Real Estate March 3, 2023

Get in the Boat!

First you determine your energy, how are you feeling? This will determine your mindset. The mindset determines your focus. Your focus influences the outcome.

Our goal is to connect and protect. We must first connect with the client. Understand their goals. We are meant to advise, guide and protect our clients throughout their journey. This cannot be done if we are not in the right energy space to effectively connect with them on the first contact. We must be able to take their initial questions, answer them and guide them into the pathway for the greatest success. We need to get them into our boat. We are tour guides, we listen to determine what they want and then establish trust to get them in our boat. Once they enter, we guide them down the river and through the jungle, navigating each moment until we arrive safely and at their desired destination. How smooth and comforting that journey is determines how successful of a guide we were. Some clients have a specific mindset on how they would like to go through the process. The best Realtor/Client relationships are those in which the client understands that the Realtor’s value is their experience and everything we are doing is to get them the best result with the least amount of problems.

Real Estate May 30, 2022

Pressing Buttons for Information on Realty Sites and Representation

You see a house online that you may be interested in. You pressed a button for more information. Now you’re in the system! When you press a button online on the big Realty sites you will always be directed to a Realtor. Most times it will not be the Realtor actually selling the property. This is a GOOD thing. You never EVER want to deal with the Realtor who is actually listing a property. Why? Because they are working for the seller! They cannot effectively negotiate price or repairs for you. It is legal in some states (Washington included) for a Realtor to represent both parties but it is rarely in the buyer’s best interest! The kicker to all of this is that it doesn’t make the house any less expensive either. Seller’s enter into a listing agreement with a brokerage’s firm which states what they will be paying towards the Real Estate commission. That is usually based on a percentage, such as 6% of the total sale price of the home. Half typically goes to the Realtor representing the seller and half to the Realtor representing the buyer. When a buyer doesn’t have their own Realtor, the listing Realtor simply makes that whole commission. It is always in the buyer’s best interest to have his own Realtor and the best part is that the seller is the one paying the commission! The exception to this are cut rate listing which can be read about in that blog post.

A good Realtor will steer you towards a lender who will work to get you the best rates and save you money overall. They should also be handling all of your questions about houses so there is no reason for a person with a Realtor to be pushing buttons trying to gather information. Have your Realtor do that work! All you’ll be accomplishing otherwise is getting into contact with another Realtor(or several) who want to help you with the home search. This is something your Realtor should have informed you of in the beginning of your relationship.  My clients know to contact me if they have any questions on something they may see and I will be sending them potential listings when they become available. I receive frequent calls from people who have Realtors but didn’t want to “bother” them to gather information. Instead they are now bothering another Realtor who then has to educate them on how all of this works because their Realtor didn’t do so.  If you aren’t getting prompt answers from your Realtor, get one that is truly looking after your best interests and communicates effectively with you!

Real Estate May 30, 2022

Builders who won’t work with Realtors!

There are certain construction and builders who refuse to work with Buying Realtors. Often times they actually employ a Realtor themselves but do not want the buyer to be represented even if the buyer is paying their own Realtor fees! This is a major red flag. Why? Because they are intelligent enough to know that they need one, but don’t want you too! That said, reputable builders have no issue actually dealing with your Realtor.  The vast majority of purchases are accomplished with the aid of a licensed Realtor which provides the peace of mind that your interests are being properly looked after.

Real Estate March 6, 2022

Understanding Asking Prices, Market Pricing and Offers

There are several things to consider when making an offer.

1. Asking price – The current list price is what the listing agent’s research and competitive market analysis has determined is a fair value for the home in its current condition.

2. Condition – The seller is aware of the current condition of the home and have considered that in the asking price. Sellers do not care what a buyer needs or wants to do to improve a home. They, and their broker’s market research, have already considered what the property should be worth.

3. Market – Most properties sell ABOVE the listed price. It is a popular strategy to list homes at the low end of the CMA (competitive market analysis) to promote interest and bring in more offers. This results in bidding wars and higher sales prices than what was originally asked for. I believe this is a disservice to buyers for a few reasons. A) If you list a property for $489,000 but have no intention of accepting anything less than $515,000 all of the buyers who rushed to see it who are only pre-approved to $500,000 will have no possibility of actually getting the house. B) This means their offers are there simply for the list agent to boost other, more competitive offers closer to their intended price. C) It forces the use of the 22AD form in situations. This is a form that allows a buyer to pay OVER the appraised value of a home with funds out of their pocket. Often time the highest dollar offer is not the best offer! When there is financing involved, a house is worth what an appraiser says, not what a buyer offers so the 22AD form guarantees a seller that they will get the appraised value PLUS whatever additional funds the buyer agrees to pay. This unfortunately has become a necessary evil in some negotiations.

4. Offer price – It is almost never a good idea to send in a low ball offer. If an offer is too low it will not even be responded to and can be considered insulting. If a property has sat for an unusual amount of time then offering less may get us on the playing field. The goal in offering less should be to get close enough that the seller will consider sending us a counter offer. Most properties fall in a 30-50% increase from the county’s assessed value. This is mainly relevant for non-cash offers as cash offers do not require an appraisal.

5. Earnest money – The more earnest money offered, the more serious the offer in the seller’s eyes. This also shows the financial state of the buyer. Low earnest money amounts can be a deterrent to the seller.

6. Type of loan – Cash is king and will always beat an offer that is financed. Conventional loans are less stringent than FHA/VA/other types of loans so they are more desirable from the seller’s standpoint. Often we will need to increase the offer price to compensate for the type of loan. This is because the seller will have more potential expense with items needed to be corrected to pass the appraisal process.

7. Bottom line – The seller is concerned only with the net amount they will be making from the transaction. If we are asking the seller to contribute to closing costs then that must be considered in the offer. A $300,000 property can have $9,000 worth of closing costs. If we ask the seller to contribute 3% of the purchase price and offer the asking price of $300,000, the net offer to the seller is actually only $291,000.

8. Appraisal – You are never required to pay more than appraised value of a home. If you agreed to purchase a home for $300,000 and the appraisal comes in at $290,000 the financing addendum protects you from paying over the appraised value. This can get tricky if we are asking the seller to pay closing costs because often times that credit can be the factor in a house not appraising at value. It is best to take that into consideration and what is fair to all parties if that occurs. There is a trend with buyers to include a 22AD form which state that a buyer will pay a specified amount OVER appraised value in the event of a low appraisal. It is important to be aware of this as several factors will be taken into account (If you are using an escalation clause, 22AD, and whatever the appraisal comes in at).

9. Desire – How badly do you want the home? At what dollar amount are you willing to lose it? Properties are the single most expensive asset you will ever purchase. The difference of a few thousand dollars over the course of a 30 year loan becomes very small. As long as a house appraises at what you and the seller have determined is a fair price everyone should be happy. You should always think “If we lose this house because of this offer, will I be able to sleep tonight?” If the answer is yes, then the offered amount is fine.

Conclusion – The best strategy is always putting your strongest offer in from the start. It shows that you are serious about the property and is likely to get a faster, more positive response. The home buying process is long, usually between 30-45 days, unless it is cash (which can close as soon as the inspection process is complete), and if you aren’t committed to it then it is likely the deal will fall apart at some point. Never make an offer on a house that you don’t really want. I do my best to get every client the house they want. The deals that fall apart are the ones that the people weren’t in love with.

Real Estate February 21, 2022

What is a Cut-Rate Listing and What Sellers and Buyers Should be Aware of:

A cut-rate listing is when a Realtor lists a property for less than what is standard in their area.  There are two main reasons this happens:

  1. The Realtor is inexperienced or isn’t local.
  2. The Seller is trying to save themselves money.

Why is this a bad thing for a seller? Consider this, a Realtor who cannot negotiate their own commission is not going to negotiate the best deal for you. As a seller you will save a few dollars on your listing commission but you are definitely going to lose more in sales price and most likely repair costs because you chose to work with someone who is starting the relationship off proving to you that they can easily be pushed around with a “something is better than nothing” mentality.

Cut-rate listings are also a prominent red flag to buyers. Why? Cut-Rate listings will require the buyer to pay the extra in commission that the seller isn’t willing to do. That makes the house cost more for the buyer. Someone not willing to pay the standard rates is also not as likely to provide any seller concessions to help you pay for closing costs. Additionally, when it comes time to deal with inspection requests, they are notoriously less willing to negotiate repairs. These all add up to more failed transactions and frustrations for you.

Have you never worked for less than the standard rate? I have when I was newer, but I NEVER. I repeat NEVER passed on the cut to the buyer’s and their Realtor. I used to have a policy that if a client purchased a property from me personally and had a circumstance that required them to relocate within the first year that I would list the property for less than the standard rate on my side only. I have never imposed my discount on buyer’s or their Realtors. I have too much respect for others in my profession.

Cut-Rate listings can only be achieved ethically when the Realtor is cutting their own commission for whatever reason and it does not affect any other person involved with the transaction.

Real Estate February 2, 2022

What’s a House Worth?

When a buyer is paying cash, a house is worth what a seller is willing to sell for and what a buyer is willing to pay.  When there’s a loan involved, the house is ultimately worth what an appraiser determines. Appraisers base their values on what has sold in the last six months, in similar neighborhoods, with similar characteristics, adjusted for notable differences. Ideally, the homes used for “comps” (or comparable) should be of the same type of structure with similar square footages and features. This means that if you’re looking at a two story, 2500 sq ft, 3 bedroom, 2 bathroom home that the comparable homes would be as close to the subject property as possible. The more differences in the homes you are trying to compare, the more adjustments have to be made for a reasonably accurate comparison.

A CMA (Competitive Market Analysis) is NOT the same as an Appraisal! Realtors base comps on major items, such as square footage. An appraiser will base their value on several more detailed factors.

Most of the time an appraised value is going to come in equal to the purchase price. Why? If a Realtor has determined a realistic value of a home when they listed it for sale based on the CMA’s, then the appraiser’s more detailed report will USUALLY fall in line with that value. There can be glaring differences when an appraiser is from another city, doesn’t quite understand the specific market, or any number of other factors. It is more common for a house to appraise LOWER than the purchase price than it is for a house to appraise HIGHER.  You can learn about low appraisals here.

Real Estate February 2, 2022

What Happens with a Low Appraisal?

When an appraisal comes in lower than what a buyer has offered there are a few options. It is important to note that a buyer can never be forced to pay more for a house than what it is valued at! That said, in a competitive market many buyers are submitting a guarantee with their offers that they will pay a specific amount ABOVE the appraised value in the event of a low appraisal. This is a tactic that can help secure a home when there are several offers for the seller to consider and should be looked at as the long term investment that it is.

Assuming there was no guarantee in the offer (and that the offer included the protections of a financing addendum), then the buyer cannot be forced to pay more than the appraised value. The sellers in most cases will lower the purchase price to the appraised value and the buyer gets the house for less!

A seller can also request that the buyer pay more than the appraised value up to the original agreed upon price. The buyer always has the right to terminate the agreement and begin their search anew.

Real Estate November 21, 2021

Step 1: Pre-Approval and Why It’s Important!

The market seems to move faster every day. Houses are receiving multiple offers often within hours of being listed. It is necessary to be prepared to reduce the overall time and stress involved in the home buying process. Why do I need to be pre-approved prior to looking at house? 1) We need the loan type that you’ll be working with. Not all houses will accept all loan types. It’s a great disservice for someone to get their hopes up over a house that their loan may not be qualified to purchase. 2) We need that comfortable price range. Most Realty sites will show you a potential estimated payment but often that is assuming you’re putting 20% down and doesn’t include the entire costs. Payments often include what is referred to as PITI (Principal, Interest, Taxes and Insurance) and those collectively make up your monthly payment. 3) You can’t submit an offer without one! Without a pre-approval from a solid, reputable lender a person is simply shooting in the dark. I’ve heard countless times how a person would like to see a particular house only to learn that the seller will be reviewing offers too quickly to obtain a solid pre-approval.  Be prepared and get pre-approved. We are very happy to direct you to a lending team that can most likely save you time and money!