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April Market Watch
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FSBO or no? How do you know what you don’t know?

On a stretch of road about a mile and a half long yesterday I counted three For Sale by Owner signs.  I didn’t stop and inquire, or try to sell them on the benefits of working with a REALTOR®; more often than not folks who start with a FSBO sign end up signing with a REALTOR® within a couple weeks, once they realize the time they’re spending takes them away from their own job and day to day responsibilities, or the transaction they had ended up falling apart in a confusing way.  But seeing those three signs I couldn’t help but wonder if those sellers have been seeing all the “Sold in Three Hours with Twelve Offers” declarations all of us have seen REALTORS® put on social media this year.  Must be easy, right, just put a sign in the yard then count your stacks of money?  It’s true that now is a pretty good time to be a seller, and it’s also true that sometimes homes are listed only hours before offers are received.  But in order to truly maximize your gains and minimize your risks, you must understand each detail of the purchase agreement as well as the consequences if something is missed, prepare for each step of the process before it happens, and have the experience to work through each of those steps.  In other words, it takes a whole lot more than a sign in the yard to sell a home and maximize your gains, FSBO or not.

The Purchase Agreement used by most REALTORS® is eight pages.  If the process works the way it should and everyone is doing what they’re supposed to, you probably only refer to about two of them.  But the times when the process becomes challenging are when the other six pages come into play.  Knowing why, how, when to leverage all eight pages of the purchase agreement is a crucial difference between a successful closing and, well, something different.

Going back to a comment I made earlier: It’s good to be a seller.  Yes, it is but don’t think for a moment buyers aren’t getting their licks in too.  Many buyers are weary – they’ve lost several other homes, they’re tired, dejected.  So when they’ve finally gotten under contract they’re looking to maximize for themselves.  Understanding what the inspection process means is a big deal, but especially important if the buyer agreed to pay the seller above list price.  Many sellers believe they don’t have to fix anything and if the buyer doesn’t like it, they can walk.  While that is true, there are some pretty important legal ramifications that go along with that.  Working with a professional who is able to educate you so that you can make the best decisions moving forward is crucial.

Now about this appraisal: whose business is it anyway what the seller and buyer agreed to?  Well, the appraisal is done for the lender; not the buyer, not the seller.  The main purpose of the appraisal is to make sure the lender isn’t lending more than the home is worth.  The appraisal is done by an independent person who uses a strict formula to determine value.  One of the ways they do that is by looking at historic values of comparables.  But wait a minute – how do home values grow if the appraiser is looking at historic data, and how does that work in this market where buyers are often offering more than list price?  Exactly.  Times a thousand.  I do this for a living, full-time, millions of dollars in transactions each year, and every one of my listings gets my full attention, and a great deal of research and care when it comes to the appraisal.  It comes down to this:  It matters not what the buyer and seller agree to in terms of purchase price, if the appraiser assigns a lower value, that agreed price goes out the window.  That often means the seller gets less money than they agreed to at the beginning, or the deal falls apart and you start over again.  And depending on the type of loan the seller may be stuck with the appraised value even in a future transaction.  Clear as mud, right?  Understanding the importance of the appraisal can’t be overstated, and neither can being prepared and maneuvering through it.

Having said all that, I don’t believe FSBO is necessarily a bad thing for some situations.  I’m not one of those people who says you wouldn’t perform your own surgery so why would you perform your own home sale.  Well, I didn’t go to school for 12+ years to learn to do something that if I fail I die.  But I will say that a home is the largest, most important financial asset most people have so before throwing that FSBO sign in the yard consider how important your financial future is to you and your family, and whether you have the experience to leverage your best outcome.

As always, if you have any questions, and you’re not currently working with a REALTOR®, I’d love to hear from you.  agarard@talktotucker.com 317/752.6331.  Until next time – Angie

By Angie Garard, talktotucker.com/angie.garard

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