Summer is the second-busiest time of the year for house and condo sales. In most communities, the home sales market is as hot as the summer heat.
The recent rise in home mortgage interest rates seems to have motivated prospective home buyers to purchase before interest rates go higher. But it’s still a great time to buy. Home mortgage interest rates have only increased about 1 percent from their record low last March.
Purchase Bob Bruss reports online.
However, some local markets are “cooling,” as more home inventory comes on the market from sellers who want to get top dollar while the “getting” is still good.
With increased home inventory, buyers can now afford to be more discriminating and negotiate harder. To help buyers, here are the toughest questions most home sellers (and their realty agents) hope you don’t ask:
1–WHY ARE YOU SELLING THIS LOVELY HOME? As a longtime buyer for more than 35 years of rental houses, I love to ask this question. However, if the house is a fixer-upper “el dumpo,” I leave out the word “lovely.”
The reason it is important for buyers to know why the seller is selling is to determine how flexible and motivated the seller will be with price and terms. As a buyer, it is shocking to discover how many listing agents either don’t know the seller’s true reason for selling, or they pretend they don’t know.
Sometimes, it is none of the buyer’s business why the seller is selling, such as a divorce or family problems. But often it is vital for the buyer to know the true reason, such as when there is a pending foreclosure and the buyer must be able to complete the purchase before the foreclosure sale deadline.
My favorite reason for a home sale that I love to hear is: “The seller is retiring and moving to Florida (or Arizona, Texas, or wherever).” Then I know there is an excellent chance the retiree seller will carry back a first or second mortgage for extra retirement income.
To illustrate, where else can a home seller earn 5 or 6 percent interest today with the safety of a mortgage on a home they know so well? For the home buyer, seller financing is usually a bargain without loan qualifications, mortgage lender junk fees, and endless lender paperwork.
Retiree home sellers, incidentally, can either be highly motivated to sell or very difficult. Some are downright stubborn, hoping to extract every profit dollar.
If a house or condo has been listed for sale more than 90 days, chances are the seller is not highly motivated to sell. But when a house has been listed for sale a long time, it becomes a “tired listing,” which often creates a negotiation opportunity with little competition from other buyers.
2–HOW WAS THE ASKING PRICE DETERMINED? Smart home sellers and their listing agents set the asking price based on recent sales prices of nearby comparable homes.
But some home sellers, especially do-it-yourself “for sale by owners,” set their asking prices based on their purchase price, plus capital improvements added, plus the inflation rate, or some other nonsense method that bears no relationship to actual market value.
Still other sellers irrationally set their asking prices at the total cash they need to pay off their mortgage(s) and other debts.
Naive home sellers don’t realize most buyers are not dummies. Purchasers often know vast details about competitive homes, which sellers haven’t even inspected.
That’s why it is so important for serious buyers to inquire of sellers and their realty agents how the asking price was established to discover if it is realistic or PFA (plucked from air).
3–WHAT WAS THE HOME SELLER’S PURCHASE PRICE? If the home was purchased many years ago at a price far below today’s market value, the seller has lots of room to negotiate. However, if the purchase price was close to today’s current market value, then the seller will usually be inflexible negotiating the price and terms.
Occasionally, the seller overpaid for a home that isn’t worth its purchase price paid by the seller several years ago. This is especially true for luxury homes for which there is limited buyer demand.
These overpriced residences often languish on the market unsold for many months until the seller becomes motivated to sell, even at a loss, at the current market value.
When a home seller or the listing agent refuses to tell a serious buyer the purchase price, in most communities it is still possible to discover this information at the county recorder’s office.
Another source is the local tax assessor or the tax collector’s office. Depending on how local property taxes are established, the purchase price will usually be part of the official records. Many cities and counties now have this information available online via the Internet.
4–WHAT RESIDENCE DEFECTS HAS THE SELLER REPORTED ON THE DISCLOSURE STATEMENT? If you are seriously interested in buying a house or condo that is listed for sale with a professional realty agent, as part of the listing procedure the agent should have obtained a written defect disclosure statement from the seller.
Many states, by law, now require home sales defect disclosure statements to prevent future lawsuits for misrepresentation. Even in states where written disclosures are not required, smart sellers and their realty agents voluntarily provide defect disclosures to prevent future legal problems.
Smart home buyers need to know the defects of which the seller is aware to take into consideration when making a purchase offer. Of course, a home purchase offer should always provide a contingency for the buyer’s approval of their professional inspector’s report, just in case the seller “forgot” to reveal any defects.
After the buyer’s purchase offer is accepted by the seller, if it contains an inspection contingency clause and that inspection reveals unexpected defects, the buyer has several choices: (a) a repair credit can be negotiated with the seller, (b) the buyer can cancel the purchase and obtain refund of the good faith deposit, or (c) proceed with the home purchase anyway.
Home buyers, and their buyer’s realty agent, should always accompany their professional inspector to discuss any problems discovered. What looks like a serious defect often turns out to be unimportant after the inspector explains it to the home buyer.
5–ARE THERE ANY CURRENT OR PLANNED NEIGHBORHOOD MATERIAL FACTS THAT WILL AFFECT THIS HOME? The listing agent, home seller and the buyer’s selling agent should be aware of any significant off-site facts that affect or might affect the home.
For example, if street widening is planned, which will take away part of the front yard, that’s a material fact. Or if the home is beneath an airport flight path, that’s significant although it usually won’t apply at all hours and might not be easily observable.
CONCLUSION: Home buyers can’t ask too many questions before purchasing. The better informed the buyer is, the greater the probability the home will be a long-term, satisfying purchase. But home buyers who fail to ask key questions and only discover problems after purchase may have little practical recourse.
Every home has drawbacks. No home is perfect. However, home buyers who know about any problems in advance will maximize their long-term satisfaction probability.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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