The Need for a True Real Estate Professional

The KCM Blog recently posted an article in response to NAR’s just released 2011 Profile of Home Buyers and Sellers.

Anyone in the real estate industry for any length of time realizes that the education required and the resources necessary to be a true industry professional have dramatically increased over the last two decades.

Consider the ups and downs of today’s volatile market.  As the KCM crew points out, “It is necessary to have a true real estate professional if you want to sell your home for the best possible price in the shortest amount of time – and make sure the deal gets to the closing table!”

According to the National Association of Realtors (NAR), 18% of all contracts were cancelled in the previous month. This compares to 16% the prior month and 9% in August of 2010.

The good news is homeowners have realized that attempting to sell their home on their own is an arduous process best left to an industry expert. According to NAR’s 2011Profile of Home Buyers and Sellers, the percentage of sellers selling on their own, known as For Sale By Owners (FSBOs), has dropped almost in half over the last 20 years:

The bottom line is that if you are considering selling your home, now more than ever before, “It is best to take on the services of a local real estate expert. He/she will guide you through each step of the transaction thereby increasing the likelihood that there will be fewer inconveniences for you and your family.”

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Why Picking the Right Agent is So Important

According to the Existing Sales Report issued two weeks ago by the National Association of Realtors (NAR), the percentage of cancelled contracts is on the rise.  NAR defined this alarming trend as: “Contract failures – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price.”

Only 9% of all contracts were canceled in August 2010.   In August 2011, a whopping 18% of all contracts were canceled.  In one short year, the percentage of canceled contracts doubled!

This issue only serves to highlight the importance that both buyers AND sellers take the time to pick the right real estate professionals that will be able to help you throughout the process with all of your real estate needs.

Buyers should make sure that their agent will not only be able to help find them the right home, but will be helpful and knowledgeable throughout the process, i.e. mortgage, title, escrow, etc.

Sellers should take note that now, more than ever, agents have to be able to sell your home twice:  first to a qualified buyer, and then to the bank by way of the appraiser. The second sale can be MUCH more challenging–coming up short here could potentially kill the deal.  However, the right agent will have no trouble selling your home during an appraisal.

The bottom line is that in the current housing market, there are too many things that can go wrong before and during the Escrow process.   Now, more than ever, it is absolutely crucial for sellers and buyers to use the right real estate professionals to guarantee that their deal will actually close.

Seller’s Guide to Understanding Today’s Buyer

Keeping up with the ever-changing ins and outs of the real estate market can be a challenge.  Buying or selling a home in 2011 is a totally different ball game than it was in 2006.  Five years ago, prices were high and it wasn’t uncommon for a home to go out in multiple offers over asking price.  Today, prices are lower and buyers have become much more cautious.  Understanding the just how today’s buyer operates has gotten a little bit easier, thanks to the blogging team over at Zillow.  They’ve broken it down for us by naming three types of buyers: “The Home Stealer, the Market Feeler, and the Real Dealer.  Unlike buyers five years ago, they’re far more cautious — sometimes to the point of inaction.”  Let’s examine further…

1. The Home Stealer

According the Zillow bloggers, this type of buyer is probably the least likely to actually purchase your home.  “They’re not terribly experienced in the local real estate market and in most cases, they have little or no relationship with a real estate agent. They’re likely not pre-approved for a mortgage.”  This type of buyer may make unreasonable requests from the sellers, (i.e. asking that the neighbors cut down their tree), or avoid answering questions regarding their finances, experience in the market, etc.  While they may be serious about buying a home at some point, they’re probably not serious yet.

2. The Market Feeler

As the name implies, this is the buyer that is new to the market and is carefully feeling it out.  They’ve made the decision to buy but want to take their time deciding.  “Market Feelers are more likely to disclose their financial situation to their seasoned agent. They probably have a pre-approval letter from a lender, too. They’re likely represented by a local agent and seem to be well-versed on local market and conditions. They may even come for multiple showings.”  But when it comes down to it, they’ll likely hold back on making a reasonable offer because they just are not ready to dive in.  The Zillow team recommends that sellers should, “Try to work with them at first. Respectfully move on from the low-ball offer but with the realization that the buyer might return with a reasonable offer later. Market Feelers are often on their way toward becoming Real Dealers, once they can get beyond their inexperience and overly cautious approach. Unfortunately, that transformation might take months.”

3. The Real Dealer

The Real Dealer is ready to make their move–they are the real deal.  This buyer has developed a rapport  with their agent, they’re familiar with local market conditions, they have spoken with a lender and received a pre-approval letter.  “They’ll spend a lot of time in your home. They ask a lot of questions because they’re seriously interested and want to know as much as possible.”  They’ll bring their family, friends, co-workers, their contractor, their designer, etc. to see your home.  This buyer will spend time visualizing how the home will feel once they are living in it.   For the Real Dealer, “When it’s time to write an offer, the contract comes with a local bank or mortgage broker pre-approval letter. Their offers are usually within striking distance of the asking price.”  Sellers should be encouraged to, “Be responsive, act quickly, and make yourself available.”

Spotting the Buyer

It’s up to the listing agent to separate the Stealers from the Feelers and the Real Dealers.  According to the Zillow experts, “The listing agent has such an important role in negotiating the transaction.  They are the only ones that interact with all parties of the transaction.”  Sellers with their listing agent should find out as much as possible about the buyer.  Ask questions:

  • Why are they buying?
  • What do they do for work?
  • Where is their office?
  • What is their motivation for purchasing?
  • Did they just get a new job or have a new baby?
  • How long have they been looking at real estate?
  • How many offers have they already written?

Sellers take note: “You can understand a lot about who you are dealing with, which will ultimately help you in your negotiations…Knowing as much as you can about potential buyers helps to tip the balance of power a little bit back in your favor.”  At the very least, it will help you avoid wasting time with any less-than-serious buyers.

Top Mistakes of Sellers

Selling your home can be a tough process, especially in this market.   As a seller, there are certain things you should– and shouldn’t–do to help make the process easier.   RealtyTimes.com recently posted this article, Top Five Mistakes Sellers Make by Phoebe Chongchua, discussing some of the most common mistakes and misconceptions that sellers have about selling their home.

1 – Underestimating Cleaning Up

Tidying up around the house when you know potential buyers will be viewing it can seriously make a world of difference.  First impressions can be everything.  As Chongchua points out, “If you can’t take the time to wipe the grime off the refrigerator doors, tidy up the kids’ rooms, take out the messy diapers, put away the food, and take the dogs out of the house for a while, then you’ll likely find buyers will quickly move on to the next home on their list.”

2 – Lingering During Showings

It can be tempting for sellers to want to hear what feedback potential buyers may have after a showing, or hang around to hear how the open house went.  Generally this is not a good idea: “Sellers who tend to linger during showings often make the buyers uncomfortable. Buyers like to have time to explore the home at their own pace and without feeling any pressure.”  You can always find out all of the details from your agent as soon as the open house or showing is over.  After all, says Chongchua, “That’s what you’re paying your agent for! Let them do their job. Just make sure that your agent has all the home’s selling points and any additional features that make this home standout.”

3 – For Sale By Owner Trap

While many people feel that they’ll be able to do it themselves, selling your home is rarely a by-the-book process.  Indeed, “maybe they can sell their own home, but it likely won’t happen without some headaches. Trained specialists are called ‘experts’ for a reason. An expert real estate agent knows the market, has connections, guides you through the process, negotiates on your behalf, and will make the process of selling your home simpler.”   A great example:  the unqualified buyer.   Without an agent, you may be getting tons of traffic through your home, but it’s not really important if none of them is a serious buyer–“Instead they’re just looking and satisfying their curiosity at your expense. Agents know to ask the right questions to make certain the lookers are truly potential home buyers.”

4 – Not Interviewing Agents

Not all agents are the same, not all will have experience with properties like yours, not all will offer you the same services for the same result.    Oftentimes, “choosing the wrong agent for the job will be a headache and slow the process down. There must be a connection, understanding, and good communication between the seller and the agent.”  You will be much happier in the end if you take the time initially to seek out and interview the top real estate agents in your neighborhood.

5 – Pricing a Home Incorrectly

This is one of the most serious mistakes a seller can make.  Your agent wants you to get the best price for your property just as much as you do.  As Chongchua notes, “Real estate agents see homes every single day. They know the neighborhoods and the comps. They are there to help you understand what homes have sold for in the recent past and what they’ll likely sell for during the current market conditions.”  Get a market evaluation from your agent and have a discussion about what your home is worth.

Short Sale: 101

The latest edition of the CAR’s bi-monthly magazine, California Real Estate, is focused entirely on understanding the short sale process.  One article in particular, “Anatomy of a Short Sale,” did an excellent job of breaking it down.  

“With nearly 1 out of every 3 homeowners nationwide owning homes that are worth less than their mortgages, the number of short sales tatewide is expected to increase as owners and banks seek a solution to the underwater market dilemma.”

Navigating a short sale  can be daunting and time-consuming process.  As a seller, the right agent–one with exceptional negotiation skills, who is overly-attentive to paperwork, and whose patience never seems to end–can make a WORLD of difference.

Experts in the short sale process advise that it would be wise for sellers to seek a Realtor with short sale training, “on the issues, options, and solutions involved in handling these transactions, which are changing from minute to minute in today’s economy.”

Step 1: Is a short sale right for you?

The 1st step in the process is determining whether or not a short sale is even the best option available.  Sellers should speak with a CPA or attorney BEFORE listing their home with an agent to determine the right course of action for their particular situation.

Step 2: Who is the lender?

The process for a conventional short sale will be different at every bank, while FHA loans will use the same guidelines every time.  Negotiating a short sale with Wells Fargo will be different from Bank of America, or Citibank.

“Sellers may also qualify for the Home Affordable Foreclosure Alternatives (HAFA) program, a government-sponsored program that sets certain standards for the short sale process and provides financial incentives to lenders that participate. Requirements, however, are numerous. If a seller does not qualify for the HAFA program, short sale terms can still be negotiated with the lender outside of HAFA.”

Step 3:  Offer and Approval

In a short sale situation, the short sale involves the seller’s lender approving a loan payoff that is less than the balance owed.  Once the seller is presented with an offer that they subsequently accept, the offer and other paperwork–i.e. documentation of the seller’s financial hardship, status of their finances–are submitted to the lender to review.

“Unfortunately, that first offer is usually a teaser…The agent is forced to do this in order to find out what offer the bank will accept. If the bank counters with a price that’s higher than the buyer can afford, the agent will have to go through the process again, resubmitting all the paperwork with a new offer.”

As a Seller:

It is up to your agent to make sure that the bank receives all of your documents for submission.  Time is of the essence, and delaying at any point could seriously impact your short sale eligibility.  Ultimately, the sooner that you contact agents regarding a short sale situation, the better your position will be.

As a Buyer:

Waiting for a decision from the bank on a short sale can take a lot of time.  It’s not uncommon for buyers to continue seeing other properties even after the contract has been entered into.  In the interest of protecting the buyer,  the standard short sale contract will have a 45-day commitment clause, which allows the buyer to walk if, after 45 days, they see other opportunities.

You can find this month’s edition of California Real Estate in full here.

Hello from Deb and Pat

Berman and Kandel has finally joined the blogosphere!

After recently celebrating the 26th anniversary of our real estate partnership, the Berman and Kandel Team is thrilled to assume a new role as Real Estate Blogger Extraordinaire.  More importantly, however, we hope that we’ll be able to help you–the potential buyer or seller–by offering a unique perspective via the Berman Kandel blog.

Just as the local real estate market is constantly changing,  Berman and Kandel is constantly adapting so that we can continue to cater to the specific needs and goals of today’s buyer and seller.

As always, feel free to leave us any comments, questions, or suggestions you may have for us.