Sellers disclosures and you

bungalowMinnesota sellers are required to fill out a seller’s disclosure or non-disclosure. The seller’s disclosure form is fairly long and detailed. Sellers are asked about leaky basements, roofs, walls and more.

I usually give sellers the disclosure form a few weeks before I list a home because for some filling out the form is overwhelming. it is alright to answer a question with “unknown” or if it is a matter of not understanding a question a real estate agent or Google can sometimes help.

The whole idea behind the disclosure is for the homeowner to disclose everything they know about the property that might be a problem for future owners.

Sometimes sellers forget things they know about the property because they have lived in the home for decades. It is also possible to live in a house for a long time and to not be aware of a defect, like a collapsed sewer line or a water heater that doesn’t vent properly.

Often owners of rental properties use a non-disclosure which states that they did not live on the property and do not know anything about it.

As a Realtor® I am required to disclose what I know about a property. If I know that the roof is leaking I have to disclose it. I recently wrote an offer on a house that had mold in the basement and some serious foundation problems. Both the seller and the seller’s agent knew about the issues but did not disclose that information.

Problems arise when sellers fail to disclose something important that the home buyer believes they should have known about. In other words, sometimes people try to hide defects which is why it is so important to have a complete home inspection. Most home sellers are honest and most realize that by hiding defects they could end up in court.

The home buying competition

There are about 310 homes on the market in St. Paul and about 100 of those have offers on them. The shortage of homes for sale has become the new normal.

Buying a home is like a competition and I would like to offer a few pointers.

  1. If you have found this amazing bargain-priced house you are not the only one looking at it.
  2. Avoid overpaying. In the long run, you will regret paying too much. Let someone else pay too much.
  3. Current home prices are causing some people to re-evaluate renting. Sometimes renting for a while longer is the right decision.
  4. Be prepared to make an offer. Have your pre-approval letter ready.
  5. Do not wait for an open house to view a home for sale. See it the day it comes on the market. There might not be any open houses or the may already have an offer on it by the time the open house rolls around.
  6. Work with one agent.

Home buying has not yet become a contact sport but it isn’t unusual to see other interested parties touring the home you are touring.

Work with an agent who has the ability to help you make an offer on the spot. Speed matters. Avoid the agent who has the day job and the agent who only works certain hours or days.

Being a buyers agent isn’t a 9 to 5, five day a week job.

Serious buyers know that they may need to change their plans in order to see that perfect house the day that it comes on the market or before. Life happens but sometimes being flexible enough to meet friends for a drink a half hour later than planned can mean the difference between having a home to buy or losing out to another buyer.

 

Negotiating in a seller’s market

iris
Iris

Home buyer’s like to negotiate and most expect a little haggling. These days home seller’s are not always willing to negotiate. The market is greatly out of balance and favors home sellers.

Home sellers do not have to negotiate. They can and do pass on offers they don’t like and many do.

The back and forth isn’t always part of the process. In multiple offer situations, which are common they just take the best offer.

It is important for home buyers to understand this and put their best offer on the table before someone else does. It is also important not to overpay and regret it later.

Skipping the inspection in an effort to make the offer more appealing to the seller isn’t wise and can hurt the sellers too. Buyers will have a problem with the house and accuse the sellers of knowing about it but not disclosing it.

When the market shifts to a balanced market or a buyers market the rules will change again. During the last buyers market seller’s were paying for points and home warranties. Some were paying movers and others were allowing people to stay in their home for the weekend to help them make up their minds.

The market is always changing.

What is earnest money?

Earnest money is money paid to confirm a contract. People who make an offer on a house draw up a purchase agreement and offer earnest money. Earnest money isn’t required but it is often expected and is considered a kind of standard business practice.

The funds are usually in the form of an electronic deposit from a bank account or an old-school paper check. The funds need to be immediately available. They are deposited into a brokers trust account where they are held until the closing.

Usually, the money ends up being used to pay for the house.  If the buyer backs he/she/they may end up forfeiting the earnest money and it will go to the sellers.

There are no hard and fast rules about the amount of money a buyer should offer. Generally, $1000 dollars is a starting point for homes in St. Paul and there is no limit to how much money can be offered. I have had buyers offer $25,000 or more.

The amount of earnest money offered is usually part of the negotiating strategy. It shows the sellers that the buyer is serious. Sometimes sellers will counter an offer and ask for more earnest money. The money forces the buyers to have some skin in the game.

Once a seller accepts an offer the house is tied up for a time. Even though it is usually left on the market until inspections are completed it may be largely ignored by other buyers. Sellers want to know that the buyer will not back out.

Purchase agreements are usually structured in such a way that the buyer gets the earnest money back if he/she/they if they decide not to buy the home because of issues on the inspection or in the case of a condo if they are not comfortable with what is in the association documents and financials.

Buyers may also be able to get their earnest money back if the financing falls through. Again it depends upon how the purchase agreement is written.

Sometimes in multiple offer situations, buyers will offer more earnest money and the contract will allow the sellers to keep it if the financing falls through.

In the end earnest money usually isn’t enough to compensate sellers if the purchase falls through and they have lost time on the market.

Buyers earnest money is safe. There are numerous laws that dictate how the money is kept and accounted for. Real estate is regulated by the state. People who are buying property outside of Minnesota should consult a professional in their state.

Coming soon home listings

I have several buyers who are looking for homes to buy. I regularly contact for sale by owners and I look for “coming soon” listings on Zillow.

I just want to say that some of those “coming soon’ listings were sold long ago. They are kept active because they can be used as bait by real estate agents.

There are also “coming soon” listings that have been coming soon for many months. Coming soon is a vague kind of thing. Soon can mean hours, days, weeks or months.Information on Zillow has gotten a lot more accurate since out MLS feeds data to the service. We are required to keep the information in our MLS up-to-date and people who put bad data in can be fined.

Agents who pay for the service can put “coming soon” homes in Zillow that are not part of the feed.

To be fair I also contact homeowners who have listed their home as for sale by owner in Zillow and have found that some of them are not serious about selling but just want to see what happens.

Most but not all of the homes listed in the MLS are really for sale but sometimes especially over the weekend we do find houses that already have offers on them but have not had their status changed.

bad advice on the internet

Like most people, I like to use Google to do a little research when I want to buy something or get a quick answer to a question.

I use it for recipes and for technical support and occasionally for medical type information. There are articles on most topics.

There are many articles on the internet about how to choose a real estate agent. Most of them are fluff pieces written by people who do not have any expertise in the area.

They do some research . . probably on the internet and use ideas from someone else’s fluff piece or maybe from several fluff pieces.

I disagree with most of the questions people are advised to ask agents.

Why would anyone want to know how many listings an agent has? The better question is to ask them what percentage of their listings get sold.

The real estate market is ever changing. If I am asked how long houses I list are on the market it wouldn’t be the same for one year to the next.

If I am asked what percentage of the asking price I get on average for homes that I list, that really isn’t a fair question unless I get to set the price.

If I did set the price in this market I would go low and consistently get more than the asking price for the home.

Real estate agents are salespeople and finding clients is most of what the job is all about.

Hiring the right real estate agent boils down to three simple questions:

  1. Does the agent have experience? 
  2. Is the agent someone I feel that I can trust and work with?
  3. Am I just a “deal” or will the agent give me the time and attention I deserve?

By experience, I mean at least 5 years and it should include working in your neighborhood or the neighborhood you wish to move to. Personally knowing what I know I wouldn’t work with anyone who has less than ten years of experience. Agents with no experience generally charge as much as agents who have decades of experience.

I have a bias toward full-time agents but I can honestly say I have known some part-time agents who do a better job than most full-time agents.

Trust is a big deal. If you don’t trust an agent do not work with him or her. Choosing someone who is easy to work with is also important. You will have to work closely with the agent that you choose.

Ask the agent if they have time to work with you. Are they going to hand you over to a junior team member? Do they sell zillions of houses? Will they care about your sale or purchase?

One of the best ways to find an amazing real estate agent is to ask friends, family, neighbors, and co-workers who they worked with and if they would recommend that person.

The only downside to that approach is people who have had only one experience buying or selling a home might not even realize their agent wasn’t up to par because he or she was so “nice”.

If you think choosing an agent is tough you should try choosing clients. When I mess up it can make my life miserable for weeks or months. I can end up spending money to market a home before I figure out that the owners are not committed to selling.

Also see: REALTOR is not an occupation