Dealing with Home Inspections in a Buyer's Market

You’re a seller and (finally!) someone wants to buy your house. You’ve got an accepted contract. Congratulations, you’re past the first hurdle in this slow market. Now it’s time to move on to, potentially, a more difficult phase- the home inspection.

When inventory is high and buyers have a lot to choose from, the ball is in the seller’s court to try and keep the deal together through inspection. Here are a few hints as a seller that will hopefully help ease the inspection process and move you on to the next step, mortgage commitment…

1. Have your own home inspection done before you list your house and have any major issues taken care of before it goes on the market. If the home inspector finds problems with the electrical, plumbing, heating, or any other major system, have a licensed professional come in and fix the issue. Keep receipts of the work performed and provide them to the buyer prior to their inspection.

2. Offer a 1 year homeowner’s warranty to the buyer. If any of your mechanical systems are near the end of their life, a homeowner’s warranty is a great way to give a buyer peace of mind for the first year of their homeownership. These typically cost around $400-$450 for the seller and will be rolled into your closing costs.

3. If the inspector finds mold, have it remediated if the buyer requests it. If you refuse to have the mold remediated and the buyer walks away from the deal, you then have to disclose that there was mold found. This becomes a “material fact” so your agent, and you, must disclose it going forward. Future buyers will most likely either be turned off by this fact and not put in an offer or request that you have it remediated as an outcome of their home inspection. It’s best to just have it taken care of once it’s identified as an issue.

4. Have your furnace serviced and chimneys swept. If you benefited from a year of use (or more) of your furnace and chimney, have the proper service professionals come in and maintain them.

5. Stating that you are selling your house in “as-is” condition may not be enough. The buyer may still request that items be fixed or they have the right to walk away from the deal. I recently had a buyer receive 3% off the agreed to purchase price of a house because major items were found during inspection and he threatened to walk away. Once those major items become known, they become “material facts” to the next buyer. You may need to be able to withstand a buyer walking away or bend to their requests and issue credits or have items fixed.

As the market shifts to favor buyers more than sellers, home inspection becomes another benefit to the buyer. Proactive sellers can improve their chances of keeping a deal together if they follow some or all of the steps above.

Tomorrow I’ll outline some home inspection strategies a buyer can take that will help them maximize the current market environment.

Nifty New Market Data Tool on Raveis.com

votetoday2.jpgMost importantly today, please go vote. You have until 8:00PM to get to your local polling place. So get a move on if you haven’t already…

Now, back to real estate topics. If you saw the lead article in the Hartford Courant today, you might think the sky is starting to fall on the local real estate market. This September was a slow month historically for sales and it’s going to take several months to see if the trend continues and exactly what is happening in our local market.

I believe that data is an incredibly important tool when analyzing a local market, as evidenced by all of my Greater Hartford housing statistic blogs. Well Bill Raveis believes it too, and today he launched a fantastic new tool on the Raveis.com website, if you’re a fan of charts and graphs.

The Local Housing Data applet will let you look at historical sales data town-by-town in several different categories; Unit Sales, Total Inventory, Time on Market, etc. It provides charts, the recent sales driving the graphs, and summary statistics- all for your local town. No more lumping several towns together which skews the real story. Talk about transparency. So, give the tool a whirl and see what you think. Just another great technology feature on the Raveis.com website!

Local Real Estate Sales Slow, Prices Not Too Bad…

My favorite mantra in residential real estate is “the market is local.” You can read all of the national news reports you want about how foreclosures are overwhelming Ohio and Michigan and how housing prices are dropping faster than Britney’s fan base. But if you live in an economy like Connecticut with a stable job market and reasonably paced home construction, you shouldn’t expect the sky to fall on the housing market. And after doing some data mining on the local Multiple Listing Service, my research supports the fact that the local residential housing market in Greater Hartford (at least West of the River) is fairly healthy. Take a look…

stats_summary_2007.jpg

First, a couple of disclaimers. The data pulled from the MLS compared April through September of 2006 with April through September of 2007. The April through September timeframe is typically the busiest time in single family residential sales for the area. Data from the MLS is “deemed reliable, but not guaranteed.” The towns I selected are all West of the River because that is where most of my reader base is located.

And the observations…

1. Only Avon, Simsbury, and the West End of Hartford have seen declines in the median sales price from 2006 to 2007. The other towns I surveyed had more typical, historical grow rates of 1-3%. We seem to be returning to normalcy.

2. Every town has experienced a slow down in the number of sales. This is most likely attributable to fewer available buyers due to the tightening on mortgage requirements and fewer people willing to sell because they are either concerned they “missed the market” or reassessed their need to move-up to a different price level.

3. The time it takes to sell a home has not drastically increased. Farmington saw the most dramatic increase with about 2 weeks added to the average length of time it takes to sell a home in that town (which was 54 days in 2006). Avon and the West End of Hartford have actually seen houses sell faster in 2007 compared to 2006, but unfortunately for a lower median price.

So, for the most part, median price increases are healthy in towns West of the River. But will prices continue to remain stable? Unfortunately there is no way to time the bottom of the real estate market, just like there is no way to determine exactly when to sell a stock. If you’re thinking about buying a home right now, make sure your agent does a market analysis of recent sales (the last 3 months) when you are formulating your offer price. Understand that buying a home should be a long term investment, at least 3-5 years, and that you probably can’t expect to see gains similar to what happened in 2004 and 2005 anytime soon.

Hartford's West End Real Estate Statistics

Continuing on with real estate statistics for local areas, here are the most recent stats for Hartford’s West End… All of the data is pulled from the Multiple Listing Service and “while deemed reliable, is not guaranteed.” This includes public, MLS transactions only, no private sale data is included.

hartfordwestendrealestatestatistics.jpg

My observations:

1. The median sales price is down 8% when comparing 2007 to 2006.

2. Homes are selling, on average, approximately 3 weeks faster when comparing 2007 to 2006.