Property Damage After Acceptance Prior to Closing

An easy to happen and complex to navigate situation licensees address is property damage after acceptance and prior to closing.  The WB-11 Residential offer to Purchase begins to address this on lines 206-215. In compliance with Wis. Stat 706.12, unless this provision is not part of the Offer, the parties have expressly agreed to who has responsibility (buyer or seller) to repair the damage and under what conditions the contract may be terminated and parties released.

WRA on Damage after Acceptance
When the licensees become aware of damage which occurred after acceptance and prior to closing decisions have to be made regarding disclosure, damage assessment, repairs, closing date, and resolution.  The prudent licensee will be careful to direct their clients to legal counsel to interpret their rights and obligations, and to their insurance companies to determine their coverage. The parties will look to the provisions of the Offer to determine the avenue they will take to move forward or to separate.

Attorneys may advise their clients to maintain their right to remain silent on the new condition, make the necessary repair and proceed to closing.  Because  the buyer may have recession rights when they receive an amendment to the RECR with previously undisclosed conditions, sellers may be advised by their attorney to not amend the RECR or issue a new RECR.  Even though a seller may not have disclosure obligations, the licensees do. A Disclosure of Material Adverse Fact form is available for licensees to disclose conditions they are aware of.

Occupancy May Change Everything

Buyer pre-closing occupancy is a condition which may alter the buyer’s rights and seller’s obligations for repairs, expenses, and resolutions.  Pre-closing occupancy is a seriously risky proposition. The Addendum O (Occupancy Agreement) has been modified to make it easier for licensees and parties to incorporate occupancy provisions into offers.  I wonder if that’s a good idea considering the complexity of the issues involved with occupancy. Anything which contributes to parties avoiding consulting their lawyer is not an advantage to their safety. Just my opinion.

Water Everywhere

It happened here in 2008 and it will happen again. Spring is flood season in Wisconsin. Frozen ground, rain, melting snow, clogged drainage sewers, rising river levels are the perfect storm conditions for property damage after acceptance and prior to closing. It’s never too soon to sharpen your skills in the disclosure of defects and conditions responsibilities.  Heavy rain is the forecast for today through tomorrow.

 

Would you rather learn or be trained?

Learning is what we do for ourselves. Training is done to us. Maybe that’s why learning opportunities promoted as training sessions are unfilled with experienced employees or professionals.  Continuing education isn’t a big draw either. Education is learning, but it’s not something people who have arrived agree they need. That’s why CE is mandatory and not voluntary.

A company with a culture that places high value on learning will attract learners. People who learn develop insights, skills, and wisdom they won’t get in training or Continuing Education.  Learners stay ahead of change. They embrace new technology if for no other reason than it’s something new to learn.

Would you prefer to be represented by a person who is continually learning, or one who just got  out of training, or attended mandatory continuing ed?

 

Duty to Disclose Conditions

Wisconsin real estate buyers are well protected in the house buying transaction. At least they are protected to the extent the Seller and licensees comply with their duty to disclose conditions which may adversely affect the transaction or the property.

Sellers of 1 to 4 family residential properties are required to complete a Real Estate Condition Report (RECR) and provide the report to the Buyer within 10 days of the accepted offer. It’s not illegal for a transaction to close without the RECR being provided. Instead, the law extends rescission rights to the buyer who does not timely receive a RECR.

A buyer who does not receive a RECR, and used the Wisconsin approved offer to purchase form will have affirmative statements from the seller representing they have no notice or knowledge of specific conditions which may be defects or material to the transaction. Unless the provisions are deleted or a counter offer is prepared to override the affirmative condition statements in the Offer, much of what is on the RECR is addressed by the seller in their acceptance of the Offer.

If the Seller declines to adequately complete the RECR the licensee still has an obligation to disclose to the seller and the buyer adverse conditions he/she is aware of from a limited inspection of the  property.

A consequence of this hyper active seller’s market may be a loss of attention to disclosure obligations. I’ve heard attorneys say their post closing complaint cases have increased in the last two years. I’m not surprised. Whether a person resents having been pressured to pay more or accept conditions without an opportunity to do discovery, adverse conditions, the extent of which are unknown until after closing are likely to bring the buyer and seller together again, and this time with lawyers instead of real estate licensees.

Suggestion:  Sellers who correct, prior to listing, and fully disclose adverse  conditions are better protected from a claim of failure to adequately disclose. I understand some people will shy away from a home with a condition report acknowledging defects, even those which have been repaired.  It’s safe to say the person who would not consider the house because of a known condition would be a prime candidate for suing a seller who didn’t disclose. Licensees who complete a pre-listing inspection of the property and document their findings in writing will have what they need to conduct an appropriate pre-listing discussion of the property condition with the seller.

What’s My Home Worth? The answer doesn’t have to be a WAG.

No one ever said the appraisal process was scientific or perfect. Certainly somebody from MIT, or Stanford, or the UW Math Department could create a system to pinpoint real estate value. Oh, it’s been tried. See your property assessment, or Zillow’s Zestimate, or the RPR Value. There are a multitude of these calculators out there. They all use quite disclaimers of their lack of dependability, but they whisper the disclaimer and shout their confidence.

A useful tool on the internet is the mortgage amortization calculators. They different than (WMHW) tools in that  we expect accurate information.  Accuracy doesn’t appear to be the goal of the WMHW tools we see. You do know the tool isn’t generating a product, right? You’re the product.  All of these tools are shiny machines to attract your attention. Everyone know we will give away our valuable privacy for  a peek at a cute cat or a bird that talks. Lead capture is the purpose of WMHW and other calculator programs. (You’re not even a number, you’re now a lead and you’re getting sold to who knows.) Oh, the program will put out a number for you. Some will give you a $90,000 range (the right number has gotta be in there somewhere). It’s not a dependable number and it comes with no evidence of support.

The widespread use of WMHW is concerning. These numbers do get used as starting point for home sellers and buyers, data for financial statements, as an idea to decide to refinance, dispute resolution, etc. I’d like to see them go away until someone builds something that works. Until then, there is a better way.  Of course the appraiser is your only resource for a report to satisfy a lender.  That appraisal may cost $500 and it’s likely to be worth the cost. If you don’t need a certified number, the Realtor® price opinion is still better than WMHW WAG. If the licensee, regardless of experience, is using a value adjustment process to arrive at an opinion, you can trust the number to be within 5.0% of what a typical buyer would pay to own your property at the moment.  The key is the proper input of relevant data, and a calculator.

If you want to know a number worth knowing and you don’t want to pay, talk to a Realtor®. If you want to be sold to the real estate industry, play with the shiny machine.

 

 

 

Is This Really a Price Escalation Offer? Probably not.

Buyer: “Mrs. Seller. You are asking $300,000 for your house. Here is my offer for $300,000.  If you get another offer by 7:00 PM tonight for $300,000 or more, my offer will then be $1,000 more than that other offer, up to $351,000.”   The first price escalation offer may have started just like this. A capable, committed, fearless buyer promising to pay more than any other offer the owner has in hand,  up to a specific amount. That’s a true escalation offer. It’s free of stipulations. No if, and, or but. This buyer is appealing.

The Price Escalation clause common in our market is remarkably diluted of fearless commitments from the buyer with weak if, and, and buts.  If we take the written watered down clause and put it in a conversation it looks like this:

Buyer: “Mrs. Seller. You’re asking $300,000. My offer is $300,000. If you have another offer in hand for $300,000 or more, I’ll increase my offer by $1,000 up to $351,000. BUT you have to show me the other offer as proof. AND I get to scrutinize it to see if that offer has credits, concessions, or seller costs which mine doesn’t have. If after I compare to make  sure we are apples to apples, and I’m satisfied, I will sign an amendment to change the purchase price. Oh, by the way; if the appraisal doesn’t support the price, I can rescind my offer. We’ll see the appraisal in oh, 30 or 35 days from now. About 5 days before closing. ” 

Every real estate licensee and attorney  sees the caveat filled contingency is trouble waiting to happen.  The buyer who needs this kind of protection is not the price escalation buyer you want. This buyer is hopeful that you will be so enthralled by the big number that you will overlook the conditions. The game is on and it’s a gambler’s game. You and the buyer are taking a chance that the appraisal will or will not support the Offer price. A low appraisal is a big win for the buyer. You’re 4 weeks closer to closing and your other buyers are gone as is your leverage.  So, before you accept an offer with a diluted escalation clause you gotta ask yourself: “Do you feel lucky?”

A skilled real estate licensee will know how to modify the Offer to protect you when this contingency shows up in your offer. It’s great to have a strong, committed buyer interested in your property. The buyer capable of a true escalation commitment won’t be afraid. You’ll know her when you see her offer.

How to be a Superhero

Google Trends 2017 is an inspiring video. We are asking how to do and be everything. How to be fearless, how to change a tire, how to be a good parent, how to be a superhero. Once we know how-to, we have a choice to make. Take action or stay out.

The superhero does not sit this one out. All superheros have in common a desire to do good for the well being of other people.   While I’ve never seen a superhero accept a check to cash at a bank, the superhero is rewarded with trust and call backs.

To be a superhero, declare yourself one. Be a superhero Realtor®. Declare an intention to do good for the well being of other people in every interaction in 2018, and then begin by being that superhero you would want on your side with your next interaction. And then do it again.

Improve the experience.

Real estate technology changed rapidly. Creators of the technology know who their customers are and they’re making apps to make their customer’s lives easier, swifter, more efficient. From our offices we open access for our customers to use these apps. The real estate experience of those folks also may be easier, swifter, more efficient because the app exists.  We didn’t create the app. We have not improved the experience by being a pathway to the technology.

Those who make techno tools may devise something people can’t see living without. (a camera in their phone) Those who don’t could make a low tech advantage the client will not want to live without.  Feelings keep a person coming back or moving away.   It’s easy to  let a person feel special. It’s also easy to leave a person feeling disregarded.  How we approach contracts is a great place to change the feeling from disregard to special.

As the world turns toward technological precision and away from human interaction skills, there may be a giant gap in the human interaction enhancement world.  Whoever fills this gap will have the secret to the real estate agent remaining relevant. Or even necessary.