These are unusual times for the real estate sector. Mortgage rates and home prices have shot up far above prepandemic levels, though mortgage rates did ease slightly late in 2023…the supply of homes on the market has dried up…and a lawsuit threatens to disrupt the way homebuyers pay their real estate agents. A jury recently ruled that the current system amounts to price fixing, though an appeal is likely.
But these aren’t the only challenges. There are plenty of misconceptions that can derail the process, including…
An appraiser you’ll never meet has more power over your home sale than you realize. Real estate contracts usually are contingent on the property appraising for an amount at least equal to the sale price. But many sellers don’t realize how precarious this appraisal process can be—appraisers are assigned at random by a third-party clearinghouse. Your appraiser might have limited experience with your neighborhood or be doing his/her first appraisal—and if he concludes that your home isn’t worth the price for which it is being sold, it could destroy your sale.
What to do: Before choosing an agent to sell your home, ask each candidate, “What do you do between the contract and closing to facilitate the deal?” It’s a great sign if an agent’s answer includes something along the lines of “I meet with the appraiser.” An agent can reduce the odds of a low appraisal by providing the appraiser with a copy of the market analysis the agent has done…and/or noting that there were multiple offers for the property in a similar range to the one that was accepted. Unfortunately, many agents don’t bother to meet appraisers—they leave the appraisal totally to chance.
Home buying takes longer than you expect. On the TV show House Hunters, buyers look at three homes and choose one—everything is wrapped up in 30 minutes. Reality: The average time spent house hunting is around 90 days.
What to do: Allocate at least three months to house hunting, if possible. Expect to be disappointed by many homes before you find the right one. Don’t let an agent pressure you into a home that isn’t what you want.
“Average days on market” is a poor way to evaluate seller’s agents. Some agents brag that their “average days on market” is very low, suggesting that they sell homes quickly. But there’s only one way to consistently sell homes quickly—and that is to sell them for less than they could have fetched. Agents with low average days on market tend to mostly handle ordinary homes—cookie-cutter homes sell faster than distinctive ones.
What to do: Avoid seller’s agents who boast of low average days on market if your priority is to get a good price for your home or if your home is distinctive.
Most “professional” real estate agents are real estate “hobbyists.” The average real estate agent does only a few transactions per year…and well over 90% of agents don’t do enough business to truly be considered “full time.”
What to do: Work with an agent who does lots of business in your area. Don’t work with an inexperienced or part-time agent even if it’s your friend or relative—there’s far too much money on the line when you buy or sell a home to work with someone who isn’t an expert.
Your agent might know why your home isn’t selling…and he might not tell you. It isn’t easy to tell people unpleasant truths about their homes. No one wants to say, “Your home has a strange odor” or “Your furniture makes your home look cheap and ugly.” Seller’s agents are motivated not to say such things—if they alienate a seller, the seller might choose a different agent.
What to do: Insist that your agent tell you hard truths about your home…then accept any criticisms as useful guidance. It’s better to find out what’s wrong with your home and correct it than for the home to languish on the market. Also, make it clear to your agent that you want open communication and transparency throughout the entire sales process—some agents become hard to reach after sellers list with them. If you want a weekly update or to be copied on every e-mail related to your property, say so. If the agent balks, choose a different agent.
When you are looking at homes, the sellers might be looking at you. Sellers may use security cameras to monitor buyers and listen to their conversations.
What to do: Assume you’re being watched and listened to when you’re in a home for sale, even on the deck or in the yard. Don’t do anything you wouldn’t want the seller to see or hear until you’re off the property.
When your seller’s agent says, “I have a buyer in mind,” he might not have your best interests at heart. It sounds like great news—the seller’s agent you’re working with has a potential buyer even though the house hasn’t yet been listed. This might mean that a quick sale is possible, but it also could point to a serious conflict of interest—this agent or a colleague at his firm likely represents this buyer, so you can’t be certain if this agent will try to get you the highest possible price…try to get their buyer the lowest possible price…or try to split the difference. Your agent should be 100% on your side. In fact, in some states, this “dual representation” isn’t even legal.
What to do: Before settling on a seller’s agent, ask candidates, “Do you have a buyer in mind who is going to be interested in my house?” If the answer is yes, consider a different agent.
Homes in developer-dominated communities can be hard to resell. Buying a home in a new development can be appealing. But as long as the developer continues putting up new homes in the area, reselling your home there could be a nightmare. Developers don’t like resales creating competition for their new homes, so they often create neighborhood covenants designed to undermine resellers. Examples: They might enact rules banning for-sale signs on lawns…and/or the use of real estate agents other than the developments’ on-site agents, who inevitably prioritize the developer’s interests over those of the resellers.
What to do: Before buying a home in a community that a developer is still constructing, ask how resales are handled in the community…whether resellers are allowed to use outside real estate agents…how the prices of resales compare with the prices of new properties…and how long construction in the community is likely to continue—resale tends to become easier once new construction ends. Don’t automatically trust what you’re told—request a copy of the “restrictive covenant” plus resale data for the past two years from your realtor, the title company, the homeowners’ association or the county/municipal clerk.
Real estate websites steer users to unknowledgeable real estate agents. Buyers who spot promising properties on sites such as Zillow.com and Realtor.com often click the link labeled “contact agent” or “e-mail agent” to learn more. They assume that this will put them in contact with the property’s listing agent, but it’s more likely to put them in contact with a buyer’s agent who is paying the website a hefty commission for leads. These buyer’s agents often don’t know any more about the listings than the callers have already read on the website.
What to do: If you contact an agent through a listing on a third-party real estate website, clarify who he/she is. Ask, “Is this your personal listing?” and/or “Do you represent this seller?” If the answers are evasive or vague, look further on the website for the listing agent.
If a listing agent says, “The home isn’t available for viewings after 4:00,” visit the neighborhood in the evening. The listing agent might be timing viewings so potential buyers see the neighborhood only at the best time. A street that seems pleasant at 11:30 in the morning might have a different character when at rush-hour or when loud music is blaring from neighboring properties at 7:30 pm.
What to do: Before buying a home, visit the street at least twice, ideally once during a weekday and once on a weekend or in the evening.
Relocation coordinators often hand clients to underqualified real estate agents. If an employer is subsidizing your move, you might be provided with the services of a professional “relocation coordinator.” He/she likely will set you up with one real estate agent to help you sell your home and another to help you buy a new one. These agents are unlikely to have been selected based on skills or experience—they probably agreed to pay 38% to 42% of their commission to the relocation company. Only novice or struggling agents tend to be willing to pay such massive kickbacks.
What to do: Typically, relocation is predicated on a contractual lack of transparency for the employee. If an employer offers you the services of a relocation coordinator, ask if you can receive a cash bonus instead because you prefer to choose your own real estate agent.
Almost every article recommends baking cookies before potential buyers visit so the house smells appealing. That isn’t the only small thing that can influence buyers…
Women look at other women’s stuff. A significant percentage of buyers—yes, typically female buyers—think more positively about properties when they see luxury-brand purses and women’s shoes in the closets. These things encourage buyers to think positively about the possibility of living there next. Sellers who don’t own high-end designer-label handbags and shoes could borrow such things from a friend while the home is being shown.
A clean oven and fridge send the message that the sellers are fastidious. Some buyers check these spots to gauge whether the sellers took good care of the home in general.
Poor light bulb choices cast a shadow over buyers’ opinions. Those twisted fluorescent bulbs might be good for the environment, but they’re bad for home sales—many people associate them with excessive frugality, suggesting to buyers that the home might not be valuable. Also: Rows of bulbs should match—if there are three bulbs in a row over the vanity, for example, the bulbs should all match.
Real plants and flowers are a better choice than fake ones.
