Most of the time, when a home goes on the market, there is a yard sign.  It doesn’t matter if a Realtor is representing the Seller or if the house is For Sale By Owner.  There is almost always a yard sign. Why?

There are a some of good reasons to have a yard sign:

1. It provides a little advertising for the listing agent and
2. It provides a marker for people who are trying to find the house (mostly other Realtors) who want to view the home and
3. It lets people in the neighborhood or people who want to live in the neighborhood that the house is for sale.

The Home Buyer Drive-By

I get a lot of calls (in fact, I got one today - the day after Thanksgiving) from people who are just driving around the neighborhood and looking for homes that might be for sale.  This is a good thing for a couple of reasons:

1. For the Seller, it’s good because it might attract a possible buyer and
2. For the Listing Agent, it’s good because it might attract a potential client.

Typically, the phone call is short and sweet.  The potential home buyer wants to know the price and the general make-up of the house - how many bedrooms and baths, does it have a basement, etc. A lot of times the buyer is actually working with another Realtor and just doing a little legwork of their own.  Many times the buyer is rally looking for a home in another price range and once they know the price of whatever house they call about the conversation quickly ends.

Not For Everybody

Believe it or not, I do work with the occasional client that does not want to have a yard sign in front of their house until the house is under contract.  Typically, the Seller doesn’t want the neighbors to know they are selling the house. Although, the home will still be marketed all over the Internet and people will be coming in and out of the house.  So it’s unlikely the neighbors won’t catch on.  Still, there are people who just don’t like yard signs.

That’s OK.

It’s completely up to the Seller how they want their home to be presented and with or without a yard sign the house will sell…if the price is right and the condition of the home is good. The yard sign will not sell the house.  It may help get the word out that the house is for sale.  As I mentioned, there are people who drive around and call the number on the sign (and that number usually gets my voice at the end of it!).

I usually like to recommend a yard sign.  In this market, every little bit helps!

It’s a crazy market out there!

The Maryland Contract of Sale and all of the appropriate addenda for various inspections and jurisdictions, etc. can run to 40+ pages.  Even though most of it is boilerplate put together by lawyers, there are still a lot of blanks to fill in with terms and conditions.

Instead of going to the trouble of filling out this humongous “offer” a lot of Realtors have resorted to a Letter of Intent.  These Letters say right on them that they are not offers to purchase and not enforceable.

So why use them?

They’re an easy way to ‘test the waters” to see if the Seller is even remotely interested in entertaining what is almost always a low ball offer. It’s a way to start a negotiation prior to going to all the trouble writing this 40+ page offer and having people cross out stuff, write new stuff, fax back and forth, etc. until the documents become illegible.

The challenge is that they are almost always way, way too low.  The Seller gets insulted. They either laugh or scream.  Most Buyers’ Agents know this.  Most Listing Agents know this, too.  However, It’s our job as Realtors to represent the interest of our clients faithfully according to their [the clients'] wishes.  As I often tell my clients and other Realtors, “It’s not my house.”

So we throw these low balls back and forth to each other wishing and fantasizing that maybe one day we’ll get a phone call saying, “The Seller agrees.  Write the formal offer.”

Everyone knows this is a very favorable buyer’s market.  Prices are down, Sellers are willing to offer concessions, lots of “short sales” and bank-owned foreclosures. All in all, a good time to buy a home.

It’s not like going out and picking up a pizza, thought.  You have to have a plan and your ducks have to be in a row.

What’s Important When Buying a Home in The MD Suburbs of DC

Before you head out into the market, there are a few things to consider:

• do you qualify for a mortgage and, if so, how much of a mortgage
• do you have cash to make the required down payment and/or closing costs
• do you know where you want to live
• what type of home do you want

I can’t tell you how many times people will tell me “Oh.  I’ll live just about anywhere.” or “I want a four bedroom single family home under $200,000.” Sometimes people ask to look only at foreclosures and “short sales” thinking they’re going to get a “deal” only to realize that the kitchen has been stripped bare, the carpet is trashed, there are holes in the wall, there is water in the basement or a host of other issues that you will need to address after they buy the home and move in (see “Paying to Fix Up The Fixer-Upper”).

A Plan

Planning is good because it really helps you, as a home buyer, clarify your goals.  When you see the house you want, it’ll sing to you.  It also helps cut down endless amounts of time running around from one place to the next. After awhile the homes all tend to blur together. “Did I like the one with green paint in the bedroom?” ” What was the address for the one with the really nice kitchen?”

The Internet is a wonderful thing.  It allows you to look around from the comfort of your own home (or at the office!).  A lot of homes will have virtual tours, a lot will have public disclosures about being a “short sale” or needing “third party approval” or being “bank-owned”.  You can tell which ones have the number of bedrooms and baths you want, if they have a basement or a fireplace and on and on.

That way you can get your plan together and when it’s time to talk to a mortgage officer and a Realtor, it’ll be tons easier for you to find and purchase the home you’d really, really like.

There are a lot of houses, town houses and condos in the MD Suburbs of DC that are “short sales” and require “third party approval”.  What’s that all about?

A Definition

A “short sale” is a property owned by a Seller who can no longer afford their mortgage payments and wants to sell their home.

Unfortunately, the Seller cannot sell their home for enough money to pay off their mortgage and the related costs of the sale (i.e, transfer and recordation fees due to the State and County, lien release fees, settlement costs and, of course, the fee for the Realtor). In other words, they are “short”.  Another way of saying this is that they are “upside down” in their house.  They owe more than it’s worth.

“Third Party Approval”

The “third party” in all these cases are the banks or mortgage companies that will have to take a loss when the house sells.  Sometimes the loss is substantial.  Sometimes the Seller is just trying to get out of a tight situation and could really afford to keep up the mortgage payments but just doesn’t want to, for any number of reasons.

Because these banks and mortgage companies are going to take a big hit on the sale of the house, they need to be involved and approve any offer.  This means they review the terms of the offer and they are also reviewing the financial status of the Seller to make sure he or she is not “gaming” the system.

Since there are so many of these “short sales” in the MD Suburbs of DC, the banks and mortgage companies are overwhelmed.  Add to that the fact that the people processing the files are strictly 9 to 5 employees who couldn’t care less if you got an approval today, tomorrow or sometime next month.  They’re just plowing through the files, one by one, and trying to work the best deal for the bank.

The bottom line is that the bank or mortgage company has to approve the offer or there will be no sale - no transfer of real estate from a Seller to a Buyer.  Nada. Nothing.  Goose egg.

So How Long Does This Take?

Since there is such a huge backlog of homes that are being processed as short sales and as foreclosures it is not uncommon for the bank to take anywhere from four to six months just to respond. Even after they respond they still need to scrutinize the Buyer to make sure the Buyer is qualified to purchase the home and the title company will still need to do a title search to make sure there are no other liens against the property like a tax lien or unpaid water bill.

So it can take quite a long time - 6 months or more - from the time a Buyer places the initial offer on a home and the time they go to settlement and take possession of the home and can move in.

Oh yeah.  They’re all “as is”, too.  No repairs. Nothing.  What you see is what you get.  And that changes as the months go by.

When I talk to Seller clients, I often hear a lot of reasons as to why my clients want to value their house at a certain price:

• Sellers need the money to move to their next house,
• Sellers have made numerous upgrades to the house,
• Sellers don’t want to “give their house away”.
• …and many more

While I try to present a good case for valuing the house and suggesting a price that I think a buyer will pay, it is really the decision of the owner of the house to set the price.

What Happens Next

The real challenge is that no matter what price might be agreed to between the Seller and the Buyer, the mortgage company will not provide a mortgage for any amount higher than the appraised value of the  house.

Here’s an example:  Let’s say the Seller decides to set the price of their home at $400,000.  The Realtor does a good job at marketing the house and a Buyer comes forward and offers, say, $374,900.  The Seller agrees and everyone is thinking it’s a done deal.  However, since the Buyer needs a mortgage to pay for the house and the mortgage company is not going to provide more financing than the house is worth, they will hire a licensed appraiser to determine the true value of the home.  If the appraiser reports back to the bank that the house is really only worth $350,000, that is the maximum the amount the bank will provide for a mortgage. Period. (We’re not even talking the requirements for a down payment or closing costs here.)

Possible Solutions

So the Seller and the Buyer need to come to an agreement that the Seller will:

1. Agree to accept the $350,000 appraised value,
2. Negotiate some middle ground with the Buyer or,
3. Take the home off the market.

There are some variations and other options but this is pretty much how it is.

The point I’m trying to make is that regardless of the agreed upon Sales Price or Contract Price, if the Appraised Value is less than the Seller will need to accept less, if he or she wants to sell their home.

Unfortunately, with the glut of “short sales” and foreclosures driving prices down it means that even Sellers who are not in trouble with their financing will need to adjust their pricing downward if they want to sell their home.

It’s not nice, fair or pretty.  It is reality and it doesn’t do any good to price a home high in the hopes a Buyer will pay it.  If the appraiser doesn’t think the house can be valued at the Sales Price the mortgage company will not provide the money.

No Sale.

I’ve written about the Open House concept on a variety of blogs and I always say that I’m not a real big fan of Open Houses.  Of course, Sellers really like the idea of an Open House and I can understand why.  After all, the Open House is steeped in real estate tradition.

Back in the old days - before a widely used, computer based Multiple Listing Service, pre-Internet, pre-lockbox - one of the only ways to get your house shown to the largest number of potential Buyers was to have an Open House, usually on Sunday afternoon, and advertise like crazy hoping that someone who visited the house would want to buy it.

Nowadays, of course, there is a widely used, computer base Multiple Listing Service that can be accessed by virtually every Realtor within 100 miles of the house.  That Realtor can make the necessary arrangements with their Buyer client to see the house almost anytime.  Tuesday at 3:00pm.  Thursday at 6:00pm.  Saturday at 10:00am.  If the Seller can provide reasonable access to their home, it can be shown virtually anytime.

In addition, there are literally dozens of real estate specific sites that collect data (”data mining”) from the local MLS systems and provide it, for free, to anyone who has an Internet connection.  Here are just a few:

• Realtor.com
• Trulia
• Zillow
• RE/MAX.com
• Homesdatabase.com

There are literally dozens, if not hundreds, of others.  In fact, according to the National Association of Realtors, 84% of home buyers will search the Internet before calling a Realtor or visiting a house.

So, if an Open House really isn’t that effective, why are they still so popular and why do they still exist?

Tradition

Believe it or not, this is a case where because something has always been done, people want to continue to do it.  You’ve probably heard, “It’s always been done this way.” whether at work or at school or at some organization to which you belong.  That’s the deal with Open Houses: tradition.

The Neighbors

Yep. It’s great for the neighbors.  They’ve seen the sign in front of your house and they’ve been wondering for years what the inside is like.  What is your decorating sense like?  Have you done any improvements to the kitchen, bath, family room?

These are the folks you never invited over for coffee or a cookout and want to compare your house (and your house’s price) to their home just in case they might want to sell their own home.  Which brings me to…

Meeting Potential Sellers

There is a possibility that one of your neighbors has been thinking of selling their home.  Just thinking.  Now that they have a chance to visit another home in the neighborhood they jump at the chance.  Fortunately, for the Realtor hosting the Open House, that neighbor might be calling that Realtor when the time comes.  After all, the Realtor must be the neighborhood expert since he’s selling a house down the street.  If there is any connection whatsoever, the Realtor may have just picked up another client, which leads me to…

Meeting Potential Buyers

You may think that potential buyers that are visiting your home really want to buy your home.  If you get real lucky that might actually happen (about 1% of the time).  More likely will be someone floating in just to see what’s available in various price ranges in the neighborhood and, if there is a good connection between the Realtor and the potential Buyer, the Realtor might be getting a call to help the buyer find a house - a house that has a lockbox and can be shown anytime.

The Realtor

Sometimes an Open House attract a lot of people.  Sometimes it attract zero.  I always bring a book or a newspaper or some other reading in case it turns out to be zero.  I know other Realtors that bring their laptops to catch up on their blogging (no, this is not being written at an Open House) or check comps for other clients or catch up on e-mail.

It’s also fairly good exposure.  Yes, it gets my name out.  People call me and ask me about the house even if they never show up.  They usually have a follow up question about other houses that are less expensive or have more bedrooms or are in a different neighborhood.

The Home Owner/Seller

They make the home owner feel good.  The house gets all cleaned up (and if you use my services, professionally staged) and prettied up. It gets them out of the house for the afternoon.  Sometimes the Realtor can report a lot of “traffic” through the house and that will create the illusion that someone may be forthcoming with an offer. In the end, an Open House will have been conducted and real estate tradition will have been continued.

Don’t get me wrong.  I really don’t mind doing Open Houses.  Sometimes, I have great fun at them chatting up the neighbors and enjoying my Sunday afternoon.  However, I always let my Seller clients know that they shouldn’t get their expectations up too high.  An Open House is a long shot, at best, when trying to find a buyer for their home.  It’s not unknown for someone to come into a home and tell the Realtor sitting there, “I’d like to buy this house.” so I do them with a smile.  One day that magic buyer will come into one of my Open Houses and me, the Seller and the Buyer will all be happy campers.

OK.  I admit it.  I am not the neatest person in the world.  I have been known to accumulate stuff.  Mostly in my home office. You probably know what I mean. Trade magazines. Scrap pieces of paper with phone numbers on them. Loads of motivational and instructional CDs and (gasp!) cassette tapes.  Lots of different books like The Principles of Real Estate from when I was taking my pre-licensing classes in 1999. All kinds of stuff.

Yet, every now and then I look into my office and I tell myself, “This has to go!”  It takes me a few more times of doing that before I get down to business with a large contractor size garbage bag and start filling it up with stuff.

Yesterday was one of those days.  I was so tired of fighting through stuff I had on the floor (old files, old hand-outs from previous office meetings, etc.) that I just went crazy.  I would occasionally look at a piece of paper I had laying on a shelf on a bookcase.  It would have a date on it - 1998, 2004, 2001. Then I would come across things like a birth certificate (”Oh! That’s where it is!”) or my Notary Public certificate which tells me I have to renew my Notary Public by the end of the year. Crazy.

What Does This Have to do with Selling a Home in the MD Suburbs of DC?

I tell my clients all the time that if they want their home to sell faster and for a higher price it needs to be as clutter free as humanly possible.  In fact, I will offer professional home staging as part of my service if my clients agree to put the things in storage or boxes or wherever the stager tells them to put it.

Most of everything has to come off the kitchen counters, the dressers in the bedrooms, the sinks in the bathrooms and out of the closets everywhere.  A house needs to look open and spacious and neutral so that potential home buyers can walk through the house and visualize themselves and their stuff in that house.

I will be the first person to say that I know this is not an easy task.  After years of living in a home you just seem to gather a lot of stuff.  Some of it has good memories for you but I’m guesing a lot of it hasn’t been touched by a human hand in years. If that’s the case, it needs to go.