We get a lot of questions about the standard residential purchase contract versus as-is agreement.  Let’s go over the differences and how each should be used.

Standard Residential Purchase Contract Versus As-Is Agreement

First off, the seller is required to disclose known defects regardless of which contract is used.  In the old days agents always used the standard purchase contract which provides for automatic repairs of certain items.  There was always a fight about what was covered or not, so the contract was cleaned up and made more precise.

Standard Residential Purchase Contract Versus As-Is Agreement

Since the foreclosure crisis it’s become common practice to use the as-is agreement.  The as-is agreement has no automatic repair provisions, so it allows the buyer to cancel for any reason.  What invariably ends up happening is a fight about repairs.  Buyers get ticky-tacky about little things and demand they are repaired.  The seller says no, it was sold as-is and we’re not doing it.  The buyer walks and finds another property.

Meanwhile the buyer is out the inspection costs and starts all over.  The seller had their home off the market for 10-15 days and lost marketing time.  If the buyer wasn’t prepared to accept minor issues they should not have written an as-is contract.

Under the standard contract the seller is responsible for repairs up to 1.5% of purchase price for items like roof, water damage, heating, cooling, plumbing, septic, etc.  Cosmetic conditions are not covered.  And yet even with as-is contracts buyers ask for cosmetic repairs and get turned down and are left searching for another home.

Buyers are Fearful

Buyers are fearful the problems are bigger than they are, or that costs will mount.  Buying a home is an e emotional event, and fear often gets the better of buyers.  The time to talk about all this stuff is before they purchase a home.  Once buyers know what to expect, the process becomes much easier for them.

Sellers are emotional too.  They often feel like the buyer got the better of the deal in negotiations, and now they want stupid repairs on top of it!  You can hear their frustration the minute we present them with repair issues.  The as-is contract was supposed to cure all this and make contracts simpler and less argumentative.

People are people, and no contract is going to suppress the emotions of fear and greed.  So long as this is reality, it might be best to consider using the standard contract which addresses certain issues quite well.

Agents Should Counsel Buyers and Sellers

At the very least agents should be counseling buyers and sellers up-front as to expectations and the process once an offer comes in.  If buyers and sellers are properly educated, the emotions are tamed, and the experience of the agent takes over.  Each side has confidence they are being treated fairly and according to protocol.

This is one more reason for sale by owners have such a difficult time selling on their own.  They don’t have anyone counseling them on how to act and feel.  More importantly, there isn’t a neutral party the buyer trusts counseling them on how to feel and act either.  Invariably the deal blows up and both sides are more frustrated than ever.

Agents, have upfront consultations with your buyers and sellers.  If your buyer is skittish or emotional, consider using the standard contract.  It will keep more deals together for you as the contract is specific about what is covered.  The as-is contract is like the old Wild West, and in the Wild West anything goes.  And usually somebody dies.  Don’t let your contracts die needlessly.  Rely on your agent’s wisdom and experience to get through these issues.  Hopefully both sides are using an experienced agent.  Learning on the job is not fun for buyer or seller.  Experience matters.  Either use an experienced agent with hundreds if not thousands of transactions experience, or someone on a team who has access to all that experience from a team leader.  Experience isn’t costly, it’s priceless when you need it.

If you’re looking to buy or sell, always call the Ellis Team at Keller Williams Realty 239-489-4042 or visit our website www.LeeCountyOnline.com for more tips.

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How Much is Your Home Worth?

 

News Flash.  Home sales in Lee County will be down in 2017.  Current Southwest Florida home sales trail last two years, and this occurred before Hurricane Irma.  Since the hurricane sales have lessened.

Current Southwest Florida Home Sales

Lee County is not alone.  Tight inventory has caused much of this.  If home inventory is down, it stands to reason homes sales would be down.  While inventory has been up year over year for the better part of 2017, it has been falling since February.

Last year inventory grew from October through February.  The same will probably happen this year.  What is not growing, at least since the hurricane, is the new pending sales.  Of course, they were down drastically in September -47.8%.  Some thought we’d see a rebound in new pending sales in October.  We’re still down 3.5%

New Pending Sales Southwest Florida Home Salesest

We know closings are down for 2017.  We also know new pending sales are down.  If new pending sales are down it means we don’t have a reasonable way to catch up to last two previous year’s numbers.  It wasn’t likely before the storm and sure isn’t likely now.

Real estate agents are probably wondering what they’re going to do.  As we’ve written in previous articles, this is the time of year agents evaluate their position.  Board dues are coming up by the end of the year.  Bunches of agents will get out of the business.  Still others will get into the business.  The merry-go-round will continue in 2018.  There are just as many who want to join as those that try and give up.

We think you’ll see two things in the 1st Qtr. of 2018.  First, more agents will join teams.  They’ll have to, or they won’t stay in business.  It’s costly to advertise, lead generate, pay assistant salaries, broker splits, etc.  It’s also costly to do all on your own and struggle.  Real estate is a very costly business.

Even though real estate is costly, it costs even more not to use an agent.  Several studies have shown that using an agent more than pays for itself in attaining a better price.  Saving a commission does not help, a seller nets less at the closing table than if they had used a broker.  And the seller did all the work.

The second thing we think we’ll see is increased listings.  They always go up this time of year, and we think 2018 will continue this trend.  Prices are up nicely over 2016.  In fact, October median prices were up 6.7% and averages sale prices were up 8.6%.

So, what’s the takeaway from these two predictions?  If you’re a seller, make sure you list with an agent that is going to stay at their brokerage through 2018.  Ask the agent you interview how their sales are.   Ask if they’re contemplating making a move, and what would happen to your listing if they did move?  Would they assign it to another agent and collect a referral fee, or could they take it to a new broker?

Agents, develop your business plan for 2018.  Before you take new listings be sure you’re at the place you’re going to be for the next year.  If not, do everyone a favor and make the move now before season.  It’s kind of like recruiting season for football coaches.  Recruiting season is now through Feb 1, and yet some coaches won’t be there next year, and they know it.  The coach can jump around but the players are locked in.  The same is true for sellers.

Look at joining a team or develop a strategy that can carry you through the next year.  You’ll have to invest in your business.

Sellers, all you can do is select the right agent, and price your home to today’s market.  The days of picking any agent to sell your home are over.  You’ll have to get selective again, and ask the tough questions.

If you have real estate questions, please call Sande or Brett Ellis 239-489-4042.  Or visit our website www.LeeCountyOnline.com and you can search the MLS for Free!

Good luck and happy selling!