Let the seller beware

September 2006

Let the seller beware

The times they are a-changing
The mutterings about a shift in the U.S. market are increasing and, although the Canadian equivalent is more in the way of a murmer or two, the days of bidding wars and something of a take-it-or-leave-it attitude on the part of sellers and their listing agents do seem to have receded. As a buyer you may not yet be fully in the driver's seat, but the road ahead does appear to have become much smoother than it's been for a while.
With this in mind, it seems useful to consider a number of questions that deserve to be asked. It goes without saying that the price and value need to be right, but it also makes sense to clear away the chance of any unforeseen surprises.
I will admit that I always have the questions in mind whenever I'm working with a client, but I suppose you can decide that it's high time I came up with this kind of checklist, and you'd be right!
So then, let me suggest six things you should find out about ...

1.    Why are the sellers selling?
2.    When did they buy the house and what did they pay for it at that time?
3.    What are the neighbours like?
4.    How's the shopping, the schools, the churches, other local (or distant/nearby) facilities?
5.    What improvements have the sellers made, when, why, and at what cost?
6.    Has the house ever been rented to someone?

There aren't, of course, any right answers and you may have to make some judgements about the truth of what you're told. However, the more knowledge you have ahead of moving into a house, the better prepared you'll be to enjoy it to the fullest.

Reasons for selling
The obvious -- and relatively acceptable -- ones include a job move and a change in financial circumstances (both for the worse or the better), and there can also be a variety of interests in buying a smaller/larger/better/newer place. These can be triggered by such conditions as too many stairs and too much garden (a common complaint when you get older!) or, in contrast, a lack of enough rooms (beds and baths in particular), not to mention places for storing "stuff" (a common complaint when there are teenagers in the household!), and, taking things either way, the no-longer-required or absolutely-essential existence of a garage, a family/rec room, or office space.
The point to emerge from the answers is a worthwhile comparison with your own situation and requirements.
Depending on how well things match or not, you can get a measure of how suitable the house will be if you move into it. What the seller finds wrong could be exactly what fits in with your needs. Or, of course, you could both be on the same page except that each of you wants/needs to move on to a new chapter in your life.
In any case, there are houses that feel just right -- or the reverse -- and the reasons are no less important than the tangible one of getting good value for your money.

How much are the sellers going to make?
The longer the sellers have owned the house, the more room they have to negotiate. Especially if the current downward pressure on prices continues -- and there's now some consensus that it will -- the chance of striking a deal could therefore improve for both parties.
Things can become difficult if there's been some recent refinancing or the sellers are overextending themselves with what they want to buy, but overall there's going to be a comfortable cushion between what was and what now is. Even if the seller's purchase is further back than an MLS search will show, some indication can be found by looking at the background of other similar houses currently on the market. Moreover, there's no good reason why the seller cannot be asked the question outright -- and if the listing agent is worth his/her salt he/she will either know the answer or be able to make a good guess at it.
The salient point is the degree of motivation in the seller's decision to put the house on the market. It ties in somewhat with the underlying reason for wanting to sell, but it allows you to decide whether or not you're dealing with someone who's simply looking for a profit.
Even then, though, you can find a supporting rationale for what you want to offer. For instance, if you're faced with a seller who needs to "get out from under" what was intended to be a quick flip, an argument for avoiding any greater loss in a possiby downturning market could win your day.
Most of all, however, a Comparative Market Analysis should be seen as an essential requirement in the information gathering you do when looking for a place to buy. To expect the asking price to be "at market" relies too much on the seller's and listing agent's assessment of what it ought to be.

What are nice people like you doing in a place like this?
Location, location, location is a well known maxim in the real estate business, but it helps to do some prying into the neighbourhood. The address itself may be fine, but how about the homes either side of it or elsewhere in the vicinity? Are you, for instance looking at the best -- or the worst -- house on the block? No harm done if the price is right, perhaps, but the more unique the property is, the less likely a quick resale is going to be if/when the time comes for it.
Accessibility is another point to consider. Being far from the madding crowd has its attractions, but the inability to run to the corner store when you've forgotten to bring something home may outweigh the benefits. Similarly, getting the kids off to school (and never mind bringing them back) isn't going to be easy if you're miles off any beaten track. In effect, the closer you are -- or aren't -- to life's essentials affects the extent to which you'll be able to enjoy them.
Or, if you wish, given that no man is an island, he needs to realize that his domicile cannot be seen as a place entirely on its own. The world around it puts demands on him that call for due recognition.

Have things always been like this?
To round out all this scepticism, a case can be made for determing what the sellers have -- or have not -- done to the house while they've owned and/or lived in it. Much of this information should be available in the Seller Property Information Sheet that any worthwhile listing agent will have had his/her client complete and, if things are perfect, can be found on the kitchen table (along, it's to be hoped, with current tax and utility bills). However, this cannot be taken for granted nor, for that matter, viewed as the gospel truth. Deliberate misrepresentation shouldn't be too common -- most people nowadays know that it will simply catch up with them -- but failing/vague memory tends to be in direct proportion to how long the sellers have been in occupation.
Of course, a Home Inspection should catch and fill in most of the gaps, but this, too, cannot be guaranteed. Short of tearing down the walls to find out what exactly lies behind them, you have little choice except to depend upon the seller's honesty. Thus, asking some leading questions and having the seller look you in the eye with their answers isn't going to do any harm and may end up doing you a whole lot of good.
But not the least, you should find out if the place has ever been rented out. Not to be unkind to the majority of tenants, they nevertheless lack a pride of ownership and won't generally point out the imperfections to the landlord, who can remain (blissfully?) unaware of them. To compound this agony, though, enough income property owners aren't renowned for a pride of ownership either! Assuming the worst is therefore good advice if you're buying a place that hasn't always been -- and never mind still isn't -- the sellers' primary residence.

I suppose I could go on going on with ideas like this, but there's an analogy in the commercial property market. It's called due diligence and assumes that it pays to know what you're getting into.
If there's any merit to the Buyer Agency idea -- and obviously I'm fully convinced there is -- it rests on making sure that more than the price is right.
Yes? No?