Your home: To disclose or not to disclose

Dripping Faucet

Over the course of my career, I have seen some really interesting things. After participating in hundreds of inspections, you can only imagine what I have seen. Although I am most shocked (usually) by how some sellers participate in the home selling process when it comes to disclosure.

Disclosure laws vary state to state, but in general a seller is obligated to disclose all known material defects to a potential buyer. When I say I have been shocked it is because a home inspection is like putting someone’s home under a magnifying glass. It exposes most if not all material defects. Every now and then we will come across a seller who has not in good faith disclosed all material defects. Or in some cases, they have also gone to the trouble of trying to hide the defect. This is a big no no!

Not only will failing to disclose kill a real estate sale in the blink of an eye, it can also set a seller up for a law suit for any cost incurred by the buyer. And no one wants that, right?

So what must you disclose? My answer to this question is always the same, “When in doubt, disclose.” We coach our sellers to be extremely forthright when it comes to the condition of their home. We also go so far as to coach them to perform a pre-inspection of their home and attach it to the seller’s disclosure statement. Our goal is for the buyer and seller to enter into a contract with “eyes wide open.” And after a year of having sellers perform a pre-inspection, I can tell you that it has made for a much smoother process for both buyer and seller.

Back to the question: What must I disclose?

Here are some items that you certainly don’t want to skip over when filling out your seller’s disclosure:

1. Water leaks in the basement, crawl space, or roof.
2. Electrical safety issues.
3. Active plumbing leaks.
4. The existence of any health hazards such as radon, asbestos, or lead based paint.
5. Pest infestations such as termites or carpenter ants.
6. If the home is in a flood plain.
7. Multiple layers of roofing.
8. Mechanical disrepair when it comes to the furnace, a/c, or hot water heater.
9. A death in the home.
The last one, death in the home, is a tricky one. Several states only require this disclosure if the death was a suicide or murder. This is called a psychologically impacted property. That being said, the last thing that a seller wants is for the new owner of the home to find out from a neighbor that someone died in their new home. Whether the law requires it or not, this kind of a housewarming gift is always bad and can certainly cause bad feelings if not a law suit.

Again, “when in doubt, disclose,” is the best frame of mind to be in when completing a seller’s disclosure. Setting all legal reasons aside, isn’t it best for all parties when there are no surprises? As I have said before, I am a firm believer in putting good real estate mojo into a transaction. Mr. and Mrs. Seller: Your seller’s disclosure could be your first opportunity to plant a seed of good mojo into the sale of your home. And that seed should bear the fruit of a great real estate transaction.

Photo Credit: https://www.flickr.com/photos/kozumel/

Your home: Top reasons why homes aren’t selling in a seller’s market

The title of this column almost feels like the “Top 10″ segment on David Letterman’s Late Show, but this list is no joke.
That’s right: There is no humor in getting your home and keeping your home ready to show at a moment’s notice all day every day and then never receiving an offer. In fact, I would say it’s downright depressing.

So how is it possible that in a strong seller’s market there are homes that have not been able to sell? It is a great question and one that I am hearing more often lately. So let’s explore some of the most common causes for “not selling in a seller’s market.”

1. Overpricing: I have mentioned before that only 30 percent of buyers are willing to pay up to 10 percent over fair market value for a home. If it is priced more than 10 percent over market, the percentage drops even more. So overpricing your home eliminates 70 percent of your potential buyer pool on day one. In an improving market like ours, there is a little breathing room when it comes to pricing. But I mean little. One might be able to price a home at $225,000 instead of $220,000 (the current market value) and count on appreciation to pull your value up. It does happen. However, in our example the difference in price is only 2.2 percent and the seller would still need to be prepared to adjust if the market did not respond in short order. This is where a Realtor and their seller must have a clear understanding of fair market value based on recent sold and more importantly (in my opinion) pending comparables.

2. Competition: “It’s a price war and a beauty contest.” I have said that a million times and it still holds true today. The moment that a seller decides to sell their home they have also decided to enter a contest. A contest in which the competition changes almost daily. One day you might have three homes that you are competing with and then wake the next day to find that you have three more. Double the competition in 24 hours! Can you see why staying ahead of the market is important? A seller must also know how many homes are selling each month (absorption rate). If three homes are selling each month and there are twelve for sale in a given area, then it will take four months for all of them to sell at the current rate. AND if you must sell in the next 30 days you better know that you are confidently in the top three when it comes to condition and price. Otherwise, you will be waiting until next month.

3. Deferred maintenance: Yes, it is true that in a low inventory market buyers are more forgiving when it comes to the condition of a home. That said, I believe that it is more accurate to say that buyers are willing to overlook functional obsolescence and outdated areas of the house. They are not, however, too excited about inheriting a lot of deferred maintenance. When buyers see repair items that should have been repaired by a seller but were not, it begins in their minds a narrative of habitual neglect. And in many cases, a buyer will choose not to consider the home for purchase. If a seller’s home is in disrepair, then it must be repaired before it can compete in the open market. If it just needs updating, price it accordingly and jump into the race.

Your home: Pending home sales boom in May!

Sold Sign

The National Association of Realtors just recently announced that the pending home sales index saw a significant increase of 6.1 percent in May compared to the previous month. NAR attributes the notable increase to low interest rates and the availability of new inventory. Whatever the cause, the pace of the national market is moving at a very favorable pace.

NAR chief economist Lawrence Yun expects improving home sales in the second half of the year. “Sales should exceed an annual pace of five million homes in some of the upcoming months behind favorable mortgage rates, more inventory and improved job creation,” he said. “However, second-half sales growth won’t be enough to compensate for the sluggish first quarter and will likely fall below last year’s total.”

Our Kansas City market is seeing even stronger gains in the pending homes sales arena. According to Heartland MLS, our pending home sales increased almost 10 percent in the month of May. Yes, the May market was a fun one. And honestly, the June market was a blast too.

So what about July?

So far, July has pretty much followed our normal seasonal pattern. Due to the Fourth of July holiday, the month started out at a slower pace. We did not see very many homes go under contract, nor did we see much new inventory. But just yesterday, we saw 11 new listings come on in Prairie Village alone. That is three times what we typically see. If that trend continues, we will probably have some happy buyers because their options will improve substantially. Conversely, the sellers out there who have had very little competition up until now may suffer a rude awakening.

Seasonally in KC, we see a slow but steady increase in inventory from July through the end of the year. If this seasonal pattern holds true this year, then time is of the essence for you sellers out there. Every new listing on the market increases our supply and unless the demand increases as well (which seasonally it usually does not), our values will stabilize for the year and in some years have slipped a little going into the winter months.

As the new school year approaches quickly, we may see a resurgence of homes going under contract as families try to make a last minute purchase before the school year starts. So take advantage of this time, Mr. and Mrs. Seller. Get your home on the market!

In some areas of town we are still seeing historically low inventory, and yes, interest rates are as low as 4.125 percent on a 30 year mortgage. Most homeowners are primed for the perfect “move up” scenario. If you sell now while your competition is minimal, you are almost guaranteed to get top market value for your home and have the benefit of an unbelievably low interest rate on your purchase.

Rates will not and cannot stay this low forever. As the unemployment rate continues to drop and the country continues to add jobs, the Fed will most certainly continue tapering its purchases of mortgage backed securities. The “taper” as it is famously known has resulted in higher interest rates each time the Fed has announced a reduction in its purchases. Don’t allow the taper to taper your buying power by paying higher interest rates on a home loan.

Remember, every percent of increase in the interest rate will reduce your buying power by 10 percent. If you are pre-approved to purchase a $250,000 home based on an affordable mortgage payment and rates increase by only 1 percent, to keep the payment at that same amount you could only purchase a $225,000 home. Ten percent of the value of your future home can make a huge difference in how that future home improves your quality of life.

Photo Credit: Mark Moz on Flickr.com

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