Why Home Inspection Negotiations Fail
ARDELL on 06 29, 2009
Properties “falling out of escrow” due to the home inspection negotiation failing, is on the rise. In many cases this is because the buyer is asking for something the seller can’t really say yes to, because what they are asking for just doesn’t make any sense. Consequently the answer often becomes no and the escrow “falls out”. See this example of a recent Extreme Home Inspection to see how difficult it is to say “no” when no is the most appropriate response for all parties, and still keep everything moving forward to a right conclusion.
A home inspection is not the same as the original contract negotiation. The original negotiation is more about price and terms than the house itself. Consequently both parties can decide what to do, and what to do next during the negotiation, in email or by fax. To successfully complete a home inspection negotiation, the negotiations need to start AT the property, and may take a few inspections by experts to complete the inspection negotiations properly.
The example in the link gives a better picture of why this is so, than I can describe here. But let’s look at the three main causes for inspection negotiations going sideways, and how the buyer is often moving in the wrong direction.
1) The new norm of not letting the seller’s agent be present at the inspection is not a good one. I agree that the seller should not be present, as the emotional level can get out of control and unmanageable. But the agent for the seller needs to take the ball and run with it once the buyer starts making a request. The BEST way for the agent for the seller to negotiate to a good conclusion is if they are AT the inspection and heard and saw what the inspector was talking about. Not permitting the agent for the seller to be present can lead to the seller fixing the wrong thing, or fixing it incorrectly. If the paper report were an adequate representation of all facts at hand, the buyer would not need to attend. We all know that is not the case, and to understand the inspection in its entirety, so as to negotiate the appropriate fix, requires that all relevant parties be present.
It is a great disservice to the transaction as a whole for buyers to insist that the agent for the seller not be present. Yes, I’ll agree that a lazy, crappy agent in the room doesn’t help anyone. But the right agent in the room can make everything work out even better than the buyer hoped for. The agent for the seller has the best chance of getting the seller to react appropriately to the “issue at hand”. Give that agent what they need to help you best. Let them be present during the inspection, in fact insist on it. The paper report does not replace being in the space with the inspector as he finds and discusses the issue at much greater length and detail then ends up in the written report.
If you have an agent who sits on the front step reading a book or doing “work they brought to do during the inspection”, and doesn’t stay “engaged in the process”, well…I think you know what I want to say there and can’t say out loud.
2) Successful negotiations require you to put yourself in the other side’s shoes. Often agents who have represented hundreds of buyers and sellers can do this better than any buyer or seller. When a buyer’s agent writes up an inspection response, they then have to read it back to themselves pretending they are the agent for the seller. How would the agent on the other side of the table take this request and run with it? Often the answer is, they can’t. The agent wrote what the buyer asked for, without analyzing whether or not the other side has enough information to respond well.
Example: “Fix everything.” Even if the seller says yes, there are some things you don’t want the seller to fix. Some things need a credit, some things need to be fixed, and most things need a whole lot more detail as to HOW to fix them than “fix everything on this list” explains. RARELY does ANYONE say yes to an unknown cost. Fix everything is just lazy. The buyer’s fix might cost $6,000. The seller’s fix might cost $300. The seller may be saying “yes” to $300 while the buyer is thinking they said yes to $6,000. Then you get to the end after closing and the fix is horribly inadequate. You must be VERY specific if you want a “fix”, and that fix has to have a “work order” attached. The work order dectates WHO will fix it and the cost of that fix, so the seller is saying yes to what the buyer really wants and needs.
3) The request has to make sense. When the inspector says (and they all do) I can’t tell what’s behind the wall, it is NOT usually appropriate for the buyer to ask for the wall to be opened. Sometimes yes (as in the linked example in the first paragraph) sometimes no.
Example: 200 amp panel is of the type that was recalled. The inspector says it needs a new panel (cost approx. $1,000). The inspector suggests the panel be moved from outside the house to inside the house (generally not an appropriate request – it’s like asking for the washer and dryer to be moved from the second floor to the first floor. A home inspection should not include a request to change the home from what it is, when that something is not “a defect” and is a suggestion vs. a needed repair.)
The inspector says “I see no problem besides the panel itself”, but as a CYA he adds, “I can’t trace the lines throughout the home as I can’t see behind walls”. Buyer asks the seller to replace the panel AND move it from outside to inside AND asks them to trace the lines throughout the home…no possible answer to all that besides “no”. The inspector can’t see through walls and neither can the seller or the seller’s electrician. You’re basically asking for someone to rip out every wall and see the wiring behind the wall and check it. Unless the inspector sees a problem in the wiring, and even when they do, there is a limit to what you can expect a seller to do. Handing them a to do with no work order…no cost…no detail as to what they are to do next, is begging for a no response.
RECAP:
1) Make sure both the agent for the buyer and the agent for the seller are in attendance and “engaged” during the inspection.
2) If there is a “potential” but unidentified problem as to specifics CALL FOR A 2ND INSPECTION of that item by a qualified specialist, before making a request.
3) Don’t simply ask for the biggest number you can get. Make sure your request matches the issue at hand.
Example: 35 year roof is 6 year’s old. Inspector sees 3 cracked shingles and flashing issues around the chimney. If you really want to buy the house, don’t ask for “a new roof”. Sure, getting ten grand is nice. But asking for a new roof when it doesn’t need a new roof will likely lead to the seller not trusting anything you want as “real”, and leads to the seller simply saying “NO!” and not wanting to negotiate any further and that equals #FAIL!
About the Author: Ardell DellaLoggia
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75 Responses to “Why Home Inspection Negotiations Fail”
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Ardell-
This is an incredible post! I often deal with these exact same situations and issues with my clients. Clients and realtors alike ask me to be present at the inspection so that I can help them understand the items on the list, and what can and should be fixed, and the costs.
We often collect bids for realtors for this very reason- no confusion about work to be done and cost. This is a fantastic description of some of the things that come up with an inspection.
This Ardell Post is especially interesting to me. Our present Mercer Island home was shown to us by our Realtor as a “challenging” house that many of her prospects wouldn’t even get out of the car to view. However, Patty and I could see the possibilities and after my experienced inspection, we bought it the day we saw it- “as-is”.As they say- the rest is history- as told on my jgWebSite-
(Click) http://jgropp2.googlepages.com/alterationsanadditions
Jerry,
Your stance is clearly not the norm, especially in today’s market conditions. Most people expect to move within 5-7 years, or plan for that possibility. That being the case in a flat or down market, no one wants to bet on the % return of an expensive remodel.
In many cases the exterior “look” is what is “obsolete”, and the % return on the interior improvements without updating the facade is nil.
The facade changes you do not appear to like are the ones that have the higher return, and promote a higher return for the interior improvements as well.
I happen to like “mid-century modern” but in determining a price to pay for one, I must consider how potential future buyers will view the obsolete appearance.
Blending with nature went out with “earth shoes” in the 80s. Could make a comeback, but for the most part people want their home to stand out and not blend in.
Ardell- You are so right in saying- “Your stance is clearly not the norm, especially in today’s market conditions”. As an architect, if I let the “norm” govern my practice, I’d never produce anything of value designwise. The reason the RE industry has so many totally indifferent houses to peddle is because the norm has governed for far too long. Hopefully the current downturn will end with a better product on the Real Estate scene with aware agents selling same with a positive, knowledgeable approach. J-
Loaded Words Ardell- who says-
“I happen to like “mid-century modern” but in determining a price to pay for one, I must consider how potential future buyers will view the obsolete appearance.
Blending with nature went out with “earth shoes” in the 80s. Could make a comeback, but for the most part people want their home to stand out and not blend in.”
JG- There’s nothing obsolete about good residential design- mid-century or just plain modern that provides tasteful good living. As to standing out, some people want to do so, others don’t. JG
Jerry,
I’m jumping to the bottom to respond as the “tiers” of response aren’t working for me.
See curren end of string for response. I don’t like the new format and it doesn’t work well when there is a volume of back and forth going on.
Hi Ardell-
I have a semi-related question around how the seller’s disclosure may tie into this. We recently bid on a home whose MLS description included central AC and a gas fireplace as features. Other items were listed as deficiencies on the seller’s disclosure, but not the AC or fireplace. During a pre-inspection, the “newer” AC was shuddering and not cooling properly and the gas fireplace wouldn’t light. Our agent was very specific and worded the repairs similarly to your suggestions in our offer. We also didn’t hit them for any deficiencies that they had already disclosed, reasoning that their pricing was taking those into account.
However, the seller’s reaction was that those were “unreasonable” repairs; the house was “perfect” and stated that their recent price drop should cover anything we “wanted” done. In our minds, their price drop simply put the home in range with comps and the disclosed condition. There were other unprofessional aspects of the sellers agent’s behavior in play as well, and ultimately the deal never went anywhere.
But my question is this- There are some repairs that only a professional could detect and the scope of the issue could indeed be a mystery.
But in this case it wouldn’t take a rocket scientist to know that these items didn’t function correctly and what it would probably take to fix them. If they are advertised as features, they should work properly or should be listed on the seller’s disclosure. If they don’t work properly, then a seller (or their agent) shouldn’t be shocked/upset if asked to make repairs. Yes?
Ardell- I’ve done a lot of informal home inspections in my time. With my lengthy experience as a “hands-on*” residential architect, it usually doesn’t take me long to evaluate a structure and to advise go- or no-go on a RE deal. *by “hands-on”, I mean being out in the field overseeing my projects- or in some cases building them. Writing this Comment has given me another idea for a Google “Knol” on the subject.
https://knol.google.com/k/knol/system/knol/pages/Search?q=Jerry+Gropp&restrict=general
Jerry,
Home Inspections these days go into every single detail and way beyound structural integrity issues.
Ardell- What I said was “evaluate a structure” which is in fact “way beyond structural integrity”- things like hidden rot, mold and things like that. I also judge the layout, basic architectural design. JG
Stillwatching,
You have a lot of “should”s in there
I can’t answer at length as I’m not permitted to respond when you have an agent. 2nd opinions unfortunately are not permitted in this biz unless you drop your Realtor and mls membership, which I am considering doing LOL! Would make it easier to blog and I can still be licensed to sell real estate by the State without being a member of organizations that make it hard to help people.
It’s true that some sellers say “yes, I’ll sell it ‘that low’ BUT not another dime!”
When the price is a screaming deal like 2 or 3 I’ve been working on recently (bank owned and short sales) that is the case and “should” isn’t a factor. But sometimes the seller thinks they were wrestled to the mat on price, and the price isn’t a good buy. But the price reduction is not the indicator of good value. Many homes get reduced to a price that is still overpriced.
You are confusing me when you tie in the seller disclosure, as just because it is in the seller disclosure doesn’t mean you can’t request it in the inspection phase. So you lost me there.
I’m come back and fix those typos and try to respond more fully. A bit rushed as to time and concentration with end of June closing and other client issues. End of month can be a bear! Sorry for the sloppy response.
Typo score- JG (2), Ardell (1) so far.
Jerry,
I fixed those for you. Let me know if you need anything else. Sorry it took so long, had a 9 p.m. appointment.
Ardell- Thanks much. Hope your deals went OK. On to more carefully crafted comments. LOL J-
Hi Ardell-
My point was that there are two sides to the ‘reasonable repairs’ story. It is true that some buyers are making demands that are either ridiculous or aren’t well thought out. And I can empathize that some sellers are frustrated by getting pinned to the mat on price.
However, my last several experiences (the one I alluded to yesterday being a good example) lead me to wonder if many sellers are allowing their frustrations over the current market to prevent them from dealing in good faith. And I am suggesting that perhaps this is what causes some buyers to become reactionary and demanding after the inspection. In this economic climate, anyone willing to spend their money is rightfully concerned about making a bad buy or getting “ripped off.”
In my situation, the asking price was neither a smoking deal nor a short sale situation. If anything it was on the high side for the area. If they were unable or unwilling to make the repairs and stated that in a business-like manner, then fine. But I found it silly that the seller could be so emotional and upset at being asked to repair items that were obviously not working.
My understanding is that the seller’s disclosure is (among other things) a way to set a buyer’s expectations as to the condition of the property- BEFORE an initial discussion of price occurs. That is where I think the seller’s disclosure ties directly into repair negotiations. If a seller discloses a known issue up front, then I’m aware of the problem when I’m formulating my offer in terms of price. I was duly warned and can decide what I’m willing to pay and there isn’t any hint of dishonesty.
But, if the seller is trending low on the honesty scale or trending high on the frustration scale; to the point that they purposely neglect (or give the appearance of doing so) to put obvious deficiencies on the disclosure, then of course the deal is going to take a contentious tone.
So, getting to my question. Is that not what the sellers disclosure is for? Wouldn’t being reasonably truthful earlier prevent a lot of drama later on? Or maybe I need to revise my expectations.
Stillwatching,
There is no concensus answer on the questions you raise. I am often surprised by the way many agents treat these issues, and there is no “one way”, as from my point of view expectations must be based on reality vs. “paper”. Reality comes in many and varied forms as that changes from seller to seller, and the paper trail is grossly inadequate and does not replace reality. Reality is always way more important than any piece of paper.
In my experience most sellers are so inundated with the 4 pages of questions, that they are focusing more on which box to check than they are focusing on their home with regard to “disclosure”. There is no “disclosure” phase in negotiations as to price. It’s just some extra paper and not relevant to the process. Page 5 is often done incorrectly in my opinion. I almost never have the buyer sign twice on that form as many agents do. (exception would be in multiple offers, if that is what it takes to have the offer accepted vs. someone else’s offer.)
My position when representing a buyer client is to never have them sign a form that they don’t have to, and doesn’t benefit them to do so.
Phase 1 – negotiate price usually without regard to condition (exception is when you have no inspection contingency and are clearly buying “as-is” per the contract)
Phase 2 – negotiate repair items after all inspections are complete
Phase 3 – deal with items that may have been broken or are no longer working at closing, that were not broken and working at time of inspection and disclosure.
There are 3 “money phases” (see below) and none of them have anything to do with the seller disclosure form (Form 17).
From my clients perspective (buyer or seller client) it is almost never better for a buyer to see a seller disclosure form prior to offer, at least not formally, as that could set an expectation that price “allowed for” disclosed items, when in fact it does not under the terms of the contract.
Case in point, I wrote an offer last night and none of the obvious defects are noted on the seller disclosure form. NONE, and they are many. The disclosure form is often of benefit to describe an item that was a problem and is now fixed. Often it is harder to see it if it was fixed, nor can the inspector tell in many cases. i.e. “roof leaked back in 2006 and was repaired”. That gives you a heads up for the inspector when he sees old evidence of water in the attic or in the ceilings, etc. but no current need for repair. Something being “fixed” also gives you a heads up that the next step is full replacement, so knowing something was fixed is very important, though rarely pointed out adequately on the Seller Disclosure Form.
The disclosure can potentially be “helpful”, but not something that you rely on when you are in your due diligence phase prior to inspection negotiations.
In my experience sellers do not “lie”, they simply can not bring themselves to say anything bad about their home. I have tested several very honest and good people by asking them to list the 5 things they don’t like about their house…most often they turn negatives into positives. It’s just human nature, I think. There are exceptions, but if you ask a seller to list the 5 best things and the 5 worst things, they almost never can put the 5 worst things on paper.
Most disclosure happens while I have the listing and not on the form. That is why in a hot market if a property sold too quickly once listed, it was a disadvantage in many ways. Often the listing period is a time of discovery.
I will take your comment and respond to it paragraph by paragraph in a new comment.
“My point was that there are two sides to the ‘reasonable repairs’ story. It is true that some buyers are making demands that are either ridiculous or aren’t well thought out. And I can empathize that some sellers are frustrated by getting pinned to the mat on price.”
The two sides are this:
1) Get the most you can (buyer); Give the least you can (seller)
2) Deal ethically and honestly with the issues at hand as to the property condition.
I tend to move in the direction of 2) in most cases, but there are times when #1 applies in an instant case. Neither is “right” vs. “wrong” inherently. If the buyer has to pay a little more up front to gain offer acceptance, then often 1) is the correct approach. When the seller has to give till it hurts up front, they have less to give at inspection and 2) is best hope, and sometimes not fully achievable as to minor cost repairs (nickel and diming).
“However, my last several experiences (the one I alluded to yesterday being a good example) lead me to wonder if many sellers are allowing their frustrations over the current market to prevent them from dealing in good faith. And I am suggesting that perhaps this is what causes some buyers to become reactionary and demanding after the inspection. In this economic climate, anyone willing to spend their money is rightfully concerned about making a bad buy or getting “ripped off.”
Both true, but one does not negate the other. Both are correct from their point of view. My definition of “market value” is “the price at which neither party is exceptionally happy.” and this market holds that definition to be true. That is why inspection phase is not a “right” but a “negotiation”. There is no right price and there is no right method to negotiate repairs.
Think of it this way, often what the buyer is absolutely aghast about as to a repair, is something the seller lived with for the whole time he lived there. From the seller’s point of view the house is just fine, or he wouldn’t have lived with that “needed repair” for so long. That includes asbestos, lead based paint, and many hazardous issues that were just honky dory for the seller the whole time he lived in that “hazardous” condition.
Both sides are correct most times, and so a “negotiation” ensues. The buyer has the right to cancel on inspection. Beyond that the buyer has no absolute “rights” to repairs under the current form of the Inspection Contingency. (There used to be another form which no longer exists – in fact many other forms that I liked better than the one we now use.) If someone is reading from out of this area, your inspection form is likely different and this response may not apply in your instant case for that reason. What you may or may not be “entitled to” is in your contract, not on a blog
. In our area there are no entitlements beyond the right to cancel if you lose the negotiation.
“In my situation, the asking price was neither a smoking deal nor a short sale situation. If anything it was on the high side for the area. If they were unable or unwilling to make the repairs and stated that in a business-like manner, then fine. But I found it silly that the seller could be so emotional and upset at being asked to repair items that were obviously not working.”
There is no “business” end of residential real estate. It almost always boils down to pure emotion at one point or another during the process. It is the agents’ job to try to move that emotion toward “a business-like manner”, but we are not always successful in that regard. Often I take the heat and let the client vent at me…and then we get to a different place, so that the emotion doesn’t effect the “parties in interest” of which I am not one. Taking the heat and allowing a client to vent is a huge part of our job in difficult negotiations. There’s a whole lot of psychology utilized in negotiations…it’s mega to an ethical and appropriate final outcome. It separates the players from the paper pushers.
“My understanding is that the seller’s disclosure is (among other things) a way to set a buyer’s expectations as to the condition of the property- BEFORE an initial discussion of price occurs. That is where I think the seller’s disclosure ties directly into repair negotiations. If a seller discloses a known issue up front, then I’m aware of the problem when I’m formulating my offer in terms of price. I was duly warned and can decide what I’m willing to pay and there isn’t any hint of dishonesty.”
That is not correct unless that was part of the contract for you to do so. That is normally only true if the listing said something like “house needs a new roof, asking price is reduced accordingly”. OR if your offer said “offer is reduced by cost of new roof”. If it was not addressed that way in the contract or the listing, then you are not correct. Disclosure is not a “money phase” as I indicated in my previous comment, though you and the seller can agree to that stance in the contract at time of offer and acceptance of price.
“But, if the seller is trending low on the honesty scale or trending high on the frustration scale; to the point that they purposely neglect (or give the appearance of doing so) to put obvious deficiencies on the disclosure, then of course the deal is going to take a contentious tone.”
Emotion is always incorrect. There is no such thing as a fully honest disclosure form, as the questions are not all inclusive. I’ve written on this topic before. All you have to do is be present while a seller is filling out that form and you will understand. Their eyes glaze over and they often don’t understand what to check. Rarely is their mind on the house vs. the piece of paper they HAVE TO finish quickly. Most would like to just put “don’t know” to everything, as it is 5 pieces of paper among many that need to be completed, and their thoughts are more about cleaning the house before the sign goes up, vs anything that has to do with “the paper” that needs to be completed to list the house.
The new policy of getting the Seller Disclosure Form up front is “wrong” in my opinion. We used to leave that with the seller so they could really take their time, and we needed it AFTER an offer was made, so that the seller could add things during the listing time. The current system of getting it with the listing contract makes the form just about useless, IMO.
“So, getting to my question. Is that not what the sellers disclosure is for? Wouldn’t being reasonably truthful earlier prevent a lot of drama later on? Or maybe I need to revise my expectations.”
You need to revise your expectations to the 3 money phases of the contract.
Make offer without regard to condition (unless you note that condition IN the contract) OR remove inspection phase as a “contingency” and adjust offer price accordingly. One or the other, not both. Always have an inspection whether or not you are making the sale contingent on that inspection. In any case where negotiation is potentially hindered, better to do a pre-inspection and make your offer after inspection vs. before. The ONLY time condition is part of the offer price, is if you have done a pre-inspection or condition items are noted IN the contract specifically as being reflected in the price.
P.S. Almost ALWAYS the seller deems the accepted price as final and is not prepared for the inspection phase as a “money phase”. Almost always. As agent for the seller it is my job to put a number in the sellers “net proceeds” estimate prior to listing, reflecting my expecation (best guess based on property specifics). Almost never does the listing agent do that, and so they lead the seller down the chain of events that accepted price – costs of sale = net proceeds. It is not the seller’s fault that they balk at money being requested or repairs being requested, as most of the “net proceeds” sheets used at time of listing the house do not include the anticipated repair costs. So it takes them by surprise…and then when they act surprised everyone gets angry. Kind of a bad setup from the getgo really.
Bottom line, seller disclosure form came into being somewhat recently. When I started in real estate there wasn’t one. The contracts and contract phases did not change when seller disclosure forms were added, and so the contract runs from initial negotiation to closing, without regard to the seller disclosure form.
The PRIMARY reason for the disclosure form, IMO, was as a protection to the agents. In CA there is a portion to be filled out by the agent for things they noticed that the seller didn’t. Often we see things the owners do not see. It’s like a car, and you are used to the little quirks to start it or adjust your foot on the brake to accommodate minor deficiences. People live in their home without noticing the things they do to adjust for its deficiencies.
The only reason I as an agent can see most defects, while the sellers can not, is because I have been to hundreds of home inspections. I can anticipate most of what the inspector is going to say. When I view a property with a buyer I never see the good things
as I call that “the buyer’s job”. My partner and I go and look for all the things the inspector will find and “call”. BUT that we know them in advance and tell the buyer in advance is not part of the offer process unless they are buying it “as-is”. In some cases it is not “as-is” but we advise the buyer to treat it as if it is “as-is” because of the situation.
Examples:
Needs new roof can be a “duh”. House built 19 years ago and it is the original roof. 19 year old roof with a 20 or 25 or even a 30 year shingle is on the downside of life expectancy. “roof math”.
Needs new hot water tank: Date of tank is almost always ON the tank. 10 years old or older = inspector is going to “call” it, even though it could last, the inspector is going to call it on “past life expectancy”
Old house – 60 amp panel – inspector will call for an upgrade, but techncally not a defect if the house was not epanded since time of original construction.
Old house – knob and tube wiring – unless it was gutted to the studs all over the house, there is going to be knob and tube somewhere…or a caution that there “may be” as inspectors can’t see through walls.
No GFCIs near water – obvious, but still a common inspection item
Plantings too close to house or dirt too high up to a wood siding piece or tree branch too close to roof – rarely is there an inspection without this item in some form
Chimney needs new flashing – 95% of the time that is on the report of a house that is at least 8 years old or older unless it has a new roof within the last couple of years.
Broken window seal – technically cosmetic and something a buyer can see without an inspector.
Furnace – often the date installed and the date last inspected is on the heater. Past life expectancy depends on the type of furnace, but if you see it is 23 years old, well…probably passed life expectancy but working.
Crawl space defects can usually not be seen without the inspector going in there. Attic issues are usually not seen until an inspection. Roof is never a totally known factor without an inspection, but you can guess most times. In fact it’s a game of mine to guess the age of the roof and I’m right at least 95% of the time.
I think you missed my point with regard to requested repairs. NEVER say “fix that”. Always know what it costs to fix it, and give the seller a work order, or ask for a credit in the amount of the work order.
Gas fireplace not lighting is usually easily remedied and a common “mistake” where the owner can light it but not the inspector. Often the pilot is turned off during the summer and getting it on once it is off takes time and patience.
A/C “shuddering and not cooling ‘properly’” is a subjective issue. Usually the components are based on life expectancy or a 2nd inspection is called by a qualified HVAC contractor.
We used to say “in good working order” but good is different from one person to the next. The current standard for a walk through vs an inspection phase is “broom clean and main systems and appliances in working order”. Washer, dryer and refrigerator “as is” meaning if they break before closing, that’s not real estate. Stove is real estate. Dishwasher is real estate. Refrigerator is not real esatate, it’s personal property.
Lots of general info there…every situation is different and ask 10 agents and you’ll get 10 answers. My answers change depending on THIS seller and THIS buyer as expectations must always match the realities of the individuals and the property at hand.
Stillwatching originally asked: “I have a semi-related question around how the seller’s disclosure may tie into this.”
Bottom line response: It doesn’t.
Jerry,
You give the industry too much credit for what sells…it is the home buyers that determine that, not “the peddlers”.
In my experience, different styles appeal to different phases of life, for the most part.
When your children are young you tend to like what I call a “standard two story – colonial” style. One where the family room is very visible from the kitchen, and the kids go “up to bed”.
When the children get to be teenagers, you don’t want to see or hear them as much. Video games – punk music, etc…and the open family room as their “play area” off the kitchen is no longer the desired floor plan.
Then when the kids are gone, one floor tends to be the preference.
So there is no one style for all seasons or all reasons.
Cost is KEY and so the least desired style may be the MOST desirable as to cost.
You just can’t get more money for the lower tier home in the “food chain” regardless. Everything is “good” if it is priced properly for what it is. If most people don’t like it, it just has to be cheaper no matter how much “this buyer” likes it.
The current trend is for smaller square footage (2,200 to 2,800 or so) Lots of windows and natural light. Not “buried in the big trees”.
People are afraid of big trees around their house these days.
Ardell- As to: “You give the industry too much credit for what sells…it is the home buyers that determine that, not “the peddlers”. I’m usually accused of giving the RE industry too little credit- (with cause I have to admit).
However, I’ll have to admit you’re right about one thing- The third picture down on the attached was our “Kid-Raising
Barn” where we sent our three kids “upstairs to bed”.
(click) http://tinyurl.com/lb7kj8 J-
Jerry said: “Our present Mercer Island home was shown to us by our Realtor as a “challenging” house that many of her prospects wouldn’t even get out of the car to view. However, Patty and I could see the possibilities and after my experienced inspection, we bought it the day we saw it- “as-is”.”
I expect then that you got it at a “discount” to other homes on market at the time. Price is determined by how many buyers “want it” generally.
Let’s test my theory that style governs price tier:
Median Price – 2009 – North King (includes Eastside)
1 story = $330,000
split entry = $387,500
Tri-level = $412,750
1 story w/basement = $492,375
2 story = $556,375
2 story w/basement = $700,000
Those are my basic tiers of value. There are exceptions, but generally a lion can beat a housecat in a fair fight
Age ranges:
2000+ = $645,000
90s = $520,000
80s = $498,125
70s = $395,000
60s = $395,000
50s = $391,500
40s = $391,000
(required disclosure – stats not compiled, verified or posted by NWMLS)
As to my definition of “obsolete” floor plan or facade = what is not readily built by new builders en masse, today.
PNW is not the true barometer for “obsolete” as functional obsolescence is determined more by national norms. The term “obsolete” is not a criticism, it is an accepted and primary factor in the home valuation process.
i.e. a 1 bath house is “functionally obsolete” in this day and age.
I really, really have trouble with this of Ardell’s- “As to my definition of “obsolete” floor plan or facade = what is not readily built by new builders en masse, today.” Watch this space. Jerry-
As to MCM “discounts”- Ardell said- “I expect then that you got it at a “discount” to other homes on market at the time. Price is determined by how many buyers “want it” generally”.
to which Jerry says-you are so right, I could see the possibilities immediately. The discounted price allowed us to put more money into badly needed repairs (a new roof first of all), as well as desired alterations and additions. I always discuss first off with my clients the basic fact of the purchase cost being lower gives us more to work with. J-
Here’s the deal, Jerry. If the average 60s home sells for $395,000, it doesn’t make sense to put $200,000 into it and expect it to sell for $600,000 plus. It will still be a 60s house when you are done.
Exception is a neighborhood like some areas of Lochmoor in Bellevue, where there is a restriction from expanding to a 2nd floor. A limitation that all homes must be one story w/basement, expands the value of that style, since no one is allowed to have a 2 story. Add Lake Sammamish view considerations, and that 1 story with basement is well worth remodeling. Except once they allow 2 story w/basement, if they ever do. That would destroy the value of “the obsolete” style.
With an expert remodel, what you will have in fact done is recover the ’60s value (considerable) and added to it- rather than what you say- “It will still be a ’60s house when you are done”. JG
ardell, you do yourself a disservice by confusing midcentury modern with average 60s home. the line is kind of being blurred here. mcm buyers are in more of a smaller niche market, but it is always consistently solid as far as retaining value….assuming design is maintained. the worst thing typically done to these properties are the home depot cookie cutter remodels.
but, even for the average 60s homes, i wish sellers were buying into your comment on return on investment because i see properties from this era on the market all the time that have been defiled by “modern updating” remodeling, and list price rarely reflects age.
fillmore,
Do you have enough examples by mls # for an analysis? I can’t do the stats except the way that I did above, 60s homes generally. There is no classification “mid-century modern” in the mls, and even if there were, I doubt they would be correctly marked by agents.
youre right about mls and agent tracking. i use my own crude system consisting of redfin, ziprealty and zillow, but i have a couple years worth of data saved that generally gives me a good idea of trends in particular era properties in target east side neighborhoods.
“home depot cookie cutter remodels” fillmore has it right as usual (in his lower-case style). “the worst thing typically done to these properties”. I’ve had to undo more than a few of these- including our own ‘55 home. J-
https://knol.google.com/k/jerry-gropp-architect-aia/this-mcm-home-turned-out-to-be-an/246qxuxd260sm/103#
Generally kids going “up” to bed vs. “down” to bed, costs more.
As to- “Generally kids going “up” to bed vs. “down” to bed, costs more.”- that’s usually probably true- but it’s usually worth more too. Cost should not always be the governing factor- nicht wahr? LOL J-
Jerry,
Cost is almost always “the” governing factor, except for people with unlimited means. For Gates, maybe not…for most people, yes.
The Agent and the Architect are speaking past each other, as usual.
This definition really gets past me- “my (Ardell’s) definition of ““obsolete” floor plan or facade = what is not readily built by new builders en masse, today”. It’s no wonder the en masse homes being offered today are less than inspired- to say the least. JG
Jerry,
New home builders study people’s wants and desires. They spend massive amounts of money on design research. They “upgrade” features the same way fashion upgrades styles. Mostly so people will deem their current home to be “obsolete” because they are “missing” these features. It’s OK to be the only person in a miniskirt and love that look, but you don’t get insulted if someone says you are “out of fashion” when you do that.
We’ve both been around the block a few times, so let’s take a trip down memory lane from the 50s to present. We’re talking about “value” which to me is “appropriate pricing”. Custom homes are by definition excluded, as they are not “price setters” for the marketplace. They are the Prada of fashion, mostly irrelevant to the process of valuing property in general, until a “knock off” appears based on the custom design…if and when that happens in enough quantity to affect “the market” as a whole in domino fashion.
50s = 3 bedrooms, 1 bath, no family room (by and large)
50s home became “obsolete” as builders and homeowners added a second toilet, usually a 3/4 bath with a shower stall, sometimes just a toilet in the basement called “a service toilet” so people stopped banging the door down to the one bathroom because they had to pee.
By the 80s, the standard was 2 1/2 bath with a family room. That massive change made almost every home built prior “obsolete”. Once builders STOP building something…there is no question but that style and the features that go with have become obsolete.
So far we’re sticking to the accepted “functional obsolescence” of home design. The builder’s added features become a necessity in time.
1) people want guests to use a “guest” 1/2 bath aka powder room and not the bathroom they themselves use every day to shower. Much easier to keep that 1/2 bath clean all the time in case “guests” stop by, than to keep the bathroom their kids are using in pristine condition for guests who stop by without advance notice.
2)Family rooms became the place children could play and mess up. So the family room not being visible from the front door or “formal areas” had to be part of the design. Homes that have the family room as visible as the living room when you open the front door, miss the point of why one HAS a “family room”.
Now Jerry, here’s where we part ways, without going into master bedroom changes.
PRICE IS ALWAYS THE GOVERNING FACTOR!
This very day I have a client making an offer on a home as described in point two. Yes, he loves it. Yes he wants to buy it. Still I must factor in the functional obsolescence of that family room being visble and opposite the formal areas.
When you open the front door you can see the family room on the right and the living room on the left. Great house, but you still don’t want to pay as much for it as you would if the family room was not visible when you entered the front door.
Now…here’s where architect comes in. I can tell that this house was once a Cape Cod (1 1/2 story) and converted to a Colonial/Craftsman. The family room was added to the floor plan at that time. BUT the change does not move the style up the food chain to full value of one built as a “true 2 story”.
Price is always key to an agent, as people depend on us to know things like what I have noted above. Not sure if an architect has to know the likely market price of the finished product. Maybe they do. But I would think not as acurately as a real estate agent.
If 1 1/2 story = $415,000 and 2 story = $550,000, then at best this expanded Cape Cod is $485k-ish. Yes it has the square footage and 4 bedrooms and 2 1/2 baths and a two car garage now. On a price per square foot and major components basis it is equal…but the flow features and obsolete aspects (including facade) must prevail when determining price, even if the buyer loves it just the way it is.
[passes baton to architect]
Having the baton passed to me- Ardell- I wish I could type as fast as you do. Then I might have a chance to convey a few aesthetic design concepts to you and RainCityGuide readers. Watch this Space. LOL J-
As to- “New home builders study people’s wants and desires. They spend massive amounts of money on design research”- JG- and far too little money on DESIGN per se.
Said builders often have in-house CAD (Computer-Aided Design)
departments devoid of architectually-trained designers. (I know some of them- fine people who are the first to admit they know nothing about design). J-
many people I know like the vintage aspect of older homes, simply because today’s design is so horrible. Unfortunately, good design has become “obsolete.”
It appears realtors are always willing to push clients into unnecessary remodeling to increase the value. that’s a shame. screw preservation, get that buck! so sad.
no home becomes obsolete. there are different ways to live, other than what you market says.
Joe has made my point for me. Thanks! J-
an example of- “today’s design is so horrible”.
https://knol.google.com/k/-/-/246qxuxd260sm/pj9dir/mcm-75-crop.gif
Jerry,
That is not necessarily “today’s” style, but I agree that is one of my least favorite. I know it from the 80s. If you park your car “in the driveway” it is in front of your house. Looks a bit “trailer trash”. Even when you have a party with cars parked out front showing through the window.
That is a good example of “discount for design” in a price evaluation. I know it as “a Danbury”, maybe from Toll Brothers model name back in the late 80s.
Trying to drop that pic in, but not sure it will take a .gif
This is bad enough to be a Toll Brothers. However it’s local I’m sorry to say. J-
Toll wins many awards for design and are very popular and sell well.
We’re not allowed to be smarter than the market, Jerry
For those who don’t know Toll Brothers, Ardell, you might make my just sent eMail into a “Reply”.
(WordPress format wouldn’t let me). J-
Joe,
Why would an agent “push someone” into a big remodel? Usually we are not around when someone “remodels” their home.
If they call me to ask if I think the cost will be returned upon sale, maybe. Or how to do the remodel they already plan for best return. But generally “remodel” isn’t much in the agent field.
How would an agent “push” someone into a “remodel”?
maybe the more appropriate term is influence? if it doesnt apply to you, great, but it is a fairly common occurrence.
I just went out today to see a friend’s “remodel”. He did a great job. No one told him to do it. It’s a flip. I’ll probably be doing a post on it. He’s an agent, so I have no monetary interest in liking it
I can’t imagine someone being talked into a remodel…most don’t have the money for one. I can see some improvements, rule of thumb is 1/2% to 1% of home’s value to get it ready for market. You don’t mean that, do you? Spending 1% of the value to get it ready for market? Or putting on a new roof if the inspector is going to call it anyway. Or having it pre-inspected and fixing all those things.
Agents do that all the time. But a full remodel?
I do have a client who I told to change out some 40 year old cabinets in a very small kitchen sometime before he sells it. I tell people when they buy a home what things they may want to do before they sell it, just so they know when they buy it what things they should discount price for at time of purchase. I often give them a list of things they should do IF they are wanting to make improvements over time. My clients appreciate that and I think that’s important for a buyer to know.
Is that what you mean by “influence”? Most times they do those things for themselves and never move out
I don’t understand this “fairly common occurence” and what the problem is.
As part of an Agent’s motivating to buy, the alterations/additions possibilities inherent in the subject property may not be visible to the prospect without a little judicious pointing-out by said Agent and/or te consulting Architect. I’ve done a lot of that over the years. J-
Jerry,
Don’t you like any homes that aren’t “mid-century modern”? or new(er)?
I love all kinds of homes. How much I like them is price dependent. I like different homes for $300,000 than I do for $900,000, as example.
As to- “Don’t you like any homes that aren’t “mid-century modern”? or new(er)?” Indeed I do. We’ve many a time driven around New England and Colonial Williamsberg admiring the many authentic well-designed Colonials, Cape Cods. Also Pasadena’s Craftsmans. J-
Can’t argue with that, Jerry. But it’s a bit insulting to the locals to not like most local homes, isn’t it? I like them all, at the right price for what it is.
Ardell-
Thank you for your thoughtful answers. It gave me a lot to consider and will be helpful when we make our next approach on a home.
We’ve worked with several agents during our home search and interestingly the only agents who were the most informative (besides you) are associated with the newer, slightly controversial real estate brokerage with a certain color in its name.
All of the other “standard” buyers agents were less than helpful and it felt like their only purpose was to obscure the process and rush to make a sale at all costs.
Several things stood out to me in your commentary:
As buyers, we need to approach each “money phase” separately and to remember that the seller’s eye is on the bottom line. (And yes I got your point about the repairs needing specific costs and a work order.)
We should use the seller’s disclosure as a “nice to know” versus expecting to get a realistic picture of the condition of the home from that form.
A good seller’s agent evaluates a home from a buyer’s point of view and then prepares the seller for what their actual net proceeds (accepted price – costs and possible repairs) from the sale might be. From what I’ve seen, I think you are correct when you state that most sellers agents aren’t doing this, so it’s no wonder that sellers lose their minds when they hear someone wants repairs.
A good seller’s agent can handle pressure and strives to keep the interactions on an even keel. I don’t think this is happening much- most agents seem unable to control their own reactions to pressure or are the ones stirring up the drama. I know of several 13 year old girls who demonstrate more composure than what I’ve seen.
My opinion is that more agents need to get better at the last two points; particularly as more foreclosures and short sales enter the fray (those are full of drama on their own) or if prices continue to trend downward.
Home buying has an emotional component for both sides. But I’m hoping sellers and their agents will also understand that when you’re looking at making over a half million dollar commitment (in a recession), your “business eye” just has to be fully engaged. (I’ll get all soppy about a home after its mine, not before…) It frustrates buyers and erodes confidence when the people on the other side of the deal don’t behave as if they are in “adult-land.” In the long run, I think that sort of behavior will hurt sellers more than buyers.
Stillwatching,
You’re allowed to say Redfin here
Good point of Stillwatchings above- “We should use the seller’s disclosure as a “nice to know” versus expecting to get a realistic picture of the condition of the home from that form”. It usually takes an expert’s eye, nose- and pocket knife to know more. JG
Stillwatching,
I just got off the phone with an agent, helping her in negotiating an inspection (not my transaction…not even an agent in my company)
It’s one of the hardest things we do as agents, and frankly, during the hot market, agents didn’t have to know how to do this well. So any agent who wasn’t in the market during the last recession hasn’t had a lot of experience with “being the glue that holds everything together” and level headed.
Exacerbating the problem is that agent’s income has been reduced dramatically. The only way to work is to forget about whether or not you will ever get paid. That is hard to do on a good day, and VERY hard to do when your income is down 50% or more.
I make good excuses for everyone and try to see it from all sides so that the negotiation falls on my client’s side without ruffled feathers, as much as possible. A good negotiating strategy is to make up a very good reason why the other people are acting the way that they are. That removes the emotion for you.
As to freaking out, I use Aristotle’s advice on using anger appropriately to good use. Freaking out comes in handy from time to time, especially about 4 days before closing. Half my transactions wouldn’t close on time if I didn’t freak out 4 days before closing, when people are moving in slow motion, or the pile is too high for everyone to close on time. Agents use anger with each other all the time, especially to intimidate new agents into backing off. Works most times too LOL!
You really shouldn’t be losing houses over these issues though, as a sluggish air conditioner can often be remedied by a good home warranty after closing, as long as it is in working condition at closing and not past or near the end of its life expectancy. Not saying that’s the full answer in your case, but no one should lose a house over something that is working or a gas fireplace issue. Relative to home prices, these are workable problems.
I think everyone’s expectations and frustrations were more of a problem than the “stuff” that needed to be addressed. In 20 years the only things I couldn’t get good answers and fixes for were bad structural problems. I don’t do foundation issues…that’s a run don’t walk for me.
Tantrums as a tool- sometimes that’s what it takes to get things on or off track- in sales or in creating things like custom homes. (Works both ways- in both directions). J-
When I was new in the business I was in a transaction where the agent called me repeatedly screaming her head off about nothing. I still think she was either a lunatic or an alcoholic
Many months later I was at a regional real estate agent convention and she came up and gave me a big hug like we were best friends. It wasn’t until then that I realized it was all a big act of some kind. Luckily she had a partner and at one point I just refused to talk with the screaming meemie. I think they played “good cop; bad cop” a lot.
“good cop; bad cop”- whatever works. J-
Jerry,
Pocket knive not allowed! Not allowed to “damage” the seller house. I’ve seen that happen a few times and yes, I know it’s rot, but making a hole in the sellers window or door frame or siding is not permitted. You can’t leave it worse than you found it. You can’t even scrape their paint.
Just the point of said pocket knife- (no visible damage whatsoever). Ardell- you keep forgetting I’ve been aound the block a few times. When I do an informal inspection, I take the prospective buyer all over the house, comment on conditions encountered (no written report).
Last year a buyer made a hole the size of a tennis ball in an upper balcony atrium door over in Meadowbrook. It was my listing and we hired someone to fix it, but the sellers were furious. Many years ago I had an apprentice agent who “shadowed” me and he took out his pocket knive and dig out rot from the class action suit Louisiana Pacific siding (actually it was Georgia Pacific on that house).
When I see a pocket knive come out of a guy’s pocket, I practically tackle them now
I hear “pocket knive” and I automatically see “keep that in your pocket!” LOL
I’ve seen some inspectors gouging at rot with a screwdriver over the years. Not good.
I’ve taken a hammer to a plasterboard wall- after the deal has closed. Timing is everything- nicht wahr? J-
Jerry,
What do you think of this one? I just saw it posted by my friend Hilde on Facebook.
http://www.facebook.com/ext/share.php?sid=95034281126&h=tgEMh&u=LuYRD&ref=mf
[...] Bookmarked a link on Delicious. Why Home Inspection Negotiations Fail viaSeattle Real Estate | Rain City Guide [...]
An informative video (that probably cost Hilde a bundle). Here’s one of my ’60s custom homes out in Meadowdale, Edmonds being sold by Craig Purfeert- with video.
https://knol.google.com/k/jerry-gropp-architect-aia/mid-century-modern-homes-are-good/246qxuxd260sm/65#
Jerry,
I couldn’t see the house. The video said “not available. Try again later.” Let me know if it comes back up.
What did you think of Hilde’s? Is that a “mid-century modern”? I didn’t look up the year built, but the style looked right as to floor to ceiling windows, etc.
Craig’s video works fine for me. Hilde’s is MCM- shown with too much clutter. J-
in my opinion, the kenmore lakefront house in your posted link isnt midcentury modern. 1977 is about twenty years past the cutoff. there are a few leftover design elements that carried into the early 70s, but it is more of a pacific northwest contemporary. great location and view, though.
Fellow architect Fillmore as usual is entirely right-”Pacific NorthWest Contemporary” is a better term than MCM. (My work falls into the above PNWC category as shown here). JG (Click)
https://knol.google.com/k/jerry-gropp-architect-aia/jerry-gropp-architect-aia-ps/246qxuxd260sm/135#
Jerry,
Hilde used to be involved with TV in South Africa, as I recall. My friend on Mercer Island is also from South Africa and won the lottery to come here. I still can’t quite picture that, having been born here.
I’m pretty sure Hilde made the video herself, and that is her voice. I just realized that under mls rules, showing you that here on the blog is “advertising another agent’s listing”. I better give her a call and get the required “written permission” or pull the link.
So many rules
As to: “having been born here” you mean the USA, not Seattle.
I’m a native, Patty’s a New Yorker- so I understand you EastCoasters (sorta). J-
Winning a lottery to get to the US is so bizarre to me…that’s not about East Coast – West Coast, Jerry. East Coasters don’t need to win as lottery to get to Seattle. At this point I’ve worked in real estate much longer on West Coast than I did on East Coast. I like to stay pretty Type A though, as it suits my work ethic.
Thanks for tip on adding photos to my Replies. Here’s a Builder Spec Offering that I might well have added previously. J
![https://knol.google.com/k/-/-/246qxuxd260sm/pj9dir/mcm-75-crop.gif][1]
[img]https://knol.google.com/k/-/-/246qxuxd260sm/pj9dir/mcm-75-crop.gif[/img]
Stillwatching,
I want to thank you for posting from your vantage point regarding your home inspection as it is very helpful to future home buyers to see how a buyer sees things play out in the process.