This months newsletter is posted below the fold. Read on for:
* 5 Questions Buyers Should use to their Advantage.
* Home Staging: Getting the Most out of it.
Contact Team366 for more information.
June 2007
Volume 18 No. 6
5 questions home buyers use to their advantage
By Robert J. Bruss
How to get a ‘good deal’ through curiosity, negotiation
Thanks to abnormally low mortgage interest rates, home sellers had an extremely favorable “seller’s market” for the last few years. That means there were more qualified home buyers in the market than there were homes available for sale.Homes often sold in just a few days or weeks. Typical home sale prices appreciated 10 percent or more annually for the last few years in many communities. Since 2000, the average U.S. home has doubled in market value, according to the National Association of Realtors.But the home sales market pace has rapidly slowed down in most communities, mostly due to rising mortgage interest rates, according to home industry economists. The volume of home sales is down. But home sales prices are holding steady in most communities. The result for this year’s peak spring home sales season appears to be a “buyer’s market.” That means there are more houses and condominiums available for sale than there are qualified home buyers.As a result, home buyers can be more selective and negotiate harder even though mortgage interest rates remain remarkably affordable in the 6 percent interest range. To help home buyers negotiate their best possible sales price and terms, here are the five key questions home sellers and their real estate agents hope buyers don’t ask:
1.) WHY ARE YOU SELLING THIS LOVELY HOME?
Having bought and sold dozens of houses and condominiums for both personal use and as investments, this is my favorite and most revealing question to ask of home sellers and their listing agents.
Even if the home is run-down and shabby, I always try to use that word “lovely” to see if the seller and/or the listing agent have a sense of humor.
The primary reasons the home buyer needs to know why the seller is selling are to (1) tailor a purchase offer that will meet the seller’s needs, and (2) determine if the seller is highly motivated to sell.
To illustrate, if you learn the sellers are moving to a retirement residence, perhaps they will carry back a first or second mortgage, thus creating superb secured income earning around 6 percent for them and easy financing for you as the buyer. Or, maybe you learn the sellers are in foreclosure so the buyer needs to act fast to close the purchase before the foreclosure auction.
Unless the buyer asks, the listing agent is unlikely to volunteer the reason for selling. Occasionally, the buyer will be rebuffed.
For example, I recall I once asked this key question and the nasty listing agent said, “It’s none of your business.” Later, I learned the sellers were retiring to move to Palm Springs, Calif., and they would have been perfect candidates for a seller-financed mortgage.
2.) HOW MUCH DID THE SELLER PAY FOR THIS HOME?
In most communities, this information is a public record, which the buyer’s agent can easily obtain. The reason smart home buyers insist on knowing this vital information is it shows how much negotiation room the seller has.
A key follow-up question is, “What is the current mortgage balance and are there any other liens against the home, such as a second mortgage or home equity loan, judgment liens, and mechanics’ liens?”
The answer from the seller or the listing agent shows how much cash the seller absolutely must receive. If you learn the home is free and clear with no encumbrances, you just struck gold because the seller can then be flexible as to price and terms.
As a seller, when a home buyer asks me what I paid for the property, I politely reply, “I got a bargain purchase price when this was a run-down shack before I renovated it so my purchase price is irrelevant to today’s market value.”
If a smart home buyer, and his or her buyer’s agent, discover the seller paid a low purchase price many years ago, that means the seller has lots of room to negotiate. However, if you find out the seller bought the house in the last year or two with a large mortgage or two, the seller might not have much negotiation flexibility.
3.) WHAT DEFECTS DOES THE HOME HAVE AND HAVE THERE BEEN ANY RECENT PROFESSIONAL HOME INSPECTIONS?
In most states, home sellers must now provide buyers with written home sale disclosures revealing any material facts that affect the home’s market value or desirability.
Smart listing agents obtain the seller’s written disclosures at the time of listing and have it easily available to prospective buyers. Then buyers won’t be surprised later by discovering the home has major problems that were already disclosed by the seller.
Home sellers, at the suggestion of their listing agents, often have customary professional inspections completed before the home is put on the market. Then the seller can either have any defects repaired, or at least can make the buyer aware of them before the purchase offer is made.
Of course, after the seller accepts the buyer’s purchase offer in writing, the buyer should always hire his or her own professional inspector just to double-check the seller’s inspector. If the buyer’s inspector discovers any undisclosed defects, then negotiations can be reopened if the buyer included a professional inspection contingency clause in the sales contract.
A good source of quality home inspectors is the American Society of Home Inspectors. To find local ASHI members, go to www.ashi.org or phone 1-800-743-2744.
4.) WHAT PROBLEMS HAVE YOU HAD WITH THIS HOME?
An open-end question like this will remind the home seller of any problems that, hopefully, have been corrected.
For example, when I first moved to my current home I quickly discovered I couldn’t have a decent garden because the deer would eat virtually everything. So I constructed fences to solve that problem. A few years later, the wood shingle roof began to leak but new leaks kept reappearing after a roofer made repairs. About 20 years ago, I had a new metal “lifetime” roof installed and I have had no further roof problems.
In most states, court decisions and statutes do not require home sellers to reveal past problems that have been corrected. But it is still important for buyers to know if those past problems might again become future problems.
5.) WHAT IS THE QUALITY OF THE PUBLIC SCHOOLS?
If you don’t have school-age children, it’s easy to forget this important question. But top quality schools contribute to home values and future market value appreciation. Families prefer to buy in communities with superb public schools and are willing to pay extra for the privilege.
However, in many big cities where the public schools are poor quality, families who buy a house or condo there realize the low school quality contributes little or nothing toward residence values.
Because most home sellers do not have accurate information on public school quality, the buyer’s agent should provide their home buyer with the latest school quality statistics, usually based on standard test scores and high school graduation rates.
Most real estate brokerages have access to the Internet resource www.schoolmatch.com, which tracks over 14,000 public school districts. Over 7 million parents accessed School Match services last year. A related Internet resource is www.houseappreciation.com, which rates the top 32 percent of communities based on their school quality and home value appreciation since 1994.
Copyright © 2007 Inman News - Robert J. Bruss
Get the most out of your home stager
By Dian Hymer
Waiting until the last minute to get your home ready to sell is bound to make your move more stressful. It could also result in a lower sale price if you forego properly preparing your home for sale.The extent to which sellers put time and money into fix-up-for-sale work varies from one area to the next. In the San Francisco Bay Area, so many sellers stage their homes for sale that you could be at a disadvantage if your home is not staged. In other areas of the country, sellers do virtually nothing to ready their homes for sale.The staging effort can be as minimal as removing clutter and excess, cleaning and rearranging furniture to show the living space at its best. Or it could involve painting, replacing tired floor coverings and light fixtures, and hiring a decorator who specializes in staging to bring in a house full of furniture, houseplants and accessories.Staging your home for sale if you live in an area where the concept hasn’t caught on could give you an advantage, particularly if there are a lot of unsold listings similar to yours on the market. Buyers tend to gravitate to the listings that look good and are in move-in condition. Real estate agents like to show homes that look great because they are easier to sell. So, attractive listings tend to be shown more often. More showings mean more market exposure, which is a critical element for a timely and profitable home sale.Staging costs vary depending on how the job is, how much competition there is among stagers in your area and whether the stagers have their own inventory of furniture. Stagers who don’t have inventory must rent furniture for a staging project. This tends to increase the overall cost of staging.
The staging fee could be as minimal as $75 or $100 for a consultation on how to rearrange your furniture. Or it might run up to $10,000 or more to completely furnish and stage a vacant, 3,500-square-foot house.
HOME SELLER TIP: Before hiring a stager, check out the stager’s reputation. Ask for recommendations and talk with people who have worked with the stager. Real estate agents tend to know who the best stagers are in an area. Your agent should be able to recommend a good one.
If you don’t already have someone in mind, you might interview two or three and ask for a detailed proposal, including the stager’s fee. Be sure to ask how long the staging will remain in your house for that price, and find out the price to extend the staging if you find it takes longer to sell your home. The extension fee should be less than the initial fee for staging the house.
It’s a good idea to preview a listing currently on the market that was staged by a decorator that you’re considering. Most sellers try to spend as little as possible to get their home ready to market. However, the point is to make the house look better. The stager with the lowest bid might not provide the best look for your home.
After your home is staged for sale, it may no longer look like your own. Actually, that’s the point. You stage your home to maximize its appeal to as large a pool of prospective buyers as possible. A well-staged home looks beautiful and is depersonalized so that buyers can see themselves living there, not you.
THE CLOSING: Sellers who can’t afford a big staging bill can consult with a stager to find out what modifications can be made on a budget and still provide their home with a refreshing new look.
Copyright © 2007 Inman News - Dian Hymer
Equal Housing Opportunity
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