An “All-Cash” Deal is Not Literally a Briefcase with Cash in it

Posted by Lee Baybrook on

When the pros refer to “All-Cash” real estate transactions, most people envision the buyer lugging a heavy briefcase with stacks of hundred dollar bills to settlement. I find this hilarious. Through the years, Hollywood has created that impression with their repeated depictions of cash in briefcases, sacks and duffle bags in action movies. Usually it’s ransom money, drug money, or the result of some big heist.

What “All-Cash” in real estate really refers to, is a transaction where the buyer will wire the funds in full, or deliver a certified check for the full amount to settlement. In other words, the “All-Cash” buyer will not need to obtain mortgage financing. They can literally just cut a check—albeit a certified one. To make an “All-Cash” offer, a prospective buyer would demonstrate their ability to the seller by submitting bank statements along with their contract paperwork.

“All-Cash” buyers, who do not require financing, will always have a competitive advantage in a multiple offer situation; they can usually close quickly and their transactions are immune to falling apart due to financing. It is extremely difficult for buyers who intend to get loans with multiple conditions to compete with “All-Cash” offers, which have become increasingly popular as investors make their way back into the marketplace.

16 Absolutely Imperative Tips for Home Sellers

Posted by Lee Baybrook on

Alec Baldwin will raise his voice indefinitely until you get it.

1.       Remove all clutter from your home. Consider renting a temporary storage unit during the listing period if you have a lot of extra stuff. Less is more.

2.       Clean your entire house from top to bottom. Think “move-in” ready.

3.       Repaint rooms with unusual colors to neutral colors. Bland is better, believe it or not. Let the eventual buyer imagine the color possibilities, instead of being turned off by crazy wallpaper or weird paint colors.

4.       Focus on curb appeal. Curb appeal matters now more than ever. Clean windows, paint the front door, trim bushes, and mow the lawn. Power-wash and reseal the driveway, if necessary.

5.       Always get a pre-list Home Inspection. It will be worth a few hundred dollars to get a written report of exactly what is wrong with your house. Don’t be caught off guard with the buyer’s list of expensive repairs during the home inspection phase. Even routine repairs will quickly add up if you need to hire plumbers, electricians and HVAC technicians. The point being, if you can get repairs addressed before a contract develops, you’re going to have a much smoother transaction with an eventual buyer. And you will remove the element of surprise that can eat away at your bottom line.

6.       Take care of all repairs and maintenance, prior to listing. Small leaks, faulty outlets, missing light bulbs, dirty air filters, missing sink stoppers are all small repair items, but cumulatively leave an impression of deferred maintenance. If you want a buyer to pay closer to your list price, you need to take care of these items, especially if your buyers are first-timers.

7.       See what the competition is offering before pricing your house. Check out some other homes in your home’s price range to see how they compare. Try to put yourself in the shoes of a potential buyer. What would a reasonable buyer expect?

8.       Don’t overprice. Overpricing a home initially can inadvertently stigmatize it, even if you reduce the price later. Consider that most buyers are novices. Once they see a house that has been on the market over 120 days, they will wonder what is wrong with it, and stay away. I often have to explain to buyers that the only thing “wrong” with a property is that it was overpriced initially, but now reduced. But it is difficult to account for all the buyers who didn’t consider the home at all because they assumed something must be terribly wrong with it. In addition, homes lingering on the market look stale, and will attract lower offers because the perception will be that the sellers are more desperate.

9.       Make showing the property as easy as possible. I cannot stress this one enough. It sounds like common sense, but you’d really be surprised what I encounter as a buyer’s agent. If you still live at the property, have agents call your cell phone directly to schedule showings. If you don’t answer, most agents will leave a message stating the day and time of their showing. They will assume it is ok to show your house if they don’t hear back from you. Also, if you have a copy of your house key made, be sure to test it in the lock before putting it in the lockbox. Sometimes new key copies do not work.

10.       Never turn down a showing under any circumstances. Be flexible. There are going to be agents who call without much notice. This mostly happens because their buyer clients noticed your For Sale sign when they were in the neighborhood looking at other homes. Or they found your listing online but didn’t give it to their agent in advance. Suppose the buyers are from out of town and only have that weekend to find a house. If you turn them down, you will never see them again. Remember, it only takes one buyer for a successful sale.

11.       Always leave the property during a showing. It’s a big decision for buyers, so they need to take their time and view your home without interference. If you linger around the showing, buyers will leave more quickly and not get a chance to adequately evaluate the property.

12.       Respond to all offers within 24 hours. If you plan to be out of town, make plans for handling offers while you’re away. So long as you have an internet connection, you can review and sign paperwork electronically. Delayed responses always frustrate negotiations.

13.       Leave some wiggle room in your price for negotiating, at least 1-3%. This is actually a purely cosmetic tip. It’s really to placate buyers and make them feel like you’re giving away something. So the strategy is to just come up with the number you would ultimately accept, and then bump it by 1-3%. This will keep you from countering at full price, which can totally blow a deal. If you are listing below market, or at your bottom acceptable number, make it clear in advance that the price is firm—and support your price with actual market data from recent comparable sales.

14.       Listen to the market: it will tell you if you are overpriced. If your house is not getting any showings, it usually means that buyers are looking at other homes they perceive as more value for the money. Don’t expect many offers if you are at a price ceiling. Exceptions must be made, however, for seasonally slow real estate periods, like the winter holidays.

15.       See what the competition is offering during the listing period. The market is always changing, and new listings come on the market every week. Keeping tabs on the local market will help you decide whether or not you need to adjust your list price.

16.       If you do end up overpriced, reduce the price at regular amounts and intervals. But make the amounts count for something. For example, consider reducing the price by $5,000 every 30 days. Or $10,000 every 60 days. I recently saw a house listed at $750k reduced by $2,500 after more than 100 days on the market. Considering that most offers are going to come in at 95-97%, such a small reduction is meaningless. The point of a reduction is to attract more buyers to your listing.

All Houses Now Sold “As-Is”

Posted by Lee Baybrook on

2012 brings us a completely revised Regional Sales Contract. Most of the changes amount to much-needed administrative editing: clarifying and tightening the language, increasing the font size, as well as moving paragraphs around for better logic and flow.

The most notable change is the removal of the “Equipment, Maintenance and Condition” paragraph, the now legendary Paragraph 7. Under the new contract, sellers will no longer be required to complete repairs to major appliances and systems. As a matter of practice it will simply mean that all repair items listed in a home inspection report are negotiable, instead of the old way of having two sets of repair items: a set of mandatory items, and a set of negotiable items.

Paragraph 7 always led to a lot of confusion, arguments at the settlement table about “Walkthrough Items,” and you guessed it…lawsuits. It’s funny to think about settlement attorneys sheepishly asking that dreaded first question after all the parties were seated: “Are there any Walkthrough Items?” This was their way of asking, “Am I about to preside over an ear-splitting screaming match?”

There was never a general consensus about what exactly Paragraph 7 covered, nor was there ever universal agreement about what “normal working order” meant. Sometimes, I felt like the only agent in the world who actually understood it.

While the removal of Paragraph 7 adversely affects buyers, its removal is a reflection of the current market. Most, if not all, bank-owned foreclosures and short sales are sold “as-is” anyway.

For buyers, there are two silver lining aspects of this change, however. When everything is sold “as-is,” buyers will have more price leverage. I predict you will see list prices with more flexibility, and buyers will compensate for potential repairs in their initial offers. The second piece of silver lining is that buyers will be able to prioritize and ask for the repairs they really want, instead of settling for a set of mandatory repairs and perhaps not reaching an agreement on a negotiable repair they really cared about. A broken window, for instance, would not have been covered by Paragraph 7 and a seller would not have been obligated to fix it.

It will be fascinating to see how this pans out in 2012. To be sure, more resale sellers will offer home warranties and most, if not all, buyers will insist on home inspection contingencies. The future is now!