the market with your house, just be mindful of these 4 factors and your home selling experience will be so much smoother.

A contingent contract is something that is useful in both a seller’s and buyer’s market. So it is important to know what it is, how it works, and how to use it to your advantage.

In a nutshell, a contingent contract means that something has to happen before the transaction can be closed. For the contingent buyer, they have their own house to sell. And that must be done for their lender to give them the money for the other house. For the contingent seller, it means they have to find a house before they will sell their house. Think of it like dominoes, one has to fall before the next one can.

Basically, a contingency is there to protect one side of the contract.

There are several types of contingencies, as there can be a contingency written up for almost any situation. So we cannot possibly talk about every type that can come up. However, we will discuss the two main ones you will run into in real estate.

Buyer Contingency

For the buyer’s out there, the “contingent” houses are the hidden jewels of the market. Why do I say that? Because somebody has already deemed it to be a great house at a great price…because a buyer made an offer and are trying to buy the house. And, it is hidden because most buyers do not include them in their home searches because they are not a default option in the searches. The buyer has to take an extra step to include them and so they disappear from most buyers’ searches.

But they shouldn’t disappear from yours, especially if you are a buyer who doesn’t have a house to sell. Here is why. As a non-contingent buyer, your offer is already stronger than the current one the seller has in hand. And that is before any financial terms are discussed. Because you are not waiting on a house to sell, you are ready to go. If you can match the financial terms, you are in a great position to get the house.

Those contingency contracts have in them what is called a “kick-out” clause. And it does exactly what the name implies. The seller can “kick-out” the contingent offer for a non-contingent offer. So when your offer comes in, the contingent buyers will have 48 hours to drop their contingency and proceed with the contract, or they will lose the house to you. Thing is, most with a contingency cannot get financing without the sale of their house. So they are out of luck and you slide in as the new buyer. Pretty sweet.

But you may be thinking, “I will have a house to sell too, so this doesn’t apply to me.” Not true. It still could apply. You do NOT have to be non-contingent contract to knock out a contingent one. Say what?  Yep, it’s the truth. If you have a house to sell, but it is on the market and already has a contract, guess what? Yours is still a stronger offer than the other one assuming they do not have a contract. And the seller could invoke the kick-out clause in favor of you. So don’t give up just because you have a house to sell.

So, as a buyer, make sure you include these in your searches. Most real estate websites have a way to do this. If you cannot figure it out, ask your Realtor to set you up on a contingent search. It is a great way to find a house in a hot market.

Seller Contingency

This is basically the same thing as a buyer’s contingency, but in reverse. This is used in a market where houses are selling very fast and a potential seller doesn’t want to end up homeless, or having to move into a temporary residence if they cannot find a house in a certain period of time.

In most cases, you will need to at the very least have your home on the market in order to make a contingency offer on another house for the seller to accept it. So, for sellers it can be a catch-22. They don’t want to put their house on the market and have it sell too soon, but cannot seriously look at houses without theirs being on the market. The contingency allows both to happen.

While that contingency can give the seller the warm and fuzzies, it doesn’t come without its downfalls. For one, buyers will take this into consideration when deciding whether to make an offer or not. Some buyers don’t want to be tied up in a contract that may never come to fruition and miss out on another house because they are waiting on the seller to find a house. For all they know, you may be the pickiest buyer ever, and pass up several great homes looking for the perfect one that may never come along.

Also, some buyers may not feel like they would need to honor the contract they made with you if something else comes along and back out of the contract. Now your house has been on the market a while and you might have missed out on a bunch of other buyers. So be careful when considering this option as it might backfire on you.

Overall, the use of contingency contracts can be a sound decision for virtually any type of market cycle an area can see. There will always be a purpose for them. However, one needs to be sure they understand what they are getting themselves into when it comes to signing one. Consulting with a knowledgeable real estate professional will help you know when to use it, and when not to.

Ok, so I pulled the title from that great disclaimer at the end of ads for attorneys on tv and radio. I love it because of the irony. The FCC (I assume) says lawyers can advertise, but at the end of it you have to tell people to NOT call based on the ad. Funny how this disclaimer is nowhere to be found on the infomercials at 3am. But I digress…

Here we will talk about how to pick an agent.

We have covered before why you need to use a Realtor, so I will assume you have now decided it is time to take action and hire one.

As I have hopefully impressed upon you in other posts, buying or selling a home is not something to be taken lightly, and who you hire as an agent can and does have a big effect on the entire process. So it is important to choose the right one for you.

There are thousands of agents in the Kansas City area. Somewhere around 7,000, I believe. Some more active than others when it comes to selling real estate.  So how do you go about finding the right agent to help you buy, sell, or both?

If you google “how to choose a realtor” you will find numerous websites with everything from “tips for picking an agent” to “red flags when picking an agent.” Everyone has an opinion on how to go about doing it. The problem is, while some of the advice is good. Some of it makes me wonder what the author’s goal is. Because it doesn’t seem to be the type of advice a reader will want to take. So I have put together some things to consider when looking at hiring an agent.

Do they live and work in the area you are considering buying or selling in?

This may seem obvious, but you would be surprised how often I see people hiring agents from a completely different part of town to assist them. There are a few major problems with this. For a seller, selling their house is mostly about connections. So how can agent from another part of town sell a house when they have very few connections in that area? Also, a listing agent needs to know the neighborhood, and most importantly, where potential buyers to that neighborhood are living now.  It is hard from agent who predominately works in another part of town to know where to go to find potential buyers.

From a buyer’s perspective, especially in a hot market, if your agent isn’t available to go see a new listing right away, you could (and probably will miss it). That agent in another part of town from where you are looking is going to have less availability to you than the one whose office is 5 minutes away. It may not seem all that important, but it is. Plus, many times an agent who works in that area also will know about new listings BEFORE they are even on the market in some cases. That can be a huge advantage for you. Why not use it?

Should I work with a family member?

Your cousin has been in real estate for several years, so you guess you have to use them, otherwise the family reunion will be super awkward. But consider this, what would be more awkward, explaining why you didn’t use them in the first place, or explaining why you had to fire them after things didn’t go as planned? Yeah…you know the answer.

Not that in all cases will working with a relative is a bad idea. It is just smart to consider all of your options and ask the honest question as to whether that relative is the best agent for you. And will working with them be an enjoyable experience? If the answer is yes, then go for it. If no, why put yourself through that just to appease family?

Here is a tip: you can work with another agent AND appease the family member. How? Just ask the agent you hire to pay your licensed relative a referral. Problem solved. You get the right agent assisting you, and the relative gets a little money for nothing. Everyone wins.

Experienced vs. Newer Agent –which is better?

On the face of it, most would think that when in doubt go with experience, because that is always better right? The answer: sometimes.

Experience can mean a lot of things. To most people, when they hear, “I have been in real estate for 20 years.” They think of it as this agent has been a top producer year in and year out and really knows the business. They remain current on the trends and know how to work in today’s market. However, that same statement could mean this agent has had their license for 20 years as a part time agent doing a couple deals a year. And they haven’t really done a great job keeping up with the current trends in the market place.

So which one are you talking to? Sometimes it can be hard to tell.

ALL agents basically have the same tools at their disposal. There are no patents, copyrights, etc. keeping any agent from being able to do anything another agent can do. But how (and IF) they use those tools is the separating factor between the good agent and the not so good.

It should seem pretty clear that the first experienced agent uses more of those tools in the tool belt than the part time agent does, right? Asking questions of the agent will help you know which one you are talking to. They should have a solid plan as to how they use their tools to sell your house. If they cannot really explain how something works, they probably are not using it (or using it well).

The same is true for a newer agent. When people find out an agent has been in the business for a couple years or less, their assumption is that they will be “learning on them.” And that the agent probably doesn’t know as much, or cannot serve them as well as an agent who has been in the business for several years. However, that is not always true. Sometimes the newer agents are more knowledgeable and better with newer trends. (If you have or are around the younger generations, think of how much better they are with technology than you are)

The newer agents are willing to work harder, think outside the box, and go to greater lengths sometimes because they are trying to get their business off to a good start. These agents haven’t established habits (usually bad) and are not bound by the “that doesn’t work” mantra that people get when they get set in their ways. So while they may not have much to show in the way of home selling experience, that might be a good thing.

Keep in mind that in most real estate companies (I know it is true in mine) these newer agents are never alone. Most have brokers and mentors working with them. These are seasoned professionals who have been through it all and are now assisting the new agents in learning how to do things. So in a sense you are getting two (or more) agents for the price of one.

So the answer to the experienced vs newer agent question is, it depends. You have to choose what is right for you and what you are wanting in an agent. The key is, don’t assume going in you know which is best before you have a chance to interview them.

Should commission rate be a consideration?

I wrote another blog about commission rates with real estate agents prior, which you can find on this site. So I won’t belabor the point. But when it comes down to it, the best answer to this question is the old saying, “you get what you pay for.”

This holds true in real estate just as it does in another areas of life. It doesn’t mean you have to spend the most money on everything to be happy with the product or results. But at the same time you have to live with the choices you make.

As you interview agents, you will find that there are some that stick to their commission rate, and there are some that are more than happy to cut their costs to get your business. The question is; does it make more sense to spend extra on a real estate agent if you can get the results you want for less money?

Real estate, commissions are a “success fee.” Meaning you only pay when the agent does exactly what you want them to do…sell your house. So who do you think will work harder to do so, the agent who would be getting their normal pay, or the one taking a pay cut? Just think of yourself and your job. If your boss gave you two projects to work on at the same time, one you get your normal hourly rate to perform, the other you get less. Which one will you work on first, and more diligently? I think you know the answer to that. And how does that affect the outcome?

Do you realize that the agent that cut their commission for you, probably has other listings paying them their normal commission? So now you are paying them less to do the same job. Guess who will be neglected!

And here is the kicker. You still have to pay them if the house sells. Even if that neglect lead to your house sitting on the market longer, costing you time and money. Perhaps causing you to miss out on the house you wanted to buy. So…was that lower commission actually saving anything?

Additionally, if you are paying your agent less, then they are probably going to have to offer the selling agent (the one with the buyer) less money too. Now you are asking the other agent to also accept less money for the same amount of work.

The lower commission also communicates a lot to the buyer’s agent, beyond just them not getting paid as much. They may be concerned with how much extra work they will have to do because the listing agent took a lower rate and isn’t as committed to it. The lower rate indicates you might not be easy to work with in negotiating all aspects of the deal, etc. And there are some that simply will not deal with all of that and skip over your listing.

Keeping in mind that the agents involved in the transaction have a direct impact on how smooth the process is for you. Sometimes better service comes at a price.

 Pick a Winner?

You have seen their face on billboards, their signs are in seemingly every yard and you have seen them cruising around town in the fancy sports car. Seems like the easy choice. They are obviously successful at real estate. And, you are probably right, they are likely very good at what they do. But, does that make them the right agent for you? That answer lies in what you want in the transaction.

Chances are; with this type of agent you are likely to be just a part of their big transaction machine. Nothing personal, just business. Get in, get out, collect the check and ask for referrals. You likely meet with the agent one time, and then from there on out you hear from an assistant. You are simply an address on a listing sheet.

For some people, that is just fine as they don’t need anything more as long as they get what they want in the end. They want to hand it all over to them, step back and let it all happen. If that is you, then go for it.

However, some people would prefer to have the process be more personal. They want to feel like the agent is working for them and not just for a check. They want to be able to call, text or email the agent and hear back from that particular person, not an assistant. Some people want to be more involved in the process of selling their house. Wants the agent to sit down with them throughout the process and go over things face to face.

For these people, they would find the “winner” agent wouldn’t meet their needs. They would be better off working with an agent who chooses to be less busy and has more time to work with them on a more personal level. Because in real estate, there is a choice as to how busy you let yourself become.

The key is to know which type of person you are, and what you want in an agent and hire one that fits that mold. You are the one hiring them, not the other way around. You should act accordingly.

In the end, probably the best advice about choosing an agent is to find out who your friends, coworkers, neighbors, etc. used and would recommend, since they are like-minded people to you, so you know that if they had a good experience, you are likely to as well. But don’t just take their word for it, interview a few of them. Then pick the one you feel the most comfortable with based on what you want in an agent. The entire house selling process will be much easier for you if you pick an agent that you have confidence in and relate to well.