Tuesday, August 21, 2018

"Why won't my house sell?" Six reasons no one is buying your home.


You decided to sell your home, discussed it with lots of other people, hoped there would be a a flood of interested buyers, but the offers didn't come rolling in. Here are my observations from 20 years as a home inspector and 30 years as a home buyer as to why some homes just don't sell very well, in no particular order:
1) Bad timing. There are ebbs and flows in the demand for real estate, affected by seasons, economics, interest rates and leniency of lenders. You might be led to believe it's a good time to sell because you've read an article or seen a news story that says 'home sales are booming' but those alleged news stories are 12 weeks behind the trend because actual home sales are a lagging indicator of market demand for housing - it often takes months between when a home is put on the market and when the final closing on the sale takes place. It has been my experience the best time to put a house on the market is around mid-March through April when things are starting to get warm and green, and people want to get out of the house they were cooped up in all winter. Another reason to list a house is April is families looking to move or change neighborhoods or schools often want to be done with the transition by late summer before the next school year starts, thus they start seeking out homes in early spring.
2) Over-priced.  Many home sellers are either greedy or scared of selling their home too cheap, thus they put too high a price on their property initially, which limits buyer interest in the house.  Buyers often search for homes online in order of value, starting with the lower valued ones first, so by the time they've found your house they've already scrolled past numerous similar homes at lower prices, which doesn't illicit much enthusiasm or interest in your house. The consequence of asking too much for a home up front is you'll miss selling opportunities, which ultimately costs you more money (insurance, taxes, utilities, mortgage interest, maintenance) than had you just priced it at or below market value in the first place. Another problem with over-pricing a home is the longer a home sits on the market, the less buyer interest it generates.
3) Unclean. Having a clean house might not affect the value too much, but it definitely affects the mindset of a buyer. Do some basic landscaping (trim trees and shrubs, mow and rake, remove weeds - especially those ones growing through the cracks of the driveway), wash windows, scrub / vacuum floors, dust walls, ceilings, lights, cabinets, trim and furnishings, and remove any evidence of pets including their odors. Also, get rid of clutter.   
4) Stylistic turn-offs. Believe it or not, other people think your house is ugly or doesn't have the kind of curb appeal they're looking for. Perhaps they think it's too gaudy, or too meek. It might have an awkward layout, outdated finishes, under-lit rooms, bad art, worn furnishings, or God forbid - brass hardware on doors and plumbing fixtures.  It is highly unlikely your tastes (or indifference to style) will be considered cool by the majority of those who might potentially be interested in your home. That doesn't mean you need to remodel everything; just understand that your house isn't suited for everyone.
5) Defects. Every house has problems, but some people are more turned off by the various problems than others. The defects that are often most likely to turn off buyers might include: settlement or foundation problems; groundwater (moisture problems in basements); large cracks walls or ceilings; roof or plumbing leaks, and; bad windows. 
6) Insufficient marketing or exposure.  The best way to sell a house is to make sure as many people as possible know about it, and that it's properly represented by clear images and accurate descriptions where publicized.  Listing a house through a real estate agent or on Zillow is a great start, but sharing the listing on social media such as Facebook, or on other sales sites such as Craigslist will help get it out to a wider audience, and one of those people not even looking for a house might have an in-laws' friend's cousin's nephew who would be perfect for your house, but wouldn't have even considered it if it wasn't for someone else sharing the information with him.
If you're having a hard time selling a house there are a few options to consider: Sometimes it's best to hold onto a home and wait for the market to change or the right buyer to come along, other times it's best to cut your losses and reduce the price to get it sold in a hurry. Other considerations to having home that's not selling might include: 1) taking down the listing for a brief period, hiring a real estate agent, or changing the agent you have, and relisting the property; 2) hiring professional cleaners or a staging company to spruce the place up; 3) doing some easy, quick improvements such as planting flowers out front, making simple repairs to minor defects, installing better light fixtures and brighter bulbs, repainting some walls, or replacing the flooring in the most prominent rooms. I typically recommend doing simple, easy improvements rather than making major expensive modifications to help sell a house that's already listed because usually the hassles and cost / benefit ratios of those major modifications aren't enough to make them worthwhile. 
Sometimes the 'pride of ownership' clouds objectivity. In our own heads we often we inflate our home's value while minimizing its problems. Unfortunately you can't easily control regional economics, market demand, or the location of your existing home, so if you need to sell your home chances are you'll have to either correct the issues that are turning off buyers or reduce the price, or both.

Sunday, April 1, 2018

Where Does One Find a Commercial Property Inspector?

Commercial Property Inspections - An Emerging Opportunity
Finding a property inspector qualified to perform comprehensive evaluations of commercial properties isn't easy. Every inspector I know is a "home inspector" specializing in residential inspections, not commercial, though many will perform commercial inspections on occasion. I'm primarily a residential inspector who's done some commercial inspections on the side over the last 18+ years, but as of late my income from commercial property inspections has grown exponentially because of the increased demand for (and limited supply of) commercial property inspectors. I've inspected medical offices, restaurants, multi-family dwellings / apartments, grocery stores, office buildings, warehouses, retail stores, manufacturing facilities, schools, agricultural operations, bars / taverns, and assisted care facilities.

Commercial buildings are fewer in number than owner occupied residential buildings and don't have as high of sales turnover rates, thus there's been less of a demand for inspectors to investigate the condition of commercial properties at the time of sale relative to whole home inspectors.
It's been my experience that most commercial buildings are sold without comprehensive general inspections. Instead of hiring a general property inspector, commercial property buyers or owners are often more likely to have maintenance personnel, civil engineers, or systems specialists (plumbers, electricians, HVAC technicians) check out various components of a property.
There are few contractors or inspectors that understand the comprehensive elements of a commercial property relative to construction, mechanical systems, and the extensive rules, standards and guidelines that apply to commercial properties. There's a breadth of uses for commercial buildings that have to be considered in context with regulations imposed by various different governmental agencies relative to those uses, and few inspectors have a good understanding of those regulations or how they apply to different buildings, of different styles, constructed in different time periods, and used for different purposes. I have a unique background because while in college I did commercial property maintenance for three summers and later worked as a plant engineer at a food processing facility. After graduation I was a project manager for two different contractors that did commercial construction and commercial restoration. That background has served me well.
Unlike owner-occupied residential structures, commercial buildings serve a single purpose for their owners - production of income - thus the costs associated with maintenance and repairs relative to rental income are usually the most important consideration for commercial property buyers and owners, and the inspector must be cognizant of that fact when evaluating the conditions and life expectancies of a property's various components.
Another challenge of inspecting commercial properties is working around tenants, thus an inspector must often work outside of normal working hours or hours of operation of a non-vacant property to perform the inspection.
Commercial property inspectors must be able to evaluate the comprehensive components of a property and convey those evaluations accurately to a buyer in order for the buyer to weigh the financial risks of a purchase. Failure of an inspector to find and report serious problems can be costly to a purchaser, and depending on whether the inspector might have been negligent at any point during the inspection or creation of the report, he or she might be liable for those oversights.
Commercial inspections are time consuming, require extensive knowledge on the part of the inspector, and can expose an inspector to huge liabilities, thus the inspections can be expensive. The cost of a commercial property inspection starts at around $750 and that cost might increase based on the property's size, value, accessibility, and/or the amount of time it takes to do the inspection and report.
I will continue to do home inspections as I've done for the last 19 years, but I'm expanding into the commercial market more aggressively to fulfill the growing need for such inspectors.

Friday, June 16, 2017

Ten Most Common Homebuyer Mistakes

Are you a dreamer?  Maybe a bit over-optimistic?  Good home buyers are typically diligent and don't let their emotions get too involved in the home buying process.
I've assembled this arbitrary and non-scientific list of homebuyer mistakes in hopes that it will better prepare consumers for the home buying process. Enjoy! Matt
Ten Most Common Homebuyer Mistakes
1. Not getting a home inspection or hiring the wrong inspector. People often approach me after buying a home without having an inspection or after hiring an inspector referred by their agent and say, "I should've used you to do our inspection. I'll never buy another home without hiring you." I've never had anyone tell me a good inspection wasn't worth the cost, but I've had a lot of people tell me the money they thought they were saving cost them a lot more in the end.
2. Paying too much. Some buyers just don't have the discipline to save money to make payments or resources to pay for necessary repairs when there are problems, and if if someone pays more for a home than it's either worth or what they can afford, it creates a cycle of debt. Some consider a mortgage loan a safety net to the risk of paying too much, but if the lender approves the loan and the house appraises for the purchase price that doesn't mean a buyer didn't pay too much; the home could lose value or not actually be worth as much as was offered. Despite public perception lenders often take unusual risks and appraisers don't always protect the buyer. Sometimes an appraiser won't save a buyer from paying too much because an appraiser is going to attempt to justify the offering price, which is why appraisals are done after the offer is made, and also why appraisers know what the offer price is when the appraisal is being done.
3. Hiring the wrong agent. I once had an agent for a homebuyer tell me, "Don't screw up this deal, because if this house doesn't sell I'm not getting paid, and you won't be an inspector for very long." This isn't unusual. I'm given slightly more subtle variations of this threat regularly. If you could hear the things agents tell home inspectors behind their clients' backs you'd be appalled. An agent should go to bat for their clients and be an effective negotiator, both before and after the home inspection. Many agents lack the ability to negotiate effectively, which can have costly consequences for homebuyers. When you're looking for an agent ask a home inspector because inspectors usually know which agents are skilled negotiators and advocates for their clients, and which agents are driven by greed.
4. Falling in love with a house. Emotional attachment causes a loss in objectivity. Once homebuyers fall in love they start minimizing serious problems that affect a home's value or condition via rationalization, which makes me anxious because I've been through the cycle so many times before: 1) they'll ignore me, my report and the problems presented; 2) they'll buy the house as-is and avoid fixing the problems, and; 3) they'll blame me when the problems get worse because they'll claim I didn't do a good enough job warning them or explaining to them what the problems were while they were ignoring me and at the same time being enamored by their new love.
5. Chasing a dream. Buying a dream house is similar to falling in love with a house, but dreams are further disconnected from reality and lack any practicality, and they're rarely done on a whim as is often the case with falling in love. There are lots of examples of dream chasers, but the most common ones include the dream of buying and fixing up a big mansion or an old Victorian home, or buying a far away acreage or farmstead. Huge, old homes are difficult to maintain and expensive to heat and cool, and even after spending tens of thousands of dollars on improvements these homes still have cracking walls, wet basements, mouse problems, and just about the time you finally finish painting the house, it will need to be re-painted again. Another dream is the rural acreage, but the most affordable acreages are far away and often in need of numerous repairs. The dreamer thinks he or she won't mind the long daily commute, that people will come visit regularly, or that they'll enjoy the solitude and work of being in the country. Living the dream often means miles of muddy roads, being snowed in without power during blizzards, or having to deal with the weeds, bugs, critters, expenses, well water problems, septic systems, hillbilly neighbors, and other hassles. One cool thing about most dreamers though - no matter how miserable they are with their massive headache of a home, they'll usually stick to it, because as a friend told me about his dream / nightmare house project, "Failure isn't an option."
6. Buying a house to impress. There is an ebb / flow cycle of the trend towards people buying homes with the intent of entertaining and impressing others, and it's flowing right now with homes featuring towering foyers and tall cathedral ceilings, outdoor kitchens, large formal dining rooms for dinner parties, and basements / walkouts with bars and a large TV rooms for hanging out during the big football game. Problem is, most people are so busy working to pay for their impressive home neither they nor their working friends have ample opportunities to take advantage of the features, thus they're under-utilized. If you want to impress a home expert, find a place that is open (brings the outdoors in and is easy to navigate), efficient, comfortable, and maintenance-free - THAT'S impressive.
7. Under-estimating the problems. Many homebuyers think problems are something that can be handled by a simple call to a contractor. As I always say, "If the problems here were easy to fix, they'd already have been taken care of." Under-estimating the problems can also be categorized as being "overly optimistic" which isn't necessarily the biggest mistake a home buyer can make, but it's easily the most common.
8. Over-estimating their abilities. Home improvement stores and television shows have worked in tandem to get people to believe they can do their own home improvements. As I always say, "An inspector's worst nightmare is a do-it-yourselfer."
9. Being hasty. When people feel rushed they typically don't reason things out, and will overlook obvious problems out of haste. Here's an interesting statistic that's related to this phenomenon: More often than not, when a people pick a "bad" house out of haste and don't buy it because of the problems discovered during the home inspection, the next house they put an offer on will be equally as bad or problematic - typically if a client doesn't buy a house I inspect because there are significant problems there is an above average chance they won't buy the next house I inspect for the much same reason (too many problems), but usually the third house is the charm. I've been through this 3-house cycle of haste with about 10 different clients, and in each case it all worked out in the end, but it cost them a lot more than it would've had they been more diligent and patient to begin with.
10. Being too scared or apprehensive. In contrast to the first nine homebuyer mistakes, which mostly relate to people not being diligent or practical, there is such a thing as being over patient or a little too gun shy when it comes to purchasing a home. I've had a number of clients walk away from good houses for the wrong reasons. It's important a homebuyer understand up front that no home is perfect, so one must be prepared for a few issues here and there that will come up through the course of the home buying process.

Tuesday, June 13, 2017

"What is Your Biggest Challenge as a Home Inspector?"

What home buying problems are predictable? What problems are preventable? Where does a home inspector draw the line between prognosticator and fact finder?
People often ask me, "What is the most difficult part of your job?"
Being a home inspector is extraordinarily challenging because it requires so much discipline, knowledge and communication, all in conjunction with an almost infinite number of opportunities for mistakes.
A good inspector must: 1) be agile enough to enter attics and crawlspaces, and climb on roofs; 2) be able to work in extreme heat and cold; 3) stay on top of the industry standards, maintain knowledge of construction materials and have a broad understanding of building systems; 4) be able to work and communicate effectively with all types of people; 5) accept criticism graciously without being defensive; 6) maintain composure despite the hostility and anxiety of adversarial parties relative to the sale or purchase of a home, and; 7) share information and observations objectively and factually.
For years I've said the toughest part of my job was working with home sellers and/or real estate agents. Often adversarial parties to a transaction try to intimidate me, invalidate my conclusions, get offended by my findings, or minimize the problems I discovered. After 18 years as an inspector I've learned to let that type of stuff go so now that part of my job is easier to deal with, but another part of my job is causing me more anguish as time goes on...
As I've become more experienced I've witnessed numerous clients make bad decisions, most of which were avoidable. Consequently, the most difficult part of my job is maintaining my professional and ethical duty to keep personal thoughts and opinions to myself when I think someone is making a bad decision. Making matters worse for me personally is I feel responsible when another person's mistake leads to negative consequences that I might have been able to help them avoid had I intervened or communicated my opinions up front.
My cumulative life experience as a homeowner, restoration contractor, home inspector, property manager, and "adviser" to numerous friends and family members that are homeowners has provided me the background to predict the future fairly accurately, but my ethical and professional home inspector obligation as an objective fact-finder prohibits me from being able to share many of my premonitions. There are some predictions I'm obligated to share, like the life expectancy of a roof, when the furnace filter will next need to be changed, what times of year the gutters will most likely need to be cleaned to prevent them from getting clogged, or what locations on a roof ice damming is most likely, etc. However, there are many predictable outcomes I can't share with my clients, like the probability that a neighbor's unsupervised pets and children will drive them nuts; the likelihood home improvements will take twice as long and cost three times as much as hoped; the 100% chance that huge maple tree overhanging the house will fall at some point in time; or the inevitable disappointment that occurs when reality sets in after those drainage issues the inspector reported end up leading to water in the basement in addition to $20,000 of foundation repairs.
A home inspector should never tell someone they're making a bad decision or advise a person not to buy a home, despite the fact there are obvious signs the buyer or buyers are moving forward without considering the ramifications of their decisions in addition to ignoring or avoiding obvious pitfalls related to the property they've chosen to buy. If I did say, "Hey, what in the heck are you thinking?!?" it wouldn't solve anything, and would likely create some pushback or resentment from my clients for me not respecting their decision, so I bite my tongue (figuratively speaking). However, when I think someone is making a good home buying decision or I inspect what I consider to be an exceptionally well constructed home, I will often say something along the lines of, "I think you'll be happy in this house" or "I think you'll look back on your decision to buy this house as a good one" and as of this writing, no one that I've said those things to has ever come back to tell me I was wrong, but nonetheless I shouldn't say such things if it is influencing my clients' decisions.
The reason I and other home inspectors shouldn't share our opinions is because we're often wrong. No one can predict the future with certainty, and if I try to sway a person into either buying or not buying a home based on my opinions, then I've failed at my job.

A home inspector also can't predict or warn a buyer of every negative scenario possible because it would create too much fear.
I've discovered a tool that helps me help homebuyers consider the ramifications of their decisions, and also helps me conquer the frustration of not being able to speak out when I think obvious conflicts, problems or potential probelms are being ignored - I ask questions:
"Do you have contractors in mind to help you fix the problems?"
"Have you obtained estimates for planned repairs or modifications?"
"Will you move again if your employment situation changes?"
"What are your long-term plans?"
"What are the benefits of this home relative to your existing home?"
"Have you researched utility expenses, taxes, insurance, cost of maintenance and repairs, and loan interest?"
"Have you contacted an arborist to check out that tree overhanging the roof?"
Preparation is the key to success, and by helping people prepare I minimize the urge to share my own opinions.
In my next update I'm going to discuss what I consider the "10 Biggest Mistakes Homebuyers Make" in hopes that preventing people from making bad decisions up front will help me save them some grief and make my job easier.

Friday, March 25, 2016

"How can I prevent a house fire?" 20 Suggestions to Limit the Risk of Fires


 

Most house fires are preventable.  I spent many years handling insurance claims and coordinating fire restoration projects at homes that had burned or were damaged by heat and smoke, and the majority of those fires could have been prevented.  The following are some simple tips to prevent fires in your own home:



1.   Reduce clutter - clutter affects fire safety because it limits the ability to view or prevent potential fire risks, promotes the spread of flames, and makes it difficult to extinguish a fire once it starts. 
 

2.      Don't overload electrical outlets.  Avoid using power strips or extension cords.
 

3.      Extinguish cigarettes properly (or just don't smoke).


4.      Never leave a candle unattended; if burning candles do not place candleholders or jars on a wooden surface without protection (if a candle burns to the bottom of the base or jar the heat can burn the wood surface below), and make sure there aren't any combustibles nearby.
 

5.      Don't leave an oven or stove unattended when in use.  Don't store items inside the oven.
 

6.      Use extreme caution when burning in a fireplace or wood stove.  Understand the components of the system (fire box, damper, flue, flue cap, etc.), how it works, and potential risks.  Don't let fires burn too hot.  Keep the flue clean and clear of creosote (this should be checked regularly when in use).  Don't burn wet or sappy wood in fireplaces or wood stoves because it will cause creosote buildup in the flue / chimney.


7.      Keep dryer vents clean and clear.

 
8.      Do not allow children to play with lighters or matches; keep fire starting tools and ignition sources out of reach.

 
9.      No heat lamps.

 
10.  Do not keep combustibles near heat sources such as stoves, fireplaces, furnaces, space heaters or water heaters.

 
11.  No gnawing pets (rabbits, gerbils, domesticated rats, etc.) because if they are loose they chew on electrical cords and wiring.

 
12.  Eliminate mice (mice chew on wiring and get in power boxes causing electrical shorts).

 
13.  Don't keep chemical soaked rags indoors, and don't launder rags or other cloth material that's soaked in any flammable chemical / solvent.
 

14.  Keep combustibles such as gasoline in a separate building or storage shed if possible.


15.  Do not use glues or solvents designed for outdoor use indoors.
 

16.  Don't bring grills indoors after use and dispose of used charcoal properly.
 

17.  Don't ignite fireworks near structures.
 

18.  Unplug devices when not in use, such as phone chargers.
 

19.  Have a working smoke detector at each level of the home, especially near bedrooms, and have a working carbon monoxide detector in the home.
 

20.  Have a fire extinguisher in the home.

 
Some fires aren't preventable, such as fires caused by lightning or an unpredictable event such as an electronic device combusting spontaneously.  However, if you follow the above guidelines you will reduce the risk of fire your residence significantly, or at least limit the potential for damage from a fire greatly.


 

 

 

 

 

 

 

 

Tuesday, March 15, 2016

Top 10 Deal Killers - Ten Reasons Homebuyers Cancel Purchase Agreements


I’ve compiled the following 10 reasons homebuyers choose to walk away from purchase contracts based on my observations and first-hand experiences. The list is arbitrary and the numbered reasons aren’t necessarily provided in order.  I started working on this list years ago after being unfairly portrayed as a home inspector that kills deals.  Subsequently, as far as I know, every terminated contract I've been involved with was the result, wholly or in part, to one or more of the reasons listed below, not the result of an overzealous home inspector planting seeds of fear into the minds of apprehensive homebuyers as some might have others believe. 



Reason # 10:  Blinded by Love

Sometimes folks fall in love with a house because it has character, is in a desirable neighborhood, has a lot of "potential", and/or has appealing features such as a modern kitchen, large master suite or gorgeous view.  But falling in love with a house can be like falling in love with the wrong person.  When we fall in love on impulse we have a tendency to ignore or minimize problems, which affects our ability to make rational decisions. 

Reality starts to set in when folks pull their heads out of the clouds to notice the wiring is outdated, siding or roof is bad, the cars won't fit in the garage, the neighbors have 4 dogs that bark at all hours, the laundry room is two steep flights of stairs away from the bedrooms, there are landscaping / drainage issues, the heating / cooling costs are outrageous, the foundation is bad, etc., etc.  I often hear homebuyers say, "What was I thinking?" after they recognize all the obvious problems they ignored when signing a purchase contract. 

Most purchase agreement contracts don't allow a home buyer to terminate the contract based on merely coming to one’s senses, but the contract does have an exit clause or contingency if the home inspection reveals unsatisfactory conditions, thus buyers often claim the home inspection is the reason for killing the deal when in truth there are other factors at play. 

Unfortunately it reflects poorly on good home inspectors when buyers initially choose to buy a bad home on impulse but use the inspection report as the excuse to get out of the deal.

When looking for a home a buyer should have a list of priorities (or a list of things to avoid) to follow before offering to purchase a home.  This might help save all parties involved time, money and excuses.


Reason # 9: Termites

Sellers must disclose termite problems at a property if they are aware of any, but homeowners / sellers often have termite problems they aren't aware of, or sometimes sellers don't disclose the full extent of known problems to homebuyers. 

 
Termites are white, ant-like critters that are very common across much of the country but we usually don't see them because they typically live underground and can't survive when exposed to light or air for long periods.  In my region I discover evidence of past or present termite problems at probably 1/3 or more of the properties I inspect. 

Termites prefer living in wet soil and consume wood or cellulose for nourishment.  They build hollow mud tubes along foundations, walls and other structures for concealment and protection when navigating between soil and the wood they are consuming.  Their ability to exist without light or fresh air is what makes them capable of doing so much damage without being observed. 

Termites are often discovered before they do too much damage, but not always.  When I inspect a home with termite problems the damage I find through the course of the home inspection is usually more extensive than what can be seen on first glance.  The challenge with termites from a home inspector's perspective is the full extent of damage can't be known unless walls, floors and/or ceilings are removed where the evidence of termites exists, and neither home sellers nor homebuyers want to start tearing the house apart days before closing.  Repairs to structural framing damaged by termites can be expensive, and trying to estimate or predict the costs of repairs without removing the finishes is impossible. 

Understandably, termite problems create much anxiety for homebuyers and can postpone a closing, or cause the buyer to terminate their purchase agreement altogether.

 

Reason #8:  Dishonesty or Non-disclosure by Sellers

Many times home sellers try to hide problems by covering or obstructing them.  Sometimes they use rugs, furnishings, shelves, boxes or close off areas to crawlspaces, attics or nooks under stairs to make them inaccessible.  Often I observe patches or touchup paint on ceilings and walls where there have been leaks or cracks, though no problems related to leaks or cracks were disclosed to the buyers.  Problems related to water leaks or cracking / settlement are supposed to be disclosed to a homebuyer even if they've been repaired.  Homebuyers get scared when they discover attempts to conceal problems that should have been described in the "disclosure statement" by home sellers. 

Deception is common.  As a home inspector I’m impressed by the memories and details shared by sellers when they describe the work that has been done in their home, but when I ask for information related to past problems, the memory suddenly gets very clouded. 

Years ago while climbing into an attic a home seller told me I was the first person to go up there since the home was built.  Once in the attic I followed a path through the insulation to a 5-quart ice cream bucket filled with fresh water collected from recent rains leaking through his roof.


There are many ways for home inspectors to determine if there have been past problems or existing conditions that home sellers are trying to conceal.  On one occasion I discovered water stains on a bathroom ceiling after using a bright light to check for such flaws.  The stains were not visible to the naked eye in natural lighting, but with a camera flash or bright light it was obvious there were moisture problems that had been covered and not disclosed.  After my discovery the listing agent told the buyer she knew about the problem and minimized it as insignificant, but the buyers were infuriated the listing agent knew about the problem and only shared that knowledge after it was brought to their attention by the home inspector. 

Homebuyers are prone to walking away from deals once deception has been discovered because betrayal causes fear and anger, and also leads one to conclude that there might be more problems that haven’t been disclosed.  

 

Reason #7:  Sewer Problems

Probably one of the most dreaded problems facing any homeowner is a clogged sewer or sewer backup.  Sellers of homes with sewer problems always say, "We just have the drain snaked every year or two."  What sellers don’t disclose is the whole story:  "Last Christmas we had the whole family staying here when the basement flooded from a sewer backup.  Roto-Rooter came right away, but it cost $300 to clear the line, we had to stay in a motel for days, the house smelled terrible for two weeks, and it wasn't covered by insurance."

Any sewer problem that needs to be snaked every year should be fixed, not ignored, because they problems will get worse.  Tree roots growing into sewer lines are the usual cause of sewer backups.  Any tree can have roots that grow into sewer lines, but silver maples are notorious for the invasiveness of their roots.  Things to watch for when house shopping are: 1) replacement cleanout caps on sewer pipes / waste stacks or caps with teeth marks from wrenches, and; 2) silver maple trees in the front yard. 

Other types of long-term sewer problems besides tree roots include: 1) deterioration of pipes; 2) collapsing pipes, or; 3) pipes that don't slope properly due to either improper placement / installation or soil movement.  Soil shifting, settlement or heaving can cause buried sewer lines to shift, sag or lift, which can trap water, solids, grease and other waste in the line, leading to clogs.

Not all sewer problems are due to bad pipes.  Many sewer problems are caused by putting the wrong products through drains, garbage disposals or toilets such as grease, starchy foods (rice, pasta, potatoes), non-flushable wipes, or feminine hygiene products.

Sewer lines can be scoped with a camera prior to purchase to determine the condition of the pipe, see if tree roots are a problem, and/or observe any sections of the pipe that don't flow properly.  The cost of scoping is somewhere around $200.  Considering the replacement of a sewer line can be in the multiple thousands of dollars it is often a good idea to scope the sewer if there are clues there have been prior problems so you don't get stuck with the problem.

 

Reason #6:  Shoddy Workmanship / The Do-It-Yourselfer House

Does a "new bathroom", "newly finished basement" or an "updated kitchen" really add any value to a home if the work wasn’t done properly?  The answer is “no” and in fact often it costs more to correct faulty work than if no updates had been done in the first place. 

 
Sometimes when I point out the flaws of poor workmanship is scares homebuyers because they usually assume the work was done properly in the first place.  The flaws that can be seen are often indicative of the condition of the hidden systems, and this creates fear, especially considering the most important components of a home are usually hidden (wiring, plumbing, and framing).

When buying a home that's been renovated a buyer can often check with the local building and safety department to determine if there were permits / inspections for modifications.  Buyers should ask homeowner for copies of contractor bids, invoices, warranties and other documentation such as photos taken during the renovations to help authenticate the work was done properly.

 
Some clues of unprofessional or poor workmanship to look for in a remodeled or renovated home include but are not limited to:  1) lack of proper ducting and air venting in newly finished spaces; 2) uneven finishes at walls and ceilings; 3) doors that are out-of-square or don't latch; 4) bathrooms without exhaust fans or air supply vents; 5) enclosed utility rooms without combustion air venting; 6) too many lights or outlets on a single circuit; 7) gaps at miter joints of trim and casing; 8) uneven stain / finish at trim and doors; 9) non-treated wood in contact with concrete; 10) improperly vented or trapped drain plumbing under sinks; 11) loose or exposed wiring; 12) lack of GFCI protection at outlets near sinks, and 13) duck / duct tape.

Don't be the one that puts an offer on someone else's DIY project unless you are prepared to make it your own project.


 
Reason #5:  Cold Feet

Usually when folks decide to walk away from a purchase agreement it’s because the house isn't right for them, but there are occasions homebuyers realize their own situations or other problems prevent them from being able to comfortably move forward with the home purchase.  Here are some examples of circumstances that might lead to a buyer getting "cold feet" after signing a purchase agreement:


a.  fear of the responsibility or commitment of ownership

b.  fell in love with a different property

c.  can't afford insurance, mortgage interest, utilities, etc.

d.  job loss

e.  breakup

f.   health problems
 

 
Most purchase contracts don’t allow a person to just walk away from a deal and the circumstances listed here typically aren’t part of a contract’s exit clauses or contingencies, so buyers might have to forfeit their earnest money or be responsible for the costs related to the delayed sale of the home should they choose to walk away from the purchase agreement for reasons not specified in the contractual contingencies. 

It is imperative a homebuyer be cognizant of all the potential life situations that might arise when signing a purchase agreement contract, and be prepared to lose some money in the event the contract must be terminated for any reason not specifically included in the contract’s terms and conditions.



Reason #4:  Electrical Problems

Undersized or outdated fuse panels, improper modifications, antiquated wiring and other electrical problems can affect the function, value and insurability of a home.  Specifically, the following electrical system components should be considered red flags for homebuyers:  1) fuse panels with 60-amp capacity or less; 2) improperly modified electrical panels; 3) “knob and tube” style wiring; 4) aluminum wiring; 5) certain Federal Pacific breaker panels manufactured in the 1960s and 1970s because they are more susceptible to malfunction, causing electrical arcing or fires.


Older homes were not designed to handle the number of electrical fixtures or amperage loads that are required today.  Subsequently old electrical panels have often been modified to support the need for extra outlets, lights and appliances, and often those modifications have been done incorrectly. 

In the early days of residential electricity, the hot and neutral electrical wires were run separately and attached to framing with ceramic "knobs" and routed through framing in ceramic "tubes", thus the name "knob and tube" wiring was given this type of system.  Knob and tube wiring is common in homes built prior to the 1940s.  Knob and tube wiring is actually a safe mechanism for conducting electricity, but because it lacks a ground conductor and is often either improperly altered or overloaded with too many fixtures, it can be hazardous.  Another problem with old electrical systems is electricians don't like to work on them because they don't conform to present-day codes, which creates a dilemma as to the degree or extent of correction or upgrading necessary when electrical repairs are performed. 

I've learned of home transactions that have been affected either by insurers not willing to provide coverage for homes with antiquated wiring or because the challenges of correcting bad wiring were more difficult and costly than the buyer believed they would be when putting in an offer.   

If you are buying and older home make sure the wiring is suitable for your needs.  Also, check with your insurer to determine if they will provide coverage for the property if there is old wiring or an outdated panel, otherwise you might either be shopping for a new house or different insurance company.

 

Reason #3:  Groundwater / Flooding / Drainage / Foundation Issues

Water is a home’s biggest enemy.  Problems related to drainage and groundwater can be nagging and virtually impossible to correct entirely.  Most home sellers don’t disclose the full extent of groundwater problems to buyers.  Conversely, many buyers are seeking a new home because of water problems at their existing residence, thus when groundwater problems or flooding are discovered it can affect the sale negatively.

Lack of sufficient drainage and groundwater can affect a home’s foundation.  A majority of foundation problems are the direct result of drainage problems because saturated soil creates hydraulic pressure on foundation walls and causes them to bow.  Also, fluctuations in subsurface soil moisture affects the expansion / contraction of soil, which can lead to settlement or heaving at footings and foundations. 

In addition to soaking basements and damaging foundations, groundwater problems are a primary source of deal killer #2 - mold.

 
Reason #2: Mold 

One of the problems most likely to hinder or delay a sale of a home is mold and/or conditions that have led to the growth of mold such as groundwater issues, inadequate ventilation, or long term plumbing leaks.  All homes have some mold-related fungi present, but the cause and quantity of fungal growth are factors that affect the severity of the problem.  Finding a bit of mold on a foundation wall or behind a bathtub isn't a serious problem, but having large areas of fungal growth in attics or basements covered in mold is serious.


Mold can be difficult to deal with because it indicates there are probably other problems related to moisture and ventilation, so it creates two issues that must be dealt with:  1) How do we remove the mold?  2) How do we prevent the mold from coming back? 

Mold removal should be done by a professional to ensure the spores are contained and removed rather than being dispersed, hidden or missed.  The most serious mold problems I've discovered have been at properties being sold by foreclosure specialists who don't disclose mold problems and who've tried to hide mold and moisture problems rather than correcting them.

No contractor can guarantee mold won't return once removed, and correcting the moisture and/or ventilation problems that led to the mold can be costly.  The fear of mold is something that scares a lot of people, and if a homebuyer has some pre-existing concerns about a house or has a family member with allergy problems, mold problems will often kill the deal.

 

Reason #1:  The Antagonistic Seller

Butting heads will ruin a deal.  If you are selling a house or are an agent representing a house that's for sale you shouldn't make excuses or minimize problems.  While all the people involved might be friendly folks, the process of negotiating a purchase often puts the parties in adversarial roles.  Hostility and stubbornness on the part of agents or sellers will scare a buyer.  In my experience, buyers are most turned off by sellers or real estate professionals that minimize or invalidate their concerns and feelings.


The most common mistakes made by agents and homeowners are excuses, misleading or incomplete explanations, and minimizing of problems.  Another common mistake is not negotiating earnestly – delayed responses, playing good-cop / bad cop, or manipulating the terms of the agreement.  Defensive or hostile sellers will cause buyers to hesitate and reconsider.  I frequently hear agents and sellers tell buyers things like: "It's always been that way;”  “Never been a problem;" "That's not a big deal;" or "Show me a house that doesn't have a problem."  While those things might be true but they are nonetheless words and phrases used as a distraction or excuse that avoids dealing with the issue at hand comprehensively, and that scares homebuyers.

Numerous homebuyers have walked away from good properties because they were turned off by the parties selling the house and couldn't stand the idea of buying a home with a stigma or negative "vibes." 

Contrary to what would seem to be common sense, it has been my experience that home buyers are more likely to buy a home from someone that lied to them than someone that’s being hostile.  I suspect it’s because we know most home sellers have something to hide and thus we are better prepared for a bit of deception than hostility or stubbornness. 

If homebuyers perceive the process of negotiation and problem solving with seller or listing agent as fighting and butting heads, the probability of a buyer walking away from a purchase agreement increases because they’ll fall out of love with the property – and once that happens it becomes almost impossible to close the deal. 

Home buying is an emotional process.  Most homes have problems and usually buyers and sellers will come to terms so they can proceed with the transaction, but if a buyer has a bad experience with antagonistic seller or listing agent the chances of resolution and transacting the deal are greatly diminished.

Monday, February 22, 2016

Possibly the Biggest Trend in Real Estate You'll Never Read About, Until Now...

 
The number of residences sold without the assistance of real estate agents appears to be growing but relatively few know about the trend because it's not been widely reported, and those who have noticed aren't publicizing it.  In fact, the National Association of REALTORS (NAR) has reported a decrease in the number of for sale by owner (FSBO) transactions despite evidence contradicting that conclusion.
 
I've personally witnessed a surge in FSBO transactions over the last year or two, and there's been a corresponding growth in the number of home purchasers without agents.  My observations are unscientific but nonetheless are evidence of the shift away from agent-assisted transactions.  To back up my own observations I've discussed the topic with title company closing agents, residential appraisers and other home inspectors who've observed the same.  Each person I've discussed the matter with described a substantial increase in residential transactions closed without the assistance of real estate agents in the last year, and some speculated non-agent transactions have doubled as of late.  One appraiser told me 25% to 40% of the appraisals she'd performed in the last few months were on FSBO transactions when in prior years the number was less than half that.
 
Real estate transaction data and trends are recorded by and publicized through organizations that exist for the advancement of real estate agents and affiliated groups who rely on real estate-related commissions and fees, thus they aren't likely to publicize stories describing the ease at which these transactions are successfully facilitated without agents because it might empower homebuyers and sellers considering going without agent representation.  The NAR and other real estate entities discourage individuals from buying or selling homes without an agent.  Type "Should I sell my house FSBO" into an internet search and you'll likely discover most of the results are posts by real estate agencies or organizations trying to sway people into using agents through fear and subjective statistics.
 
The number of persons buying and selling homes without agents is unknown.  There's not an independent organization tracking these statistics, and local register of deeds offices aren't a good resource because they don't always differentiate the demographics of the parties to transactions and/or whether the properties are residential homes, lots, commercial buildings, or multifamily dwellings.  The numbers publicized by the NAR and the affiliated Multiple Listing Service agencies (MLSs) overseen by the NAR are recorded by those agencies using information culled from their clients and reported by real estate agents.  Subsequently, statistics of home sales transacted without agents are purely anecdotal, and the research is less than scientific. 
 


The NAR has published this information on their website, presumably to discourage FSBOs:
 
FSBOs accounted for 8% of home sales in 2014. The typical FSBO home sold for $210,000 compared to $249,000 for agent-assisted home sales."
 
From the 2015 Profile of Home Buyers and Sellers, National Association of REALTORS®
 
These statistics are misleading:  First, the NAR doesn't actually know how many transactions were FSBO because they're using subjective and partially fabricated data - the NAR's stats are not derived from objective or independent sources (they do sell their data for $249.95 on their website if you want to check it).  Second, NAR's data doesn't compare the price of identical houses sold both with and without agents, rather they compare the comprehensive sales of all residential properties minus those sold by agents.  Their numbers exclude low-dollar residences, such as trailer homes and dilapidated properties that are generally far more likely to be sold without the assistance of agents, which skews the statistics significantly.
 
Independent studies have shown FSBO properties and those sold by agents generally sell for the same price.  A report published in 2009 for American Economic Review by Igal Hendel, Aviv Nevo, and François Ortalo-Magné revealed virtually no difference in sales price of agent-listed homes versus those sold without agents.  From the report's conclusions:
 
"We have compared the performance of MLS and FSBO platforms for the sale of single-family residential properties. After controlling for differences in house and seller characteristics, we find that the MLS delivers no price premium (even before netting commissions)"
 
 
Independent research, such as the study cited above, raises doubt to the legitimacy of the NAR's claims.  To make matters worse for the NAR, it has been determined agents have been providing inflated and inaccurate sales numbers to the NAR's affiliated MLSs from which the sales data is sourced.  A January 27, 2016 article in the Washington Post by Kenneth Harney reports independent researchers discovered inflated or inaccurate sales prices provided to the MLS by agents 8.75 % of the time.
 
 
The FSBO trend hasn't gone entirely unnoticed.  A May 2015 FoxBusiness.com article cited statistics from Eddie Tyner, president of ForSaleByOwner.com, who claimed seller traffic to its website was up more than 200% for the first quarter of 2015 over the same period in the prior year.
 


The shift towards buying and selling real estate independently is likely the result of unprecedented opportunities to market or search for properties via Zillow, Trulia, Craigslist, ForSaleByOwner.com and other online services.  These resources offer buyers and sellers the opportunity to both publicize and seek properties without an agent's assistance, and at little to no cost.  Advancements in technology and free access to real estate listings have provided most homebuyers and sellers with many of the same resources and tools that weren't available to non-agents in the past.    
 
Another reason home buyers and sellers might forego using an agent is poor customer service.  According to the 2015 National Association of REALTORS Profile of Home Buyers and Sellers, only 67% percent of home sellers would definitely use the same agent again.  This is an abysmal number for an industry so driven by customer service.  A 67% satisfaction rating indicates many agents aren't doing a good job in the eyes of their clients. 
 
The worst home buying or selling horror stories I've heard are from people who felt they were misled or underserved by their agent.  Of all the persons I've worked with who've bought and/or sold both with and without agents, almost every one that expressed a preference said they'd rather go without. 
 
To be clear I am an advocate of real estate agents in many cases.  I'm friends with many agents and I've seen first-hand the benefits of using a good agent.  There are some very good reasons for enlisting the assistance of a real estate agent to help home sellers and buyers conduct residential sales and purchases, and there are a number of excellent agents that have to ability to make the process easy and expeditious.   However, diligent persons considering the sale or purchase of a home without an agent shouldn't be intimidated by the fear tactics used by some in the real estate industry.  Title companies, mortgage lenders, home inspectors, lawyers and appraisers are available to help independent buyers and sellers navigate through the process without an agent's assistance.  Documents for buying / selling homes are available at title companies, office supply stores and on the internet. 

Buying or selling homes can be done independent of real estate agent assistance, and it appears a growing number of people are discovering that fact for themselves despite what some are publicizing.