Real Estate Agents; Not Magicians, Part 1

“How long a listing agreement should I sign” is a question I see often. It’s a great question but has no cast in concrete answer.

There are variables that go into the length of the agreement:

1)      Most important:  what are the market conditions? If your agent runs the Multiple Listing statistics and it shows the average days on market (DOM) for a similar home/in a similar price range/in areas where a buyer would be looking at homes to be ____(fill in the number of average DOM), this gives you a base starting point.  Add to that number a time frame to get inspections/attorney approvals done and close.  I usually use 45-60 days for these events. Your listing agreement should not be less time than this.

2)      What terms have you defined?  a) Are you pricing it where the agent suggests? b) Is your home in showing condition (de-cluttered; de-personalized; staged to show; clean)? c) Is it on a keybox and accessible on short notice (agent and buyers are in car at the curb)?

Answering no to any of these will add varying (but huge) amounts of marketing time.  You need to do your job for the agent to do his/hers in a timely manner.

I see agents respond to these questions with statements like “never sign for longer than 60 days”; why would anyone sign for 6 month/one year.”  Then, I look up their statistics and recognize that their statements are a (ahem) slight exaggerations.  Remember, some people will tell you what you want to hear or what appears to benefit them.

Mostly, I take my listing agreements for one year and have not had any seller, in over 30 years, complain or cancel because they thought I was not doing my job or thought they could get an agent who would do better. Whoa, how can I say this? When I do my interview with the seller, I make sure to cover pricing, staging, marketing, and communication.  My sellers get a checklist of everything I said I would do so they can follow along if they would like. They get in-depth market reports on the 1^st and 15^th of the month, with daily updates as things happen, and, sometimes, just a call to say hi and see how they are doing

Please remember that real estate agents are typically commission only.  Their brokerage house may pay for some of the cost of doing business but they have additional out of pocket costs…even if your home does not sell.  And, the time they spend on you is worth dollars because it is time they are not working with another seller or a buyer.  Tell me…where else can you involve someone with one of your biggest financial assets, have him spend money and time, and not pay him unless you reach your goal?

Could any major mortgage rules cause a delay in closing

Guest contributor of this post is Tricia Rieth, Senior Mortgage Consultant at Baird & Warner

New Loan Disclosure Rules may cause delays…as of July 30, 2009 any changes in closing costs that cause the APR (the actual cost of borrowing) to change by .125% from the initial Good Faith Estimate, the lender must re-disclose to the borrower at least 3 business days before closing.  During that 3 day period the borrower has the right of recission.  The lender may not close the loan during this 3 day period.  This 3 day period can only be waived if there is a bona-fide personal financial emergency which needs to be in writing by the client.  Note:  Be sure to help avoid delays by closely reviewing your Good Faith Estimate and Truth in Lending Disclosures when you receive them.

Another BIGGIE is the Fannie Mae Loan Quality Initiative (LQI). The LQI is to promote improved loan data delivery that is complete, accurate and fully reflective of the terms of the mortgage.  It is also to help ensure that the loan meets the credit and eligibility standards, pricing guidelines, and so on. A key point to remember: Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the processing of the mortgage.  If new debts are found, the mortgage is subject to a new underwriting review and a possible turndown.

To avoid home purchase delays and to learn more contact Tricia Rieth (cell: 847-312-4202 or email: tricia.rieth@bairdwarner.com)

But I have a moving deadline…

1) How long it takes to find a home to make an offer on depends on the time priority you give the hunt and how honest and specific you are with your agent.

2) An offer is being written and what should you expect as far as response time. First and foremost, it will depend on terms of your offer (price seems to always have priority) and then there may be countering back and forth. So, here in Chicagoland:

a) If it is a motivated, non-distressed seller, you can potentially close on the sale within 30 days if it works for the seller or as long as 90 days. Check with your lender on how long your rate is good for or you could be in for a surprise later.
b) If it is a bank-owned (REO) property, the bank will most likely want to close the sale as soon as possible, sometimes as quick as two weeks and usually no longer than 30 days. Make sure you have everything lined up and ready to go…mortgage, inspections, etc., because there will be no time for lollygagging.
c) If this is a distressed seller in a “short sale” situation (owner owes more on the mortgage(s) than home is worth and he can prove a hardship case), the offer will go to owner for signature but it is subject to lender approval. Once it goes to lender, plan on one of the following time frames, provided listing agent or sellers’ attorney know how to work with short sales:
• If only one lender involved, 4 to 12 weeks to hear back from lender
• If more than one lender (main mortgage, plus 2nd lien by another mortgage or Heloc loan), expect 3 to 9 months and sometimes longer to hear back since they will have some issues to settle amongst themselves.

Once again, as soon as you hear from the lender that they are accepting your offer, expect them to want to close very, very quickly.

You, as the buyer, have control over how you handle your part of the search and offer/counter-offer but the remainder is in the hands of another party. Plan ahead, make clean offers that are in the park price-wise, and be prepared to move quickly.

Become the “Leader of the Pack”

Where would you rather be…leading the pack with people clamoring for you or bringing up the rear with no attention being paid to you? How can a seller lead the pack of homeowners trying to sell?

First things first are the words every seller knows in his heart by now but does not want to hear:  If your home is not selling, it is because of price! That is the end of every story…not the market…not your agent…not the marketing…not the staging…not the location…not the color of your kitchen!

If your home is not in the price point of a first home buyer in your community, then you need to understand that you fall into the “trickle up” price points.  By this I mean that most buyers will have a home to sell before they can purchase a new home. If your home falls into the second home price range, you will likely have a larger buyer pool than the third or fourth home price range. Each time you move up in those price points, it is likely that some buyers will fall off because they have purchased the distressed properties.

Distressed properties in your price point tend to be homes that were more expensive than yours and offer the buyer more amenities than yours.  Of course, they frequently offer the buyer more work than yours too.

Now don’t misunderstand, there are still buyers who do not want to deal with short sales and foreclosures and are looking for a terrific new home.  (P.S. That terrific new home should be yours! So, let’s get on with it!)

Your pricing needs to be better than any other home with your basic amenities.  Look at your competition; make sure no comparable or better home has a lower price than yours. Get ahead of the market (remember “leader” of the pack) and stop following it. Oh, by the way, no wimpy price reductions.  A price reduction should be at least 2.5% or more (please, the more the better) of your current price and you should set a schedule of reductions until you get serious interest in your home.  My recommendation is every two weeks. Remember: the buyer does not care what you need or what you think your home is worth.

Bottom line:  if you are motivated to make a move, this will get you where you want to go and, if you are not motivated to move, maybe you should wait (off the market) for a better time so you don’t frustrate both the motivated sellers and the motivated buyers.

Wishing you wonderful and speedy success…