There are costly mistakes both BUYERS and SELLERS make in a market like the one we’re in today. It’s fast paced and expensive, and you don’t want to leave money on the table! Here are a few tips to help out anyone looking to tread these warm waters.
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VIDEO DIALOGUE:
Welcome to the video. If you’re new to the channel but you’re looking for content like this, be sure to like and subscribe and comment below. We encourage a healthy dialogue on this channel and would love to keep you with us for the long haul. Now let’s talk about some things you should be conscious of when Buying or Selling Real estate.
Ok, Buyers: Get prepared. The worst thing you can do is to not understand the current market. Want to write list price offers, or come in under the list price? Unfortunately, the way this market it right now, that’s not going to work with most listings. It’s hard right now for buyers and for buyer’s agents. You know, my name gets listed on the MLS as the sales agent when I get a house under contract, and right now I’m getting calls asking how I’m able to get accepted contracts, whether in competition or before the listings go live, while they’re still coming soon. It’s all about calling the listing agent and finding out what the seller is looking for, building that relationship and lining up the offer the way it needs to be written for the seller to want it over any other offer they will get.
Sellers: We all just assume it’ll sell in this market. I see listings going on the market with cell phone photos, no professional representation – right away, this is a flag for me that the seller, or the listing agent doesn’t care about this listing or who’s going to buy it. It’s hard for me to advise my clients to offer on a property that is just expecting to get highest and best by Sunday at 5 regardless of the presentation of the house. I saw a $1.7m listing just this week that had a hot air balloon floating on the ceiling and a cat climbing around on the counter. It’s a fun photo, but they clearly didn’t look at these closely before putting them online. I see deferred maintenance, I see lack of detail in disclosures. A lot of agents neglect to put the necessary paperwork to write a well-informed offer in the MLS listing. Guys, this is how you create problems for everyone involved. In fact as a seller, you should know that you can request of your listing agent to make sure that all disclosures go out on the MLS in the provided agent links. That’s a thing, you should know, and the more upfront you are, the least likely problems will arise and the more likely you are to find the right buyer. It’ll cost you money if you don’t get the house ready, and aren’t working with a good listing agent.
Now buyers again: Not working with a good lender and understanding the lending process. A good lender is someone that will educate you and help you understand the process beyond getting pre approved. Appraisals are not friendly right now, when we put offers in well over the listing price, you have to know that if the house doesn’t appraise for the offer amount, say it appraises for $30k less than the offer amount, someone has to cover the difference, or you have to renegotiate the deal – which in this market no seller is going to do – they all want to see “gap coverage”, as it’s called. Some lenders can cover some of that gap, but often I have to coach buyers through figuring out how much money we have for what the lender can’t cover. These are things a good lender can help you understand and navigate. And let’s be real, you want someone you get along with. They really are a part of the team and should be a helpful resource for you up until the moment the deal closes. Closing on time is important, rates are going up and if you don’t meet your close date because of a lender issue and it released your rate lock, you could end up with a much higher monthly payment and it could default your ability to buy and cause the deal to fall apart. You need a good, knowledgable lender that cares about you and understands what you need.
Sellers, selling to iBuyers. Let’s call out the elephant in the room and say that Zillow fell out of business doing it because it’s not a good business model. Look, I understand it might save you some time, maybe you like having a customer service rep, I don’t know there are definitely ways that I can see this being easier and fitting some people schedules a little better, but you’re not going to get a high market value from an iBuyer in my opinion because that’s not how the model is successful. The companies that are still doing this can’t stay in business if they’re not making a profit on it. In some instances, if you can’t do the work on your house needed, or if you want to avoid showings, or whatever your case may be, this may still be a good option. But the price difference between working with an agent versus an iBuyer can be pretty dramatic – you can make a lot more money going to market with an agent. Another agent did an analysis with a seller recently and provided these case studies to show they could make dozens of thousands more working with an agent than an iBuyer offer they received. Try to get as much info as possible on closing costs, repair values, and get quotes from many different iBuyers if you want to go this route. I’m not saying you have to use a REALTOR to sell your house, but just do your research because I’ve seen people lose money with iBuyers and investors that didn’t make reasonable offers up front. I’ve even worked with my own Sellers to consider and vet those iBuyer and investor offers, and even if they weren’t paying a commission on those offers it was still far less than they made by eventually going to market.
Another Buyer mistake is to assume you can just go to the listing agents for a house you want to buy directly. Like, call the number on the listing to see if you can make an offer. If you’re wanting to avoid working with an agent I guess, feel free to give it a shot, but you should know a couple things that are happening under the hood of pretty much every listing. Not all listing agents will be interested in working with both parties on a transaction, because legally in Tennessee you can’t be a dual agent, you have to become a facilitator. Some Sellers are going to take issue with this as well. In fact, in my experience, listing agents don’t take calls from unrepresented buyers, instead they refer those calls out to buyer’s agents on their team if they have one, or at their agency to avoid the headache of doing twice the work on the deal. And that brings me to one other thought – you’re not actually saving any money by not working with a buyer’s agent – if this is something you’re thinking… Buyer’s agency is paid by the Seller per the current listing agreements and industry standards. It can be negotiated otherwise, and some Buyer’s Agents will actually require their Buyers to pay a difference if they don’t get enough from the Compensation agreement with the Sellers, but that’s rare in my experience and something you can work out up front with your agent before you go out and make offers.
Now one last note for both Buyers and Sellers in this current market to wrap all this up. In recent years, and especially this Summer as things are heating up there is a specific issue I think we should be aware of. Buyers… Know that in order for you to get an accepted offer, you should listen to your agent when they tell you we will have to offer well over the list price – $10, 20, 30k even. Expect your agent and lender to then explain the financial implications in this, as mentioned before in this video. But as a caution to Sellers, you should know that the more we sell homes well over list price, especially if we’re selling homes well over what we think they’ll appraise, we are causing some of these spikes in value that begin to shake the confidence of buyers and effect how real estate will be valued in the future. It’s not a caution that you shouldn’t take the highest and best you can get, but I always try to advise both my buyers and sellers, we need to be conscious not to over price this market or accept offer that is so bloated to the point that it creates unnecessary risk to the buyer and neighborhood value over time, or affordable home problems. The agents that I work deals with tend to agree. In fact, the most direct consequence I’m seeing, and it seems backwards, but Sellers aren’t sure if they want to sell now because they’re afraid they’re not going to be able to afford to buy in this market any more than the buyers that are looking for a house like theirs. I don’t know how much we can do about this, but I do know that it’s up to the Sellers to dictate how much they’ll take for their home, and buyers really can only buy what they can afford.
So… plenty of food for thought. I hope you enjoyed. Till next time.
