Condition: What your agent should tell you
Originally appeared in Hills Publications, Mar. 9, 2007 and ANG Newspapers, Mar. 3, 2007
Except when sellers are sued, condition is one of the least understood and discussed topics in residential real estate. Buyers, before committing to a purchase, must be clear on how repairs might impact them financially and emotionally; sellers need to recognize how problems with the house can lower its value. An agent who knows how to deal with and communicate about condition may make the difference of thousands of dollars in your pocket.
Condition is important
After shelling out purchase prices that are among the highest in this country, buyers are disinclined to spend significant additional sums on problems that, once fixed, may not add any value to the property. Foundation, drainage, roof and sewer line issues tend to be the most costly to repair; however, upgrading or replacing electrical, heating and plumbing can add unexpected thousands.
During the seller’s market that ended in the fall of 2005, low interest rates and extraordinarily high demand allowed almost all houses locally to be sold “As Is,” regardless of condition. In today’s “normal” market, this is changing. With less competition, buyers, in most cases, expect the seller to be responsible for expensive problems by either adjusting the price accordingly or assisting with repairs.
Not all buyers and sellers, however, have gotten the message and some Realtors are operating as though the market has not changed. Failure to factor condition into the home sale equation can be an expensive proposition whether you are a buyer or seller.
What your agent should do
Many licensees tell their clients what not to worry about, such as, “With a little paint here and some new fixtures there, this house will be darling.” Rather, agents should emphasize the pitfalls and traps their buyers and sellers need to avoid; for example, “This termite report is open-ended because it recommends test holes in the stucco to determine if there is any hidden damage.”
In the above example, the buyer who does not investigate the implications of further inspections could be writing a “blank check” if there is considerable additional work. Similarly, if inspections reveal suspected inadequacies with the foundation or drainage, you, as a buyer or seller, should ask your agent to follow up with a structural engineer.
Commonly, I learn of situations where the buyer does not take responsibility for finding out, in detail, what he is buying. A familiar scenario is one in which the seller gives the buyer reports disclosing problems and bids for foundation and drainage work. The buyer then relies on those inspections rather than verifying scope and cost by getting his own. Regardless of which reports the seller provides, you, as a buyer, will be making a wise investment by getting your own general home inspection.
The most conscientious listing agents advise their seller to have a termite inspection as well as a general home inspection before the home is priced and marketed. Buyers need to carefully read and understand all reports and disclosures presented by the seller.
Unless the seller has had comprehensive inspections before marketing, he can be blindsided by high repair estimates from the buyer for items the seller did not know existed. This can lead to failed escrows and, ultimately, a lower selling price. The seller mistake of not getting pre-sale inspections will be magnified as the current market progresses.
In effect, you need an agent who understands the relationship between condition and value. He or she will help you to systematically determine exactly what you are selling or buying.
Your Realtor’s most important job is to represent your best interests, not to just sell you a house or get you to list with him or her. An experienced, competent and caring agent will point out, from reports and consultations with professional inspectors, which problems could be much costlier and time consuming to repair than you might have imagined.
Real estate attorneys I know from my expert witness work are predicting a large increase in lawsuits from buyers who have been hit with the double whammy: their home is now worth less than they paid and the problems are much greater in degree and expense than what they believed when they purchased. Having a detail-oriented agent who will help you get a handle on the real condition of the home you are selling or buying can save you money and aggravation.
Condition is Critical;
As Is Pointers, Part 1
As Is Pointers, Part 2