Are Realtor Teams Helping or Hurting Clients? (Part 1)

by MICHAEL BODEEN | Jun 23, 2014 | Bodeen Team Blog

A large local real estate team brought a buyer to one of my listings recently. The negotiations went well, the parties were very amicable, a deal was struck and escrow opened. The 10 day “Due Diligence” period began. Because the buyer was obtaining a VA loan, and since the property had a private well, the lender (VA) required a water quality test.

No problem, right? Wrong. Big problem! It turns out that the property’s water quality after lab testing had an unacceptably high amount of arsenic, per EPA guidelines.

Now, the good news is that a quality Reverse Osmosis (RO) system will reduce the arsenic levels in the water to more than acceptable limits. So recognizing that the seller had a problem, we needed to determine which company can best provide the solution affordably and quickly. The “we” in this case is “me.” The seller had just gone out to the east coast for two weeks to find and close on a house out there.

Now this is where it gets a little frustrating. The Bodeen Team was instructed by the buyer’s agent’s Transaction Manager (TM) to no longer contact the agent who wrote the contract, that we would need to deal directly with the TM. The other oddity is that we were told to change the MLS reporting for which agent actually sold the house. We put the gal who wrote the contract and negotiated the deal. “Wrong!” said the TM, the agent who gets the credit for selling the property is actually So and So, who’s name you may recognize as they use extensive radio and TV advertising getting their name out there.

Okay, no problem there. That is not uncommon for large Realtor teams.

Now, back to the story. The logical solution to this arsenic issue is to negotiate who fixes the problem. In this case, it’s pretty clear that my seller is on the hook, though not legally, just practically. And he agrees to correct it, within reason. We begin to research the issue which will be saved for a future blog. The short story is that we will need to install an RO system at the kitchen sink to handle the sink area and refrigerator water line and then re-test the water for the lender. Voila, problem solved, right? Wrong again! The buyer, like most people, does not like the word, “arsenic.” (And can you blame him?) And he’s heard all the bad stuff and more about arsenic, including that you can get skin cancer by coming into physical contact with the arsenic laden water. WRONG! Only ingested arsenic can cause a problem, not bodily contact.

And because of all the bad he’s heard, the buyer wants EVERY water outlet covered, or in other words, a whole house system. Under sink RO units that can take out arsenic can be installed for less than $500 up to almost $2000 for the best product on the market, supposedly. Whole house systems can run in the tens of thousands. We were quoted $30,000 for a top of the line unit.

Now, the buyer still wants to buy and the seller still wants to sell, so we need to determine if there is a reasonable middle ground solution.

Here’s the rub. Come to find out that it is the TM who is now negotiating. Whoa, what about the buyer’s agent who showed them the property and wrote the contract? “No, they are officially out of the loop,” said the TM. So the gal who has never met them and did not write the contract is now negotiating. But no one is talking sense to the buyer, trying to help the buyer see what is reasonable.

Did we get the deal done? As of this writing, not yet! Stay tuned!!

The Potential Cost of NOT owning a Home

by JONATHAN BODEEN | Jun 9, 2014 | Bodeen Team Blog

Let’s be honest, many potential and qualified home buyers are not presently shopping for a single family home. They seem to be content with non-home ownership. Renting, as some of them say allows for more freedom. They saw what happened to their parents or friends by getting into a situation they could not easily get out of. (i.e., underwater property, foreclosure) And they don’t like what they’ve seen.

     Tough to argue with that one. But make no mistake, there is a downside risk for buyers not buying at this time, and quite honestly, many buyers may regret that they have not acted. Here are some risks:

1)    Government Action: I’ll give you one real world example of a consequence for buyers who could have bought 6 months or a year ago and didn’t because the government adjusted downwards the maximum loan amount that would be loaned on an FHA in Maricopa County from $346,250.00 to $271,050. Now many can’t buy in a neighborhood they can afford because of needing a substantially greater down payment. (FHA will provide funding with just 3.5% cash down payment which means that a buyer could have bought a $355,000 home with a lot less cash than is required now with conventional financing. (i.e., 10% to 20% cash down)

2)    Home Values Moving Up: The local market bottomed out during the fall of 2011. For 24 straight months, prices increased and have now leveled off. Have they stopped increasing? Well, it’s a risk, but consider that our market is still almost 30% below the peak we reached back in December 2008.

3)    Further Mortgage Rate Increases: One year ago, mortgage rates were in the mid 3% range. Today they are averaging between 4.25% and 4.5%. Nuff said.

4)    Selection of Homes Could Decrease: Right now there’s a healthy assortment of homes for sale. If sales begin to increase, inventory of available homes will fall, thereby decreasing buyer choice.

5)    Rents Moving Up: Landlords are happy with this one. With so many renters, the demand for rentals has increased, thereby increasing average rents.