Yes, that’s right, I am actually going to write about Real Estate. Buckle up!
Oh, and cue the mobs and pitchforks!
Now as a disclaimer, I am not saying that people who work in Real Estate are out and out LYING all the time (though there are definitely a few bad apples in the bunch). However, I will say that there is a certain massaging of the truth that takes place in order for home buyers/sellers to feel comfortable, and for Realtors® to survive in this dog-eat-dog industry.
It is my mission to be authentic and transparent in all of my business activities, and sometimes that means shining a light on some of the deceptive practices that are prevalent within the real estate industry. Admittedly, this approach is not always met with enthusiasm. I don’t often enter a room to the sound of deafening applause, streamers and confetti whirling through the atmosphere, and choruses of “For He’s A Jolly Good Fellow…” In fact, as you’ll soon discover, it has sometimes come at the cost of losing out on possible income because I have been unwilling to lie about the value of a home for my own gain. Nonetheless, it is my duty to you and everyone I come in contact with to practice what I preach…to be authentic and generous in a phony and greedy world.
So here we go…
HOMEBUYERS AND PRICING
One of the truths that buyers don’t want to hear is that we are no longer in a “buyer’s market.” Everyone still thinks they can get a “steal” of a deal, but frankly those days are long gone. Supply is down (fewer houses on the market), and demand is up (more buyers to compete with), which means that you may need to pay more for a home today than you would have for that same home just a year ago. As a result, buyers don’t want to hear that they “missed the boat.” This leads many agents to tell clients what they want to hear, which then leads to unrealistic expectations, and ultimately feeds the stereotype of the misleading salesman. This stereotype has a negative effect on the agent/client relationship, because rather than trust the professional, people tend to listen to family, friends, and internet articles (like this one LOL!) about the current state of the Real Estate market. i.e. Uncle Fred bought a house 6 years ago for pennies on the dollar so that means I should be able to as well.
This can be very frustrating, because in any other industry, you trust the person who has been trained and is making their living by being an expert in that field. But because of the negative reputation that real estate agents have developed, I find that I am constantly combating misconceptions in my interactions with clients and prospective clients. I often have to remind clients that this is not a flea market, this is the housing market. The idea of bartering doesn’t carry-over in the same way. There is such a thing as fair market value, and offering someone $200,000 on a $300,000 listing and assuming they will just counter-offer back and forth until you get the deal you want is ludicrous and, more importantly, insulting to the seller and his agent. The end result is that of expecting your money to go further than it can in today’s market, until many of the homes that you can realistically afford are off-the-market, and you are left to settle for something less than desirable due to time constraint and low inventory. That is why I always try to hit potential clients with the hard truth upfront in order to set appropriate expectations. Unfortunately, it is an ugly truth and people don’t want to hear it.
HOMEBUYERS AND PROPERTY CONDITION
Another ugly truth that buyers don’t want to hear when buying a home is that, unless buying new construction, you are buying a used item, with a lot of wear and tear. And chances are the home is priced to reflect that (again, assuming that the listing agent is honest, good at what they do, and is not misleading potential buyers). Also, based on the seller’s disclosure, and a visual inspection, you should be able to figure out what items will need to be replaced in a few years (e.g. roof, heating system, etc.), prior to having the official home inspection.
A good agent will encourage buyers to make a suitable offer based on the condition of the home and the expectation that some repairs and upgrades should be put into the budget in the coming years. Unfortunately, in a world of HGTV property shows, buyers often expect a completely pristine, updated home for less than asking price. Then, low and behold, we receive the 40+ page Home Inspection report that lists every single defect in the home and the buyers think they’ve bought a “money pit.” They use that information (some of which includes minor things like a cracked light-switch cover) to either ask for the moon, or to back out of the deal. The truth is that most homes are like used cars. You need to assume that there are things that are going to break the moment you cross the threshold on settlement day. That is simply part of being a homeowner. No risk. No reward.
I try to have potential buyers put themselves in the seller’s shoes. The seller takes his agent’s advice and prices his home $15,000 lower than he thinks it should be based on the fact that there are some things that will need to be repaired/replaced in the next few years. He also makes sure to disclose the age and condition of every major item in the Seller’s Property Disclosure statement. For instance, the roof is 20-25 years old and will certainly need to be replaced sooner than later. Then along comes a buyer, who can’t believe that such a great house is available in his price range! (Not realizing that the reason it is in his price range is because some major items will need to be replaced). After seeing the home in-person, and signing the Seller’s Property Disclosure, this particular buyer offers the seller full asking price! WAHOO! All is right with the world! Until…
Unfortunately, once the home inspector does his job and “recommends” that the roof be replaced, all of a sudden the buyer considers the home to be unsafe (even though the roof has never leaked) and wants to negotiate a price reduction or asks the seller to spend an additional $10,000 to have the roof replaced.
Had the condition of the roof changed from the time the buyer had seen the property and acknowledged that he understood the age of roof, and the time the home inspector had drawn up his report? More than likely, nothing had changed. So why now should the buyer expect a new roof to be installed?
This is something that I will never understand. Whether it is the buyer or the seller, someone always expects the other party to pony up to their demands. They simply don’t want to compromise so that the deal is mutually beneficial. In the seller’s mind, he has already conceded $15,000 off the initial sale price based on the age of the roof, and has been forthright with the buyer, who had no problem with the age of the roof at the time the offer was made. The deal is now in jeopardy because the seller doesn’t understand why he should lose an additional $10,000 because the buyer wants a new roof.
WHAT IF THE SHOE WERE ON THE OTHER FOOT?
I try to stress this to the buyer because this same truth will hit home (pun intended) when the buyer becomes a seller many years down the road. In 10-20 years, he may be facing a buyer who is making demands or threatening to walk away from the deal. I always encourage my client to see things from the other side of the transaction. This helps to remove a little bit of the emotional aspect of the transaction by imagining the shoe being on the other foot.
There are plenty of other “hard truths” but I think these two are enough for now. Hopefully you found this information to be helpful. Next up, we will tackle the things that sellers don’t want to hear.
Thanks for reading and Godspeed,