The inspection period explained

Ten-day inspection periods are common. The buyer makes an inspection contingent offer on a home. The inspection period starts the day after the final acceptance date on the purchase agreement.  If there is no final acceptance date then I guess the ten-day period could start anytime.

During that ten-day period a few things need to happen:

  1. The buyer has inspections and tests done at his or her expense.
  2. The buyer decides if they will ask for repairs or not.
  3. If the buyer asks for repairs the seller reviews the repairs and responds with a yes, or a no, or a counter of some sort.
  4. Both parties agree in writing to the repairs.

That is why it is important to get the inspection done as soon as possible or ask for a longer than 10 day inspection period. If the ten days run out before there is an inspection then technically the buyer just bought a home.

I do everything I can to make sure no one is buying a home without an inspection no matter which party I am representing.  However, I don’t make up the rules or the laws and it is up to my clients how they want to handle all of this. I can only advise them.

Sometimes the inspection is all done but one part or the other needs to research the repairs and get a price. As I have mentioned before sellers should not commit without knowing if they can get the work done or how much they will cost. Negotiations will need to go beyond the stated inspection period.

If extra days are needed for research the inspection period can be extended if both parties agree and sign an amendment.

Occasionally sellers just won’t respond. In that case, rather than letting the inspection period expire buyers may want to cancel the contract while they can still do so without penalty.

Inspection periods used to be separated. Buyers had X number of days to have the inspection, sellers had X number of days to respond and both parties had X number of days for negotiation. Many of us prefer the old system but it wasn’t perfect either as parties would disagree over which day or period was which and when they started or ended.

Occasionally for houses that are going to sell with multiple offers, the buyer will have an inspection done before making an offer or waive the inspection. I am not a fan of waiving a complete home inspection for any reason. Third party inspections protect buyers, sellers, and real estate agents.

It should be noted that even if the contract states that the sellers can continue to show the house the showings will slow down or stop once the seller has accepted an inspection contingent offer. Sellers can only sell to one party but can collect offers during the inspection period as backup offers.

Screen print of contract with Inspection contingency

Social media and real estate

socialWhen social media and real estate are mixed, what could possibly go wrong?

If you are buying or selling a house be careful about what you post about it on Facebook, Twitter or any other social media site.

Sometimes I find information that helps me negotiate on behalf of my buyers or sellers. My clients also find information that can give them the upper hand during negotiations.

First time home buyers, in particular, will ask their friends, family, and co-workers for advice. Sometimes they put it all out there on Facebook or even on a blog that anyone can read.

People often believe that their Facebook friends are the best source of help when buying or selling a home. They also rely on Facebook when they have medical problems and electrical problems too.

Real estate discussion often ends up in groups where there are people like me who lurk but rarely participate.

Sometimes buyers or sellers will say something unkind about the other party in a transaction on social media. It is much easier to negotiate if we leave personal feelings and drama out of the equation.

Sometimes buyers will let everyone know that they desperately want to buy the home which will weaken their negotiating position if the seller finds out or at the very least sellers will know they have the upper hand.

Sometimes home sellers give out way too much personal information. No one has to disclose why they are selling a home. Being vulnerable and demonstrating a level of cluelessness can attract people who make a living from exploiting others.

While negotiating with buyers or sellers it isn’t a good idea to share too much with friends and family until it is over.

When you work with a real estate agent they can not discuss your motivation for selling or anything else about you without your permission.

Also when getting advice on buying or selling a home keep in mind that real estate is local. Rules, laws and business practices from other parts of the country may be meaningless in the local real estate market. People who are local but have not purchased a home in the last decade may be unfamiliar with current contracts and law.

I see the strangest things on social media from people who are looking for advice. The people who are giving the advice are just as clueless as the people asking for it.

Buyer negotiation strategies can backfire

Blazing star
Blazing star

Sometimes home sellers will not negotiate. In a seller’s market, they have the upper hand.  Home buyers want to negotiate. The most common strategy is to want to go way below the asking price. Buyers believe that starting low is the best way to get the seller to come down on the price.

That might work in a buyers market but in a sellers market the sellers sometimes just say no rather than negotiating.

When there are multiple offers buyers usually get one chance to put in their highest and best offer. If there is any negotiation at all the seller negotiates with the buyer who submitted the best offer. The buyer who goes low never gets an opportunity to go up

It has become a common experience for home buyers to lose out on the first house or two because that is what it takes for them to understand that going too low isn’t the best way to buy a house.

Buyers should do their homework and have an idea of what the value of the house they are making an offer on is. If it is over priced I strongly encourage buyers to make an offer that is below the asking price. Most buyers will not make an offer.

I see overpriced real estate as the biggest opportunity for home buyers to buy without competing in multiple offers.

When making an offer on a home that is being offered at or below the market value the offer should be at or over the asking price.

There is no single strategy that works in every situation for buying a house. There are sellers who do not need to sell and who will hold out for a retain amount even if it takes years.

Having a negotiating plan in your head is fine just keep it in your head as you pay attention to prices and what the sellers strategy. Sellers should keep in mind that buyers really want to negotiate.

Buyers sometimes regret having “won the bidding war” and as a result they back out after the inspection. Sellers who get top dollar for their home should expect the buyer to request some repairs.

Advice from friends and family who bought a home last year or a decade or more ago probably isn’t as useful as the advice from your Realtor®. Choose an agent with experience. There is no substitute for experience.

The history of an over priced house

Downtown St. Paul, rooftops

As a homeowner myself I totally understand wanting a high asking price when selling a home but as a real estate agent, I can tell you that asking for more can mean getting less. It seems counter-intuitive but it is true.

A house that was listed for $449 but should have been listed for no more than $380 and would have sold for about $370 in less than three months.

The owners wanted $450,000 for it because that is what they wanted. As a result, it took 2.5 years to sell the home for 10K less than it would have sold for it was priced correctly.

They changed agents three times and reduced the price 8 times and ended up getting about $360,000. This example is extreme but is an example of why and how homeowners can end up with more by asking for less.

The houses that get multiple offers are usually priced just right. They sell faster and generally speaking the highest offers come within the first 10 days a home is on the market.

The local real estate market strongly favors sellers which means it is a good time to sell but even in a seller’s market pricing is important. Deciding on a price is more of an art than a science and there are always agents and sellers who will aim too high.

letters from real estate agents

What is up with those letters homeowners get from real estate agents? The letter is from an agent who has buyers looking for a home in your neighborhood or the agent has buyers looking for a home just like yours.

These letters are not exactly truthful but they are very effective. They are a way to get a listing appointment and the opportunity to list your home. There is about a zero percent chance that the agent will have a buyer who is an exact match for your home.

It is likely that the agent does have a client who may want to buy a home in your neighborhood. In the current seller’s market, most of us have buyers that we are struggling to find a home for. That doesn’t mean they can afford your home or that they will like it.

Some homeowners get letters from a few different agents who are soliciting business in the same neighborhood. They end up believing that their neighborhood or property is particularly hot. The letter also boosts seller confidence and the result is an inflated view of what their real estate is worth.

Homeowners who get a lot of letters may fit the profile of someone who is going to move soon. We use predictive analytics these days.

Real estate companies and associations have templates real estate agents can use for this kind of marketing.

Template for a letter to homeowner

Once the agent who has the buyers looking in your neighborhood lists your home it will be another agent who brings in a buyer. That isn’t all bad. If your listing agent does bring the buyer then he or she is acting as a dual agent.

When a home is listed on our MLS agents compete with each other to bring in a buyer. Half of that commission the seller is paying will be paid to a buyers agent if her buyer buys the house.

If you have been getting letters from agents who have buyers you can ask them if they will agree to a one-time showing contract. Under that contract, they can bring in their buyer(s) and if the buyer makes an acceptable offer you may just end up selling your house with almost no hassle and a minimal commission.

The good news is even though agents don’t really know someone personally who will buy your house they keep the idea and mystique alive and in this market, someone will have a buyer for your home.

Snow in June it happens every year

Clearing the steps April 15th

I’ll admit I write about this every year. There hasn’t been any snow on the ground in these parts for a couple of months. Homes are selling quickly yet I still see a lot of snow in listing photos.

Home buyers and agents know the home has been on the market for awhile. Real estate professionals know that the agent listing the home isn’t doing a very good job. Maybe the sellers don’t care but they should.

Back when it took months to sell a home instead of hours or days we sometimes had to take pictures of houses two or three times to reflect the season and to freshen up the marketing.

It is super easy to take a new picture and upload it so that the first thing a buyer sees is a picture of the home that was taken in June. Sometimes changing the picture will actually attract more buyers who will notice the home more than they notice the snow.