All posts by Danielle Bunch

What Your Agent Doesn’t Know Can Cost You Now and Beyond the Sale

What Your Agent Doesn’t Know Can Cost You Now and Beyond the Sale

Getting the right agent is crucial when putting your home on the market.

When you hire an agent to sell your home, you spend quite a bit of money at closing, but what are you actually paying for? It really depends on who you hire and how they perform their duties. Unfortunately, many sellers end up hiring what we refer to as “real estate secretaries” – someone who enters the listing into the MLS, puts up their sign, (maybe) answers calls, fills out a contract, and shows up at closing to get their check. When sellers see bare-minimum service like this, they ask “Why am I paying them thousands of dollars to do so little?” and they are right to question this.

Being well represented as a seller goes beyond not just getting your value out of your listing commission in the form of great marketing, communication, and follow-up. The process of selling a property involves multiple parties, legally binding contracts, and many complex steps before closing, so it must be executed diligently, to avoid the risk of large expenses and even lawsuits. It is your agent’s knowledge, advice, guidance, and experience (or lack thereof) which will make the difference here. This is where the value is found in information that you can’t just get from Google and wing it. A seasoned, thorough, detail-oriented agent will have those skills, which prove to be priceless in many situations.

While these concepts all sound good, let’s look at a real life example which came up very recently. The seller of a property had some previous title work done with a title company and was under the impression that if the buyer used their title company, then the seller would save significant closing fees. So, the seller told the listing agent to mandate that the buyer must close with their title company. First of all, the seller was mistaken about the closing costs, since most closing costs are the buyer’s responsibility and a seller’s fees typically only run $250-$500 at closing, and often less. Far more important however was the fact that by mandating the closing company, the seller (and agent) were actually violating the Real Estate Settlement and Procedures Act (RESPA), a federal law that governs the sale and purchase of residential property. This law “prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.” (Reference: HUD RESPA Section 9) Violating this section of RESPA allows a buyer to sue the seller for up to 3 times the amount of the title insurance, so with a typical title insurance cost of $800-$1200, the liability to the seller is $2400-$3600 (probably in addition to attorney fees etc), all to try to save at most $500.

Not only was I concerned about putting everyone in the transaction in a position to be sued if something were to go wrong with the title, but I also wanted to have a different set of eyes on the title work to be sure that it all gets processed correctly. I emailed my concerns to the listing agent, citing the federal law and the liability vs. potential benefit for the sellers, and the sellers decided that it, indeed, was in their best interest to not push this issue with my buyer. All of this happened in the background without upsetting my buyer and causing them unnecessary stress.

“Real estate secretaries” will not anticipate issues such as this one, and often lead the seller into dangerous territory, where expensive litigation or other financial losses could result. So, when you interview and choose a listing agent, keep in mind that the discount commission charged by an inexperienced agent or one who rushes through everything very superficially can ultimately cost you far more than an agent who has the experience, knowledge, and skills to keep you out of trouble and to maximize your profits at closing.

The Danger is In the Details

The Danger is In the Details

Seemingly small things can lead to big problems when listing your house.

When it comes to deciding on a listing agent, many sellers are often confused about what they should be looking for. Most won’t know what to ask except the commission question. Others will Google questions to ask and find some which are very helpful, such as, “are you full time?”, “How many homes did you sell last year?”, and “What will you do to market my house?”. These are definitely good things to know about the person who will be representing your home for the next 6 months. However, this only scratches the surface. Far beyond that is a level of professionalism and knowledge that you will be glad you have, or sorry you don’t. With agents of such high caliber comes one often overlooked facet – security and safety procedures for your home while it’s listed.

More and more, we face reminders that we cannot assume every person who requests a showing has the intention of buying. Yet, in order to sell a house, a buyer needs to be able to view it. So, sellers paint, declutter, repair, and stage their home to encourage their visitors to choose their property over others. However, often sellers do not think about protecting themselves from those who aren’t interested in buying, and this is where a truly professional agent will fill the gap.

Among the listing paperwork and sign installation should be a discussion regarding safety and security during the listing period. Yes, the buyer’s agents will be present when the property is shown, and theoretically they should be right next to their buyer the whole time, but that might not always be the case. With that in mind, the seller should prepare their home accordingly. A quality agent will run down a list of suggestions that greatly reduce any problems for sellers.

One very important consideration, which on the surface doesn’t seem to be a problem, but can make a world of difference, is your lockbox. These hold the keys to your home and allow agents to access them. In an attempt to save money, many agents use combination lockboxes, which have either dials or push-button mechanisms. When a call is received to book a showing on a house with a combination box, the code is simply given over the phone to the caller, thus granting them access to the home. Yes, the listing broker could ask a few questions to try to verify the caller, but most of the time, that simply is a matter of the agent’s name, brokerage name, time they want to show it, and maybe phone number. Since agents market themselves for a living, these pieces of information are not hard for anyone to find on the internet via a simple search.

In addition to easily getting the code, there is the issue of keeping the code private. Not only will buyer agents need to find/remember this code and enter it without their buyers seeing, but they have to remember to re-scramble the letters/numbers when closing the lockbox. Commonly though, we have walked up to many listings where the code was still showing on the lockbox, meaning it was unlocked, and therefore the keys were available to anyone who walked up. The latest incident of this was on a local listing in January, and the keys were actually missing! Since the lockbox was on the front door, it was obvious to passersby that it was there. Just by checking periodically for that inevitable time when the last person forgot to scramble the code, someone who probably doesn’t have good intentions got those house keys. Of course, I immediately told the owners, but when showing multiple houses, not all agents will remember to do so.

In order to prevent the combination lockbox security issue, we use electronic lockboxes called Supra boxes. These are expensive, but they are the only lockboxes we use, because of the peace of mind they afford to us and our clients. Only authorized, monitored entry to your home is allowed. These boxes are industry-specific and require paid membership with an electronic key that is assigned to each agent. When they get their e-key, the agent is also given an individual access code which must be punched in. This prevents anyone from just picking up their key and using it. So, without an e-key AND the matching personal code, no one can enter our listings!

Perhaps the greatest advantage of using a Supra lockbox is that it automatically reports all access. After a lockbox is opened, we are sent a notification containing the property address, date, time, and WHO is opening the lockbox. We carefully monitor all access to our listings, and compare the notification to our list of showing appointments. Although it is a no-no, and all of our listings require appointments before showing, once in a great while agents will show without an appointment. If this occurs, we immediately call when we see the notification, and find out what they were doing there. These notifications allow us to immediately send each agent a request for feedback about the property. We can also eliminate the question of whether or not an agent showed a property, as sometimes the sellers aren’t sure they actually did so. In addition, should something happen at a property during a showing, such as lights being left on, etc. we can narrow it down and determine who did it.

So, although asking about the type of lockboxes an agent employs in the listing of your home seems trivial and way down the list of priorities, it, along with other security and liability-prevention measures, is a substantial question. The answers to these questions are indicative of the overall approach of the listing agent you are considering. Are they going with the easy, cheap, unconcerned route, or have they invested in your home’s security and taken steps to prevent larger problems down the road?

Doors to Future Resale Value

Doors to Future Resale Value

A Great Question About Closet Doors

A client who recently bought her home has been doing quite a bit of renovations to get the property updated and to her taste. She writes:

“Would I have better resale value by re-installing the sliding closet doors in the front bedroom or by replacing them with the same type of hinged doors that I put in the back bedroom?”

Closet doors shouldn’t make a difference in resale value. However, the hinged doors allow someone to access more of the closet at one time, and are a more modern style, so I would go with these. Also, they are simpler, and do not slide on a track like bifold or sliding doors. In our experience, such tracks always break, and/or the doors come off of them. The only slight downside to hinged doors is that they swing open into the room, so that must be considered.

Small details like closets that aren’t frustrating to open and interior trim features that seem more in-line with current trends may not make the appraiser add a little extra to your value. However, these certainly can be among those intangibles which make the difference to a buyer when deciding between properties.

Thanks for the question, Marie!

HomeReady, Buyers Not

HomeReady, Buyers Not

Was one more nail in the mortgage industry’s coffin hammered in on December 21, 2015?

We are not, and some could argue that we may never, be fully recovered from the huge mortgage fiasco of a few years ago. Although many people have different opinions on what caused the mortgage crisis, this former loan officer and current real estate agent attributes it to several reasons. The main issues I saw were: 1) Somewhere along the line, the government promoted the opinion that homeownership is a right as an occupant of the United States, rather than a privilege and conscious choice for a person who is financially ready for the investment and maintenance that owning a property entails. 2) The government went too far in its effort to “protect” the “underserved” groups of the population by actually monitoring and fining large and small banking institutions that simply didn’t have their prescribed mix of borrowers in their portfolios. As a result, loans that shouldn’t have been made to borrowers who weren’t financially ready were pushed through to make sure the quota was covered. The sad part is, while these rules seem to care for the economic underdog, they actually hurt the people they profess to help, because those people simply aren’t prepared for the $5,000 expense of replacing the AC unit, or the $10,000 roof repair. Also, just the mortgage payments themselves proved to be unaffordable for many. In spite of this disaster, the government is back at it!

A new Fannie Mae program called “HomeReady” took effect on 12/15/2015. It reduces the income requirements, down payment requirements, and mortgage insurance requirements below those of even a current day FHA loan. You remember the FHA loans, right? They took place of the previously labeled now taboo “subprime” loans. They have a lower credit score requirement, higher debts allowed, and looser credit report rules. They are also the loans that when their buyer loses the home it is taken over by HUD. Have you seen many HUD foreclosures? We all have. So, take those standards and dip them lower to get a larger group of unsuspecting, unprepared borrowers so we can make a bigger foreclosure market and a larger financial problem for the people that are already not making it by even today’s standards.

Here are the basics of the HomeReady loan:

- Minimum 3% down payment
- NONE of the down payment has to come from the actual borrower! They can use grant money, grants, gifts, and the never allowed before CASH ON HAND. The cash on hand is such a no-no in the industry that it has caused home purchases to be delayed and even get turned down because the borrower couldn’t document where the cash came from. The reason that it is an issue is claimed to be that they need to be sure that the funds aren’t from terrorist sources OR are not that of someone other than the borrower. Yet, here on the new loan, those issues don’t seem to be a concern.
- REDUCED Mortgage Insurance coverage for loans that have less than 10% down payment! This is where you want more insurance coverage, as these buyers have less to lose if the 3% isn’t even theirs!
- Homeowner Education Requirement: A mere 4-6 hours to learn everything you need to know to become a homeowner with an online test.

Click here to see a comparison chart showing how HomeReady stacks up to Conventional loans and the MyCommunityMortgage (which has quietly passed away).

Yes, it appears that it has a higher credit score requirement than you would expect, but there are efforts in motion to allow VantageScore to be used instead of the traditional FICO scores, which will allow rental payments and utilities as sources of credit history. This change some are saying would add 100 points to everyone’s score or create credit history where there was none before. It’s arguable whether or not these payment histories of non-traditional credit sources are indicative of a borrower’s ability to pay a large regular payment like a house note. When you don’t pay your cell or electricity, they turn off those services. When you don’t pay your house note, it can take months or years to lose it to foreclosure, so the penalty of not paying is even less of an immediate concern.

What’s even more interesting is that I am not hearing any chatter on the typical mortgage and housing channels on this supposedly sweeping edict of benevolence. There are a few small articles, but not nearly the amount of attention it should be getting. Lenders, please share what you know and let us know what you’ve heard!
Hopefully, individual lenders will not be eager to jump aboard the HomeReady bandwagon. However, if the government convinces them that they will (again) be bailed out when foreclosures happen, they may very well embrace this insanity. If this occurs, many knowledgeable people in the real estate and finance industries fear that another meltdown could occur that would be far worse than what we’ve already lived through.

One loan officer we’ve spoken with said that a lender in her portfolio with this program has added additional rules called “overlays” on top of the basic guidelines, but they don’t have all of the details yet on exactly how it will work.

We are excited to help people buy their homes, and do it all the time. Yet, we feel it is irresponsible of the government to seduce buyers into an attractive, but potentially damaging financial situation which they may not be capable of sustaining. Furthermore, with these “low cost” loans being offered, the future of our industry and economy continue to be jeopardized without disclosing the true price tag to the public and unsuspecting buyers.