Appraisals and “Value”

April 30, 2007

With home prices dropping, stabilizing, shifting and doing crazy things, I thought it was timely to comment on appraisals and value. Once in  a while, a home seller will consider getting a licensed appraiser to give them an appraisal of their home so they can get an expert opinion on price. Consider these thoughts:

1. If you had 10 different appraisals, you would (most likely) have 10 different appraised values. From high to low, there might be great differences, especially if the home is custom built ot unique.

2. An appraisal is an opinion, as is anyone’s determination of value. For every person, there is a different value.

3. Some appraisers don’t pay much attention to what is currently on the market, they focus more on what has sold or is under contract. This omission of supply evaluation can be a huge mistake.

4. When a seller tells me their home was just appraised for $50,000 more than what I feel the value is, I know right away they had a refinance and pulled money out for personal reasons. Your home is almost never worth what a refi appraiser said it’s worth.  If you have great credit, some appraisers completely over-appraise.

5. When an  appraisal is done on a purchase, many times the appraiser knows exactly what the purchase price is, and then miraculously appraises the home for that exact same sales price. This is a practice which, when stopped, will have a huge impact on the industry.

What is a home worth?  It is worth what a buyer is willing to pay after the property has been exposed to the market for a reasonable time period.


10 Steps to Avoid a Personal Real Estate Crisis

April 29, 2007

In my 24 years in real estate, I have encountered many problems at closing (settlement) which could have been avoided. Some were my fault, especially as  a new and inexperienced agent. Though I always had the best intentions, nothing can prepare you like experience. After encountering yet another crisis at a closing this past Friday, I am compelled to share with you some great advice on how to avoid your own closing crisis.

1. Keep your mortgage payments current. If you are not current, notify your agent of your dilemma so they can help you navigate to closing. Recently, a client had gone into foreclosure proceedings just 24 hours before closing, accruing yet another $2,700 of unnecessary penalties, which could have been easily avoided.

2. Price your home right from the onset. Avoid wasting your time and everyone elses. Unless you are so unique that your home has “it’s own market”, get very real with the asking price.

3. Get your C.O. in advance. Many towns allow this, so you won’t be scrambling on the day of closing asking everyone (Realtor, Buyer, Town, Contractors) for favors.

4. Do you have all permits pulled and satisfied?  If not, get them done. Don’t try to think you’re going to get away with anything, or “pull a fast one” on your town. This could come back to haunt you after closing, or delay your closing significantly.

5. Get your mortgage payoffs 3-4 weeks in advance. Understand how much you really owe. Sometimes sellers forget to get this important documentation before closing, thus delaying closing by hours or more.

6. Get a home inspection before you have a buyer. There’s a 95% chance the buyer will have an inspection and make repair requests. Do you really want to wait until a few weeks before closing to run back and forth to Home Depot? Wouldn’t it be cool to tell  and show the buyer that your home has been pre-inspected?  Would this make your home stand out?  The more work your home needs, the better off you are getting your own opinion, then knocking off the issues which a buyer is going to want a steep discount for in many cases anyway.

7. Communicate with all parties. Don’t assume anything. Some times, no news is a recipe for bad communication. Do what you said you were going to do.

8. Be ready for closing date. Some folks will be late to their own funeral. Don’t inconvenience the buyer by not being ready. None of this stuff seems too big until the moving truck is parked in front of your house with the buyer’s possessions.

9. Clean it out, empty it out. Your home must be in broom-clean condition. Don’t leave any “presents” behind for the buyer, like paint cans, lumber, etc., unless the buyer specifically requests them.  A couple years ago, one of my clients thought it was ok if they came back a few days after closing to claim their cat, who was hiding somewhere inside the house. Obviously, the buyers were not pleased.

10. Get it in writing.  If you agreed with the buyer on any issues which were not in the original sales contract, or changed, get it in writing. For example, a change in closing date, a credit for home repair, or an inclusion or exclusion of personal property.

Discounters, Perception and Set Fee Brokers

April 20, 2007

First, I would like to give my definition of a Discount real estate broker, and how they differ from Set Fee brokers.  A discount broker is someone who charges a lower percentage commission, or a lower fee, and gives less services in return.  A set fee broker is someone who charges a set (pre-determined) fee, and is not paid on a percentage of your sales price.  A set fee broker, like myself, can be full service.

I was offended today when a veteran agent questioned if I would discuss with my client, the seller, the items which her client, the buyer wanted fixed as a home inspection request.  She said, rather rudely, “You don’t do those things, so who will?  You discounters don’t get involved with that, do you?” 

My response ws quite calm and simple. “Yes, I do. I am not a discounter, I am just not a full-commission broker like you. Frankly, I do all the same things as you, and sometimes more.”  I was stunned that a 15+ year agent could be so ignorant about different real estate models, and insinuate that I was “less” than her model.  To this point in the transaction, I had done everything a traditional broker does. Just minus the  “%”  fee.

Perception, however, is everything, and when the consumers realize they can get more while paying less, then a true revolution with take grip of the industry. Set fee brokers who create a great balance of service and a low fee, creating a great value and service, will have fantastic growth opportunity.  This is exactly what traditional brokers fear.  

Why would I choose to be a set fee broker?  1) The old business model is broken, and the consumers are sick of it.    2) Lots of repeat business and referrals!

Real Estate Vocabulary

April 20, 2007


Misrepresentation-  A false statement made with the intent to induce some action by another party.

I have heard many complaints over the years from consumers who felt as if their agent misrepresented a particular situation, almost always an item of factual, finite value. I see things a bit differently.  I truly believe that an overwhelming percentage of agents try be be very truthful and factual.  The problem is many do not do their homework, or “take a seller’s word for it”, and erroneously and innocently misstate the facts.  

I recall a situation a few years ago when a buyer I represented wanted to know about the farmland behind a certain property, and if it could ever be built upon. The listing agent, when asked, (as per the policy of this blog and my company will remain un-named) stated “That property backs to Green Acres”.  Wrong. Green Acres is state owned, meaning preserved for life. This property was privately owned.  Is this laziness on the agent’s part, or are they just repeating what the seller told them?  Does the agent have a responsibility to know the difference between Green Acres and farmland?  Yes!  The worst part was when I double checked with the agent she became annoyed, as if I was questioning her credibility (when in fact, I could care less about her credibility) I just cared about my client being upset one day when 390 condos are built in her pretty view of a back yard.

Beware When Refinancing

April 19, 2007

Sadly, I meet many folks who want to sell their home after a recent refinance, then learn they cannot sell their home.  Just yesterday, I met nice retirees who refinanced their home about a year ago for $157,000.  The problem is the house might be worth, at the most, $155,000.  Most likely, it is worth $150,000. After my fee, state transfer tax and other settlement costs, the seller would need to sell for approximately $164,000 to break even, and walk away from the property. 

There is a second part to the story, which involves the 2 real estate agencies who had their property on the market before I met the seller. Both agents took the seller’s listing at $195,000.  This is $45,000 more than what I think it will ultimately sell for. To put it another way, this is a thirty percent higher asking price than the probable value.  Can you imagine listing a $500,000 home for $650,000? How did this all happen?  Here are my thoughts:

1. The seller had good credit, and the lender stretched the limits, gave them more than what it is now worth, and made a nice commission on the refinance. The more you borrow, the more they make.

2. The seller probably didn’t need to take that much equity out of their home, and should have been more conservative.

3. The agents who took the listing 30% too high either:

a. Have no idea what they are doing.

b. Were shooting for the “office listing award” for the month, and are not paying for any of the marketing expenses associated with the sale, so what the heck?

So, I simply suggest you list with someone who knows what they are doing, or ask a friend or family member who they used, and do they consider that agent to be competent? 

Amazingly, agents don’t know how they get bad reputations.

Internet Use for Buyers Hits 80% +

April 18, 2007

Consumer internet Usage in Home Search Reaches 77%

This analysis from the National Association of Realtors shows what we have all known for a long time- internet is the king of home searches.  Ease of use (free), the ability to get color photos, property addresses, mapping, floor plans, school info, room sizes, open house info, schedule an appiointment, see a quality virtual tour etc. are the primary reasons why the web has become the #1 tool for home buyers. 

Amazingly, many Realtors don’t understand the impact, refusing  to use mulitple pics, virtual tours and even room sizes.

There is no “Mr. Harbinger”

April 17, 2007

When buying a real estate franchise, like Help-U-Sell, one must come up with a dba (doing business as) which technically is the correct / registered name of your company. In my case, we are Harbinger Realty, dba Help-U-Sell Harbinger Realty. I wanted to pick a name (Harbinger) which had nothing to do with ego, i.e.,  my last name, but instead stood for everything that I wished to create, which is something special. As per Merriam Webster, Harbinger is  One that pioneers in or initiates a major change. 

After tearing thru endless pages of the dictionary, that is how I arrived on “Harbinger”.   Of course, Help-U-Sell itself is inititating a major industry change with it’s set fee price structure, and by the choices we give our sellers.