Avoid These Sellers Market Listing Pitfalls
February 1, 2021
Laura Kelly Mance
We’ve all heard it. “In this market, a listing is a guaranteed sale.” When demand exceeds inventory it certainly feels easy, but there is still a new set of problems you’ll have to avoid in order to keep your listing transaction on the right side of easy.
The most obvious problem in a quick sale market like we’re experiencing is going to be the potential for a low appraisal. Appraisers are hired to reflect on the market, not predict it, and when demand is driving prices they tend to get pushed beyond the supporting comps. So, what’s an alternative to a bidding war followed weeks later by a low appraisal? There are ways other than price to make an offer more competitive. Some of them include doing a pre-inspection and including the BINSR in the offer or simply shortening the inspection contingency if you plan well. Talk to the Seller about what their ideal offer looks like in terms of timing, earnest money, closing and other factors. Make that information available to Buyers agents. You might even suggest the Buyers consider paying some of the Sellers closing costs, like the reverse of Sellers financing incentives. If the Buyers offer to pay $9,000 worth of the Sellers closing costs on a $300,000 sale that’s like paying half the commission for them. Net to the Seller if 9k is better without worrying about the appraisal. Check with the lender before doing this.
Another common problem these days is caused by the speed with which a property comes on the market and sells. Has there been enough time to do the necessary verifications or read a preliminary title report? Have you thoroughly reviewed the personal property on the premises? Just this morning I heard that the Sellers put all the outdoor furniture on their moving truck and it’s on the way to Seattle though one Seller told the Buyers it would stay. I can guarantee you that the Sellers idea of the value of that old furniture is very different than the Buyers. I recommend putting together a detailed addendum to the listing agreement that notes any exceptions and review it along with the offer when it comes in! It seems that every day an agent is replacing a Nest camera or Ring doorbell because they didn’t have that conversation with the Sellers. They stay by the way.
What about the negotiation process in this market? Buyers who have lost out on properties will do anything not to have that happen again and sometimes “anything” includes going into escrow on the wrong house. Buyers remorse can be lethal when the buyer is not getting their first-choice property. It’s a good time to encourage other Buyers to put in back up offers. I’m finding that half the time the first Buyer ends up cancelling during inspection. They’re expecting many repairs since they paid “top dollar” and the Seller is feeling pretty sure they don’t have to do much. In comes the backup offer Buyer who’s feeling infinitely more grateful.
The best recommendation I can give you is to take time to set expectations with the Seller. Tell them about what might happen. Use stories of other transactions to illustrate. Hearing about the family heirloom chandelier that had to be left behind might help remind them of their own precious memories. Don’t take short cuts when it comes to confirming sewer hook ups, road maintenance agreements or well registration. It’s the things that don’t come often that are more likely to slip by. Remind them that a thoroughly filled out S.P.D.S. is the best insurance policy they can have against undisclosed defects.
We all know that whatever the market is doing, no sale is easy if it’s done well. Don’t let a quick contract inspire you to take costly shortcuts.