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Daily Real Estate News | September 20, 2007
The Dark Side of Good Home Staging
A nicely staged home can do wonders for turning casual lookers into serious buyers. For the seller, it's often a worthy investment. But when you're representing buyers, a staged home could draw attention away from a home's negative features, says a new report from the National Association of Exclusive Buyer Agents (NAEBA).
In a recent NAEBA member survey on home staging, 82 percent of the practitioners who responded said that buyers are likely to get distracted from important issues when viewing a staged home. And 51 percent said that staged homes often cover up real defects, including structural damage.
"Staging has taken the residential real estate industry by storm," the report says. "It has been the major focus of television programs and has been a dominant topic in real estate trade publications. However, up to this point, virtually all the shows and articles have been directed toward the seller’s benefits."
Jon Boyd, NAEBA president and a principal of Home Buyers Agent in Ann Arbor, Mich., says the report aims to make buyers more cautious when they're viewing staged homes.
"They need to be aware that staging does have a substantial psychological impact," Boyd says. "The person who buys a house once every seven to 10 years can easily be misled. Buyers also need to realize that staging does not impact home values after the home is sold.”
However, staging professionals say they're trained to show off a home's assets, not cover up defects. In general, staging aims to help buyers to imagine themselves living in the home. It typically includes removing clutter and personal memorabilia, using neutral colors on walls and floors, and doing a detailed cleaning of the home. Sometimes new furniture or props also will be used to demonstrate how a space might be used.
“Disclosure is the name of the game,” says Barb Schwartz, founder of StagedHomes.com. “If anything, home staging allows buyers to actually see the property. We would never put a picture over a hole in the wall or a rug over a patch of defective floor,” she says, referring to scenarios mentioned in NAEBA’s report.
However, Boyd says buyers still need to be on guard. If they get too emotionally attached to how the home looks when it's staged, they can end up overpaying.
"The biggest concern for home buyers is that the staging effects can make a home seem more appealing to the eye," the report says. "Once you own the home, the staging furniture will no longer be there, the cut flowers go away, and often you need to repaint your new home."
— REALTOR® Magazine Online
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Demand Inspections and Disclosures
You can never be too trusting when it comes to buying real estate. The buyer is entitled to know what he/she is getting for their money. The buyer should insist on an inspection and full disclosure of the house being purchased.
Why Do You Need an Inspection?
An inspection is an opportunity to have an expert give you an oral and written report as to the condition of the property you are purchasing.
After researching recent sales in the area, you decide that 30-year-old home for $180,000 is worth the money. You make an offer, which is accepted. The next step would be to hire an inspector. The report shows that the concrete foundation is cracked. The roof and plumbing need to be replaced. The cost for repairs adds up to $40,000. Your inspection contingency would let you back out of this deal or negotiate.
Remember to accompany the inspector during the visit. He/She will give oral comments that give more specifics as to the problems of the property. When writing a report, the inspector must abide by certain legalities on paper. He/She will be more open in person.
Why Do You Need Disclosures?
In most states, the law requires the seller to disclose any knowledge about the condition or history of their home to the buyer. For example a seller would disclose information ranging from a leaking roof to their house being built on a sacred Indian burial site.
Disclosure contingency gives you protection. Upon discovering the roof needs replacing, you can either back out of the deal or renegotiate for the cost of repairs.
It also makes the seller responsible legally. A seller may go on record saying nothing is wrong with the house. You move into your newly purchased house only to discover that cracks in the foundation that were filled in and painted over. A court of law can view the disclosure statement as evidence that you had no prior knowledge. The seller is held liable for the repairs.
How Do You Get an Inspection?
The inspection is written in as a contingency in your offer. Many real estate contracts automatically have an inspection written into the terms.
The buyer is responsible for the inspector's fee. Ask your real estate agent to recommend a list of local inspectors. Please check references carefully. This type of service may not be regulated in your area. A retired city or county building inspector may be your best bet.
There are two national trade organizations. One is the American Society of Home Inspectors (ASHI) or the National Association of Home Inspectors (NAHI).
How Do You Get Disclosures?
In California, the law states that a disclosure statement is provided to the buyer; then the buyer has three days to approve or disapprove. If the buyer does find the defects acceptable then the agreement is broken. Your agent or attorney can clarify the laws pertaining to disclosures in your state.
If there is no statutory procedure in your area, the buyer must request it as a contingency in the list of terms. Your investment is not worth being jeopardized. Insist on a home inspection and full disclosure. Make your purchase contingent on approving the results of both.
A "final walk-through" is not a home inspection. Structural problems are only revealed with a home inspection. A walk-through is designed to make sure the seller has not damaged the property since your first visit.
For more information please contact:
Joe Crain
Century 21, Smith & Associates
(210) 710-3270
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Counter-Offer Strategies
The art of the deal is negotiating. The goal, when you're countering a buyer's offer, is to get the highest price and best terms possible. Once you reject the initial offer, you must decide how much to counter. The answer is easy when the market is hot. You will counter at full price or more.
If the market is normal, you may receive less than full price for your property. In this case, one strategy would be to set your asking price higher than normal. How much lower than your asking price will you counter-offer?
Beware of Setting a Minimum Counter Price.
Setting a firm minimum counter price is a big mistake that some sellers make. Depending on the deal and the buyer your counter offer should be flexible. For example, after investigating the market, you set your asking price at $350,000. Your minimum price may be $320,000. If you are offered your minimum, you sell. If you are offered lower, you don't sell. It sounds simple.
Unfortunately, in this mindset, you box yourself into a limited deal. You want to be flexible when negotiating. Let us review our last example. The buyer offers $300,000. The seller rejects and counters with the minimum of $320,000.
The buyer counters with $305,000 again. Where do you go from here? You have already offered your lowest minimum counteroffer. The only recourse would be to repeat your same offer.
One strategy would be to counter lower at $315,000. Or what if the buyer is willing to pay more than your minimum?
The buyer might be willing to pay $330,000. You will actually have lost money again by countering too low.
There are housing situations where you are just lucky to be paying off the mortgage, commission, and closing costs. You might be offered a little less but you accept to some cash to save your credit. In this case, setting a minimum price would be reasonable.
If you do feel the need to set a minimum counter price, don't set it in stone.
Try to Get a Sense of the Buyer
Your counteroffer is not the final transaction. It is one step in the negotiating process. You counter. The buyer will counter your offer. You will then counter back. This process will repeat until the a deal is made.
Therefore, your counteroffer should not be your best and lowest. The buyer's first offer is usually a low-ball offer. A seller's first counter is a high-ball offer. Both parties are testing to see how the other will respond.
Let the buyer know you are willing to negotiate. You ask $340,000, the buyer offers $300,000. You counter $335,000. You must also send the message that you are not willing to drop your price too much.
Some buyers will cave and accept the counteroffer and others will not. Anytime you reject and counter, you are opening negotiations but you are also taking the risk of losing the deal.
There are some buyers who are just looking for a desperate seller. They make a lot of low-ball offers until they find the property. You are not going to find a good price with that type of buyer.
Others will counter with close to what they originally offered, in this case say $305,000 (now you're still $30,000 apart).
What if You're Close Together in Price?
After a few counters, you are only a few thousand dollars apart. You countered at $335,000 and the buyer countered back at $330,000. Now you're only $5000 apart. Should you accept the buyer's counter?
You can simply accept the deal. Another strategy would be to tell the buyer or the agent that you want to split the difference. They accept. You will then have sold your property at $332,500.
Splitting the difference can be an effective way of closing out negotiations to bring about a win-win situation.
What If You're Far Apart?
You counter at $335,000 and the buyer counters at $305,000. You're $30,000 apart. That's serious money.
There are only two ways of handling this situation. You could hold your original counter. The buyer would understand that this is your final offer. This could be a deal breaker. If you were highly motivated to sell, a steep decline of your price would get the ball rolling again. You counter at $320,000 saying this is your best but last offer.
This action could spark the buyer's interest. He/She could accept or at least make a higher counteroffer.
Is There a Time to Walk Away?
There are only two reasons to walk away from negotiations. You are truly angry and will not lower your price.
The second is for effect. You are willing to take less, but you want the buyer to think you've made your last, best offer. You say, "Take my last offer or leave it. I'll give you an hour to decide."
As a tactic, walking away can start negotiations. You could get your price or lose the deal.
There are no guarantees when negotiating real estate. The final outcome is often determined by the following percentages:
10%--how good you are at negotiating
45%--how motivated you are to sell
45%--how motivated the buyer is to purchase
100%--luck
For more information please contact:
Joe Crain
Century 21, Smith & Associates
(210) 710-3270
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