I have mentioned before that I was in the real estate industry in 2008 in the Southwest Florida real estate market. Real estate agents in that time had never seen anything like it. That was the part of the country that saw the strongest growth prior but also the largest decline after the crash. Agents thought that was a crazy time. Well we seem to be in that type of climate again. One thing I have noticed is sellers and listing agents have become much more difficult to deal with. The demands they are insisting buyers adhere to is absolutely ridiculous. Listing agents are being lazy and unethical to the point I am ashamed of my colleagues.
This is why most agents that like to actually help people. The real estate agents that have gotten into the business because they enjoy real estate, do not like when a market is so unbalanced. You know you are in a strange market when real estate agents, a group of people that really don’t have much of a sense of humor, are posting memes about the market. How sellers are taking advantage of buyers to the point of it being uncomfortable for buyer agents.
What Crazy Things are Real Estate Agents Writing in Their Offers?
As we all know a listing agent never tells other real estate agents what an offer on the table is. They usually give you an indication of where your offer stands and a ballpark of an idea of what you should do to make it stronger. Some of the things we are seeing in offers as listing agents is crazy. Agents are writing in clauses that I would never advise to my clients. If I do mention that we could write a clause like that I will stress I do not recommend doing so. For example one agent did not fill in any dates or deadlines. That means the buyer has no way to get out of the contract and get their earnest money back. Contracts are designed to be in the buyer’s favor for a reason. No matter how much of a seller’s market it is, a buyer should never give up all their rights to terminate the contract. For one the average earnest money these days is about $25,000. That is one big piece of cheese to risk on a home that may not be the perfect fit.
15 Minute Showing Windows are Stupid
What listing agents are doing is setting up 15 minute showing windows for 5,000′ sq homes. A buyer can’t properly preview a 5,000′ home in 15 minutes. Any real estate agent that only provides a 15 minute window is being stupid. They are just inviting buyers to have remorse and pull out of the deal. For some reason sellers believe the world has changed so mush they just must have their home close 2 weeks after listing with a real estate agent. It is a very dangerous and silly move on the part of these listing agents and the sellers. Sellers and listing agents are expecting people to pay $2,000,000 for a home they preview for 15 minutes? That just shows sellers don’t have pride in their home. I would want people to know what they are making an offer on.
Removing Inspection Objections and Inspection Termination
As mentioned before on the main contingencies that are removed is inspection objection (and in some crazy situation inspection termination). I never, ever advise my clients to remove the termination on inspection items. I do recommend in this market that they remove objection on inspection items. A lot of real estate agents don’t understand the difference. The big difference is that you can not ask the seller to make repairs (can’t nickle and dime them) but you can terminate on major items. For example you wouldn’t want to close on a home that has foundation issues. So you can still terminate and get your earnest money back.
My Real Estate Agent Says We Need to To Add an Appraisal Gap Clause
This is another very scary unknown variable that your real estate agent may advise you to put into the contract to buy/sell. Most contracts for the last month in Evergreen and the rest of the Denver Foothills have had appraisal gap clauses. Most of my offers I have written have had them. It is a scary concept for buyers. Banks will only lend a specific loan to value amount on a home. So if a home doesn’t appraise the bank will only lend on the LTV of the appraised amount. So what an appraisal gap clause states is that the buyer will bring the difference between the sale amount and the appraised amount to closing in the form of cash. So in addition to your earnest money and downpayment, you may need to bring more cash to the closing table. The other issue many buyers don’t think about or their real estate agent doesn’t explain is they are also going into their new home with negative equity. So if the home misses by $100,000 that means you are $100,000 upside down in your new home.
Real Estate Agents Need to Advise Sellers Better
There are some homes coming on the market that are so overpriced they will never sell. These sellers see nothing but dollar signs and are going crazy. Yes, some homeowners that have kept their homes nice and had pride in ownership can get top dollar for their home. Unfortunately in this type of market many real estate agents do what we call “buying a listing”. What that means is telling a seller anything they want to hear just to get the listing. Then in a couple of weeks, the real estate agent breaks it to the seller they are overpriced and need to lower their price. Buyers are taking unnecessary risks but they aren’t dumb enough to overpay too much for a home.
Buyers and Sellers Need a Real Estate Agent That Knows This Type of Market
Sellers need to find a real estate agent that is familiar with this type of market. One that goes through the same motions they would listing their home in a buyer’s market. Since most agents are listing homes slightly under market value in order to get a bidding war going, it still need to be marketed. If a real estate agent and seller go that route they need to understand more of the market needs to be exposed to the listing. More bodies through the door means more offers and higher offers. Too many real estate agents aren’t even posting professional pictures. They are not returning calls of agents that have questions about the property. They are just being lazy.
Buyers need a real estate agent that has relationships with the agents. One that knows how to present an offer in this type of market. There is a lot more to a contract than the price. It is 25 pages long and the price is only one line of that contract. A real estate agent that knows what they are doing will be able to write a good contract that won’t give their buyers a massive amount of exposure.