Don't Shoot Me...I'm Just the Real Estate Agent!"
100 Risks for Sellers, Buyers, and Agents
By Cari Lynn Pace
An Interview with Cari Lynn Pace
- How do Sellers know what to reveal and what isn't important when it comes to selling their home?
Sellers who try to decide what they think the Buyers will want to know, or not know, are asking for trouble. Sellers should not be making those decisions at all. My strong advice, is "If in doubt, disclose." When a Seller asks me, "Cari, do you think I should disclose anything about the?" my answer is always "Yes!" Even prior problems that have been repaired should be disclosed to the Buyer.
- Why is that something you advise?
Here's an example: Let's say the Seller had some work done last year, maybe on their heater, their gutters, repairing storm damage, whatever, and didn't turn over the report or the repair bill to the buyer. The buyer moves in, finds that problems have resurfaced, and point fingers at the seller for concealing his knowledge.
Another common issue is water damage disclosure - most of us have suffered some sort of leak that was repaired. If it no longer leaks, who would think to mention it? Now the leak has resumed, bringing with it a buyer's claim of mold damage and expensive repairs. Disclosures could be about anything, since every home has problems, especially so with brand new homes.
- Brand new homes have more problems than existing homes?
Sure, since no one has yet lived in the home. No one knows if all the systems work, or if the drainage drains, the windows weep, or the concrete cracks. With an occupied home, you can at least point to the problems so Buyers know what they're getting, and maybe how to correct them.
- What should buyers watch out for when looking for a home?
Well, besides a hidden physical problem with the home, it could be a whopping assessment that no one told the Buyers to anticipate, or discovering that the neighbors own the land around the Buyer's pool, or the tenant who's renting the home can't be evicted, or the local building codes won't allow the room addition that the Buyers had in mind. The list goes on and on.
- You mentioned a loss in value. There are a lot of "short sales" in this market.
Yes, if buyers are making an offer on a home where the Seller owes more money than the property is worth. It's up to the lender or lenders whether or not they will reduce their loans to allow a sale to happen. Even though this puts the Seller in a very stressful situation, short sales are nerve-wracking on Buyers, too.
- What do you mean?
Short sales take a lot of time to complete, so there is that lack of certainty whether the sale will go through or not. Once the Seller accepts the Buyer's offer, the agent has to get the entire contract approved in writing by the Seller's lender. This may take months for the agents to accomplish.
- What should Buyers do?
I recommend that Buyers be patient, and take this time to thoroughly read any existing reports. Examine all the disclosures which have to be provided to Buyers at no cost. The timing is tricky. Agents work diligently to get the lender's approval, and hopefully this happens before the Buyer commits to spend money checking out the home, lining up new financing, paying for an appraisal, etc. Buyers are at risk of spending money for nothing if the Seller's lender ultimately says "No."
Inspections are critical, particularly in short sales. Remember that the Seller in a short sale is likely stressed out with the whole business and may just want the sale over. Some Sellers may be less than forthcoming about their disclosures of problems with their home. So Buyers need to be very thorough.
- How do Buyers know what questions to ask? What problems to anticipate?
Sure. Let's say the home was in escrow before - ask your agent what made that other buyer back out? If the home has been renovated - have your agent find out who did the work, was it done with permits/signed off, was there any work left undone or not paid for? And of course, what reports and estimates does the Seller have? Buyers should not be afraid to dig in and ask lots of questions. Competent real estate agents will help you get all the answers.
- How do Buyers know if their agent is doing their job? What is the agent's job?
Most of the lawsuits have come about by unhappy buyers who felt their agents did not serve them well. My book reveals what Buyers and Sellers might expect of their agents - wrong or right - and clarifies how to proceed.
From a Buyer's perspective, agents should know the local area and inventory - what's on the market, what sold and the prices, to help them make an offer. Buyers can expect their agent to assist them in getting the home thoroughly checked out, and possibly negotiate if defects are discovered. Buyers may not realize that it's also their agent's job to point out any problems the agents observe or know about the home, if the Buyer isn't already aware of them. This applies to the Seller's agent as well.
- Any other tips?
Buyers nowadays may have a tough time getting homeowner's insurance, particularly if they are first-time home buyers. There are so many insurance scams that some insurance companies are not writing policies for new customers. Buyers who are currently renting can take out a renter's policy with a reputable company when they first start shopping for a home. This kind of coverage is very inexpensive. Once they find their dream home, they can apply for a homeowner's policy as existing customers.
- You have a little-known hint regarding which day of the week buyers will want to transfer title?
Yes, when a buyer is ready to take title to their home, it will save them money if the transfer date doesn't fall on a Monday, or a Tuesday following a Monday holiday.
- Why is that?
In California, the Buyer usually must deposit the full purchase price into the escrow company the day before the transfer. When there is a new loan, the Buyer's lender deposits the borrowed funds the day before as well. Since the lender is charging the buyer interest on the loan from the date deposited, the buyer ends up paying an extra couple of days of interest for the funds to sit there over the weekend, unused. It's a lot better to use the money to buy new furniture, don't you think?
About Cari Lynn Pace:
Cari Lynn Pace is a 36-year-experienced California broker, former President of the Marin Association of Realtors, and a popular real estate speaker at conferences. She has sold everything from Sausalito houseboats to Novato warehouses and bank-owned REO, and earned four professional designations. Cari's background as a training course developer and instructor makes her in demand by attorneys as a real estate expert witness in litigation throughout the S F Bay Area. Nearly 90% of these lawsuits never went to trial, but were settled out of court. No one else knows about them. These issues were still costly and emotionally draining for the parties involved. Her observations and advice with these disputes led her to reveal 100 of the top real estate risks facing Sellers, Buyers, and Agents