Stephanie McCarty, REALTOR, ABR

I am writing this blog post mainly because I believe that buyers might benefit from taking a "big picture" view of the negotiating process, particularly now, when the market is already so heavily weighted in their favor.

Whatever happened to the win/win scenario in negotiating? I just lost a deal that was such a rare opportunity for a first time homebuyer, and I'm stunned.

Here's the scenario. The sellers/the home: Young couple, newlywed, bought the cutest ranch home in a sought-after area with great schools and easy commuter route access. Two years later the market tanks. Mr. Owner learns late 2008 that his company is consolidating and to keep his job he has to move out of state.

The owners contact an agent in the area and during their meeting it is obvious to the agent that this couple gets it - these sellers, refreshingly, had completely realistic expectations. They understand that a profit after expenses will not be part of the equation. They don't expect to make enough to pay off all their credit cards like so many sellers try to do these days. They just want to get out clean - pay costs of sale, allow for a contribution to buyers' closing cost and move on with their lives. Sound like very reasonable people, right?

The agent priced the home as low as possible to allow for payoff of mortgage, commission, buyer closing costs and a smidge of negotiating room. It's a great home with upgrades, immaculate, shows like new and has a spacious, popular floor plan. The sellers move out of state leaving the home "staged" with their nearly new furnishings. The agent takes several top producing agents in the area to see the property - they all agree, great home at a great price, and it shows very well. Everyone is optimistic.

It's a tough market even with a well priced really special home. Months pass with few showings. Buyers are not making offers - it's not that they don't like the house; they just have so many other choices that for one reason or another, it never ends up being #1.

Finally, 9 months into it, an offer is received. The offer is terrible - the buyers offer $20K below asking price, ask for all of their closing costs to be paid by seller ($4400), AND they want nearly EVERYTHING that is in the house - I would estimate to find like items would cost at least $10,000 - high end front load washer and dryer, the refrigerator in the kitchen along with the appliances that are normally left, the complete dining set, the complete leather great room furniture and tables, the master bedroom furniture including the mattresses and a giant armoire. Buyers offer no evidence of qualification to make the purchase, and set a closing date that is almost 2 months away.

The listing agent is almost afraid to submit the offer - these nice sellers - she is so afraid that they will be so insulted and absolutely freak out! To the contrary, the Sellers are shocked but again, very smart and reasonable people, they agree to leave ALL of the expensive furnishings - they are shocked by it but, okay, if that is what it will take, they agree that the sacrifice is probably in order given the market conditions. They AGREE to pay the $4400 in closing costs. They ask for a 30 day escrow and they want full price. The sellers ask for a preapproval letter from the buyers. Sounds pretty reasonable to me - after all, the house was priced fairly to begin with!

Buyers counter only slighly better than the original offer.They still want all the furniture and all closing costs paid. When sellers made their 1st counteroffer they gave their agent permission to explain to buyers' agent that they had only enough equity to cover commission and closing costs. Anyone could take a look at the tax record and see that this was the truth. Short sale is not an option here.

Much to the listing agent's surprise, sellers returned the next day with a counteroffer that would require them to take out a personal loan of about $7000 in order to close. Buyers would get the furniture except for an item of sentimental value, and sellers would still agree to pay buyers' closing costs. To sell the house these sellers were willing to literally pay the buyers $7000 over and above giving them furnishings worth about $10,000 and pay all closing costs.

It wasn't enough for this buyer. Mr. Buyer indicated to his agent that friends and co-workers were telling him that he was leaving money on the table. Mr. Buyer expected to get it all with no regard for the fact that sellers would need to take out a loan to make it happen. It's not like we are starting this negotiation with an overpriced home to begin with. That's not the case at all.

Obviously this buyer has never heard of win/win and has no sense of basic fairness - he would only be happy with everything that the sellers owned, including their first home and placing the sellers into debt in order to achieve his own selfish and unrealistic goal.

Buyers out there, let this be a lesson for you - it is not all about you. Relax - the odds have never been more in your favor -- you ARE going to get a good deal in this market. Period. The contract that you sign is called a "purchase and sale" agreement for a reason. There are two sides to the transaction. There is going to be an appraisal and these days, rest assured, that's a hurdle that provides ample protection to buyers. The banks are being ALOT more careful with valuations.

Fear of paying too much has been replaced with a total aim at eviscerating the seller. Listening to co-workers and friends over professionals that you have hired to represent you; believing everything you read on the internet - what is all that about? Whatever happened to basic fairness and reason?

To sellers out there struggling just to walk away "clean" in this tough market - take heart, all of the greedy buyers who have made your life difficult will one day be sellers too. It has never been more true - what goes around, comes around. Somewhere in metro ATL right now there is a ticked off woman ready to choke her unrealistic husband for causing her to miss out on the perfect house, practically filled to the brim with nearly brand new, gorgeous furnishings. Me thinks that he will get what he deserves!

Buyers, the moral of this story is: be smart, do your homework, protect yourself in the contract with contingencies, hire an experienced agent, be reasonable and fair minded and you won't have regrets.
Home buying is supposed to be a joyful experience, not a slaughter.

I've been reading alot in the blogs and consumer Q&A and there seems to be an enormous amount of misinformation, or maybe lack of information, when it comes to short sales and what they are all about. We see questions like "what kind of scam is this. . .I made an offer and it's been three weeks and the house is still on the market, they have my earnest money and I haven't heard a thing." Well, probably not a scam, just a bank going through the paces, maybe. A potential short sale can be derailed by any number of small mis-steps on the part of the buyer, the listing agent, the homeowner, or the buyer agent.

Most buyers are working with a timeline - they can be somewhat flexible but when the rubber meets the road, most of them have a date that they need to be done with this process and occupy a home. If you are an investor, totally different situation - I'm addressing people who want to buy a home to occupy as their principal residence.

Depending on the bank and the situation, a short sale can take months and months to complete. I don't claim to be a short sale expert but, if you are an agent still in business right now, you won't survive if you don't have some experience in short sales, even if it's just enough to teach you that you want to run the other way when you encounter one!

I worked with a well qualified cash buyer last year. We were told by an experienced, knowledgeable listing agent that the property my buyer was interested in was about to go into the foreclosure process and the loss mitigation manager for one of the major banks who held the primary mortgage told her point blank that the bank was looking for a well qualified buyer willing to pay "around $300,000" for the property. The defaulting homeowner owed around $370K. My buyer and I determined that based on comps, condition, location, the property was worth up to $325K and immediately wrote a cash offer with no contingencies or stipulations, as is, for $300,000, providing proof of funds, with a closing date as quickly as 2 weeks or as soon as the bank could have the title work done.

What do you think happened? It has been over a year and we have never heard a single word - no response at all. My buyer rescinded his offer after several weeks of no communication from the bank. The agent made phone call after phone call, the offer package was submitted with all of the required documentation proving the homeowners hardship, financial records, etc., comparable sales were sent, etc., etc. Nothing.

What could possibly have prevented the bank from jumping all over this offer, or, at the very least, coming back to the buyer asking for "highest and best"? Who knows. . .seriously, we never heard another word and the agent's listing eventually expired and the home was foreclosed. Several months later, after not selling at auction, the home was relisted and sold for substantially below my buyer's offer. This had to cost the bank close to $100K or more after taking the loss on the original loan, attorneys fees, etc., costs of sale, everything connected to the foreclosure process.

It doesn't make sense, and if you are the type of person who needs it to make sense, you should probably avoid trying to deal with a short sale situation. Each and every one is different. You may hear something within 24 hours (highly unusual), you may be told your offer is accepted but never receive a signed copy of a contract, and then learn that the property has been foreclosed and the seller evicted. It's bizarre.

One of the most common problems lately is that the original mortgage insurer is killing the deal at the last minute because they feel that the house is being sold for a price that is too low. Why do they care you ask? Well, the original mortgage insurer is going to be paying insurance on the defaulted loan and the less that the home sells for the MORE they are on the hook to pay.
An agent in my office had a foreclosure in escrow for about 8 weeks earlier this year, had signed contracts, inspections done, everything was supposed to be fine - loan was approved. The day before closing she received a call from the closing attorney's office that her deal had been killed by the mortgage insurance company. There is no negotiating at that point. It's done. That intrusion into what is supposed to be a deal solely between a buyer and a seller, is unpredictable and unsurmountable. Once that takes place, broker pricing opinions and additional appraisals are ordered and the home is usually foreclosed before it's resolved.

Not to put too broad a stroke on the situation but, generally, it's because you are dealing with a corporation that the short sale and foreclosure process is so frustratingly unpredictable - even for seasoned and experienced real estate agents. What the bank or mortgage insurer does or believes that affects your deal is TOTALLY out of the control of you and your agent. It's not like you are negotiating over a repair with an occupying seller.

There are layers of management and staff that everything must go through, things get lost in the shuffle, meetings are held and postponed, various opinions are solicited, one hand doesn't know what the other is doing, and it's just extremely difficult to consummate a residential real estate transaction under these circumstances.

It's not supposed to be done this way basically!

Foreclosures are usually better. . .I want to say alot better but that might be overstating. I closed a foreclosure 4 weeks ago, another cash deal, the listing agent and I never spoke to each other (not for lack of trying on my part) and the day before closing one of his "assistants" called me to ask why I hadn't sent them an extension on the contract. I told her it was because it was closing tomorrow - there was no need to extend, we were closing 4 days early! They had no idea. I don't know how they could have not known - all of the paperwork was in order and I was sending it to all of the people I was told to sent it to at the management company. The management company was obviously not communicating with the listing agent. The listing agent was, well, just a "listing" agent - there was no real participation there apparently.
Consumers are frustrated when they call listing agents on these properties and don't get a reply, or attempt to see the property, or even make an offer, and feel they are hitting a brick wall. It's because this is how the banks want it - they hire agents to list their properties on the MLS for a reduced commission or small fee, and that is the extent of their obligation. Every other aspect of dealing with the property is left to the management company that is hired, i.e., maintaining the grass, etc., checking the property on a regular basis, etc. If a buyer wants to see one of these properties they are expected to have a buyer agent of their own showing them the property and assisting them with the transaction.

Here are some pretty common questions that I have seen and a general response:
1. Why can't I put offers in on several properties without submitting earnest money until one of my offers is accepted?
Answer: You can do that but if the bank is not entertaining offers that they deem frivilous, i.e., offers without earnest money (the definition of earnest money would be pertinent here), then your great offer may never be reviewed or considered. And, what happens if your offer or more than one of your offers is reviewed and accepted? Are you prepared to purchase more than one property? If your offer is accepted without changes or a counteroffer, you are party to a legally binding agreement whether you put up earnest money or not.

2. What if I don't like all of the banks special stipulations and 16 pages of addenda that they require me to agree to when I present an offer? Can I simply ignore the requirement, strike thru what I don't agree to, or leave them out of my offer all together?
Answer: Yes, you can. But, your offer will not be considered even if it is cash to close asap. You either play by their rules or you don't play. Part of the process put in place by the banks is meant to weed out less than serious buyers. Fishing expeditions are costly and the banks just don't have time for it or resources to deal with it. Just dealing with legitimate offers that include all required documentation is overwhelming right now.

3. Why is the property still on the market or active in the listings when I have a signed contract with the bank?
Answer: because the banks will not allow the listing agent to remove the property from the market until it has closed and even then the process may take several days to a couple of weeks post-closing before the property is removed from the market. However, listing agents are obligated to advise buyers or buyer agents of the status of the property - sale pending, still accepting offers (back up), etc.

4. Once I make an offer thru my buyer agent, and we receive a verbal or email acceptance of my offer or counteroffer, isn't the bank legally bound to sell me the property?
Answer: not in the State of Georgia. Until you receive a contract that has been signed by both parties - or a counteroffer that has been unchanged and signed by both parties, you do not have a legally binding agreement. There have been many cases of buyers being told that they "got the house" only to find out later that before the bank returned a signed agreement to them, another offer was submitted and accepted. Sometimes the bank's representative (management company or listing agent) will contact the original buyer and tell them that another offer is on the table and they need to submit "highest and best". However, there is no "standard" operating procedure here and you may not be given an opportunity to stay in the game.

5. If I make a full price offer on a short sale doesn't the bank have to sell it to me for that price?
Answer: not usually. I'm not an attorney so all of my responses should be taken as such and if you have a particular situation that concerns you, you are better off consulting with your own real estate attorney. Having said that, there are agents out there listing short sale properties without including "wiggle words" - you have to understand that a short sale listing is a starting point for the bank and the seller to attempt to prevent foreclosure by selling the property at something less than what is owed to the bank. All short sale listings are "subject to approval" by the lender.

Many times sellers are told to hire an agent and get the house listed after a preliminary determination that the seller has a legitimate "hardship". We (agents) are finding out that sometimes homes are being listed as "short sale" BEFORE preliminary approval by the bank - the bank may not even be aware that the home is being offered as a short sale.

Even when the bank is "in the loop" about the home being offered as a "short sale", they don't typically set the list price of the property - that's up to your listing agent. The banks have been doing their homework (appraisals) AFTER offers are submitted. Makes sense when you think it through - if the bank is entertaining the idea of accepting a short sale offer, why would they go even further and perhaps direct a listing agent to market the home for an amount that is less than true market value?

The listing agent should be studying the comps to determine a reasonable price that should move the home sooner than later - after all, the goal here is to get the house sold BEFORE it forecloses and the seller is evicted.

If the house lists at $113K and you offer $113K but the lender orders appraisals that tell them they should be able to get more, then depending on the difference between your offer and the appraised value, you may not be be successful. Another kink here - if there is a home equity line or 2nd mortgage, that lender can also object. AND, you probably have to get a loan also. Your mortgage lender is going to order an appraisal. What if they disagree with the listing or contract price? If they don't feel it's worth the risk, your own bank could raise a red flag here also.

We could go on for days giving examples of the various scenarios that come into play even in a simple, "normal" real estate transaction between a ready, willing and able buyer and an occupying seller. When you get into foreclosure and short sales, with no "standard" procedure, uniform rules, or laws governing how the fine points of these transactions are handled, it's like the wild west - before you jump in, make sure you have weeks or months to devote to this, patience, plenty of cash for multiple inspections, an experienced buyer agent, and more patience.

Good luck!

There is alot of buzz in the news these days about the massive foreclosure crisis and the fact that buyers should try to take advantage of reduced pricing by considering the purchase of a foreclosure REO or a short sale property.

Here are a few things to consider when you find yourself in a bind, having difficulty paying your mortgage, and need to consider all alternatives available to you:

Sellers must qualify for a short sale before the bank or their lender will assign a negotiator or approve a short sale contract.

What is a "short" sale and how do you qualify for a short sale of your home:

1. A short sale is the bank's agreement to accept less than the total outstanding principal amount as a full settlement and payoff of the mortgage. In the past, if this was done, the bank would come after the borrower for the difference and the IRS would consider the difference income for tax purposes. These days, it depends on the lender.

2. If you have more than one lender, i.e., a home equity line of credit or a home equity loan or second mortgage, it is doubtful that you will be successful in obtaining your lenders' approval for short sale. The long and the short of it is that they almost NEVER come to terms on who gets how much and by the time you find out, the potential buyer is long gone. If you are in this situation, short sale is probably a waste of your time, as it is nearly impossible to make it work in the span of time that would be acceptable to a buyer.

3. You have one lender. In order to qualify for short sale you have to prove financial hardship, that you have a monthly shortfall (you pay out more than you take in), and are insolvent.

4. Let's take the first qualifier, financial hardship. There needs to have been a change in your situation since you originally took the mortgage on the property that is currently affecting your ability to honor your contractual obligation to pay the mortgage. Loss of job, catastrophic illness and/or extraordinary medical bills, a disability that has affected your ability to earn, your interest rate has adjusted making your payments unaffordable, you have too much debt, you are the owner of a failed business, etc. Your bank may consider other financial hardship situations in order for you to be considered, but these are the most common.

5. Monthly shortfall and insolvency. You will be required to provide a financial statement showing that your monthly debts or obligations exceeds your monthly income. The lender will need to see your list of asset values, i.e., 401K or other investments also. In order to qualify for a short sale the lender will need to see proof that your loan balance exceeds your cash position, i.e., that you are insolvent.

Many in the industry are saying that financial hardship can be proven, in some instances, even if you do not have a monthly short fall but will have one soon due to a payment increase from rate adjustment or perhaps a pending layoff or reduction in income (say, for example, you typically earn a substantial portion of your income through working overtime and now your company has stopped paying or allowing overtime).

The short sale process is not an "easy out" by any means. The process from beginning to closing is long, stressful and without guarantee of success. Any number of events can come together to keep you from achieving a successful short sale, including your inability to find a buyer who is willing to pay a price acceptable to the lender, and willing to wait for lender approval. Sounds easy doesn't it?

Well, we all hear that these banks are chomping at the bit to get homes sold before foreclosure so surely if I bring them a buyer they will jump all over it. You need to consider one very important factor: you are now dealing with what amounts to "a corporation", not an individual seller. There is an internal process that will be pursued no matter how attractive your buyer's offer may appear on paper, and no matter what the buyer's needs are vis-a-vis a closing schedule. From the seller and buyer's perspective, short sale is not a walk in the park.

If you are a seller, contact your bank and ask to speak to someone in the loan modification department - that will get their attention. Tell them that you need to speak to someone about a possible short sale. Ask for their "package". Take copious notes concerning dates and who you speak with. Understand that you will speak to an army of individuals before you ever get to "the person" who ultimately decides your fate. Be prepared. Set aside alot of time.

Another tip, don't call a REALTOR until you have received some assurance (in writing preferably) from your lender that they will consider a short sale in settlement of your outstanding obligation. A REALTOR can do none of this for you. If the bank wants to know the market value of your home you should hire a certified appraiser. The bank will, at some point, have their own BPO (broker pricing opinion) or appraisal performed. However, the bank may want to know from you a general "price range" that you expect to list the house for sale. If you cannot afford to hire a certified appraiser, you might ask a REALTOR to do a market analysis for you but explain that your short sale has not been approved yet by your lender. An agent can do a better job for you when we have all the facts.

No, this is NOT a short sale situation. . .

I had a guy call my office last week. Really nice guy, told me he had lost his job in this area and needed to move to another part of the state to take a new position. He was already there and working, living in an apartment that he was renting. He was indignant that he was still required to "pay for this house that I'm not even living in anymore." He wanted to know what I could do for him. In our three telephone conversations before we actually met, he lead me to believe that his situation was one of financial hardship but he wanted to do the "right thing" rather than walk away and allow the property to be foreclosed. I was optimistic and had every intention of trying to help him achieve his goal of a short sale.

Then we met. The house was completely trashed - I mean trashed. He acted like it was palatial. Piles of dirty laundry all over the house, ever inch of counterspace in the kitchen had something on it, cabinet doors were hanging by one hinge, and this was a house just about 8 years old. A nice house at one time! There were wide screen LCD TVS at every turn. Furniture was just sitting in the middle of rooms and the foyer - I ask if he would be moving these things out soon and he said no, probably not.

I told him it was cold in the house and that would be an issue if we put it on the market. He told me the HVAC didn't work because he never changed the filter. Huh? At some point this homeowner must have decided that I was looking down at him, I am guessing, due to the comments and questions that I was posing concerning the condition of the property, i.e., like "what do you plan to do here before we put this house on the market?" The guy looked at me like I had two heads. He planned to do nothing and made that very clear to me in no uncertain terms. I told him that no matter what the price the house was virtually unsellable with no HVAC in our market. With literally hundreds of homes in his area and price range for a buyer to choose from, "showability" was extremely important. I can't imagine a buyer selecting this house over any other in the price range without at least some "cleaning". I even offered to refer him to a house cleaner. He declined.

Since he was acting as though he was completely broke, I was offereing to direct him to some trusted service providers that would be fair in pricing his HVAC repair and cleaning.

Then, much to my surprise he said "if we sell it for more than the bank wants do I get the difference?" I explained why this would not be the case. Then he wanted to price the house about $20K higher than comparable sales in the area. I explained that this overpricing would not result in a sale because we would have appraisal issues even if we were fortunate enough to get a buyer and the bank approved the short sale.

This homeowner owed approximately $100K more than area comparable sales, and considerably more than he paid for the house. Finally, we got to the crux of the matter. The homeowner said "well, I'm in no hurry. I can afford to pay the mortgage, I just don't want to." He went on to tell me that he was bringing home over $7000 monthly and was about to get another part time job where he would clear an additional $3000 monthly.

Clearly this homeowner could not prove hardship. What he was telling me was that he wanted a way out - didn't want to pay his mortgage any longer, realized he had put too much debt on the house, but didn't mind wasting my time if by some miracle I could make this all work out for him.

I was wasting my time. In our phone conversations when he asked me about short sale I told him that he would need to get lender approval before I could list the house. I learned on the day that I met him that "lender approval" in his mind meant that he called the lender and the lender said "yes, we might consider a short sale, get an agent." It doesn't work that way folks.

Long story short, this homeowner's situation doesn't come close to qualifying for a short sale and he was apparently unmotivated to spend any time trying to determine that - he wanted me to waste my time and "make it happen" for him with as little involvement on his part as necessary.

I could not help this homeowner because, basically, he didn't need help.

Sellers: Do yourself a favor: do your research. Have in-depth conversations with your lender if you get in a bind. There may be other options at your disposal now that the housing legislation has been approved by congress. If you have income sufficient to pay a reduced mortgage, you may qualify for assistance under the government's new plan. It's worth checking out. A word of warning however - you must be occupying the property. If you have already moved out, chances are your options will be limited.

Good luck and I hope that you are successful in achieving your goals - avoiding foreclosure is an honorable achievement.

Everyone knows that the real estate market is depressed right now. Foreclosures are up and inventories are at higher levels than we normally see in most areas. Is it still possible to sell a house this year? The answer is YES, absolutely. I have been telling sellers that they should plan for the worst and hope for the best - actually, that's good advice no matter what our market condition!

If you want to sell to take advantage of favorable prices on your next purchase, or need to move due to your job, or for whatever reason, as long as you enter the market with your eyes open, it doesn't have to be a waste of your time and effort.

Proper pricing has become increasingly difficult. It is very important that you either hire a professional residential real estate appraiser in your area, and ask for a market value appraisal, or, speak to one or two reputable real estate agents in the area. Ask them to come preview your home, talk to them about the age of your roof, systems, etc. Tell the agents or appraiser about any new major projects in the house, i.e., new hardwood flooring or all new appliances. What about an addition? Have you increased the heated square footage of your home since you purchased?

All of these points are relevant. Not every item is going to come back to you dollar for dollar in any market. However, many things speak to the overall condition and desirability of the home and can make a difference, even if only in helping you to sell faster than your competition.

Once you decide on price, the home needs to be prepared for sale. The way that we live in our homes and the way that we stage them for sale are two very different things. I have had people say to me "but we still live here." Well, nobody is asking you to do anything harmful to your health or that will pose a major inconvenience to your lifestyle. Mentally you have already left this home. The house is now a product and we need to put our best foot forward.

When you sell a car that you've had a few years, do you spiff it up? Maybe get it detailed and buy new floor mats? Of course you do. You can look at one of the auto pricing websites and get a fairly good idea of what you are likely to get for your car, but, only if the condition of the vehicle is comparable to others, or what is expected from the buyer market. If you want top dollar for your car and it's trashed and dinged up, it's not going to happen.

The same is true when you sell your home. Yes, it has been good enough for you, but that's not good enough for the buyers. Buyers have many more choices than they usually have and buyers are more saavy than they have ever been. They have access to tons of information and if your house doesn't measure up, you probably won't even see qualified and serious buyers in your price range.

Seriously, this has all become alot more intense than it once was. I remember when I have sold homes in the past, or when my parents sold a home. You just made certain it was really clean and you were good to go. You could expect to sell the house in a fairly short period of time, usually less than 60-90 days. REALITY CHECK: those days are gone for a long, long time to come for most areas. Sellers need to expect to be on the market for up to 12 months.

Your professional REALTOR can help you decide what really needs to be done and what is not so important. It is proven by the sales records, staged homes always sell first and for the highest price.

Do you want to get rid of the wallpaper that you spent 6 months selecting 15 years ago? Maybe not, but, if you don't, prepare to be on the market even longer. The home needs to be a neutral palette that will appeal to the largest number of ready, willing and able buyers. If you leave the home in disrepair, with poor curb appeal, and a very dated interior, your home may never sell. We (agents) know that is a tough pill to swallow. We are not telling you this to be ugly or because your home doesn't suit our personal tastes.

Experienced and well trained REALTORS know that all the marketing in the world won't sell a house that the majority of buyers will find objectionable. Remember what I said earlier? Buyers have choices. Carpet, paint, all of that "decorative" stuff is in play these days. Yes, it is just a gallon of paint. But, to a buyer it's much more than that. If they don't like your son's orange walls, they perceive that as an immediate project that they will need to tackle. If you have chocolate brown shag carpet in the house but everything else is neutral and perfect? That's unfortunate. You just stopped short of being in a fantastic position to sell before many of the homes you are competiing with.

An experienced and well trained REALTOR can guide you through the process. It is in our best interest to sell your home as quickly as possible. If our hands are tied, that is not going to happen.

Talking to other agents around the office and working on deals you have opportunity to share experiences. Not only is it interesting but I usually learn something that I didn't know, or a bit of additional info is gleened that can be added to a subject that I recently learned about.

In this market where lender's underwriting guidelines have necessarily tightened, we hear nightmare stories almost daily now about buyers who thought they were qualified but not under the new guidelines, or the new "declining market" evaluation that has been added to the appraisal review, and more.

I am going to address one thing in particular and that is proper pricing to avoid appraisal issues.

Sellers all want to get top dollar for their home and who could blame them for that. However, whether the market is seller friendly or not, proper pricing can prevent alot of wasted time before contract and after. I've been into sellers' homes armed with an up to date CMA for their neighborhood, only to have them inform me that, even after a thorough review of the comps, they expect to price "their" home X amount higher than the highest comparable sale because of XYZ, whatever arbitrary reason you can pluck out of thin air. Never does it relate to increased square footage that I was not aware of during my evaluation, or anything that adds real "appraised" value to the home. I think this is all pretty common sense stuff, not difficult to understand at all. The bank needs to make a sound investment.

Appraisers certify their evaluation to the lender. Lenders typically require 3 comparable sales at least. Recently, since around February 2008, lenders are now asking for 2 or 3 additional comps as a condition to be cleared prior to final underwriting and approval. That can be very difficult to overcome. What if the appraiser already used the 3 best comps in his original appraisal? That's SOP for appraisers I would think, not speaking for the appraiser population as a whole, but just a common sense guess.

What happens is that when the appraiser is asked for additional comps he will be forced to look for more recent sales, hopefully as strong or stronger than the original comps he used. What if there are no recent comps? Then the appraiser is forced to fall back to the less desirable comps to satisfy the lender's condition on the loan. The less desirable, or "second string" comps, may not satisfy that lender's very "subjective" evaluation in order to clear the condition put on the loan by the underwriter. The "second string" comps might even fall below the contract price. That's an issue.

What happens then? The lender will ask the seller to reduce the price by X%, or require the buyer to bring additional cash to closing. I've been hearing anything from 5-10% is becoming the norm.

Then, you guessed it. The deal is usually done. Wasted time and alot of disappointment for all concerned, including the agents. All of that work and you don't get paid - it is not a pretty picture. On top of marketing time and expenses, you were in escrow and all that is involved with that for 30 days or more and now you won't get paid. Anybody who says that real estate agents are overpaid, I encourage them to get a license. I digress.

Back to the original blog: Buyers don't usually have the extra cash and sellers don't always see the wisdom in making the concession in price and getting on with the sale.

If the highest comp in your neighborhood - same number of bedrooms and same/very similar finished square footage sold for $350,000 within the past year, why would you price your home at $400,000? Sellers who want to ignore the market, the comps, and their agent's professional opinions and recommendations and overprice their homes are the very same sellers who become very disenchanted and frustrated with the process after a short period of time, and begin to blame their agent for lack of interest in the market. It's not the agent's fault. I read a quote not too long ago and it was so right on for this situation.

"I can put a 50' billboard in your front yard but if the house is overpriced, I'm simply advertising the wrong price. "

No amount of advertising or internet exposure is going to sell a grossly overpriced home. If your car is valued at $10,000 on edmunds.com, do you ask $15,000 for it? Why would you? The point is that you wouldn't because it would be a waste of your time and no one would come to see your car.

I've heard everything from "our yard looks nicer", "we changed all of our door knobs and light fixtures", to, probably my personal favorite, "I've been in that house and it's a mess". Our furnishings look alot better "staged" than theirs, blah, blah, blah.

When do we as a society begin to take the process of selling residential real estate seriously? For most of us, this is our single largest investment, perhaps only behind our 401K accounts.

If your stock broker told you that the hot stock you want to buy doesn't look like a good investment, would you buy it anyway? If your doctor tells you that you need to have an MRI, do you ignore him?

If your home is overpriced it probably won't be shown. Experienced agents in the area won't waste time showing qualified and motivated buyers overpriced properties - there's no upside there - even if your buyer loves it there is a very good chance, especially now, that it won't get past an appraisal. Then you wasted at least 30 days in escrow & have to start over. What if your buyer needs to move by a certain date? The buyer agent is going to be very careful about selecting potential properties for this buyer - even in the best of circumstances a timeline can be disrupted, but with an overpriced property, forget it. You are asking for trouble. Besides, gas is not cheap anymore!

If your home is overpriced and a buyer agent does show it, let's say the buyer likes it, and asks their buyer agent to pull comps, what happens then? The buyer and the buyer agent quickly learn that they probably wasted time seeing that house and will probably move on without making an offer. It happens every day. I've even had buyer's agents contact me to say "help me out with the comps"; "I'm having trouble getting comps for your list price". All the listing agent can do at that point is spin it - seriously, discuss the closest comps to your inflated price, play up the features of the house, and pray. Spin. Not facts, just spin. That's all you are left with.

Sellers need to come to grips with reality. When sellers become buyers they get it. Why don't they get it when they are selling?

I've had sellers tell me that they decided to list with another agent because "he can sell my house for more than you said and he's listing it at XXX price when you only wanted to list it at ZZZ." That's called buying a listing. Some volume or production agents take every single listing and at whatever price the seller asks for. That's fine if you want to be a part of someone's "numbers game".

Don't get me wrong. I've taken my share of overpriced homes, especially early in my career when, like most agents, you are less confident about your evaluation of the comps and are more willing to be proven wrong, at your own expense. But, only when I see a glimmer of hope, something awesome, great location, perhaps improvements that could sway an appraisal through adjustments, and only if I think the seller is motivated enough, and smart enough, to eventually come to terms with reality and agree to an appropriate price reduction. Yes, I'm not ashamed to say it, I could be listing your house with every intention that I will likely need to reduce the price. If we didn't do that on some of the "borderline" ones we would be going to alot of listing appointments and wasting alot of time and gas and missing alot of dinners with our loved ones for no reason. Not to mention possibly missing out on some good business and the joy of working with some really nice people that we just like and want to do business with. Most of the time, for an experienced agent, it works out for all concerned. But, it only works in a small amount of unique situations and I would never have my listing inventory "heavy" on the side of overpriced properties, even if only by a little.

Bottom line: although proper pricing of residential real estate is somewhat subjective, even in the best of times, the market comps will typically render enough concrete data to give an experienced agent the ability to list the property to attract fair and viable offers from the most qualified and motivated buyers in the market.