I’m a realtor. Like any industry behind closed doors, my colleagues and I talk shop about the state of the industry. Not entirely earth-shattering stuff here. However, we have started talking about how things were even just a year ago. How things have changed. How we used to have full inspections, appraisals were rarely an issue, how so many agents had never done a “rent back” agreement and so on.
In fact thinking back to my deals last year, I am not entirely certain many of them would have gotten to settlement in this current real estate environment. Maybe you’ve all seen the video of the guy selling an apple to poke fun at this robust market. We are in unprecedented times for sure. I know this because 40-year agents are saying the market has never seen this, but I remind them we just went through something unprecedented in this country. Rest assured, things will return to some semblance of normal but for now the following are certain things that are commonplace in offers and if your agent is not using them, they should be.
Rent Backs: As I mentioned above, these have really come in handy. Formally called a “Post-Settlement Possession Addendum”, they essentially allow a buyer and seller to settle on the property, but keys aren’t transferred. The seller becomes the tenant and “rents back” from the buyer. These are usually short term (30 days or less), however can be longer. This is appealing to sellers because one of their main worries is where they will go once their home is sold. Furthermore, it releases the seller from having to attach a settlement contingency to their offer on their eventual new home. (I need to sell my house in order to buy yours). Downside is buyers have to wait for possession and might enter into a potentially open-ended landlord role if the docs aren’t written right.
Appraisal Overrides: These have become so commonplace, in certain areas and neighborhoods, you won’t get a second look without them. These were not used nearly as often as even 12 months ago, but they are now all the rage. What this says is the buyer will come with extra cash in the event of a low appraisal. As bidding wars escalate purchase prices, every dollar north risks a chance of the appraiser not finding value. Sellers realize that buyers can just write a number on a sheet of paper in order to get a contract, but they want added assurance the buyer will fulfill that price if needed. This requires the buyer to have extra cash which would normally be designated for costs associated with the move (including closing costs)
Getting Creative with Inspections: Depending on the property, waiving inspections is not as big of a deal as others. A condo which is 3 years old is much different than a 250 year old farmhouse with septic and well water. The “new normal” has forced agents to get creative with this contingency. So on the spectrum you have everything from a full battery of inspections to a complete waiver of them. In between is where the art is and can be the difference between a signed deal and a “sorry, maybe next time.” An example is what’s called an “informational purposes only” inspection. This means the buyer can inspect, but there is a tentative agreement between the parties that there will be no repair requests of the seller. Another scenario is where the buyer agrees to absorb the first $xxxx of repairs discovered by the inspector. This is again a way for sellers to be sure they won’t be nickel and dimed to death by small fixes. In those cases where a seller is gonna demand we waive inspections, I have another trick up my sleeve which allows us to do so, but still inspect. I can’t divulge this to the public as it is one of my competitive edges so contact me for more details. 🙂
Of all the things that are most important in this business right now is the ability to sell and I remind my team of 10 agents of this often. I also remind them that “the confused mind says no” to the point they probably want to hit me, but it is a very old sales truth. Understanding the ins and outs of these tools and convincing sellers (and their agents) that you’re a safe bet is a very large part of an agent’s (and their client’s) success right now.