Across the Picket Fence - Issues of Concern to Buyers

Across the Picket Fence

Issues of concern to buyers

Buyer: I've found a home in your publication that I'd like to purchase, but I've never dealt directly with a home seller before. My husband thinks we should hire a buyer's agent to represent us since it
doesn't cost us anymore to do so.

A buyer's agent is a good idea when you're looking at realtor-listed properties, however, it could hurt you when buying directly from the seller. If you're not prepared to pay your buyer agent's fee, that means you're expecting the seller to. This puts you at a disadvantage, particularly if the agent is doing your negotiating for you.

Most buyers prefer meeting the homeowner directly; they can get immediate answers to questions concerning the property, often not possible when looking at properties with an agent. The homeowner knows the property best and can supply detailed information about the property, neighborhood (and neighbors), the town, as well as the school system.

When it comes time to make an offer, buyers can improve the chances of having their offer accepted by reacting quickly to a seller's concerns (eg. the requested closing date). This is particularly important when several parties are interested in the property. Negotiations are much friendlier when conducted face-to-face, and buyer and seller often end up feeling like friends by the time of the closing. It's a win-win situation for both parties.

Buyer: I've been turned down by a couple of sellers in your magazine because I have a house to sell. I don't want to put mine on the market until I know I have a place to go to. How do others deal with this?

Surprisingly, there are still sellers unwilling to enter into a contractual agreement with a buyer who has a house to sell. This is a holdover from the sellers' market we were in before. This is downright silly ( unless the seller has reason to believe that your house won't sell easily). During a normal market, which is what we're in now, buyers have a good selection to choose from, and homes normally take a couple of months (not days) to sell. It is customary for the seller to give the buyer a reasonable time frame (eg. 45 - 60 days) to find a buyer for their home.

The "right of first refusal", or "72-hour clause", is an ideal compromise for those sellers who want to continue marketing their property while the buyer is trying to sell his. It allows both parties to move forward, yet the seller can still market and show the house while waiting for the buyer to sell his property. If another offer is made that doesn't have a property sale contingency, the buyer basically has 72 hours (or whatever time frame both parties agree to when the original contract is drawn up) to either get the property under contract, or to come up with the funds to purchase the property without selling the existing home first. If the buyer isn't able to move forward with the sale, the seller then enters into agreement with the new buyer.

Buyer: I tried to make an offer to one of your sellers, even told her I'd present a formal offer, but she said she'd rather just talk about it first, (and had other showings scheduled). I found it rather odd that she wouldn't let me make an offer...

Some people prefer verbally negotiating first before formalizing an agreement in writing, which is what it sounds like the seller was trying to do. The reason for this is simply to reduce the amount of back and forth hassle, and also to keep things on a friendly note. Once you and the seller have reached an agreement, then it makes sense to finalize it with a deposit and contract. The sellers' response to you was not odd. What IS odd is that it sounds like you weren't willing to talk about your offer, and any conditions you might have. Seller: I got a call from a buyer broker the other day, asking if he could show my home to a buyer he's working with. Before I call him back, should I ask him whether the buyer is paying him, or if I'm responsible for his commission (assuming the sale goes through...)?

Why bring up such a touchy subject before its necessary? It's not your place to question the buyer broker about his commission fee -- let him bring it up. You don't need to lock yourself into anything before-hand. Just tell the buyer's agent that you'll be accepting your best offer, and leave it at that. And why burn any bridges that you don't need to? If you start haggling over the agent's commission on the phone (before you even know if the buyers are interested in your home or not!), the exchange is likely to end with someone getting huffy. This is not in your best interest. The buyer broker might bring you your best offer, in which case it would be in your best interest to be willing to pay at least some of the 2-3% commission due to the buyer broker (if the buyer requests it).

Another reason to keep things friendly with the buyer broker is that he might have other buyers who'd be interested in your home, if the first one doesn't work out. The important thing to remember is that YOU are selling your home, not the agent. The agent is simply helping the buyer(s) in their search.

Of course, you want to be sure that the agent actually has a buyer he's working with. If he shows up alone, meet him at the door and kindly explain that you 1) are not interested in listing the property and 2) don't want to show the property twice, and want the buyers to see the house first-hand (not have him "preview" it for them).

Buyer: If I buy a house for $ 490,000 that's assessed by the town for $ 390,000, what value will my property taxes be based on?

Town clerk: Nothing happens to the buyer's tax values until the town does another reassessment. At that time, the purchase price will be taken in to consideration by the town's appraiser.

At any time the property owner can grieve the amount, of course, and the town assessor will re-examine the previously determined value. Usually this is because the owner feels the assessed value is too high, but occasionally we've had people grieve (their property tax) because they want a higher value, especially if they're trying to sell their property.

Buyer: What's the customary amount for a deposit on a house?

Lender: There really is no set amount for the earnest deposit - its generally what the seller is willing to accept and the buyer wants. It can be as little as 1%, or as high as 5%. The purpose of the earnest deposit is to reassure the seller that the buyer is serious (so the seller will enter into a contractual agreement to sell property to the buyer).

The earnest deposit is usually held by the seller's attorney in an escrow account, to be used toward the final purchase.

As a buyer, what are the normal contingencies I should include in a purchase and sale contract?

Answer: Make sure the contract contains a financing contingency so if you are not approved for a mortgage, you will get your deposit back. Also include an inspection contingency so you can negotiate the cost of any repairs or defects after you have had the property inspected. The inspection should include the septic system, water supply, radon as well as the structural, mechanical and electrical elements of the home. Most buyers include an appraisal contingency; if the property does not appraise at or above the contract price, the buyer can either terminate the contract or negotiate the purchase price with the seller.

Buyer: I am buying a house and my lender says I need to use the bank’s attorney. Can I use my own attorney?

Answer: You are entitled to have an attorney who represents you and not the bank. When there is a problem at the closing, ask the bank’s attorney who he or she will be representing, you or the bank? Your attorney will protect your interests throughout the entire process, not just at the closing. Your lender may close hundreds of loans a year, you may purchase a house once every 5 or 10 years, and it is the likely the largest purchase you will ever make. Don’t rely on someone else’s attorney when buying a home.

Buyer: What happens if I don't receive notification from the bank in time for the closing date on the contract? Do I lose my right to buy this property?

Lawyer: No. Unless "time is of the essence" is written in to the contract next to the closing date, the date is not considered to be of importance by the court.

Price Issues, Buyer

Buyer: I’m interested in one of your properties for sale, but not sure what to offer. The asking price is quite a bit above the town assessed value. I want the property, but don’t want to pay more than its worth...

Appraiser: The town assessment is not a reliable indicator of a property’s value, particularly if the assessment is over a year old, or the property has unique characteristics. Town assessments are calculated differently than appraisals. Town assessments use average land values within the town as a base point, then consider construction costs. Therefore, your assessment has more to do with the value of your land than what the house is worth to a prospective buyer. In contrast, an appraisal evaluates recent comparable sales to determine the value of your property, usually in the same town but sometimes from neighboring towns as well..

Attorney: As a buyer looking at similar properties in the same price range, you probably have a good idea whether the property is overpriced or not. You should offer what you are willing to pay for it, but also be sure to mention language in the Purchase contract specifying that the property must appraise for the asking price or higher.

Q: Buyer: How am I supposed to know how much a property is worth? I'm afraid I might unknowingly pay too much for a property.

One way to gain a sense of a property's worth is to look at similar properties for sale in the same neighborhood, or town. While it is often difficult to find an apples-to-apples comparison, this will nonetheless give you a feel for the appropriate price range. Also, the town clerk's office has records of all sales if you want to look up a particular property sale.

An easy way to save yourself a lot of worry is to simply make your offer contingent upon the appraisal value equaling or exceeding the amount of your offer. This will provide you with an opportunity to re-negotiate your offer if the appraisal comes in lower.

The most important thing to remember, however, is that there is no such thing as a price tag or "right price" for real estate. Even a professional appraisal is just an estimate of what today's buyers -- the "market" -- would be willing to pay for. And that includes you!

Buyer: Buying a home is new to me. How can I be sure the (for sale by owner) seller knows what he's doing? How can I be sure I'm not being "taken to the cleaners" or being sold a lemon?

First, buying a home is not complicated. Once you and the seller agree on a price and any other conditions of the sale, the lawyers and lenders more or less take over. There are several things you can do to protect yourself, however. (1) Make your offer contingent upon a satisfactory housing inspection (which you pay for). Be sure to include the maximum amount you will be willing to pay for needed repairs in the contract. (2) Make your offer contingent upon the property appraising for the sales amount, or more. (3) Consult your attorney about any concerns you have with your offer before signing the contract.

Contracts, Buyer Issues

Q: Buyer: I've found the house I want. Now how do I decide how much to offer?


First, ask the sellers if they have had a recent appraisal done on the property. They may be willing to share the appraisal figure with you. Check to see how much similar styled homes in the neighborhood or immediate area have recently sold for to get an idea of the going rate. Be sure to ask the seller about any improvements made to the property since they purchased it, or since the appraisal was done, since this will give you an idea of how much they have increase the value. (keep in mind that certain cosmetic improvements, such as wallpapering, may increase the home's desirability to you, but not necessarily improve the value of the property. The same is true of inground pools or excessive bathrooms.) Finally, compare this home with others that you've looked at and compare asking prices. Does it seem overpriced, about right, or under priced? Remember, the value of the home you are purchasing is based primarily on market demand.

Q: How can I be sure the Private Sale homeowner knows what he's doing? How can I be sure I'm not being "taken to the cleaners?"

First, buying a home is not complicated. Once you and the seller agree on a price and any other conditions of the sale, the lawyer and banks really take over. There are two things you can do to protect yourself: 1) make your offer contingent upon a satisfactory housing inspection (which you pay for) and 2) Have your lawyer look over the Purchase/Sales agreement contract before you sign. he or she will advise you on any concerns you have, and will advise you on any additional contingencies you should add.

Buyer: Isn't it risky buying direct from a homeowner without an agent? What if the Private Sale homeowner isn't disclosing the full truth about the property?

Since most real estate agents are representing the seller in a transaction, they are not looking out for your interests anyway. They are trying to get the best price for the seller (the exception is the buyer's broker, who represents the buyer). However, both agents and homeowners are legally required to be truthful when disclosing facts about the house.

When you purchase a home with the assistance of an agent, he/she will ask the homeowner to fill out a disclosure form about the property. Whether you are purchasing direct or with an agent, you still must rely on the homeowner to give you the details about the property. When buying direct from the owner, it is a good idea to request a property disclosure form. Also, you can make your offer contingent upon a satisfactory housing inspection (which you arrange and pay for). The attorney that draws up the Purchase/Sale contract can advise you on this or other matters, and will specify any special conditions of the sale that you and the seller decide upon.

Buyer: I'm using a buyer's broker to help me find a home. How do for-sale-by-owners feel about this arrangement? I've noticed that many specify "no realtors" in their classified ads. Does this apply to buyer's brokers too?

Very few - if any - sellers will turn down an interested buyer! Not everyone is aware of the role of the buyer broker however, and may think that they will have to pay a 6% commission if you buy the home. It is a good idea to contact the homeowner directly yourself first, and explain your arrangement. You will find most, if not all, may gladly welcome a tour by both of you.

Seller: How does it work with a buyer's broker, anyway?

A buyer broker represents the buyer, and acts on the buyer's behalf in negotiating the price and conditions of the sale. Technically the buyer is responsible for paying the commission to the agent (usually around 3%), although it is usually requested that this be paid by the seller in the buyer's offer.

Buyer: Our home inspector found quite a number of items that would need replacement or repair within the next five years, some which could cost a substantial amount of money, such as the roof. We told the sellers we are no longer willing to honor the sales price we offered given the home inspection report, yet they are refusing to come down on their price or give our deposit back. We need this money to make a deposit on another house. Do we need to sue them to get it back?

Whoa! Back up! First of all, the house you are considering buying may not have failed the inspection after all, in which case the sellers rightfully hold on to your deposit if you back out of the sale. According to an attorney, only current deficiencies, not those likely to occur in the future, are in question. Every home requires continued maintenance; it is unreasonable to ask the current homeowner to pay for maintenance costs that would likely occur while you own the property. Unless it is an issue of health or safety, the seller is not obligated to fix or replace anything not currently malfunctioning or in disrepair. (Of course, it is in the seller's best interest to repair anything that could harm someone, if he is aware of the threat, to avoid a lawsuit).

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