Category Archives: Selling a Home

There WILL Be “Yes” Answers on the Disclosure Form

iStock_000000433950XSmallHas an entirely clean seller’s disclosure form — free of reports of home defects, environmental hazards, local nuisances, and so on — ever been accurately presented in a real estate transaction?

Notice that I said, “accurately.” We’re not talking about how a few misguided sellers, filling out the standard form that is required in residential home sales transaction in most states in the U.S., may think, “This place will sell better if I pretend it’s perfect.” I don’t think anyone is keeping statistics on how often that happens.

According to a recent column by real estate agents Tarpoff and Talbert (who write for various California local papers), what happens in a normal transaction is that, “There are always ‘yes’ answers” to questions on the disclosure forms about whether the home has various issues or defects.

That’s not a surprise to anyone familiar with the real estate world. A home starts deteriorating the minute someone sets foot in it, or even without the presence of humans. A seller would have to be utterly oblivious to overlook the cracked window, the door that doesn’t close, the in-law unit that the previous seller didn’t pull a permit for, and so on. Any seller with any sense of responsibility, or who is working with a real estate agent who explains that transactions go better (and are less likely to lead to later lawsuits) if sellers are forthcoming with the truth, will come up with numerous items worthy of disclosure.

But to anyone new to the process of buying or selling a home, it’s worth reflecting on the importance of (if you’re a seller) filling out the disclosure form accurately and completely and (if you’re a buyer) reading the form carefully, asking follow-up questions, and not panicking when you see some of those inevitable “yes” answers.

The disclosure form is, after all, an outgrowth of a shift in various states’ laws away from the old doctrine of “caveat emptor,” or buyer beware. That doctrine put the onus on buyers to investigate the home’s condition, and not to come crying back to the seller if it turned out that the basement floods every winter. (Just as it had for the last 35 years.)

That doctrine may have offered seeming simplicity, but what a mess for buyers trying to accurately gauge the value of the home they were buying. Not to mention the fact that neither buyers and sellers could be sure they wouldn’t meet again in a courtroom, with buyers alleging that sellers had gone beyond the confines of the doctrine and committed outright fraud.

Today’s laws and forms requiring seller disclosures make for a far better chance that the home-sale transaction will wrap up with everyone feeling well-informed and relatively unworried about later disputes. And now’s a good time to mention that Nolo’s website has extensive online information about the seller disclosure laws in various U.S. states.

Hide Prescription Drugs Before the Open House!

pillsAll of our Nolo real estate products warn home sellers of the perils of leaving anything valuable in an accessible place during your open house. However, a recent headline from Washington State, “Real estate agent helps catch prescription drug thief posing as potential home buyer,” reminds us how relevant this advice remains.

The thief in question was ignoring cash, jewelry, and other valuables, and heading straight for the medicine cabinet in search of prescription narcotics.

When you think about how many people have some Vicodin left over from a past surgery — pills that they’ve probably forgotten are even there — you can see why a thief would figure this was a good bet, and might even reasonably hope that the homeowners wouldn’t notice the loss.

The sale of prescription drugs is apparently a big enough deal for the FBI to dedicate a separate reporting line to it: 877-RxAbuse (877-792-2873).

What can you do to avoid contributing to this trade? Clear out your medicine cabinets of all but the low-cost basics before an open house, and put any prescription meds in a locked area or even the trunk of your car. (Prevention is a far better approach than being suspicious of every house visitor who asks to use your bathroom!)

Should Sellers Have Warned About Neighbors’ Holiday Lights Display?

holiday lightsHow would you feel as a new homeowner if, with Halloween barely over, you watch your neighbors get out ladders and start gearing up for a massive  holiday display — complete with lights by the thousands, inflatable snowglobes, an open garage full of displays, and music?

That might be cute for the first five minutes. Or if it were a mile away. But then your cat starts coughing at the fumes from the lines of visiting cars, the blinking lights create a horror-show strobe effect on your bedroom wall, and the tune to a certain carol takes up permanent residence in your ear.

So why is it that I’ve met scads of homeowners who say they weren’t advised of such neighborhood holiday shows by their home seller? In one case, it was the seller himself who was the local manic decorator — and didn’t warn the buyer to expect kids knocking at the door in December, wondering when the “Santa’s Workshop” in the garage would open.

Most states in the U.S. require sellers to warn buyers of not just physical issues with the home, but environmental or neighbor-related issues that could have a material effect on its value. In California, for instance, the Transfer Disclosure Statement asks about “neighborhood noise problems or other nuisances.” Not every light show is a nuisance, of course — but at close range, or when a house attracts unprecedented traffic levels, it’s no stretch to say the seller should warn the buyer. (Of course, most homes are sold in summer — and who’s thinking about holiday lights then?)

Oddly, I can’t find any record of U.S. lawsuits against sellers for failure to disclose local holiday light displays. It’s not as though buyers are shy about suing home sellers for nondisclosure, of everything from past crimes on the property to neighbors’ regular loud arguments and late-night parties.

And neighbors have brought lawsuits against the owners of homes with overwhelming displays alleging nuisance. (Perhaps that’s the more relevant path to getting results, given that a few bucks from the home seller isn’t ever going to fully compensate a homeowners for the lost sleep from those blinking red lights.) Some have even explored even more creative approaches — check out attorney Rich Stim’s blog on, “Can We Report Neighbor for Blasting Copyrighted Christmas Music?

Or could it be that homeowners feel just too Scrooge-like suing over what’s meant to be a bit of holiday fun? In any case, if you’re a home seller, you can avert some future bad feelings by telling your home buyer what’s ahead — or at least leaving them your Santa costume.

Knowing Your Home Inspector’s Background May Change Everything

roofAs a reader of Nolo’s books and articles on real estate, you probably know that we recommend that home buyers ALWAYS include an inspection contingency in their purchase contract. That allows you to hire one or more licensed home inspectors to do a full report on the house, and to close the deal only if satisfied with (or able to negotiate around) whatever problems the report turns up.

But Patricia Wangsness, a broker with Coldwell Banker in Washington State, adds some important cautions to this advice: “Realize that inspectors are not all alike! Even if you hire an inspector who is fully licensed, you might find that one who is a former electrician will tell you a great deal about faulty wiring and sockets and deemphasize some other issues, while one who’s a former plumber will look hardest at drains and pipes.”

What’s going on here? Aren’t you hiring the person to conduct a “general” inspection of your home?

“Yes,” explains Patricia, “but inspectors arrive at this career in different ways. Some came from the building industry during the downturn, when they lost their jobs. Others simply decided that inspection was easier than what they were doing before. I’ve even heard media ads for inspector training courses, with taglines like, ‘Make your own hours! Work only three days a week!’”

This can be a serious issue, given the breadth of a standard home inspection. The inspector needs sufficient knowledge to evaluate most of the home’s features and systems. He or she should walk through the entire house, examining or testing for defects or malfunctions in its structure, systems, and physical components, such as the roof, plumbing, foundation, fireplace, doors and windows, electrical and heating/cooling systems, and so forth. The inspector will also check the exterior of the house for grading and drainage issues, problems with retaining walls, and more. (See the “Home Disclosures, Inspections, and Appraisals” section of  Nolo’s website for more information.)

As a buyer, you can understand why this makes it especially important that you do your research before choosing an inspector. Even if you find one whom you’re confident is highly trained and regarded, finding out details concerning his or her background might help you understand various related issues in the transaction – such why the inspector is focusing more on some problems than others, or perhaps why the seller responds to a request for repairs with, “But we did a pre-sale inspection and that never came up as an issue!”

If you’re a home seller, this insight might even weigh against getting a pre-inspection with the hopes of fixing up problems before putting the house on the market. As Patricia explains, “You might repair all the problems the inspector tells you about, only to have the buyer’s inspector come up with a list of new defects!”

Your Home’s Value: Who Wants to Know?

Paper house attached to yellow blank price tag on blue backgroundI normally don’t push syndicated content produced by nameless writers at marketing companies, but this article, “What’s your home’s price tag now?” makes some good points. (Despite an inappropriate title.) ((Could I be any more grudging in my praise?))

The idea is that, accustomed though we might be to thinking of a home’s worth as its likely sale price, there are actually three ways of looking at a home’s value. It depends on who’s doing the looking. These include:

  1. Market value (the likely sale price).
  2. Replacement value (costs of reconstruction, for insurance purposes, after a total loss).
  3. Property tax value (how much the government says it’s worth before sending you a property tax bill for several thousand dollars).

Understanding what each of these figures means, and how each is arrived at, will help you to both avoid confusion and know whether you’re paying an appropriate amount in taxes, covered adequately by insurance, and can sell your house for your hoped-for amount. The article itself explains these details well.

About that inappropriate title, however. Did you notice that none of these three figures would necessarily be the “price tag” that you’d place on your house if you were to put it up for sale?

Savvy home sellers do enough research (and get a Comparable Market Analysis or CMA from their real estate agent) to help them understand their property’s likely market value, but they then set a list price based on what will most likely reel buyers in.

Many sellers adjust the list price downward from the apparent market value, hoping to incite a bidding war that will ultimately take the price higher than they could have dreamed of listing it for. Then again, a seller may not want to set the list price too low, for fear that people won’t view the house as high-quality, or will wonder what’s wrong with it. See “Listing Your House: What List Price Should You Set?” for more on this topic.

There’s also one more measure of value that could have been added to this list: What amount the home appraises for. Before closing on a sale, the lender will doubtless require that a professional appraiser visit and attach a value to the property, as a way of reassuring the lender that it can foreclose for the amount it’s lending out. That appraised amount is supposed to be the “true” market value — but it’s sometimes less than buyers are actually willing to pay for the house, which can be a problem in some transactions. See “Low Home Appraisal: What to Do” for more on this.

Should Seller Allow Buyer to Do Pre-Offer Inspection?

OLYMPUS DIGITAL CAMERAThere’s a lot of buzz lately (at least in areas where multiple offers are making a comeback) about buyers getting the sellers of homes in which they’re interested to open their doors for a professional home inspection before, not after the buyer submits a purchase offer.

Buyers are being told that it will ultimately make their offer more attractive, given that they can, armed with extensive knowledge about the house’s condition, submit an offer with no inspection contingency. (The post-offer inspection, based on a contingency or condition written into the contract, is a time when negotiations often get contentious. Enough defects are usually found for the buyer to ask for repairs or a reduction in purchase price, and haggling over the details can consume — or derail — the entire process.)

Some sellers remain leery, however, of allowing pre-offer inspections. Let’s look at why, and whether these are reasonable concerns.

1) Sellers fear that the buyers will turn up defects in the property that even the seller hadn’t known about. True, this could happen. A seller who has lived in the home for years may have little idea of what’s been going on “under the hood,” so to speak. And once the seller knows of the issues, he or she will, in most states, be obligated to disclose them (or any of them that are “material”) to all other potential buyers. (See Nolo’s articles on “Preparing, Showing, and Making Disclosures About Your Home” for more on this.) As daunting as this might sound, however, it’s worth remembering that the truth about the house will likely come out eventually. Unless the market is super-hot and you’ve got buyers willing to waive the inspection contingency blindly, some other buyer will eventually conduct an inspection that turns up the defect, and you’ll be no better off than you would have otherwise been — or possibly worse off, if the buyers’ shock causes them to ask for a major price reduction.

2) Sellers feel they shouldn’t have to put up with an inspector in their home for a buyer who may not even ultimately bid on the place. True, if the inspection report comes back with a long list of defects, the buyer may get scared off completely. But there’s no reason to fear that buyers are running around casually hiring inspectors to write up reports on every home in which they’re remotely interested. These inspection reports cost a few hundred dollars a pop! Only a buyer with a serious interest in your home is likely to request a pre-offer inspection.

3) Waiting for the buyer to conduct an inspection might delay the process. Actually, this is more a concern for the buyer than the seller — as the seller, you don’t have to wait around for any one offer, but can put a deadline on considering them, and review other offers while you wait for the folks doing the preinspection to get everything scheduled and sorted. More and more home inspectors are, in light of this recent trend, making themselves available for inspections within a few days of being contacted by the prospective buyer.

Ultimately, the choice is yours, as the seller, as to whether to let a buyer conduct an inspection of your home before making an offer. But more and more successful home sales are now taking place this way.

Buyers Demand Tech-Friendly Homes

smart homeOne of the most striking results from a recent Better Homes and Gardens real estate survey was that a whopping 87% of luxury homebuyers would not even consider living in a home that isn’t tech-friendly, or “smart.” This wasn’t the only must-have on the mind of these affluent homebuyers — they would also find it hard to live without a garden oasis (53%), an outdoor fireplace or fire pit (50%), and a separate guest house, not attached to the main house (47%).

But look at the numbers differential! Eighty-seven percent is so close to an across-the-board vote that it’s hard not to imagine that the few remaining affluent homebuyers are either from a generation that never had to learn to use personal tech devices, or will simply be spending too much time on round-the-world travel to care how what their house is wired for.

Even if you’re selling a home that doesn’t qualify as “luxury,” these results are worth noting. Buyers of luxury homes tend to set the trends for other buyers. And although clever staging can hide, say, a lack of electrical outlets, more and more buyers may start looking closely at whether your house can actually support their tech needs. And on the other side of the coin, you’ll get an advertising boost if you can describe your home’s technological features and capacities. Automated appliances! Climate control! Intelligent lighting!

What exactly does creating a tech-friendly or smart home involve? Asking tech-savvy friends how they’ve adapted and upgraded their homes is probably a good start for finding practical guidance. Also check out online sources like Globitor’s “Tech-Friendly Tips for Upgrading Your Home,” Lifehacker’s “How Can I Bring My Tech-Unfriendly Home into the 21st Century?,” and CNET’s “Automate this: Smart devices for every corner of your home.”

Strategic House Pricing: A Little Low, a Little High, or Is There a “Just Right?”

savannah houseHere’s a “must-read” for buyers and sellers of real estate this week: Bob Hunt’s article on RealtyTimes, “What Is the Correct Way To Price a Listing?” Hunt analyzes a recent article in the Wall Street Journal (August 8, 2013), which described a study purportedly finding that “higher starting prices are indeed associated with higher selling prices.”

The underlying reason posited by the study’s authors is a phenomenon called “anchoring,” which basically means that home buyers develop a respectful first impression of a home with a higher price tag, and are thus willing to pay more for it in the end.

Kudos to Hunt, however, for pointing out a basic flaw in the study: The price variations they’re talking about ranged from about $117 to $187. Hunt notes that this has all the significance of “a rounding error.” I can’t add much to his reasoned analysis, but let me call those dollar amounts by another name: Puny! As a percentage of a home selling price, so insignificant that they might represent mere quibbles over repairs!

In the meantime, having observed bidding wars on a number of occasions (they’re common here in California), I can say that there are times when underpricing a house has the exact effect that real estate agents anticipate: They bring in scads of interested buyers, some of whom will fall in love with the place and bid amounts that are far higher than anyone would have realistically set as an original list price.

But that’s in one market, and may not work for every house. Once again, I can’t do better than to refer to Hunt’s observation that, “[A]s far as answering the general question, ‘What is the best pricing strategy?’ we still have a long way to go.”

When Is a Room a Bedroom?

bedSquare footage? Who cares about square footage? It’s the number of bedrooms in a home that’s usually the key indicator when sellers advertise and buyers search for homes online.

Which raises the all-important question: What’s a bedroom?

In real-estate tradition, a bedroom is a room that has a closet as well as a door you can close. Makes sense: If you’re going to sleep in a room, you’ll want to be able to close the door. And when you wake up, you’ll want to grab some clothes from the closet.

From the standpoint of the seller, this standard means that you’ll have trouble fudging the number of bedrooms. Clever staging won’t do it: Just putting a bed into a room doth not a bedroom make.

Unfortunately, that doesn’t stop some sellers from trying to expand the definition of a bedroom. I recently attended an open house for a place advertised as three-bedroom. The upstairs level clearly had only two.  The basement was unfinished. The main floor seemed to have all the normal rooms you’d expect on a main floor, with nothing resembling a bedroom.

I asked the agent, “Where’s the third bedroom?” Ruefully, she inclined her head toward a space off the living room that was obviously a den, with a couch and TV. No closet. The agent explained that the seller had once used this as a bedroom, and knew that people would prefer more bedrooms, so the seller insisted on advertising it as a bedroom.

Now, it’s true that buyers prefer more bedrooms. But for the buyers who really need a third bedroom for their large household, a room with no closet just isn’t going to cut it. They’re going to feel nothing but disappointment as they view the home.

And for the ones who are looking for a third bedroom because — as is common — they need a home office, there’s a perfectly good way to advertise it. Call it a bonus room! You see it in listings all the time, and the home-office seekers pick up on this quickly.  Such buyers might even prefer a home that doesn’t come with the price markup that’s expected for an additional bedroom.

Last I looked, the three-bedroom — no, make that two-bedroom — house I visited was still on the market.

In Housing Limbo, Sellers Scramble to Find New Homes

IMG_4418“I really hope I don’t have to move in with my mother-in-law.”

“I’ve had to move into a rental in a scary part of town — there goes my down payment for the next house.”

“Well, at least my parents haven’t done anything with my old room.”

These are all from stories I’ve heard on the local, Bay Area grapevine.  Anecdotal accounts, it’s true. But I’d hazard a guess, from the current state of the real estate market, that plenty of other recent home sellers are having the same trouble.

They couldn’t afford to buy a second house before selling the first one — banks aren’t exactly sympathetic to carrying two loans these days. But after the sale is done, they have nowhere to go. Inventory is low, and in this part of the country, multiple offers are becoming normal again — at tens or even hundreds of thousands of dollars over the list price. (Remember when the market felt so slumped that it could never unslump? Weird.)

The only silver lining to the low inventory is that buyers are often so grateful to be in contract to buy a home that they’ll bend over backwards to accommodate sellers’ needs to stay a little longer, an arrangement outlined in Nolo’s Q&A, “What happens if we’ve sold our old house without buying a new one?” But even the most sympathetic seller isn’t going to want to wait around forever.