There has been a recent wave of companies tricking new home buyers into thinking you should be able to buy a house like you buy earbuds on Amazon…by putting it in a shopping cart. Well that set of earbuds doesn’t come with a contract with dozens of different conditions and circumstances in which you could lose thousands of dollars because you as the buyer failed to do something.
There may be some things I am not smart about but I am definitely not stupid enough to enter into a 22 page contract to buy something for hundreds of thousands of dollars that commits me to THIRTY YEARS of monthly payments of $4,000 a month without having an expert in that field help me!
Companies like Rocket Mortgage make it seem that they have some amazing new technology where in fact almost every single lender I know offers the same type of service. Rocket makes it seem like you will never touch a piece of paper..as if you will not actually have to dig up credit card bills and old tax returns after you fill out an online form. You may have these in digital format which is great…guess what…that format also works for every single lender I know. Almost all lenders can also generate a prequalification letter from a simple online form. Sooner or later though you will have to sign 120 pages of documents in the physical presence of a notary whether it is an online lender or not. Why? because its a 30 year contract with a future value of over a million dollars (including interest)! No mortgage company on the planet will let you docusign a Deed of Trust.
You may be used to signing up for websites without reading the terms of service…but if you sign a contract without reading it then you may wind up losing all of your life savings in the blink of an eye. You can’t replace a trusted expert that has experience with the document that you are signing. Can you fix a car just because you watch Jay Leno’s garage? You can’t be a successful home investor just because you have watched HG Channel “reality” shows.
The Multiple Listing Service provides standard contracts that its members are required to use when selling a house that is listed on the MLS. It has silly details in it in it…like when does a day end? No the day does not end at midnight… it ends at 9pm in Washington State. If you have a 1 day inspection and it is Friday then you have until Saturday right? Wrong-You have until Monday at 9pm. What if you have a 5 day inspection and it is Friday? You have until the following Friday. Now check this out….What if you have a 7 day inspection and it is Friday? – You have until the following Friday. This is because any period of time of 5 days or less is counted in Business days, otherwise counted in Calendar days.
Did you know that sellers in WA state have to provide a list of disclosures to the buyer? or that the buyer has 3 days to back out of the deal after they get it? There would be no way for you to know that. There is not any language in the Purchase and Sale Agreement that says anything about this. It just happens to be Washington State law.
I could write 10 more pages about things in the purchase and sale agreement (and things that aren’t) that are not obvious. I have many stories of people getting burned because they thought they were saving money by not hiring a realtor. Also guess what? -If you are the buyer then you don’t even have to pay upfront for your realtor? The seller has probably already agreed to allow the seller broker and the buyer broker to be paid from closing proceeds. The seller doesn’t pay less if only one broker is involved. (and no you don’t benefit from going direct to the listing broker unless you want your advice to come from someone who has a State mandated responsibility to look after the seller’s interest instead of yours)
I am always available to answer questions. My book Winning Seattle Real Estate is available on Amazon. Contact me for the free most recent edition in either digital or print format.
(some details are changed to protect the party’s privacy) I was acquaintances with a couple that had separated. They had missed some payments on their house and were probably going to be foreclosed on within a few months. They wanted to sell their house but they didn’t want to pay a real estate agent so they offered it For Sale by Owner. I didn’t even know they were selling their house. A real estate agent came along and offered to sell it for NO commission to a developer and that he would represent the buyer (the developer). The agent disclosed that he was a partner of the developer which is why he was doing it for no commission. They gave the seller $450,000. This gave the couple $10,000 to split after paying off the loan and back payments. The exwife and 2 kids were now looking for low income rental housing.
The developers remodeled the house for $150,000 and built a new house in the back yard. Both houses sold for $750,000. This means that the developer paid $0.00! for the lot to build on….a value of $175,000 plus made $100,000 on the remodel of the existing house, plus their profit on the new house. I later ran into the developer and asked him if he would have paid $175k more and he said “absolutely”.
So the exwife got $5,000 and had to find low income housing instead of her share of $185,000. Even if they had paid a full commission to have a full service realtor represent them and list it on the MLS they still would have made around $150,000 to split.
Did you know that the State of Washington has a number of down payment assistance options? Sometimes you can even do 1% down! You can learn more here: http://www.wshfc.org/buyers/index.htm I will be teaching a state sponsored class about this program on June 23rd from 10am to 3pm at Byrd Barr Place 722 18th Ave Seattle, WA 98122. A lender from Home Street Bank will also be there to answer any questions.
I have a friend who bought a house 20 years ago with one of these programs for about $150,000. I think it is worth about $900,000 now.
I was talking with a book distributor yesterday who asked me about contingent sales. A contingent sale is a sale that is contingent on the buyer’s other house selling first. In fact I did recently do one. The house to be sold wasn’t even listed yet! The story will be added to the -soon to be released- 2nd edition of Winning Seattle Real Estate.
This happened less than 2 years ago. We will call the seller M. M had been getting her house ready for market while she was also looking for a condo to buy in Seattle. We were about 2 weeks away from listing her house when we found the perfect condo with a 180 degree view of Lake Union! The condo had just blown past its bid review date with no offers. People who have read my book already know that it is fairly common for houses to get NO offers on the bid review date (in spite of what you hear in the news).
The seller and listing broker of the condo had put it on the market without staging or even bothering to clean or paint it. After they had no offers on it, they decided to go back to square one and do everything right. By then it was too late because it had been on the market for about 15 days. Buyers in this market think there is something wrong with a property if it has been on the market more than about 10 days (usually its true). I realized that it was actually a good price and that the listing broker had simply mis-marketed the unit. The best strategy for the seller when this happens is to drop the price 5% right away and hope to get a bid war started at the lower price. A 5% price drop will make the listing show up as a new listing the MLS and other websites.
I told the listing broker that I would bring him a full price offer but it had to be contingent on the sale of M’s house in Kirkland that was going to be listed the following week. My buyer wanted to come in with a lower price but I am a believer of the old adage that you can have your price or your terms but rarely both. They both agreed -M sold her house and bought the condo which appraised $15,000 more than she paid for it!
There are a lot of lessons in this story but I can’t stress enough that most real estate agents are better at getting your business than they are at doing their job. Luckily in this case I managed to save the listing broker and the seller from having to lower the price while also getting a great deal for my buyer.
Someone suggested that I talk about the Seller Disclosure form.
What is the Form 17 Seller Disclosure
In the State of Washington all sellers must provide a list of disclosures to potential buyers…even if it is a private sale that does not involve a real estate agent. The MLS has a special form which serves that purpose called the Form 17. Usually the listing broker will have this available when the property is listed.
The buyer has 3 days to back out of the transaction from when they receive the Form 17. A buyer making a competitive offer will sign the line where they acknowledge receipt of the Form 17 and also the line waiving the 3 day review period.
If the seller doesn’t give you the Form 17 until the day before closing…..then you still have 3 days to decide if you want to buy the property.
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The Author is a first time home buyer instructor for the Washington State Housing Finance Commission. Dan Sanchez is also a Managing Broker with Coldwell Banker Danforth Real Estate
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This is the website for my booklet “Winning Seattle Real Estate” Please contact me with any questions about real estate in Seattle or suggestions for the booklet and website.
Dan Sanchez, Managing Broker
Coldwell Banker Danforth