1. The scammer finds your home for sale online on any one of hundreds of site. They copy your photos and marketing description.
2. Scammer posts a Craigslist ad using your address and photos, saying that the home is for rent, usually at an eye-popping, unbelievably low rent.
3. Scammer says to contact them via email, claims they are out of the country, and want you to fill out an application and send them a deposit and first month’s rent.
4. Renter believes what they are being told and sends their rental deposit to the out-of-country contact, who takes the money and is never heard from again.

I’ve even heard of this being carried a step further, with a scammer actually meeting someone at the property to collect a deposit, but obviously that is a far riskier scam to involve a local person who can be identified and caught by police. Most of them simply try to get you to send money overseas. I just responded to one, pretending I was a renter, and got the following response.

Thanks for your email and interest in renting my house..I am John Rasmussen  the owner of the house you are making inquiry of…Actually I resided in the house with my family, my wife and my only daughter before and presently we have moved out due to my transfer from my work now in Warsaw,Poland. Presently my house is still available for rent, (rent already includes utilities).More so Now, i am currently in the (West Africa) for an international Christian follower’s crusade..Pls i want you to note that i spent a lot on my property that i want to give to you for rent,so i will solicit for your absolute maintenance of this house and want you to treat it as your own, It is not the money that is the main problem but i want you to keep it tidy all the time so that i will be glad to see it neat when i come for a check up.I also want you to let me have trust in you as i always stand on my word. Me and my wife bought the house when we got married. When we left the state I had a thought of selling the house so I have to look for an agent, after getting one, we got a deal but later my wife advised against that. I reasoned with her and accepted her advise. So I contacted the agent back and requested for my keys and documents. Later we decided to  have the house rent out, we would have give the same agent this job also but the truth of the matter is that the agent would want to handle it professionally and the occupant may not be able to reason along with him later. If you notice, you will discovered that the price we are offering is far below standard price, this is enough for you to know that we are not after the rental fee but the  absolute care for the property. The house include the utilities like Heat, A/C in wall/window, Hydro, cable, Garbage Disposal, Fireplace , Fridge, stove, Dishwasher, Dryer, Breakfast Bar, Dining Table and Sofa Set,Refrigerator,Canopied deck overlooking nature.,internet access e.t.c. because of this reason and more we need a responsible person  that can take very good care of it as we are not after the money , but want it to be clean and for you to take it as if it were yours.

The rent is: $800
Security Deposit: $600
For this 3Bedroom Home.
Pets Allowed:Dogs and Cats.
Available :Available Now for move in.

SO IF YOU ARE REALLY INTERESTED I WILL WANT YOU TO FILL THE RENT APPLICATION FORM BELOW.

RENT APPLICATION FORM.
FIRST NAME:__________?
MIDDLE NAME:__________?
LAST NAME:__________?
PROFESSION:__________?
PHONE:
(CELL)PHONE__________?
(WORK)PHONE__________?
(HOME)PHONE__________?
KIDS_____ (YES/NO), HOW MANY________
PRESENT ADDRESS: _____________________
CITY: _______________
STATE:______________
ZIP CODE: ____________
HOW LONG? ___________IF RENTING
WHY ARE YOU LEAVING__________?
IF THIS HOUSE IS BEING GIVEN TO YOU,
HOW LONG DO YOU INTEND STAYING? ____________?
WHEN DO YOU INTEND MOVING IN?______________?
IF YOU HAVE A PET,
NAME OF PET: _____________?
KIND OF PETS: _____________?
HABITS
DO YOU SMOKE ______________ ?
DO YOU DRINK ______________?
DO YOU WORK LATE NIGHT?____?

Looking forward to hearing from you with all this details so that i can have it in my file in case of issuing the receipt for you and contacting you…Await your urgent reply so that we can discuss on how to get the document and the keys to you,please we are giving you all this based on trust and again i will want you to stick to your words,you know that we have not seen yet and only putting everything into Gods hands,so please do not let us down in this our property and God bless you more as you do this…The house is available for rent at the moment so you are free to move in as soon as you wish to. Feel free to get back to me for more information and arrangements on how to get the keys and other necessary documents delivered to you. The house will be available for rent for a period of 5 years so you have a choice of deciding how long you intend staying there…

How to avoid these Craigslist scams

Selling your home does involve publicizing it broadly online. A home for sale without pictures and a description online is a home that is not going to sell in today’s marketplace. The scammer’s ability to find a picture or description has little to do with whether you post your home on Craigslist or not, as there are literally hundreds, if not thousands, of sites where your home listing will appear.

As a seller, you and your agent must remain diligent. If the home is listed for sale, many rental inquiries will actually be directed toward the legitimate agent. When such an ad is detected, use the tools on Craigslist to flag the post, and visit the Craigslist page about scams for various ways to report it. You can usually get the ad removed quickly.

As a renter, mostly you need to use common sense when renting a home.

1. If the rent looks too good to be true on Craigslist, it is. No one is going to rent a luxury home selling for $900k for $800/month.
2. If the landlord cannot meet you in person to take the application and show you the home in person, be wary. There are legitimate out-of-country owners, but they should be able to have someone local show you the home and take your application. That local representative should be easily contacted and identified in some reputable way, and make sure that you have real contact information for them. A local representative who meets you at the home, but does not have keys to get inside is another red flag. There is no scenario where you should make application or deposits on a Craigslist rental without seeing the interior of the home or apartment.
3. Overseas landlord requests a wire payment or Western Union deposit. Common countries include Nigeria, Romania, UK, Ukraine, Spain, Italy, Netherlands, but it could be anywhere. Once you wire money, it is gone, so be cautious and make sure you are not sending money before actually ensuring that the rental is legit.
4. If you find that the home advertised for rent is also listed for sale, call the local real estate agent to inquire about the rental. The scam will be revealed quickly.

IRS Summertime Tax Tip 2011-15, August 8, 2011

The Internal Revenue Service has some important information to share with individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home.

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
6. You cannot deduct a loss from the sale of your main home.
7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

For more information about selling your home, see IRS Publication 523, Selling Your Home.

Links:

• Publication 523, Selling Your Home ( PDF)
• Form 5405, First-Time Homebuyer Credit and Repayment of the Credit ( PDF)
• Form 8822, Change of Address ( PDF)

What is a title report?

A title report is researched and issued by title insurance companies. They scan the index of files at the local county recorder’s office and match up recorded documents to particular parcels of real estate. By looking at the title history or “chain of title,” they can determine what sort of liens have been satisfied and which ones remain. A title report is a summary of all potential issues found for a particular seller and parcel of real estate at a given point in time. Obviously there could be new items filed at the county after the report is researched, so throughout the purchase process, the county records will be re-checked and verified to ensure that nothing new has come up.

What sort of issues could be present on a title report?

I have reviewed hundreds of title reports and most of them show nothing out of the ordinary. A typical title report will show the current property tax assessment and status of tax payments. It will also list any unsatisfied mortgages on the property and their original balances. It is also pretty common to find utility easements or covenants and restrictions for a condominium or subdivision. However, every so often, there are some unwelcome surprises. Here are a few that I have seen recently:

1. IRS tax liens – The IRS can attach a lien to your real estate if you do not pay your taxes. In order to remove the lien, the IRS needs to be paid their back taxes.
2. Unpaid property taxes – If your property tax payments are delinquent, this will show up and needs to be paid prior to sale of the property.
3. Judgments – A home owner may have judgments against them attached to their real estate. This could be for unpaid child support or other unpaid creditors that went to court to obtain a judgment. The lien won’t be removed until the financial obligation is paid off.
4. Contractor or mechanics liens – Unpaid contractors like roofers or painters can file a lien against the property for work they performed that they were not paid for. The lien isn’t satisfied until their bill is paid.
5. Identity affidavit – As part of the title review process, they attempt to match judgments listed in county records with the names of the seller. If you have a common name like “John Smith,” you may have judgments appearing for John Smith that may actually be a different person. To resolve this, you will be requested to fill out an identity affidavit to verify that you are a different person.
6. Encroachments – There may be evidence in title records of unresolved encroachments or boundary line disputes.

There are a lot more examples, but these are some of the common ones that I have seen.

Resolving title issues prior to sale of a home

Some title problems can be resolved simply on the closing day. If there is an unpaid property tax payment, the escrow company will simply make that payment and deduct it from the seller’s sale proceeds. However, in many instances it is better to proactively handle these issues early in your sale. Some of them can be embarrassing, such as tax liens or unpaid child support, so if you can get them removed before a buyer shows up, they will never appear on the title report. Others can take a significant amount of time to resolve, as it involves weeks of bureaucracy and chasing down the correct person to record a satisfaction document with the county.

If you are selling a home and find an issue that needs resolution on your title report, contact the title company to ask what needs to be filed at the county to resolve the issue. Then contact the party that has the lien on your property and work with them to get it removed, which may involve paying old debts. Sometimes the debt was paid long ago, but the property notice of satisfaction was never filed, so it may be as simple as getting that recorded. Either way, resolving these items early in the process will avoid delays in your closing and potential embarrassment when working with buyers.

How do buyers find an open house?

There are three primary ways that buyers find an open house:

1. Online – Most open house attendees that we come across find your open house on major websites. Sites like Redfin, John L. Scott and Windermere all publicize when open houses are taking place. This is the most important place to advertise that you are having an open house and the source of the information is the Northwest MLS open house database.
2. Agents – Buyers who are actively working with a real estate agent may get a list of open houses to attend directly from their agent. This list is also powered by the NWMLS open house database.
3. Open House Signs – Everyone has seen these signs around your neighborhood on the weekend. Open house signs do attract people to come inside, but we have found that they produce mixed results. First, your home has to be in a heavily trafficked urban area where the sign gets noticed. Rural or suburban locations don’t often do much more than give directions to someone who already knows that an open house is occurring. More importantly, you need to question the quality of open house attendees that show up because they saw a sign. Are they active buyers and were they looking at houses like yours, or are they simply curious. We find that most people who show up from the signs are curious neighbors, not active buyers.
4. Print ads – Open houses used to be heavily advertised in the Sunday newspaper. All but one major brokerage has given up on these ads because they no longer work. Active home buyers almost exclusively find out about open houses online.

Timing the advertising of your open house

After working with hundreds of buyers, it is pretty clear how most buyers schedule their weekend. Most home searchers will start planning their open house visits on Thursday, with most looking online Friday or Saturday. If you are hosting a Sunday open house, you need to make sure that the schedule appears online starting on Thursday or Friday morning. Any later and you will miss buyers’ window of attention for that weekend. We haven’t found any effect to publicizing open houses earlier in the week.

The Northwest MLS database has very specific timing for updating public websites. Each day at midnight, they update a database that is available to all of the public websites. What this means to a home seller or their agent is that you must submit the open house times one day prior to when you want them appearing to the public. If your agent submits the time on Wednesday morning, it won’t appear on consumer websites until Thursday morning. If you decide on Saturday that you want to host an open house on Sunday, you won’t be able to publicize this information until Sunday morning, which is hardly the optimal timing.

Pay close attention to scheduling when you advertise your open house via the Northwest MLS. If you are too late in submitting it, it may make sense to delay until the next weekend when you have a better chance of catching the attention of home buyers.

You never know who in your network may be “in the market” or looking to live in your neighborhood. Your real estate agent is an expert at marketing the home to the general public, but you are the best (and only!) person who can let your personal connections know that you are selling your home. Social networks can be a great way to tell friends, colleagues and other acquaintances about your great home. Let’s get started.

Marketing Content

First off, you will need some marketing content to tell the story of your home.

Seller Statement – This is more than just a marketing description. A seller statement brings your home to life and can add an important emotional component to the marketing. Write a couple of paragraphs describing what you love about the home and what you will miss. What are some finer points of the neighborhood? Where is your favorite nearby coffee shop and supermarket? Are there any neighborhood gatherings or events that make the location special? Any fun stories about the property? This written statement can be a powerful tool to transform the “house” into a “home” in the eyes of a buyer.

Photos – Your agent will have your home photographed for the listing (insist that they pay for a professional!) but consider supplementing these with other photos you may have of the property.  Show photos of the spring flowers, the lushness in the summer or how beautiful the trees are in the autumn. A snapshot or two of your home during the holidays can help a buyer imagine living there. Another good idea … take close-up shots of some of your home’s features  – the Whirlpool bathtub or a new lighting fixture, for instance.

Connect the Listing with Your Friends & Social Networks

Now that you have some snazzy content, here is a checklist of where to put it:

Facebook – Your Facebook page is a great way to let your friends and colleagues know that your home is on the market. Maybe you have a friend considering a move or a “friend of a friend” who has been thinking of moving to your neighborhood. Word of mouth can be a very powerful tool.

Flickr – Put together an online photo album of your home. Send out the album to friends or link to it on your Facebook site. Add tags to the photos or join one of the interest groups to put your photos in front of potential buyers.

Twitter – Set up an account for your home and give your home a voice. Have your house tweet its top 10 selling points or what it’s doing right now. You may attract attention of buyers who are hard-core Twitter users.

Blog Site – Some sellers put up a blog-site to post photos or describe features of the house. You can continually update the blog as the home is on the market, including news about what is going on in the neighborhood that day, or what flowers are blooming.

Online Junkie Friends – Who do you frequently see tweeting or blogging? Ask them to link to your house listing. Chances are they have a large readership and will draw some good attention.

Online Groups and Distributions – Do you belong to any Google or Yahoo groups and would those groups be appropriate to market to? Examples might be groups for parents, new moms, architecture enthusiasts, neighborhood residents, etc.

Kickin It Old School – Don’t discount old school methods of marketing either. Be creative – Church bulletin? Flyer in the lunch room? A purse full of flyers?

Your agent can work with you to review the information that you post, provide feedback, and leverage any of the information that you provide into the public listing.

What NOT to do:

Social media is great, but sometimes too much info is not a good thing. Some words of caution:

· Over-personalization of a home can actually turn buyers off. Show personality but allow a buyer to visualize living in the home.

· Watch what you share on Facebook or Twitter. Assume that the buyer is going to search your name online (the names of property owners can be found in public tax records) and may run across your Facebook page. We have seen unlocked Facebook pages describing anything from the number of showings they’ve had, to their future plans (“We just bought a house!”), to offers they are expecting. All of this information can negatively affect your negotiations.

· Don’t solely rely on social media to sell your home. Remember that the best way to get in front of a buyer is to be in your local MLS (multiple listing service) which is the mechanism to get your listing in front of as many eyeballs as possible. Use social media as a way to add extra spark to your listing.

Many home sellers are faced with the dilemma of either selling or renting their home. Here are some questions that you may find helpful in determining your decision.

Are you ready to become a landlord?

The role of a landlord isn’t easy. Becoming a landlord involves sourcing and contracting a renter (performing a background and credit check; determining your screening criteria; preparing rental forms and the rental agreement). You also need to determine if you will hire a property manager or be on the hook for those duties yourself (collecting rent, maintaining the home and yard, dealing with home repairs and tenant issues). Typically it does not make financial sense to hire a property manager if you have just one rental property.

When renting out your property, you do have to be prepared for the tenants to treat your home like a rental. There is a good chance that you will see a certain degree of wear and tear on your home that you will need to repair when you eventually decide to sell.

Additional Info on becoming a landlord can be found here.

What does my local rental market look like?

For what amount do you believe you can rent your home? Are you in a neighborhood conducive to attracting a renter? Will you attract a long term or short term renter? Some homes, near universities for example, are easier to rent. However these neighborhoods tend to attract short term renters only wishing to rent for a semester or school year.

Study your financials

Understand the true cost of renting the home (your mortgage + utilities + insurance + taxes + property management + maintenance) – Will the amount of rent you collect be enough to cover those expenses? If not, will you be able to make up the difference? Be financially prepared to withstand 1-4 months of vacancy comfortably. Vacancy is unanticipated in almost all cases, and can last awhile, depending on the rental market.

What do you believe your current home is currently worth and what will your selling costs be?

Ask your real estate agent to prepare a market analysis for you and estimate your selling costs. Understand your net proceeds should you sell in today’s market.

Do you qualify to buy your next home without selling your current one?

Qualifying for ownership of multiple homes is more difficult than owning a single home. You need to make sure that your lender approves of your debt ratios to own both homes, taking into account the rental income you will receive.

Do you believe the market is going to improve and are you prepared to hold the property for the amount of time to make your desired gain?

One of the dilemmas you are most certainly facing is “Am I missing out on future returns if I sell my home now?” A good real estate agent can help you understand the trends in your area and what the housing prices in your particular region/neighborhood have done in the past 6 months / 1 year / 2-5 years. Although no one knows with certainty what the market will do in the future, you can make some educated guesses based on housing and regional economic data.

Is my money better off in my existing real estate investment, or in another venture?

Consider your conclusion to the previous question. How does your expected rate of return on the rental property compare to other investment options? Be sure to take into account tax implications (capital gains) and interest rates (investment properties typically don’t qualify for lower interest rates).

There is no easy answer to this question, and ultimately it will take some research on your part, as well as an examination of your investment goals.

Short sales are notoriously complex and time-consuming transactions, and many sellers will seek professional assistance to help get their home sold. Given the specialized expertise necessary in short sales, real estate agents may use professional short sale negotiators to assist in the process. The Washington Department of Licensing and Department of Financial Institutions have released guidelines that must be followed by short sale negotiators. As a seller or buyer of a short sale property, it is helpful to know what state regulations must be followed when a short sale negotiator is in place.

Washington short sale negotiators must be licensed

In order to negotiate a short sale in the state of Washington, a person must have either a mortgage originator license, a real estate license or be an attorney licensed to practice law in Washington. The requirements here are very clear, but were put in place because there were so many entities out there negotiating short sales who were not licensed in any way. If you are using a short sale negotiator to sell your home, ensure that they are licensed. If you are buying a short sale property, also make sure of the same, particularly if you are being asked to contribute money to short sale negotiator fees.

Rules on how short sale negotiators may be paid

Anyone receiving compensation for negotiating short sales in Washington must be licensed. If you are using a real estate broker to negotiate a short sale on your behalf, then that broker must also be providing real estate brokerage services to help market and sell your house. Mortgage originators and attorneys may charge a fee for their services, but special rules apply for real estate brokers. A real estate broker may not charge any additional fee above the normal and customary commission to provide short sale negotiation services. So, if your real estate broker is charging 3% commission to sell your home, they cannot tack on a $5000 short sale negotiation fee on top of that commission.

Short sale scams to avoid

The wild world of short sales has given rise to a number of schemes and scams that buyers and sellers need to avoid. Here are some common ones to watch out for:

1. A real estate broker makes an offer on a financially distressed property and negotiates a short sale payoff with the seller’s lender. Once the broker knows what the lender will accept, they turn around and market the property at a higher amount and try to flip the property with a simultaneous close to another buyer. Unless all facts are clearly disclosed to the buyer and their lender, this is deceptive to both the seller’s lender and potential buyer and is a big no-no.
2. Short sale agents or negotiators may promise compensation to the seller when a short sale has closed. Lenders will not allow sellers to receive any proceeds from a short sale, since they are taking a loss. Any scheme which hides compensation to the seller is illegal.
3. Properties must be marketed at a fair price. Short sale properties may not be listed at greater than market value to discourage buyers from presenting an offer or for far less than market value to convince a lender that the property will not sell for a higher amount. Brokers have a duty to deal honestly and in good faith with all parties to a transaction, even the lenders who own the mortgage on the home.
4. Real estate brokers who negotiate a short sale are paid a negotiation fee by the buyer. This fee is offset by a seller’s closing cost concession. This is not legal. Brokers cannot charge in excess of the normal and customary commission for short sale negotiation services. This scheme is also deceptive to the lenders if it is not fully disclosed.

Seek professional help on short sales

There are professionals who can be of great assistance when completing a short sale transaction, whether you are a seller or a buyer. Finding the right one is key to your success, but there are plenty of vultures out there looking to relieve you from your money. You should look for experience in these sorts of transactions and insist on licensed professionals, as required by law. You should also make sure that they do not advocate schemes intended to deceive or defraud lenders in the process. Here are two great links from the Department of Licensing outlining their requirements:

• Short Sale Seller Advisory
• Short Sales: Guidance for Licensees

What are the advantages of seller financing?

The biggest advantage of seller financing is flexibility. In a tightened lending environment, there are both buyers who can’t qualify to buy a particular property and properties which have unique characteristics which work against typical lending guidelines. For a seller who owns a home free and clear of mortgages, they can specify their own loan terms to a prospective buyer, easing the lending requirements and potentially resulting in a quicker sale.

Seller financing probably doesn’t make sense

Seller financing of real estate is best used with extreme caution. There are numerous reasons why it won’t make sense for most sellers.

1. You have an existing mortgage – Most sellers have an existing mortgage on their home. You can craft the legal documents that wrap a new mortgage around your existing mortgage. The buyer pays you and you then pay your existing mortgage. However, in 99.9% of the cases, you have violated the “due on sale” clause of your own mortgage by selling the home. “Due on sale” means that when the property is sold, your lender has to either be paid off completely or they have to issue written approval for the sale. They are not going to do the latter, so stay away from actions which force your mortgage to become payable in full. It is not worth the risk.
2. Why can’t the buyer qualify? – The lending environment is more strict these days, but not unreasonably so. If a buyer cannot obtain a mortgage through traditional lending channels, ask why. Is their income too low? Do they have bad credit? Do they have excessive debt obligations? If you are becoming their lender, why would you incur these risks that banks are certain to avoid? Seems like a bad business decision.
3. Low interest rates – Current interest rates are at record lows. No sane buyer would choose more expensive seller financing options if they can get a great rate on a traditional loan. Most sellers would want a premium over market interest rates to incur the risk of making such a loan, but it makes little or no financial sense to a buyer. If the interest rate situation were to reverse suddenly, then sellers may be able to offer below-market financing rates to help get their home sold in a high interest rate environment.
4. Do you want to play the foreclosure game if you have to? – If the buyers stop paying their mortgage, you have the joyous task of foreclosing on them. Depending on where you live, the process is time-consuming and potentially expensive, not to mention stressful. I don’t know any sellers who would relish the process of foreclosing and potentially evicting their buyers.
5. Do you want your equity tied up in a mortgage? – Let’s say you are making a $200,000 mortgage to a buyer for a 10-year term. Are you comfortable with being paid off over a long time frame? Will you need the money sooner? Most importantly, can your equity be put to better financial use elsewhere, rather than collecting interest and principal on a real estate note.

When seller financing does make sense

There are properties and situations where seller financing is really the only option. Non-conforming, unusual or undeveloped real estate can lead to situations where banks will not make loans on a particular piece of real estate. If the seller has equity in the property and can safely grant a mortgage to their buyer, then seller financing can help the sale of real estate that might not otherwise be possible. However, for the vast majority of homes and condos, this doesn’t apply. There are plenty of traditional lenders available to make standard home loans in those situations.

If you choose to pursue seller financing

If seller financing is a choice that you have to make to sell your real estate, be sure to do your homework. You need to qualify your buyer, much like a bank would. Spend the extra time and money to hire an attorney, and perhaps a CPA, to help you draft contracts and terms that best protect your interests.

But if I go cold, I won’t get sold.

I’ll get put in the back in the discount rack,

Like another can of beans.

ZipRealty, one of the pioneers of online real estate, and still one of the most popular search sites on the web, has created their own “discount rack” of homes with big discounts from their original list prices, giving buyers a way to find homes that are 10%, 25% and 40% off of their original list prices.

I suppose this is their attempt to draw excitement towards home listings that haven’t sold, which is what home marketing is all about. However, this promotion seems flawed in so many ways that is doesn’t help buyers or sellers to make intelligent buying and selling decisions.

1. Find a great deal on your next home – This ad implies that that just because a home is 10%-40% off of its original list price that it must be a great deal. I have worked with enough sellers in the past couple of years to know that some of them are living in a fantasy world about the value of their home. A seller who believes their home has appreciated by 15% when the rest of the home values in the city have declined by 20% is still overpriced, even at 40% off of their original list price.
2. Price reductions do not equal a great deal – Some of the best deals that we’ve seen in the past few years are on homes where there were no price reductions at all. The homes came on the market at a great price and sold quickly. No price reductions necessary. In fact, when buyers recognize great deals in this slow market they still bid up prices over list price, and still get a great deal.
3. Home listings go stale when they are overpriced – Sellers worry that their listings will become stale if they are the market for too long. However, our experience shows that even a stale listing will sell when it hits the right price point. As soon as you enter a price territory that is intriguing to buyers, you will start getting traffic and eventually an offer. Get the price right to begin with and you don’t have to be put in the “discount rack” with lots of price reductions.
4. Great deals are relative to the rest of the market – Only by comparing a listing to recent, similar sales and market statistics can you gauge whether a home is a great deal or not. Looking at it in isolation based on how much they have reduced their original listing price tells you nothing.

If you are motivated to sell your home in a reasonable amount of time, you want to do everything you can to avoid being put in the “discount rack.” If you get the price right to begin with, your marketing time will be shorter, and you don’t have to go through months of 10%-40% price reductions. The price you get may not be what you had hoped for, but that is the reality for every single person in the country right now.

I can almost guarantee that the financial results from your sale will look better if you price the home aggressively and get it sold in a month, versus a scenario where you overprice by 40% and spend 8 months trying to get down to the right price. Buyers negotiate harder and demand more concessions when you have been on the market forever, so you need to start the process by standing out from the other “cans of beans.”

1. Inflate the price to get the listing – This is one of the oldest tricks employed by real estate agents to get your business. Listing contracts are lengthy and exclusive to the listing agent. By luring you in with false hopes of a higher price, they know that once they have the listing, they have a few months to work on you to whittle down the price until the point that it sells. When competing with other agents for your listing, there are plenty of agents out there who will outright lie about the market value of your home to get the deal.
2. Ignoring negative features of the house – Just because your neighbor’s seemingly identical house sold for a certain amount does not automatically mean you will receive the same. Maybe you are next to a busy street, have views of neighboring industrial activity or maybe your house hasn’t been maintained like your neighbor’s home. Sellers often ignore such factors in hopes of getting a higher price, or maybe some negative factors simply don’t bother them after years of living in a house. The agent who ignores such negative factors when pricing a home is doing the seller a huge disservice. Even if these negative factors do not bother you as the seller, they will impact the amount that buyers are willing to pay for your home.
3. Real estate agents cannot guarantee a price – Real estate agents are not able to tell you how much your home will sell for. That is a sales pitch perpetrated by aggressive agents. Agents who start the sentence with “I can get you $XXX…” should be viewed with skepticism. An agent can only provide you an estimate of what they think the house will sell for based on recent sales and current supply and demand in your neighborhood.
4. The market determines value, not your agent – The actual market value of your home is determined by what a buyer is willing to pay for it. Supply and demand changes constantly and your home needs to be priced to entice buyers to choose your house over your competition. If there are fewer buyers in the market or higher than normal inventories, your price needs to be more enticing to attract a buyer. Even the best listing agent cannot manufacture buyer demand that isn’t there, no matter what they promise upfront.
5. Free advertising for the agent – You may find this hard to believe, but it may not matter to your agent if your overpriced listing doesn’t sell. Having a sign in your yard, your listing on their website, and hosting open houses can all be ways that the agent will attract new clients.
6. Shorter market times produce the best financial results – Sellers who took the bait of a higher suggested price often grind away on the market for months at a time with repeated price drops. When the home finally sells, it ends up at a more realistic price that was originally suggested by the more conservative agents. Had you taken their advice initially, the home would have sold much quicker for the same net result.
7. The comps don’t lie – Does the data really support the higher list price that an agent is suggesting? Are the recent sales truly similar in age, size, configuration and location to yours? Don’t be duped by a set of comparable properties that are listed at higher prices unless you have evidence that properties are actually selling in your neighborhood at those price points. Looking only at unsold listings can be misleading, as there are certainly a fair share of overpriced properties on the market. List prices do not necessarily equal market value.
8. There is both art and science to determining home prices – There is a wealth of information and market data available online these days, and a rigorous analysis of that data will help you to arrive at a realistic price for your home. However, an agent who offers data analysis without looking at a range of properties in person is being lazy. Every piece of real estate is unique, and a proper pricing analysis does involve in-person analysis of the home, competing homes and the surrounding neighborhood.
9. A reputable agent will turn down an overpriced listing – The list price for a home is ultimately a seller’s decision. However, an ethical agent will turn away a listing that is clearly not going to sell at the proposed price. It can be a waste of effort for the agent, and it does a disservice to the seller with long market times and sub-optimal financial results.
10. The second agent will save the day – The best agent to be in this scenario is the second agent that comes on board after the first agent’s listing expires. The first agent promised a sky-high price, but after 6 months on the market and numerous price drops, sellers often become frustrated and will switch agents. As the second agent, the home is likely queued up at a much more reasonable price, and with a fresh listing and a bit more marketing, the house finally sells. The replacement agent looks like a hero to the seller, but in hindsight, the seller could have achieved the same result months earlier by not falling for the promise of an overinflated price.

As a brokerage, we end up losing multiple listings every month because we are “outbid” by agents who claim to be able to get a higher price than us. Our philosophy is to provide an honest and ethical opinion of the price range that the property may sell for. It does neither us nor a seller any good to overpromise on a price that clearly won’t work. As I’m writing this article we are about to lose a listing to another agent from a very well-known brokerage who claims to be able to “get the sellers $50k more than us.” It drives me nuts to lose business to this sort of sales pitch, but ultimately it is probably best for us to let the business go to the other agent. No agent is perfect on pricing recommendations. There is more than one occasion when I wish we had suggested a lower starting price, but I think an honest and ethical approach to the pricing process is what the best agents provide.

Related Articles

• Choosing an Agent to Sell Your Home

1. Figure out the rent – The rental housing market is much more fluid than the resale market, and rent prices fluctuate based on real-time supply and demand. The best place to figure out a market rent is to visit the websites where renters are looking for apartments. In most cities, that will be Craigslist and maybe a few other rental sites. An afternoon shopping for similar rentals will give you a price range to start.
2. Do I need a property manager? – Most accidental landlords don’t want the hassle of finding tenants, dealing with repairs or collecting rent. A property manager can be appropriate to offload these responsibilities, but in most cases it will be cost-prohibitive to the owner of a single rental unit. A typical property manager may collect 7%-10% of the monthly rent, plus charge you half or a full month’s rent as a “lease-up” commission. Unless distance or time constraints don’t allow it, it usually makes most financial sense to manage the property yourself.
3. Control freaks  – Does your emotional attachment to your home border on the fanatical? Are you obsessing about damage that potential tenants may cause or how they may decorate the place? Tenants have the right to enjoy a property free from unreasonable landlord restrictions, so put your control freak tendencies aside. Ignore my advice in #2 and hire a professional property manager.
4. Get your rental forms ready – Before you start looking for tenants, get yourself setup with all of the appropriate rental forms. At a minimum, you’ll need a rental application, a well-written lease and a property condition report, but in many cities there are many more forms to deal with. Do NOT visit your local office supply store or visit a random website to pick up generic lease forms. Rental laws vary considerably by city and state, and you absolutely need a lease written with local laws in mind. If you are in a major city, contact the local rental housing association, which often provides well-written leases specifically for local landlords. (If you are in Seattle, you will want the Rental Housing Association of Puget Sound.)
5. Determine your screening criteria – Tenant screening is essential to securing good tenants. Speaking from many years of personal experience, you absolutely cannot judge a potential renter by the car they drive, the clothes the wear or how much you personally like them. Some of the worst tenants talk a big game upfront, but simple tenant screening procedures would help uncover what they are really like as a tenant. You need to evaluate a few key questions. Can they afford the apartment on their income? Do they have a reliable income stream? Do they pay their bills on time? Have they been good tenants in the past? Fair housing laws demand that you have a set criteria that is evenly and fairly applied to all applicants, which leads to my next point.
6. Follow fair housing laws – You need to pay attention to both federal and state fair housing laws. Apply your rental screening criteria evenly and fairly to all members of “protected classes” and you will avoid potential fair housing complaints.
7. Advertise your rental – Advertising a home for rent is pretty darn easy these days, and most times all it takes is a simple Craigslist ad. You can get fancy and try online flyer solutions like vFlyer and Postlets as well. The other beauty of the rental market is that it has no “price memory”, so you can actively tweak your price until you find a taker. Pick a price and give it a try for a week or two. If you are not getting any activity, try something lower. Eventually you’ll get to a price that starts the phone ringing.
8. Be flexible about showings – Most renters make rental decisions quickly. A lot of rental decisions are made within a few days, so if you receive a call or email about someone wanting to see your rental, make it happen quickly. If you make them wait more than a day or two, they will often rent something else.
9. Taking an application – Make sure your prospective tenants fill out a complete application. You’ll also want a copy of their ID so that you know they are who they say they are. You may be able to charge an application fee to cover the expenses involved in tenant screening, but this is one area where you’ll need to consult local laws. In Washington, you can only charge for fees actually incurred in screening.
10. Tenant screening – When I screen for tenants, I look at a few key criteria. Are they currently employed? Is that employment likely to continue through their tenancy? Do the prospective tenants earn enough to pay the rent? (I personally like to see their rent not exceed 33% of monthly gross income, but this can vary.) I also run a credit check to see that they pay their bills on time and contact their previous landlords to look for any obvious issues. You should find an agency who can run credit reports for you. There are many credit screening services available, some of which are offered through local landlord associations. Lots of great tenants may have a few dings on their credit report. Asking for an explanation of late payments may show honest mistakes. What you are looking to avoid is chronic late payers.
11. Signing a lease – Once your tenants pass your screening process, it is time to sign a lease. The length of a lease is negotiable. My own policy is to ask for an initial 12-month lease that automatically reverts to a month-to-month tenancy. That gives your tenants an significant initial commitment, while offering lease flexibility once they have been there for a year. If you are eventually looking to sell the property, you need to understand how local laws affect your ability to terminate a lease in the future.
12. Security deposit – Asking for a security deposit is a sound business practice for any landlord, providing protection in the event of damage to the house. The deposit should be substantial and reflective of the value of the property being rented. Many first-time landlords make the mistake of making the security deposit equal to one month’s rent. This is a recipe for tenants to say “I’m moving out next month. Just take my security deposit as my last month’s rent.” This leaves you with no protection in the event of damage. I always make the security deposit something arbitrarily less than one month’s rent to avoid this situation. In most places, you are required to hold a security deposit in a “trust account” that is not mingled with other funds. Check your local laws.
13. Property condition report – You and your new tenant need to fill out a property condition report at the beginning of the tenancy. If you have to keep any portion of the security deposit because of damage, you need documentation about the original condition of the home. If you end up in a dispute about a security deposit, your tenant will win the dispute if you cannot produce documentation about the original condition of the home. You may even want to include photos in the report.
14. Regular maintenance – Have a plan for ongoing maintenance, particularly items that tenants may neglect like landscaping, snowplowing and furnace filter changes. You’ll also want to inform your tenant on the best way to contact you in the event something breaks.
15. Move out – If you have a fixed-term lease, your tenant does not need to notify you that they are moving out. If they are on a month-to-month tenancy, they will have to give you proper notice, which varies by locale. (In Washington state, tenants need to inform you 20 days before the start of the next rental period.) When a tenant moves out, it is time to revisit your property condition report. If the tenant has caused damage, you may be able to keep a portion of their security deposit, but you need to be able to document the damage and price of repairs. Most rental laws will not allow you to collect money for “normal wear and tear.”

Being an accidental landlord may be intimidating, but it isn’t that hard if you follow these simple guidelines. Seek assistance from local professionals if you need it, and be sure to adhere to local landlord/tenant laws.

Resources for Seattle-area Landlords

• Rental Housing Association of Puget Sound
• Seattle Landlord-Tenant Laws
• Seattle Rentals
• Fair Housing Questions

Sounds fantastic, doesn’t it? If I list my home for sale with a Coldwell Banker agent, I can magically extend the $8,000 credit to potential buyers. What’s the catch? The catch is that sellers participating in the promotion are giving 3% of the accepted offer price – up to $8,000 – as a credit at closing back to buyers who sign an offer before July 31st. This is not a promotion at all, rather it is a marketing ploy by Coldwell Banker to get their sellers to lower their sales proceeds by $8,000! Coldwell Banker agents offer no contributions in the process, other that advertising that their sellers are willing to concede $8,000 for offers before July 31.

Sellers have always been able to offer concessions to get their home sold, whether in the form of price reductions or contributions towards buyer closing costs. If you are a seller, there is nothing special about this promotion. These are pricing tools that have always been available to you and your agent. No matter who your agent is, if your home is not selling, you should have a conversation about your asking price, incentives you could offer to buyers and any other improvements that could be made to the property to attract more buyers.

I think my favorite part of the promotion is this quote:

“The Government has acted. Now it’s up to us!”

Up to us? I don’t see anything being contributed by your Coldwell Banker agent, other than a promotion to get you to list your home with them and lower your price at the same time. There are a variety of brokerage options available today that WILL save sellers a substantial amount in real estate commissions which they can pass along to buyers to help accelerate the sales process. If you live in the Seattle metropolitan area, listing with a brokerage like findwell will save you 1.5% of the listing commission, while still providing outstanding marketing and customer service to get your home sold. If your home sells for $500,000, you can save $7,500 by using our services, without having to take it out of your own pocket.

Why are FHA loans now important?

Loose lending guidelines caused the banking mess that we are now in and the resulting downturn in the housing market. Facing mounting defaults and losses on home loans, banks retreated from making new home loans and severely tightened their credit requirements for obtaining a new home loan. Banks were only willing to loan their money to the most credit-worthy borrowers with large down payments, strong income and low debt. Borrowers with weaker credit, smaller down payments or lower cash reserves either could not obtain a loan, or were faced with expensive loan options.

FHA loans are government-backed loans designed to offer affordable housing alternatives for borrowers who have lower down payments and weaker credit situations. After the banks severely tightened their lending guidelines, FHA loans became an attractive and affordable home loan option for many home buyers and home owners. Because FHA provides a government guarantee to banks who write loans to their guidelines, the banks are willing to offer loans to people who might not otherwise qualify for a conventional loan.

I’ve seen varying estimates, but the percentage of new FHA loans during the housing bubble was something under 4% of all home loans. After the housing market decline, FHA now represents a huge percentage of new home loans, often 40%-50%+ in some markets. Looking at some local data, 27% of condos purchased in King County so far in 2010 have used FHA loans. The bank forecasts I have seen indicate that FHA loans will remain extremely popular during the next few years.

If you are selling a condo, your condominium complex must be FHA-approved before a buyer can obtain a home loan. If your condo does not have FHA-approval status or does not qualify under FHA guidelines, there is an enormous pool of potential buyers who will be unable to buy your property. When we work with buyers who require an FHA loan, they will actively ignore properties that are not FHA-approved. Less demand for your condo will result in lower long-term property values.

Is my condo already FHA-approved?

Many condos do not have FHA approval status. They may qualify for FHA approval, but many did not see the need to obtain the approval in the past. To check the approval status of your condo, you can visit this page on the HUD website. It is not the most user-friendly site, so you may have to try a couple of different queries to locate your condo. You can also ask your Home Owners Association (HOA) manager or board members for the FHA status of your condominium.

How can my condo obtain FHA approval?

FHA does have a set of guidelines that a condo must meet before they can can obtain FHA approval. These guidelines deal with the percentage of renters/investors in the complex, financial status of the HOA, and reserve budgets for future repairs. Not all condos will receive approval, but many are eligible. The approval process involves submission of a variety of condo documents to FHA, including documents like condo declarations, association bylaws, association budgets and reserve studies.

There was a major change to the FHA condo approval process on February 1, 2010. Prior to that date, a condo buyer could seek an FHA “spot approval”, which was a one-off approval of a particular condo unit. The spot approval process was an efficient way to quickly obtain FHA approval. The process changed in February, and now FHA approval must be obtained for the entire condo complex. While the process has been streamlined, it is more complex and may still take a couple of months to complete.

There are two current methods that can be used for FHA condo approval. The first involves submitting paperwork through the HUD Review and Approval Process (HRAP). There are also lenders who have been authorized by HUD to review and approve condo projects. This is known as the Direct Endorsement Lender Review and Approval Process (DELRAP). Only certain lenders have been approved for this process, since it requires dedicated staff and FHA expertise.

If you want a deeper dive into the FHA eligibility requirements and approval process, you can read more about it in this HUD publication.

My condo complex is not FHA approved. What should I do?

FHA approval for condos is critical for maintaining property values and being able to sell your condo complex to the widest pool of potential buyers. If your condo complex has not gone through the approval process, you should request that your HOA board members and management company spend time to go through the process and obtain approval. It can be helpful for the association to hire an FHA consultant who can guide them through the approval process.

If your condo complex does not qualify for FHA approval, you should become an active member of the association and suggest changes to the association budget or rules that will enable FHA approval in the future. Some of these changes may be financially painful for the association and current condo owners, but ultimately it will improve the long-term financial health of the condo association and help maintain property values.

How NOT to select your listing agent

1. Based on the highest recommended selling price – The first agent says they can sell your home for $400,000. The second agent thinks they can get it sold for $450,000. Don’t automatically choose the second agent with the highest price recommendation. A price recommendation is simply an opinion from the real estate agent, and those opinions are based on their recent experience and knowledge of market data, which is always imperfect in real estate. The agents with the higher proposed selling price do not have access to a “magical” pool of buyers willing to spend more to buy your house. The market will determine the price. Some agents will tell you a low price because they want to price it aggressively and sell it quickly, maybe too quickly. Others will tell you a number that you want to hear to get your listing, knowing full well that once they have the listing in place, they can get you down to a realistic number over time while still retaining the business. At the end of the day, price is your decision. You should listen to the market knowledge and experience of the agents, but you should not blindly choose an agent because they are promising more money. Often those are false promises to get your business.
2. They promise that they have access to a great pool of buyers – There are many variations of this pitch. The agent will tell you that they “work with lots of buyers in the area” or will “expose your listing to all of the agents in their office who do business in the area.” This approach may be valid in small towns with a handful of agents, but it is simply untrue in larger cities with thousands of agents. Actual sales data simply does not show this result. In the Seattle area, 95%+ of sales are closed between agents from totally random and unrelated offices and is almost never sold by your listing agent. In the rare event that your listing agent actually does find you a buyer, it is not because they are currently working with a buyer for your home. It is simply because an unrepresented buyer happens to call their name on the sign.
3. Picking the “neighborhood expert” – Some neighborhoods have a few agents who “own” the neighborhood. You see their signs on all of the neighbors houses, and automatically assume that they have some special expertise in getting home sold quicker. Some of these neighborhood agents are quite good and some are not (see criteria below), but once again they do not have some magical power to produce a buyer for your particular house. In the age of the internet listing, the most important factor is to present an appealing product at a reasonable price to the broadest possible audience of buyers. Buyers could care less who the listing agent is if the house is right for them. If a buyer’s agent has a buyer for your house, they will find you through internet listings, not through consultation with some neighborhood expert.

Selecting the right listing agent

1. Comfort level – Personality fit is critical to picking the right agent. In today’s market, selling a home can be a long and emotional process, sometimes fraught with negative news along the way. You want an agent who you feel comfortable with and are willing to listen to, even if they are delivering news that you do not want to hear.
2. Marketing plan – Does your agent have a plan to expose your listing to the maximum number of buyers? Note that this is different than actually finding a specific buyer (which they don’t do). Buyers and agents will almost certainly find your home online, and a successful listing agent will have a plan to get your listing into every corner of the internet.
3. Presents your home professionally – The agent’s job is to make your listing as attractive as possible and get buyers in the door. Outside of price and location, photos are what bring buyers to your door. There is no excuse for listing agents that do not take professional-quality photos, and thousands of examples of listings with extremely poor photos. The other critical task here is helping you to get your home to “listing condition.” A quality listing agent will not be afraid to tell you what needs to be cleaned, de-cluttered, painted or repaired. Take a look at their current listings and see how they are presented before you make a choice.
4. Has a rational, well-researched approach to pricing – Price is the single biggest factor to getting your home sold quickly. It is a balancing act between wanting to sell quickly and not leaving money on the table. While pricing is ultimately your decision, you want to work with an agent who has a well-thought out approach to pricing your home. Have they researched homes that have actually sold? Are they taking current competitors into account? Have they viewed your competitors in person? How do they adjust prices based on the unique characteristics of your home (positive or negative)? A reputable listing agent will also refuse to take your listing if they think your proposed price is way too high for current market conditions.
5. Doesn’t tell you what you want to hear – You are paying the listing agent for their advice. You are not required to take their advice, but you want someone who will be open and honest about what they think of your home and current market conditions.
6. Listing fees – Listing homes for sale is a competitive business. Some agents are inflexible on their fees, while some will negotiate them. Remember that all fees are negotiable, and you need to feel comfortable with the value you are getting from the agent in exchange for those fees. Choosing the lowest fees is not always the right choice, unless you are prepared to sacrifice service levels to achieve the lower fees.
7. Negotiation, persistence and follow-up – When buyers express interest in a property, you want an agent that will follow-up diligently with all potential leads. Buying a home is not like buying a car. An agent cannot convince someone to buy a home that they originally don’t like, but a good agent can sometimes coax an interested buyer through persistence and follow-up. When you do receive an offer, you want an agent who is a strong negotiator that looks out for your best interests. They are able to effectively state your case to the buyer, hopefully resulting in a higher sales price, while not scaring the buyer away in the process. They are also effective negotiators during the property inspection, seeking creative and fair remedies to both parties to ensure a successful sale. Being a strong negotiator does not always mean being aggressive. Selling a home is a cooperative and often emotional process between your agent, the buyers agent and the buyers. Your agent needs to be able to balance assertiveness with professionalism and courtesy to the other parties in a transaction.
8. Strong communications – You want a listing agent who regularly communicates the progress of your listing and any recommended actions. It will likely take a number of months to sell your home, and you want to be in tune with what is happening with the listing. You should also use agents who have a feedback mechanism for agents and buyers who have seen your house. The most important market advice you can often receive is direct feedback from recent showings.
9. Access to contractors – Selling a house, particularly an older house, may require some home maintenance and repairs to make buyers be willing to purchase the home. Sometimes these are simple fixes, but other times are extensive repairs requiring numerous contractors. A good listing agent can be a valuable resource for getting this work bid out, scheduled and completed. Everyone has busy lives, and having a reliable agent who can make these fixes happen without your involvement will save you lots of time and hassle.
10. Experienced, full-time agents – Selling homes is a full-time job. Part-time agents will give you part-time service. A dedicated agent will always make themselves available to show your home to prospective buyers and has a team of people in place that can help when needed.

Selling a home, particularly in today’s slower real estate market, is a sometimes daunting and emotional task. Doing your homework and selecting the right agent to list your home can pay off with a quicker, relatively pain-free sale, so choose wisely.

Related Articles:

• Selecting a Listing Agent Based on Highest Recommended Price is a Mistake

In a short sale, the mortgage holders go through a lengthy review process where they review the financial condition of the seller, evaluate the market value of the home, and determine the payoff amount they are willing to take to release the homeowner from the debt. When a bank approves a short sale, they provide a payoff amount, an approved HUD-1 Settlement Statement and set of conditions that must be met by the seller and buyer. One of those conditions is a “waiver of funds” where the seller relinquishes all rights to receive excess funds from the transaction. Since the bank is being asked to take a large loss on the transaction, it makes sense that they don’t want the seller to walk away with “a little extra” at the closing table. Here is an excerpt from a recent short sale transaction that we closed:

“Any overages must increase the net proceeds and any escrow/impound balances, which also include any insurance and property tax refunds. These will be applied to reduce the total debt of the loan.

The seller shall not receive any proceeds from the sale of the property.”

Seems pretty clear, doesn’t it? The problem is, there are some listing agents out there who promise a “kickback” of some of their commission after the sale closes to give the seller some spending money. I recently came across a situation where the seller was promised $3000 if they chose this particular agent to facilitate their short sale closing. This is in direct violation of the short sale payoff agreement that the seller signs with the bank. I’m not a lawyer, but there are also possible violations of licensing laws in such a scenario. As a real estate broker, we are obligated to act in “good faith” with all parties to the transaction. This includes adhering to the written bank agreement. If you are presented with such a scenario by a potential listing agent, as appealing as it may sound, recognize that they are asking you to willingly violate the bank’s short sale agreement. Seek assistance from a reputable agent experienced in the short sale process instead.

One of the agents in our office has a grandfather who is very particular about things that he sells. Whether he is selling you a car, a refrigerator, or a home, he takes the extra steps to make sure that he is selling you the best product possible. He cleans up the car, changes the oil and fixes minor issues before putting it up for sale. He makes sure the the refrigerator is spotless and demonstrates it in good working order when you come to look at it. Does he spend extra money and time to make these happen? Yes, but he ends up with happy buyers in the process and more importantly a successful sale.

Prepare your home before listing

Demonstrating this sort of pride of ownership when you go to sell your home starts when you prepare the home for sale. You have lived there awhile and know many of the quirks and problems in the house. Are there issues that you can fix upfront? Maybe it is as simple as touching up the paint or installing new furnace filters. Maybe it is more involved like fixing a problem with the plumbing or replacing a defective appliance. If you are diligent, you can even pay for your own home inspection upfront to identify issues that need attention prior to the sale. The inspection phase of a home purchase is loaded with pitfalls and potential for the sale to fail. By addressing many of the issues upfront, you can reduce the risk that the sale falls apart during inspection. If the home has some larger issues that you are not planning to fix, being upfront about those issues and accounting for them in your price will let your buyers get past that hurdle before they even make an offer.

Be flexible on inspection negotiations

Demonstrating pride of ownership can also help you overcome buyer objections to items that they do find during their inspection. Every home, no matter how new and how perfect, will surface some issues in a home inspection report. Many buyers don’t want the hassle of fixing things in their new home, and some have unreasonable expectations that the house will be “perfect” when they buy it. Only buyers of new construction can expect perfection, but a seller can help to deliver that perfection by agreeing to fix many items, even if they are small or seemingly insignificant. We see negotiations every day where buyers and sellers get into a disagreement over a ~$1000 list of items that could be fixed by a handyman. For a $400,000 purchase, is it really worth risking the loss of a qualified buyer over such a small amount?

Dealing with unreasonable buyers

The decline in the real estate market has brought out a segment of buyers who expect the world. They want a very large discount off of your list price, and they want you to fix every problem they find in the home. Are they being unreasonable? Yes, but put yourself in their shoes. Wouldn’t you want the house at a great price with no issues to worry about? When the buyers want everything, you are going to need to negotiate to bring things to resolution. Do what you can, within reason, to be flexible and give them some concessions to get them past the issues. All too often we hear “It’s an old house, of course it has issues. We’re not fixing anything.” That is hardly a recipe for buyer satisfaction or trust. Your chances for success go up if you can demonstrate some commitment to the quality of the product that you are selling, which is your home.

The pitfalls of selling “as-is”

Maybe your house has lots of problems, or maybe you don’t have the financial means to facilitate any repairs. Those are both valid situations where you may want to try to sell the home “as-is.” There are certainly buyers out there willing to purchase “as-is” if the issues are reflected in your pricing. More importantly, if you choose to sell “as-is”, you should be very upfront about what they are getting into. Here is an example. Let’s say that you know you need a new furnace, but cannot afford the $4000 replacement cost. One approach is to say “I’m selling it as-is. I know it needs a new furnace, so you are making an offer knowing that fact.” The second approach is to say nothing and let them find out that it needs a new furnace during their inspection. Even if both situations are “as-is”, I guarantee that the secretive approach to the problem is going to end up with them negotiating and asking for the furnace replacement.

The process of selling your home is an emotional and financially stressful one. Your real estate agent can help you navigate the process and come to a mutually acceptable resolution for both the buyer and seller. While your house doesn’t have to be perfect, demonstrating some flexibility and a commitment to selling a quality home will increase your chances of a successful sale in this tough real estate market.

One other important phenomena is that many times for new construction homes or condos, buyers will simply walk into a sales office and make an offer with the agent who is staffing the sales office. I am able to filter the data to compare new construction with resale to gain a more accurate picture of whether or not agents from the same office as your listing agent will sell your home.

What does the data say?

What can we learn from this data? First of all, for resale of a home, the claim that the listing agent will get a buyer by advertising to other agents in their office is untrue in 90.0% cases. For resale condominiums, it is still largely untrue with 83.4% of sales happening between agents from different offices. Interestingly, most of the situations of a sale being completed by the same office are because of dual agency. For resale homes, if you exclude sales where the same agent helped both the buyer and seller, then 96.3% of sales happen between agents from totally different offices. For resale condos, if you exclude dual agency, then 92.7% of sales happen between agents from different offices.

New construction is a slightly different story. For new construction homes, 17.2% of sales happen between agents from the same office, with a whopping 10.4% of buyers using the agent in the sales office. For new construction condos, it is even more exaggerated, with 34.5% of sales happening between agents from the same office and an enormous 20.7% of buyers use the agent in the sales office.

Lessons Learned

There are two things to learn here. First, the claim that listing agents will magically find a buyer for your property by advertising to other agents in their office is largely untrue. The data simply doesn’t support this claim. There are cases of the listing agent finding a buyer directly, probably from their sign or advertising, but be wary of agents who overpromise on this point. Second, there are too many buyers of new construction homes and particularly condos who are blindly choosing to use the agent in the sales office to help them. They must not realize that they are free to obtain their own agent representation, and by using the sales office listing agent, that agent is getting paid double for their work, not to mention that the agent has an obvious conflict of interest with primary allegiance to the builder.

When listing your home for sale, it is important that you choose a listing agent who you can trust. Their job is to market the property and attract as many potential buyers to your home. It is also their job to help you negotiate with buyers to maximize your sales price and sell the home as quickly as possible. We recently have had a few experiences when working our buyers where an incompetent listing agent lost their sellers thousands of dollars through some very simple missteps.

When a buyer is getting ready to submit an offer, it is very common to call the listing agent in advance to alert them about the offer. This is an opportunity to find out if we are competing with other buyers, if there are any special forms needed, and to confirm the seller’s availability to review and respond to our offer. We have made quite a few of these calls lately and had some surprising results. Here is how the call goes:

findwell: We are writing an offer on your listing today an should have it to you this evening. Is there anything else you can tell us before we submit our offer?

Listing Agent: That’s great! We look forward to receiving your offer. By the way, we are lowering our list price today by $15,000.

Guess what, our buyers were prepared to make an offer on your original list price, not your $15,000 reduction. The listing agent’s quick comment just lost their seller $15,000 in the blink of an eye! If we are asking for a discount of $10,000 from your list price, you can bet that we will ask for that same discount off of your new list price. This is Listing Agent 101 stuff. Your listing agent should never process a price change on a day when they are told they are receiving an offer. Let the offer come in and decide what to do from there. This is a big enough mistake that I would seek another listing agent if this happens to you.

There are other times when buyers keep sending messages that they are “getting ready to put in an offer”, but it never seems to come in. If you believe that a price reduction is necessary, don’t wait around for a potential offer that may or may not come in, but do pay attention when you know that an offer is on its way.

How can you avoid this? When you make a price change, ask your agent if there are any potential offers coming in. If you hear that someone is “writing it up”, pause for a moment. It may just help your pocketbook.

I have recently come across some For Sale By Owner (FSBO) properties on property searches for my buyers. Fundamentally I have no problem with sellers trying to sell on their own, and for some people this setup works. However, after looking at some FSBO listings and touring some FSBO homes, there are some basic pieces of advice that I can give you as a seller trying to sell your home on your own.

1. Post lots of photos on the MLS – If you are paying to list your property on the MLS, spend the extra money and make sure you can post a bunch of photos. I just worked with a FSBO seller who bought the “cheap” MLS package which only includes one exterior photo of the house. Buyers expect to see interior photos of a home, even if it is in poor condition or outdated. With only one photo posted, most buyers will think that you are hiding something or that something inside is wrong with the house. You will maximize your potential buyers with high-quality photos of both the exterior and interior of the home.
2. Let the buyers see your home privately – Many sellers who choose the FSBO route are rightfully proud of their homes and want to show them off in-person. However, buyers generally want to see a home without sellers hovering over their every move. In a perfect world, a buyer wants to see a home privately with their agent so that they can speak freely about their opinions of the house. Security is another obvious concern. If you have signed up to have your home listed on an MLS, they will generally also provide a keybox. If you set an appointment policy, the keybox does provide assurance that showings will not take place unless under the supervision of a licensed real estate agent. The keybox will also track who has come in to your house and what time, for added peace of mind.
3. Understand what your are signing – Listing contracts outline specific legal requirements of the transaction. Most importantly they outline details about agency representation and how agents are compensated when your home sells. If you sign a listing agreement that specifies a 3% commission, this will apply to all buyers who come to you with an MLS-member agent. Also keep in mind that the buyer’s agent is representing the buyer and cannot legally or ethically advise you on your contractual obligations. Seek counsel from your FSBO listing agent or attorney if you are unsure about the documents that you are signing.
4. Pay a reasonable buyer’s agent commission if you list on the MLS – With our current commission system, buyer’s agents do expect to be compensated by the seller for their efforts when bringing you a buyer. While I don’t agree with this agent behavior, if you set a very low selling commission, it will reduce agent willingness to show your home. Also, keep in mind that if you require buyer’s to pay their own agent, many will ask for this as a concession in your sales price.

When interviewing a potential real estate agent, it is critical that you and other agents are able to reach them quickly. Everyone has a personal life and other business matters that will sometimes get in the way, but you want an agent who responds quickly to offer situations and recognizes that “time is of the essence” for real estate contracts.

We see a surprising number of agents who hide their number from other agents in our MLS. This requires you to phone their office during business hours, always resulting in a transfer to their voicemail system. These agents are usually slow to call you back. Guess what, if I am phoning an agent, it is usually because I am hoping to put together a deal with their client. I fail to see why an agent wouldn’t want to receive such a call!

1. Will you be reachable during the evenings and weekends if I need to write or receive an offer?
2. If you are busy, do you have team members you can turn to if something urgent comes up?
3. Do you publish your cell phone number to other agents? If not, why not?
4. How do you balance your time when working with multiple client offers at the same time?

If your agent is unwilling or lax about being reachable after business hours, find yourself another agent. You don’t want to miss opportunities just because your agent is afraid of solicitor calls.

1. Unrealistic price – Prices have come down nationwide. It can be hard to stomach the lower price, particularly if you stand to lose money. However, an accurate price is the single most important factor to getting a home sold in a reasonable amount of time. Work with your real estate agent and develop a realistic price range based on recent sales in your neighborhood. If you are aggressive with your price, you will attract the attention of buyers.
2. Clean, Clean, Clean – Homes need to be neat and tidy when they are listed for sale. Buyers love new construction because they don’t have to deal with someone else’s mess. The funny smell from the dinner you cooked last night or the soap scum on your bathtub are sure to turn off a segment of your buyers, but it is so easy to fix.
3. Neglected Repairs – Are there nagging and obvious repairs needed in your house? If you notice them all of the time, you can be guaranteed that potential buyers will notice as well. The home doesn’t need to be perfect, but spend the time and money to make these repairs, or be willing to when requested by buyers. Today’s buyers want a great price and a home in great condition.
4. Poor Photos – Almost all buyers search for homes online first. If you don’t have dazzling professional photos in your listing, you will not attract buyers for an in-person showing. Without an in-person showing, your home will never sell. It is that simple.
5. Marketing Basics – There are some basics that your agent needs to provide. Is the flyer box in your yard stocked with current flyers? Has your agent posted the home in all of the online marketing websites? This is all simple but essential work that needs to happen to get your home sold.
6. Ignoring Your Competition – You need to be aware of what else is listed for sale near your home. You may have a great home at a very reasonable price, but if a builder has new construction down the street, your home needs to compete with a better price or more amenities, otherwise buyers will pick the competition over you. Spend some time with your agent and pretend you are a buyer. Go and see homes that will compete with yours, take notes, and make sure that the home you are selling beats the competition with a combination of price, condition and amenities.
7. Not Giving Access – I’ve written about this before. Remember that buyers do not live by your schedule. If they want to see the home at a reasonable time, LET THEM SEE IT. Even if it is inconvenient for you, LET THEM SEE IT. Your home will never sell unless buyers take a look inside.
8. You Chose the Wrong Listing Agent – Not all real estate agents are created equal. A poor listing agent will allow you to overprice the home to get the listing. They will do little to market the home, and will be unresponsive to interest from other agents. Interview a few agents before choosing the one to list your home.
9. Buying the Wrong Home to Start With – Not much you can do about this one once you own the home, but if you focus on resale when you buy a home, you will prevent future heartache. You can’t change the location of your home, and a bad location today will be that much worse in a down market. Same thing for a home with a funky, unconventional floor plan. You can make cosmetic fixes, but an unappealing floor plan is difficult or impossible to change.

• Home #1 – We listed a 1920’s home in Wallingford, a popular neighborhood close to downtown Seattle. The seller had started a massive remodeling project, but never finished. All of the expensive work was done, such as a new roof, new plumbing, new foundation and new electrical. However, the seller never finished the flooring and trim work. Cosmetically the home was not attractive at all, and we actively worried about the impression that buyers would have with no flooring. We did our best with professional photos and making sure the house was clean. However, our aggressive sub-$400k price point was the magic that brought buyers in the door.  The goal with our pricing was to make sure that even after a buyer spent $20-30k, the home would still be an exceptional value for the neighborhood. It worked! We had 100 agents view the listing online during the first day, and had 24 agents show the home in the first two days! After two days, we had two offers for more than list price and quickly were able to secure a buyer.
• Home #2 – We listed a 1940’s Cape Cod in North Seattle. The home was in reasonably good condition and had clearly been remodeled in the last few years. However, while it was in a convenient location, it was quite close to a major arterial. Our seller acquired the property at a foreclosure auction and had enough equity that he was able to price it for a quick sale. In fact, he wanted it to sell in the first couple of weeks and was willing to price it even lower than we recommended. He spent a few thousand dollars to straighten up the place and make the yard look sharp. We followed up with professional photos and a comprehensive online marketing campaign. We had 54 agents view the property online, 36 of them show it, and then two competing offers that drove up the price after two days.

As a seller, what can you learn from these home sales?

1. Price it to sell – Even in a slow real estate market, every home has a price that will bring out buyers, and if it is aggressive enough, it will bring out lots of buyers. Pay particular attention to “psychological price barriers”. The difference in traffic between a home listed at $299,950 and $310,000 can be very substantial.
2. Make it look sharp – If the home has rough spots, do everything you can to make it look good. A few thousand dollars spent on paint, landscaping or cleaning will go a long way towards getting you a quick offer. Put away your point-and-shoot camera and make sure that your real estate agent gets a set of professional photos taken for your listing. The only way to secure a buyer is to first attract them to your online photos.
3. Buy in locations with intrinsic value – When buying a home, try to remember that you need to sell the home some day. By focusing on great neighborhoods and attractive locations, your job selling the home in the future is much easier.

Top reasons that we love Open Houses

1. Helps introduce a new listing – We like to host a broker’s open house plus a regular open house when we get a new listing. This is a way to introduce a property to the local agent community and is a way to introduce the home to the neighborhood. Word of mouth from neighbors and agents can be a powerful marketing tool.
2. Lets the DIY buyers see the house without an appointment – There are buyers who aren’t regularly working with a real estate agent, so hosting an open house is a method for them to see the home without having to make an appointment. In our market, we frequently see buyers from the discount-broker Redfin who are directed to an open house so that they don’t have to send out one of their field agents for a home tour.
3. Connect with buyers looking for a real estate agent – It is very infrequent that a person who attends an open house ends up making an offer on that particular house. Many agents are willing to host an open house to try and gain new customers who are in the market to buy a home and may not have an agent. Yes, this is self-serving on the part of the agent, so as a seller you should recognize these motivations.

Top reasons that we hate Open Houses

1. Low success rate – The percentage of homes that are actually sold via open house is very, very small. Most homes are sold via private showings from a real estate agent. Before insisting on more open houses, talk with your real estate agent about the success rates they have seen when hosting open houses.
2. Difficult to advertise – In our market, brokers are very territorial about their open house listings and many are NOT posted to the local MLS. This means that there isn’t a single place to find out that an open house is scheduled. For example, if Broker A is hosting an open house, you can only find out about it on Broker A’s website, not on Broker B’s website. The misguided idea here is that if Broker A is spending marketing funds to promote their listings, why should they potentially direct buyers to open houses held by a competing broker.
3. Attendance is not reliable – We’ve advertised a bunch of different ways, and there is no reliable method to attract buyers to an open house. Despite identical advertising, one weekend you’ll see eight buyers and the next you’ll see zero.
4. Success depends on location – One of the best ways to have a successful open house is to be located in an urban neighborhood with good car and foot traffic. Homes in a rural or suburban area have very little off-the-street traffic and generally have much lower turnouts. Also, large condo complexes are very difficult. It is hard coordinating access through the lobby, and even more difficult to post signage for the open house in these large condos.

The bottom line is that open houses are only modestly effective to help sell a home. Our approach is to host an initial open house to introduce a home to the market and then assess future open houses based on ongoing traffic to the property. As a seller, you should recognize that there are other marketing methods that yield better results such as online advertising, staging and price incentives. If you are looking to list a home for sale, have a conversation with your listing agent about their complete marketing plan.

1. Price – I just said that price isn’t everything, but guess what, if there is a big different in price, it will win most of the time. More money can make up for many other factors.
2. Closing Date  – Most sellers have a need to buy after they have sold their home. Sometimes the motivation because of a job transfer or the start of a new school year can be quite strong. Make sure your offer closes within 30-45 days maximum. If you want to be more aggressive, work with a lender who can close even quicker. Sometimes this can push your offer past the others.
3. Contingencies – In today’s slower market, most homes have an inspection and financing contingency, even in a competitive situation. There are times when you can waive your inspection or financing contingency to make a more compelling offer, but you need to understand the risks in doing so. The one contingency that sellers still don’t want to see is that your offer is contingent on selling another home.
4. Loan Qualification – Be sure to include a loan pre-approval with your offer. In addition, you’ll want to play up the positive aspects of your employment if you can. You need to demonstrate to the seller that you are the better candidate to get a loan on the property.
5. Earnest Money – Earnest money is the deposit that you include with your offer to show that your are serious about buying the home. In addition, it offers the seller some monetary protection in the event that the buyer doesn’t uphold their end of the contract. If you are competing, make sure that you have a “respectable” earnest money deposit. It needn’t be exorbitant, but it should demonstrate your willingness to purchase the home. Ask an experienced real estate agent for what is typical in your market.
6. Easy to Work With – This isn’t a written part of the offer, rather it is a story that your agent will convey to the sellers. You want the seller to know that you will be a buyer who is easy to work with and only plan on negotiating on major items that come up during an inspection. Sellers are in a stressful and busy time of their life, and the offer that makes it easier for them can prevail.
7. Intangibles – If all of the criteria above are the same, your offer will get evaluated in a variety of intangible ways. In fact, sometimes the intangible aspects of a buyer can outweigh other aspects of their offer. Sellers are emotionally attached to their homes, so they want to feel that their home is being passed along to another family who will care for the home in the same way that they did. If you are competing, write a letter along with your offer. Tell the seller why you love the house and how it will be great for your family. It’s cheesy, but if you are newly married or have adorable children, include a photo or two. You’d be surprised just how often this approach works.

Selling a home is an highly emotional experience, even in a strong real estate market, so it is understandable why sellers would be reluctant to respond to a low offer. But sellers need to recognize that a lowball offer is not an insult, rather it is a starting point to a negotiation. Put yourself in the buyer’s shoes and realize that there are a variety of factors that drive them to make a low offer, none of which are a desire to insult the seller.

1. Buyer lacks confidence in market – No one wants to lose money right away on a house if market prices decline. Negotiating a great deal upfront can somewhat insulate a buyer from these sorts of market declines.
2. Buyer lacks confidence in their own finances – Buyers may be stretching financially to move into their dream house, or they may be worried about future income potentially or increased family expenses. Getting a better deal helps relieve these pressures.
3. Buyers believe the listing price is unrealistic – Market value of a home can be highly subjective. Maybe the sellers refuse to acknowledge a price decline on their property, or maybe the buyers have not done adequate research to support the value. Either way it is the goal of a negotiation to bridge those differences.

We just encountered a situation with a buyer that illustrates the point pretty clearly. Our buyer was interested in a home that has been listed for over 200 days. The home is brand-new and was originally priced at $1.6M. The seller has reduced their price aggressively to the point where it is now listed at $1.2M. Our buyer has been watching the home for over six months and is very well-qualified. However, the buyer is still not willing to pay the $1.2M due to the factors I listed above. I approached the listing agent and mentioned that we are prepared to submit a written offer for $1.0M, to which he responded “Please don’t submit an offer that low. It isn’t high enough to get my seller to start talking.” I can’t help but think this is a huge mistake by the seller. We have a well-qualified buyer who has had his eye on the home for six months. I can guarantee that our buyer won’t pay the list price of $1.2M, but I can also guarantee that they are willing to come up from their offer price of $1.0M. Why not engage the buyer in a negotiation and see where things end up?

We’ve seen plenty of successful deals come together that started as “low offers”, sometimes with prices moving more than $100k in the negotiation process. There is no way to evaluate the true motivation of a buyer or seller without seeing a negotiation through to completion. Sometimes it may reach a dead end, but often it ends up in a deal.

Our advice is this. If you are a seller, swallow your pride and look at every written offer that comes your way, no matter how low it is. Instruct your agent to not discourage low offers, and make sure that you respond with a written counteroffer.