You can’t get Peanut Butter out of a Jar with a Banana

Peanut butter and Bananas go together like PB & J. Unlike  jelly, a banana is pretty good all by itself. On my desk is a banana and a jar of creamy peanut  butter.  Although a banana has many fine attributes, scooping peanut butter is not one. Without a tool strong enough to knife through peanut butter, the two shall never meet. Within arms reach are items MacGyver would easily use to bring the two together. I want a snack of peanut butter and banana. The two will be merged.

A savvy real estate agent will find ways to bring people  together. She will find  get done what can’t be done, by using what’s sitting there in plain sight. Because she knows if she forces some good thing to do the job it’s not capable of accomplishing, the banana breaks. What do you have at your finger tips to spread peanut butter on a banana?

 

 

The Pinterested Homes Phenomena

Pinterest is a cool ap with unlimited interesting ideas. OH, I just got it! You PIN INTERESTing ideas—pinterest. This morning I had another a-ha! moment in real estate. A trend is going on and I think it’s a product of Pinterest. I call it Pinteresting a house.

A Pinterested home is one where an eye catching photo of a renovated interior room is the main photo for an older home. These photos are of new bathrooms with cool fixtures, renovated kitchens with tile backsplash and granite counters, or some interesting fixture. Nothing else about the house is interesting. A Pinterested home has some of these not so interesting features: Old HVAC systems, roofs worn beyond their life expectancy, poor windows, plumbing issues, outdated electrical systems. What I think is being done is more than lipstick on a pig kind of sprucing up. I wonder if home buyers are being distracted from the real expensive issues by the cool renovated bathrooms?

 

 

It’s About the Net to Seller, Not the Price

There are always  gimmicks. Buyer markets gave us the Appraisal Contingency – Escape Clause, and the Buyer-Gets-the Last-Word Inspection Contingency. Seller markets spawned the Escalation Clause.  Insecurity morphed the Escalation Clause into a watered down, useless jumble of nonsense. (I’ll beat any offer price as long as I get to see the offer, and then I get to deduct a laundry list of expenses from the price, and maybe I will agree to amend our price, but I don’t have to pay this amount if the appraisal doesn’t match our price, and then….)

All of the gimmicks look like good ideas until you, ah well, look at them. People who hire smart real estate brokers as Buyer Agents get their Offers accepted by steering clear of the gimmicks. The savvy Realtor® out thinks the competition by seeing  knowing the objective of the Seller is really the Net to Seller, not the Price Offered. I believe the Wisconsin Offer to Purchase (Residential, the Condo Offer, and Vacant Lane Offer) are boiler plate forms where costs paid by Seller are pre-determined. To increase the Seller’s Net without increasing the price, financially capable Buyers will take on the Seller’s typical expenses (some may be tax deductible—see your accountant), and save themselves thousands of dollars in interest and higher property tax bills over the years of owning the home.

This weekend when you write your offer try this: Think like you are in cooperation with the Seller, not in competition. The Offer has at least 8 areas you can modify to improve the love your offer receives from the Seller…and none of them require sappy letters and photos of your kids. If you haven’t committed to a Realtor® yet, before you do, ask them what ideas they have to help you get your offer accepted. Commit to the professionals who know how to make the Offer work for you AND the Seller.

WB-14 Condominium Offer to Purchase

Providing condo documents and disclosures is the obligation of the seller. Receiving them and rescinding the Offer are the buyer’s rights. We as licensees are expected to protect those obligations and rights.

Real estate licensees are required to complete forms approved by the Real Estate Examining Board of the Department of Safety and Professional Services in a manner that accomplishes the intent of the parties (Wis. Admin. Code REEB 16.06(8)) and will ordinarily be expected to complete the form in a manner that results in an enforceable contract.   WI Real Estate Law, 2014 Edition, Contract Interpretation and Remedies 10-1.

Condominium law has it’s own Chapter in Wisconsin law. After quick review of Chapter 703 Condominiums there is no doubt that public policy favors the protection of buyers over sellers in Condominium sale transactions. The buyer’s right to rescind without any reason stated is assured. The obligation of the seller to provide an extensive list of existing and contemplated rules is clearly stated, and yet the list of those items is not clear. To make matters worse, the list is a mine field of confusion. (See page 4 0f 9 of the WB-14 lines 204-246.)

Licensees may make modifications to the procedure and items required for delivery, but we do so at some peril.To be safe, consider making NO changes to the procedure. Adding additional items from the list of additional items lines 235 to 246 can be done without touching the procedures of delivery and right to rescind.  The Offer to Purchase even includes a suggestion for how to add items without upsetting the process. This is what is suggested:

Using lines 174-188 or 514-519 of the WB-14, the licensee can add additional condo docs for the seller to provide. Something as simple as this will work: Condominium Disclosure Materials, lines 204 to 234 added to the list of items (a)  through (h) lines 208-218, seller shall also provide: Condo financial statements for the previous 2 years. The minutes of the previous 2 years of unit owner’s meetings. The minutes of the condo board meetings during the 12 months prior to acceptance of this Offer. AND SO ON AND SO ON….

PRACTICE CAUTION: The contract is clear. The seller has the obligation to provide what the parties agreed would be provided. If any documents don’t exist, a  seller might  be wise to not accept the offer. A  prudent listing agent, using section 703.33 for a check list will obtain all that is available and know at the time marketing begins, what items are not available. Disclosure of unavailable documents seems like a good idea.

By the terms of the contract, the buyer and seller agree to give NOTICE and make REQUESTS. The proper forms for a licensee to use for this communication are Notice Forms, and Amendments. There is no agreement in the WB-14 for the buyer agent and seller agent to converse by email, text, phone calls or any other method. If buyer fails to make a request for missing documents, the contingency could be deemed satisfied. If Seller fails to provide documents they agreed to provide, the buyer could rescind the offer. Licensees who help the buyer and seller operate within  the terms of the contract are meeting the expectations of their license. Those who take it upon themselves to call, send emails, texts may think they are being “friendly”. How placing the the buyer and seller at risk is friendly I don’t understand. The buyer and seller agreed that the “friendly” way involves buyer and seller signed Notices and Amendments.

 

Closing Statements Match Terms of Offer Contracts

If the buyer and seller agree in their contract that the purchase price shall be $300,000 the closing statement must show a sales price of $300,000. We all agree on that. If the contract states the Seller will credit the Buyer $1,500 for closing costs the closing statement will show a credit of $1,500 from Seller to Buyer. What if the Seller’s agent and Buyer’s agent correspond (by phone, text, email, in person) and agree that the credit will be $1,000 instead of the $1,500 the buyer and seller agreed to in writing?  The closing statement must reflect the terms of the Offer and the terms of the Offer must be in writing  using approved forms as long as Wisconsin Real Estate Licensees are involved. $1,500 is the only agreement the buyer and seller have. That’s the amount that has to be on the closing statement.

What about the situation where the buyer’s broker and listing broker agree to contribute money to the transaction by lowering the broker’s commission? Assuming the Offer to Purchase includes a statement where buyer has directed buyer broker to reject listing broker’s offer of compensation, and have the Seller pay the buyer’s broker at closing (assume 3.0% of the purchase price), the Offer to purchase must be amended to change the 3.0% to an amount less than 3.0%. If the Offer is not accepted a counter offer is the proper form. If the Offer is accepted then the buyer and seller must amend the Offer. An appropriate statement for the counter offer or amendment where the buyer’s broker is accepting $1,000 less to improve the Seller’s bottom line could be:

Addendum A, page 1. Buyer Broker Commission: Change 3.0% to 3.0% minus $1,000.

Nothing else in the Buyer Broker compensation contingency of the Offer is changed. Buyer is still directing the buyer broker to reject the listing broker’s offer of compensation. The only change is that the seller is not paying buyer broker 3.0%, they are paying 3.0% less $1,000.

The listing broker, selling broker, title company, lender, closing agent want to be careful to make sure all of the agreements the parties have with respect to money are documented and signed by the buyer and seller.

Obviously, a listing broker who reduces the commission the seller is to pay at closing will use an amendment to the listing contract to document the commission change. The title company receives the listing contract and amendments to that contract as well.

 

 

Reasonable and Logical Value Opinions

The appraiser must provide appropriate comment(s) reflecting the logic and reasoning for the adjustments provided… Selling Guide FannieMae.com  Adjustments to Comparable Sales.

Prices offered for homes last year were at times neither reasonable or logical. Home sellers were ecstatic and would-be buyers were anything but. I don’t know what the market will be in 2017 and I’m not going to guess. If we assume the next six months will be more or less like the first two quarters of 2016, it will be wise to pay attention to this publication MGIC How to Review an Appraisal. Mortgage underwriters have a critical role in protecting the lender who does not have the enthusiasm for the risk of owning properties at undocumented prices…if worse comes to worse (again).   Inflated values documented in appraisals are well documented as a contributing factor to the collapse of the last housing bubble. The prepared underwriter looks at each appraisal with a critical eye. Adjustments for amenities, improvements, location, market conditions are open for discussion. While there are not limitations or guidelines associate with net or gross adjustments, it’s the underwriter who will decide on behalf of the lender if the adjustments used by the appraiser conform to the neighborhood.

The listing agent or buyer’s agent who has a reasonable and logical method for comparing relevant sales to a subject property, using value adjustments, may be highly valuable in the process if avoiding hurdles and surprises is important. Creating a spreadsheet that functions similar to a uniform residential appraisal  form is a start. The art  to produce more or less useful results from that spreadsheet is to use dollar amount adjustments that would be acceptable to underwriters. Considering there are no published standard adjustments, we’re on our own to use numbers that are reasonable and logical to the underwriter … a person we do not and will not know. It’s all reasonable and logical. Or magical.

I have a spreadsheet I started using in 2014. It’s not perfect because it’s not the unknown underwriter, but to document the evidence and add some logic to the illogical process of pricing property, it’s a reasonable tool.