Half Of Home Sellers End Up Disappointed - CPO your home!
*Contains excerpts from the best-selling, home selling book, www.UVPbook.com
#CPO - CPO or Certified Pre-Owned Home
Up to a third of home sale contracts fail, in main due to appraisals and Inspections. Add to that staggering statistic, the 20%+ of sellers who do not end up selling their home first time around, and over half of home sellers end up disappointed.
All that effort, meeting with agents and people traipsing around their home, arranging for someone to take care of the dogs for each showing, cleaning up and keeping the home as a 'show home', dealing with 'low-ball' offers, adds up to a disaster for half of home sellers. It doesn't have to be this way! Discover secrets that you need to know when planning your home sale, and be part of the group of homes sellers that succeed the first time around.
Did you know that YOU can control the sale process? Learn the secrets.
You often begin your home sale by interviewing two or three listing agents, who are counting mostly upon their training, personality and ‘years in the business’ to get them across the finish line.
You are presented with a CMA, or a Comparable Market Analysis, which compares properties that have sold that are similar to your property, and sometimes outlines the 'competition' - homes that are similar that are currently for sale. It may surprise you to learn that agents in most states get little or no training on how to price your home in real estate school. And yet pricing is the most important factor, and one that, as the seller, you control. Some agents get it right, some are led by the seller during conversations such as: "we need to get this much out of the home". We all know this, and that's why mortgages are underpinned by professional appraisers' opinions of price, not CMAs.
Location is of course important, however you cannot change the location. Agents can do a great job of marketing the value of the location, through Listing Storyboards and Walking Tour Videos. Wherever it is, every location has values that must be communicated.
Condition is important too - and that is also under your control. So how do we go about putting you, as the seller, in the driver's seat, when most contracts are effectively written to protect the buyer?
Up To One Third Of Contracts Do Not Succeed
That's 33% of excited sellers and buyers who end up disappointed and with a home for sale that people now ask questions about ("why did the last one fail"). Failed sales leave sellers and buyers who have plans for new schools, moving and job preparation that are now back in flux. Money spent and stress wrap up the messy package.
The two main factors on failed contracts are PRICE - when they don't appraise for a buyer's loan and CONDITION - when the buyers pull out of the deal because (on average) 25+ items that need repair are listed on the inspection report.
Don't worry. There's a new way to sell your home!
I entered real estate in 2007, just as the market began the 'crash'. Though I experienced commercial success early on in my real estate career, something clearly wasn’t right. Even rudimentary steps were taking too much time. Trust between parties often seemed poorly established, too fragile or too easily broken. As exciting as buying or selling a home should have been, this was often not the case. Too often, what both agents and customers experienced was anxiety, dread, and confusion. Where does all this pain, stress and frustration come from?
The excitement was always palpable when an offer was placed on a home, and later when an agent would get the call saying, “Congratulations, the offer was accepted.” Then, when that offer became a contract, the real work began - often resembling an emotional and logistical roller coaster - throughout the inspection, appraisal and re-negotiation process. Still - after all this - contracts failed around one-third of the time.
The anxiety people feel throughout the old real estate process or 'the way it's always been done' remains real, and does not change. What can change is the process, and how we approach the challenges inherent along the way. This convinced me to begin creating a new approach, from a new perspective. To understand the difference, it helps to understand what happens throughout the life of a listing.
Traditional or 'old-fashioned' Real Estate Scenario
Note: some ‘scenarios’ may differ from state to state; this one is simply provided as an example, for the purpose of discussion:
1. The property is listed once an agent advises a seller of a fair market price. This is usually accomplished through a tool called a CMA, or Comparable Market Analysis.
2. An agent representing the buyer (sometimes the Listing agent) presents an offer to the seller.
3. The agent/s go back and forth, brokering the agreement. At this point, there is no knowledge of what repairs may be needed (if any), or whether the home will appraise for a loan, or appraise to the satisfaction of a cash-paying buyer.
4. Once a contract is ratified, the agent/s then help the buyer arrange an inspection on the home, usually within the first couple of weeks.
5. The buyer’s agent helps the buyer with funding for the home (often through a bank or other lending institution) or with preparation of a ‘proof of funds’ letter for cash-paying buyers.
6. The inspection report comes back, typically with an average of 25+ items that ‘need repair.’
7. The agent/s go back and forth, re-brokering the agreement, depending on which items the seller agrees to repair. The seller may be willing to give to the buyer a credit to repair the items themselves. Should the seller not agree to do the repairs, the common figure that the agent representing the buyer suggests for a credit against the purchase price is $2,000 - $2,500.
8. At this point in the re-negotiation, in many US states, the buyer can choose to exit the contract. (Sometimes, a ‘due diligence fee’ which the buyer has paid is non-refundable - however, most often the ‘earnest money’ which the buyer has paid is refundable).
9. The lending institution gets all necessary documentation from the buyers (as many buyers do not supply this up-front) and decides what loan amount they will offer. An Appraisal is then ordered to ascertain the appraiser’s opinion of price. (Homes do not always appraise for what the property is listed at; in a market where prices are flat or on the decline, this is not uncommon). Most Appraisals are going to come in 21-30 days after the contract is signed, and sometimes even later.
10. If the property does not appraise for the price on the contract, the agent/s go back and forth, re-brokering the agreement.
11. Up to one third of contracts fall apart at this stage.
12. Buyers may get nervous with the amount of things that need repair.
13. If the property does not appraise, and an extra dose of buyer nerves gets thrown in.
14. Should the buyers decide to pull out (and the choice is most often the buyer’s) they have the following invested: any due diligence fee, the inspection fees (usually $350-$650) and a potential fee for the loan application.
15. Earnest money is often refundable at this stage, for example, in North Carolina the buyer can request the money back and terminate the contract, no questions ask.
Negotiations happen at least THREE TIMES
Check with your state for the elements on the purchase contract.
As you can see, negotiations often occur at least three times before the buyers are handed the keys to the property:
During the agreement of the original contract, when buyers have found the home of their dreams - and the sellers are excited to get a contract (an important note)!
Inspections. *Note - In the 2000+ transactions the AllStarCertified team (at the Asheville NC headquarters) has handled to date, we haven’t once seen an inspection report with less than ten items on it that need repair - unless they have followed the Certified PreOwned or CPO Process).
Appraisals. Should the property not appraise, the buyers and sellers are thrust back into negotiations.
These hurdles are not the only ones to a real estate transaction, however they are the main ones. The CPO process changes the way that real estate is transacted, for the benefit of both the buyer and the sellers.
Many Home sellers haven't sold a home for a while, and may not be familiar with current contracts, or have little experience or knowledge regarding what really occurs once a home goes under contract. Other than the basics of a contract being presented, an inspection taking place and the closing (where documents are signed and keys are handed over), what takes place in-between those transactions can be confounding!
The below exchanges (in script format) was designed to highlight the advantages of ‘the CPO approach’ vs. ‘what happens during an old-fashioned transaction’ during a listing appointment - and identifies key reasons why the ‘CPO approach’ provides the greater value. Here’s how CPO is presented at an AllStarCertified listing appointment, which includes the following:
a) Listing agent using the CPO Program (representing the sellers)
b) The home sellers, Mr. and Mrs. Jones
c) Gladys, the agent representing the buyers
Scene: After pleasantries with the home sellers (Mr. and Mrs. Jones) the CPO agent gets down to the business of explaining how the ‘CPO process’ changes the whole transaction for the better - especially when compared to traditional ways of doing things.
*Please note: All dialogue is italicized. - “Notes To Reader” is separated with lines. CPO agent begins addressing the home sellers: Mr. and Mrs. Jones, the good news is that I sell more homes than anyone in this area. Therefore, I’m the agent that will get your home sold. One of the main reasons this will happen is because years ago, my group made a decision to step out of the ‘old-fashioned real estate process,’ and into a better way of proceeding with real estate transactions.
Q: Do you know what the 2 main hurdles in a real estate sale are?
A: The Appraisal and the Inspection. -Let me show you how we deal with those hurdles up-front, to save you hassle, stress, time and money. We refer to this as our CPO or AllStar Certified Pre-Owned Program.
An ‘old-fashioned approach’ to your home sale would have begun with an agent representing the buyer bringing the offer to the Listing agent. Let’s name her ‘Gladys.’ The conversation between the agents would (typically) go something like this: “Thank you very much for the offer, Gladys - please help me understand why it’s such a low - ball offer, though?’
Gladys usually starts off low; because that’s the 'way it’s always been done'.
At this point, most sellers are aware of low-ball offers, and will tell the agent ‘their own’ story about ‘low-ball offers.’ They’ll share about ‘what happened during their expired listing, when they got a ‘ridiculously low’ offer - or what happened to their sister in Arkansas…’ etc.
The CPO agent continues with: Mr. and Mrs. Jones, often, after the ‘low-ball’ discussion, this conversation soon follows -
Gladys, the agent representing the buyers says: Well, I did my CMA, (that’s the comparable market analysis, a basic model of valuation).
In ‘old-fashioned real estate,’ the Listing agent would normally respond with: -Well, I did my CMA too, thank you very much!
Gladys counters with: My CMA is better than your CMA. The Listing agent replies, why is your CMA better?
The two agents then debate about the value. “I can’t believe you used that home with the blue door as a comparable sale… (etc.)” (In other words, the two agents are bantering back and forth, yet neither is able to really gain any ground, as they’re both using the same ‘CMA’ point of reference).
Mr. and Mrs. Jones, do you know that most agents only receive rudimentary training when it comes to creating CMAs? That’s just one of many reasons why, in order to represent you at the highest possible level, we truly believed that yesterday’s approach to real estate needed to change.
We have what we call a ‘CPO approach’ - which changes the real estate conversation in order to keep you, the seller, in the driver’s seat. For Example - with CPO in place, when Gladys comes in with the low-ball offer, the CPO agent says:
Thank you very much for the offer, Gladys - please help me understand why it’s such a low-ball offer, though?’
I did my CMA.
In this case, instead of replying with ‘I did my CMA too,’ the CPO agent says:
Oh gosh, I’m so sorry. I must have forgotten to attach the Appraisal to the MLS. Let me send that to you. (We haven’t forgotten to attach it; we are just saving face for Gladys)!
Mr. and Mrs. Jones, the Appraisal obviously trumps the CMA. Appraisers receive extensive training, are licensed to focus on real estate value, and often spend over 6 hours appraising each property.
Now, Gladys is happy to sit down with the buyers and say, ‘Great news - you have an Appraisal to look at on the home, the Listing agent forgot to attach it to the MLS.’
Now we need to deal with the issues that will come up during an inspection.
Mr. and Mrs. Jones, have you heard of a Certified Pre-Owned Car? Many car companies carry out a 156-point inspection on a CPO car, which might be a $10,000 or $20,000 car. When you go out to buy a CPO car, you know exactly what’s wrong with it, up-front - and any issues have been identified, and resolved. You also get a warranty - so you can drive confidently knowing that the car will not fail.
And yet, in old-fashioned real estate, agents will place a $200,000 - $500,000 (or even a million-dollar house) on the market, with literally no inspection! It makes little to no sense - and can be asking for trouble.
Well I know there’s nothing wrong with my house; it’s well maintained - and there’s literally nothing wrong with it.
CPO Listing agent to sellers:
I understand. Still, in a traditional real estate transaction, the average inspection report comes back with 25 items on it. They may be nit-picky little items, such as the hinge not working on the master bedroom door, it’s squeaking, or there’s something not fitting quite right, here or there.
Mr. and Mrs. Jones:
Well, there is a drip in the bathroom faucet, and the kitchen cabinets have a couple of doors that are not quite square. All small stuff.
CPO agent to sellers:
I’m sure there are just a bunch of little things. The great thing about CPO is that if there’s something larger we can’t see - such as flashing on the roof, or something like that - we’ll find it now. We can get competitive quotes, and take our time fixing it.
Mr. and Mrs. Jones:
I’m still not sure it’s worth the investment.
CPO agent to sellers:
This approach does require some work up-front, rather than when you are in the thick of things - such as when negotiating your contract. There’s another important reason it’s a good idea: most often, there are two people buying a house. Usually those two people are not in agreement about the house, and they have house A) and house B) in the running. Have you two ever had that experience?
Mr. Jones: Of course! Jane here got to choose!
CPO agent to sellers:
It’s very easy for the person who didn’t get that choice to say, ‘You know what honey, since I’m the ‘honey-do’ person - let’s just move on to the next house, please?’ This may not make sense, as the next home is likely to have more than 25 items, however, the objection still sometimes becomes a lever that can be used to move on.
That makes sense. Those sneaky husbands! Although I gotta tell you - I'm the honey-do around here!
CPO Listing agent to sellers:
So let’s talk about what the old-fashioned approach to real estate costs.
When buyers put a contract on your home, one of the first things they organize is the inspection. When it comes back, though you may have thought it was pretty much ‘a done deal’ - you are essentially back into negotiation on the contract. The price can be decreased, or the buyers can deliver a request for repairs - the average repair request (whatever kind of home) being almost always between $2,000 - $2,500. Sellers: Surely there’s a list of repairs, and the agent representing the buyer gets quotes from all the different sources to fix them? And I know most of them are nit-picky little items, as you mentioned before?
CPO AllStarCertified agent to sellers:
I frequently check in with agents as to why that estimate always seems to come in around the same amount. The answer I often hear is, ‘because we know it’s pretty much what the market will bear!’ So agents representing buyers often just come up with this ‘average’ figure, and present it.
However a pre-inspection, which we can do in the next week, takes that ‘off the table.’ It also affords you some time, to either choose to fix things up-front (when you have more time, because you’re not in the midst of a negotiation) or to disclose any items you don’t want to fix. Another key point is this: the buyers have real confidence that you’re being absolutely honest about the condition of the property.
I will not pay $2,000 or drop my price - my home is worth a lot!
CPO AllStarCertified agent to sellers:
I agree, however, that’s ‘yesterday’s real estate.’ We do things differently. Of course it costs some money to do an up-front inspection. You have the cost of the inspection, true - however, there’s a very high probability that the agent representing the buyer and their clients are going to ask for $2,000 - $2,500 anyways. So, by spending an average of $400 for an up-front inspection you can actually be saving a lot of money.
Not to mention, the buyers can pull out of the contract at the time of inspection because they get cold feet. On average, there’s going to be about 25 items - and if there’s anything really wrong - you won’t have time to get quotes. I want to keep YOU in the driver’s seat, not the buyers.
I just didn’t realize that things were so slanted towards the buyer. What about pricing the home?
CPO AllStarCertified agent to sellers:
Most people know that the seller often drives the price. And depending on the level of experience of the agent, and whether they are hungry to take listings - they may meet with sellers and hear, ‘Oh I’ve got to get X dollars out of it.’ So, in those cases, the seller absolutely ‘prices the house.’
I’m sure you agree that you should price your home at market value - and an appraiser essentially underwrites that market value.
Our home is not new, and we are competing with a number of new homes in our area.
CPO AllStarCertified agent to sellers:
That’s where the trifecta of the CPO comes in -which includes The Appraisal, the Inspection and the Home Warranty. Whether you are competing with homes that are not new (which we call re-sales) or new homes, offering the Home Warranty up-front gives buyers peace of mind. Let’s look at a new home for a minute.
The builder offers a builder’s warranty for a year. We can offer something similar in the Home Warranty. This Home Warranty will address most issues that arise during the first expensive year of home ownership. What’s more, the buyers can choose to extend the home warranty for as long as they like.
When you order the Appraisal upfront, the good news is that you don’t pay for it until closing - AND - you get coverage under that warranty, free of charge during the tenure of your listing - only paying call-out fees, should an issue arise.
If you choose to address any issues upfront, The Inspection offers buyers a home without issues - and the Appraisal presents them with a home that has a market value determined by an appraiser. For a buyer, it’s as close to buying a new home as you can get.
So it sounds like we can spend about $400 on an inspection, and in many cases avoid additional stress during the negotiations... reduce the threat of buyers walking (as well as the likely repair request - or demand that we fix everything) - and we will likely get a better price, as it is underpinned by the Appraisal? Along with that, we can compete much more readily with existing and new homes?
Sounds like a no-brainer!
Doesn’t it sound like a no-brainer to you?
This typical conversation simply shares the highlights of what often occurs throughout the life of a transaction. When broken down in this way - where the parties have no idea what is truly wrong with the property (which may have no warranty on it), and rely on a basic tool (MLS-based CMA) to determine its value - doesn’t it make the ‘old-fashioned’ process of listing homes sound somewhat ridiculous? CPO addresses each of those issues, before they cause roadblocks and derailments, and helps sellers sell their home with less chance of the contract failing, less stress overall, and often for more money.
Leave the term old-fashioned to the cocktail and sell your home using today's methods.
Find an agent that is certified in offering a CPO program anywhere in the US, and begin your home selling process in the more intelligent way. Visit www.CPOExperts.com.
If you prefer to call, call 828 210 1648 during business hours and let our concierge team you are looking for a CPO expert in your area.
Find an agent that is certified in offering a CPO program anywhere in the US, and begin your home selling process in the more intelligent way. www.CPOExperts.com. If you prefer to call, call 828 210 1648 during business hours and let our concierge team you are looking for a CPO expert in your area.
Agents who use all of our programs are part of our AllstarCertified referral network www.AllstarCertified.com
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