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What 3 Things Worry Home Sellers Most? And How to Solve it.

Mary Jo Quay

The most emotional four-letter word in the English language is H O M E. It's where the heart dwells and memories happen...

The most emotional four-letter word in the English language is H O M E. It's where the heart dwells and memories happen...

May 14 7 minutes read

Media keeps telling us that it’s a seller’s market, and programs like ‘Make Me Move,’ enticing homeowners to think that they can demand a price that meets their wildest dreams. Anything less makes sellers fear that they are losing money.  But, every seller worries. 

1.  What is every seller’s worst fear? That their home won’t sell, or that they’ll get low offers. Most people browse online for several months before they are ready to sell, mentally comparing their home to their neighbors. They estimate the price of their own home based on the highest priced home on the block.

It might be shocking to know, but 25% of listings did not sell in South Minneapolis in 2018. We saw a lot of price reductions, ‘back on market,’ and expired listings. It wasn’t just South Minneapolis, every area had unsold listings. There are only 3 reasons why a house doesn’t sell. That’s price, condition, or if you have cactus doorknobs and no one can get in.

On one hand we had multiple offers on well-priced and well prepared homes. On the other hand there are properties that don’t meet a buyers expectations and don’t sell. Buyers fall in love with the charm and feeling of a home, or they move on.

As an example, I had a client who bought an inexpensive rambler in South Minneapolis during the recession for $100,000. He did some work, removed a wall to give it an open floor plan and built out the basement. His friends convinced him that it should be worth $350,000 because a totally remodeled house 3 doors down sold for $375000. The difference was that it still had the original 1950s kitchen, bath, they weren’t pretty. My market analysis came in at $280,000, and he argued that his friends were correct. I reminded him that none of them were standing in the doorway with a check. We compromised, at listing at $319000 with the caveat that if we didn’t get an offer in two weeks, we’d need to make adjustments. Two weeks came and went with only one showing, zero offers despite massive online marketing. Online comments were snarly. We adjusted the price, and still no showings. I asked for him to change the original kitchen countertops, he said no. He believed that if he didn’t get his price that every dollar less was money lost. His equation was that $100,000 + $20,000 in a basement and garage improvements = $325000 in value. We finally got an offer $15,000 under my original analysis. He was frustrated and disillusioned with the process.

2.  Every buyer is reality TV trained, they expect that a design fairy wafted through the home rendering it flawless. Buyers fall in love with the charm and feel of a home, or they move on. Most buyers see at least 7 homes before understanding what works for them. Their agent should do a market analysis to assure the buyers that pricing is in line with neighborhood values. Multiple offers can push the price over market values. Even if the buyer is willing we have to deal with an appraisal.

3. The buyer’s lender sends an appraiser to give the lender his opinion of value. Banks don’t loan over the amount of an appraisal.  Your house sells a 2nd time to an appraiser. Some buyers agents write into offers, ‘If the home doesn’t appraise at purchase price, the buyer can walk away with his earnest money refunded. The seller has the option to reduce the price to meet the appraisal, or both parties sign a cancellation immediately.”

That clause protects the buyer’s investment, and puts all risk on the seller. An appraisal is ordered after a buyer completes their home inspection, and the contingency is removed. It should be on the underwriters’ desk at least a week before closing. What happens if it doesn’t appraise at the purchase price?  Then the seller would be forced to lower the price if they want to close, or cancel and put the home back on the market. 

The problem is that the transaction has already two to three weeks into the process, and unless there is a backup offer in the wings, the seller is starting all over again. If the appraisal comes in low, it can be contested, or order a 2nd appraisal. If it is an FHA mortgage, that appraisal stays with the house for 6 months. That means that if you have a 2nd FHA buyer, you can only accept offers up to the amount of the appraisal for 6 months.

What’s a better way?  If you are in multiple offers, the sellers sets the terms. Rather than accepting an offer hoping that it will come in at value, require the buyer to prove that he has additional funds to cover the difference between the purchase price and an appraisal and is willing to do so. A buyer with a 3% down payment asking for closing costs concessions has less reserves than a buyer with 10% down payment. Two years ago I represented a buyer in a changing market. The seller signed an offer over list price In multiple offers. The listing agent had a panic attack in the middle of the night worried that the house wouldn’t appraise. She demanded proof that the buyer had cash to cover a short in appraisal value up to $10,000.

The buyer had funds, and there was an $8000 short, but we did close.

It is important for the listing agent to prepare a packet for the appraiser with comparable homes, and a list of upgrades that add value. When I represented a seller of a S. Minneapolis 1947 two story home, there were three other homes on the market that were almost identical. Because I previewed each of those homes I was able to give detailed notes to the appraiser on the differences. Appraisers do not see other homes, and they wouldn’t know anything that isn’t spelled out in the MLS. For instance, the home I represented had a remodeled kitchen and a large remodeled sun room. One of the 3 other homes didn’t remodel, put granite counters over original cabinets and a 1 car garage. Another was beautifully staged, but the exterior had dry rot trim and most of the shakes on the front. The 3rd had original windows, a very old roof, and the entire exterior needed paining (existing paint was peeling everywhere). The interior was upgraded, but there was $30,000 of maintenance that would have to be addressed. That appraisal came back on the dime because I gave the appraiser information that he didn’t have.

Every home seller hopes for the best price. Hoping isn’t enough. Understanding what buyers want, what the competition is, preparing your home, and having a strategy will get you there.

Selling a home in today’s market is complex. Your relationship with your agent is a partnership, you want a partner who gives you a clear plan for what works for your home.  I’m only a phone call away, give a shout for a consultation, 612 384 1360.  I answer my own phone.

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