Buyers BEWARE: Prices on the Rise, Sellers run the Show, Agents desperate for Commissions….but its not all bad!

A little over a month ago I wrote an article about avoiding homebuyer frustration by managing your expectations.  This was basically a homebuying 101 preparation course.

Today, we’re going to dive deep into some specific challenges that we are beginning to see on a regular basis.

Rising home prices – Although home prices are down in most areas from a year ago, we are seeing an increase in median home prices for the past four months in a row in both Southern California and the Bay Area.  A good friend of ours, Realtor Jane Loveday, checks in from San Diego county as well being quoted in the San Diego Daily Transcript about the challenges in this market.  Jane Loveday is a Realtor with Windemere Pacific Coast Properties.

One of the biggest challenges continues to be that there are fewer homes available for sale.  This is commonly called a “lack of inventory” – Inventory being the number of homes available to buy.  With fewer homes available to buy and the expiring $8,000 tax credit you are likely to find many buyers making offers on fewer homes.  The result is a bidding war that drives the sales price up.

Sellers run the Show -Remember hearing the term “A Buyer’s Market”?  The “buyers” that benefit most in this market are all cash buyers and investors that are scooping up homes that are in poor condition and cannot qualify for lender financing.

When the seller of the home is a foreclosing bank or asset management company we are seeing some disturbing patterns.  Buying a foreclosure home is a big risk for an unsuspecting buyer, especially if you are working with a real estate agent that doesn’t have your best interest in mind.

First, let’s talk about buyer’s rights.  If you’re buying a foreclosure property – chances are, you have no rights.  Asset management companies and foreclosing lenders are making every effort to push these properties onto the market with absolutely no protection or concern for buyers.

Unfortunately, there is no lemon law to protect you when buying foreclosure homes.  Two situations that we commonly see from these sellers are the Purchase Contract Addendum and Blanket Counter Offers.

A Purchase Contract Addendum is designed to summarily remove every protection afforded you in a standard purchase contract.  We discuss this in detail in our live web class – What to Expect When Buying Foreclosures and Short Sales.  Check the schedule for upcoming classes.

A Blanket Counter Offer may be accompanied by a Multiple Offer Disclosure like this one.  This “disclosure” might as well be a 300lb bully pinning you to the ground with his knee jammed into your neck yelling at your face that it’s “My way or the highway”!

In all caps, bold print, the headline of this disclosure boasts the following -

“HIGHEST AND BEST OFFER SHOULD BE BASED ON OFFER WITH NO LOAN AND NO APPRAISAL CONTINGENCIES.  WHAT YOU OFFER WILL BE WHAT YOU PAY.“

Only to be topped by the very next instruction (it’s in bold, but at least they didn’t “all cap” this one!) -

“If you fail to execute and return this document, we will not consider your offer.“

Oh my gosh….I’m seriously about to lose my temper right now….ARE YOU KIDDING ME?!  Ok, deep breath Scott, deeeeeeeeeeeeeeeep breeeeeeaaaaath.  I have to stop shaking so I can finish my point here.

This is NOT a home you would want to buy.  What this disclosure really says is “No matter what the reason – we are going to keep your deposit money”.  That may not seem like a huge deal to everyone, but let’s take a super quick look at what some of those reasons might be.

You will lose your deposit money, no questions asked if………

• There is undisclosed damage to the property that would be too expensive for you to fix
• You are unable to get financing for ANY reason
• The home is worth less than what you’ve agreed to pay for it

Finally, I am going to wrap this up by sharing with you a scenario that happened in our office yesterday when Vince Umali (a loan specialist with Broadview) had to battle with a Real Estate Agent desperate for a commission.

Vince is working with a first time home buyer that encountered one of these disclosures.  The home buyers called Vince to ask for his advice because their Real Estate Agent was pressuring them to sign this disclosure.  Once Vince explained what the disclosure meant and the possible (a strong possibility) risk of losing any good faith deposit that they submitted with the original offer, the buyer backed out of the offer by refusing to sign the disclosure.

Here’s the kicker….Their Real Estate Agent was so angry with the home buyer that they refused to work with them any longer and fired themselves as their agent.  Oh boy…there goes my blood pressure again…deeeeeeeeeeeeep breeeeeeeeeeath.  The Agent didn’t see a “Pay Day” from this home buyer so they QUIT!  Are you serious?!

Am I to understand that because this first time home buyer was educated and informed that the Real Estate Agent representing them QUIT to go look for the next unsuspecting fool that follows their greedy advice?

It’s not all Bad News – In closing, I hope that this adds a few more weapons to your arsenal as you arm yourself against anyone that doesn’t have your best interest in mind as they advise and guide you through the home buying process.

The entire purpose of this website is to empower you to make educated decisions throughout the home buying process.  It’s better to avoid a bad deal by knowing to pass now, then to figure out halfway through the process and a few thousand dollars later that your Real Estate Agent and Lender team are not looking out for you.

Other articles about this topic that might interest you:

1. Buyers Beware: I Suggest You Give Up Your Rights This is a “Multiple Offer Disclosure” that a home buyer received yesterday by way of email. I’m not completely sure...
2. Buyers Beware: Homebuyer Survey Says – “Market conditions” making lender’s service worse….really? A Buyer’s Satisfaction Survey by J.D. Power & Associates shows that loan originator satisfaction is down.  Much of the frustration...
3. Buyers BEWARE: How do you know when to NOT trust your Agent or Lender? I’m not sure if this is a good idea to write while angry but i’m gonna do it anyhow. The...

Tagged as: blanket counter offer, first time home buyer, first time homebuyer tax credit, home prices increase, market reports, purchase contract addendum