Experience and Volume

This is the next piece in our series on how to find the right real estate agent. Today we're going to talk about asking the right questions regarding experience and the amount of business they do.

Ask any potential agent "Is real estate your full time profession?" The average number of transactions for a real estate agent in the US is 4 per year. Obviously, at four transactions no one is paying the bills with just real estate. And realize that 4 is the average! That means there are a lot of agents out there who do substantially fewer transactions!

Now, I'm not saying that a part time agent can't be a good agent. (Or that a full time agent can't be really bad!)However, at just a few transactions a year it's going to take the average REALTOR about 5 years to get the amount of experience that a full time, busy agent gets in one year. That matters because when something goes wrong, it helps to have someone who's seen it before!

And after asking the first question, if you feel the need for further clarification, ask how many transactions the agent did in the previous calendar year.

If you decide to hire an agent with not much experience I would recommend that you meet their broker. The likelihood is that they're going to be dependent on their broker for advice and counsel during the process. And you want to feel that the broker is someone you can trust.

Buy Low! Sell High!

By now you've all heard that the Dow Jones Industrial Average hit a new high this week. The media covered this in great detail and one of the interviews I heard with a stockbroker was very interesting. They asked what effect this news had on the average investor. They wondered whether hearing that the DJIA had reached the lofty 13,000 mark would make people want to sell. The stockbroker said that, in fact, just the opposite was true for the average investor. It made them want to buy! He went on to talk about how most investors make buying and selling decisions primarily on the basis of fear and/or greed.

And so it is in the housing market! As the average buyer hides and worries, I'm seeing more inquiries daily from investors. They get the "buy low, sell high" philosophy. Investors tend to take a longer term view. One gentleman told me this week that when there was a TV show just about flipping houses it was perfectly clear that it was time to sell! How right he is!

The people who make the money, whether it's in real estate or in the stock market, tend to be the people who don't follow the herd. I've known this at an intellectual level for years. But it's been interesting to see it in action it he past few years!

One day the market will turn into a seller's market again. And all the people who listened to everyone telling them to be very afraid to buy will be scrambling to get something as prices start to climb. And all the investors who bought when they had lots of negotiating leverage will be sitting back and smiling!

Cashing Out

I wrote on this blog earlier last year about all the money we've been taking out of our homes and where it's been going.

Here's a great story on just that phenomenon illustrated by very interesting charts. It's based on a report issued by the Fed which has just been updated.

The bottom line is still that too many of us are taking too much equity out of our home (an appreciating asset) to spend on consumer goods (depreciating assets) and in the end it is making us all poorer!

It's also clearly had an effect on the housing market. If you've tapped out your equity to buy the car, pay off credit cards or take that vacation to Maui, you've got no down payment to move up to the bigger house when it's time. I hear it from sellers all the time! They can't afford to take any less and pay off all their existing mortgage debt.

Unfortunately, buyers aren't willing to pay you more than your house is worth to help you out of a tough spot! And when you move up, you won't want to help either!

I'm not saying everyone who takes cash out of the equity in their home is an idiot! There is a time and a place where it makes sense. I'm saying for most people, most of the time, they've made a bad decision.

What do you think?

Quail Ridge Subdivision

Quail Ridge is a subdivision in Amissville in the northwest corner of Culpeper County. You'll find just about every style of home here, set on large lots of 2+ acres. There are approximately 250 homes in this subdivision, making it one of the larger communities in the area, and certainly the largest in Amissville.

There are four properties for sale in this subdivision. Prices range from $409,000 to $469,000. Days on market ranges from 89 days to 331 days. As it happens, all four properties currently for sale are colonials. There are no properties currently under contract here.

Nine properties have sold here in the last year. Which means there's currently a roughly six month's supply of inventory. That's lower than the area average of approximately 12 months.

Of the nine properties that sold, the lowest priced property sold for $374,000 and the highest priced property sold for $503,000. These are net prices after any seller concessions to help with buyer closing costs. Looking at prices in the abstract is actually less useful in this subdivision since there's so much variety in the homes here. Among those nine were a split foyer, a very small rambler and a very large three level colonial. What I would be willing to bet on is that we don't see another sale for anything over $500K in 2007.

Nothing has sold in this subdivision since December of 2006. That may mean that there's actually more than a six month's supply of inventory. That's especially true since the traditionally more active spring market has so far largely failed to materialize.

There were 9 homes over the last year that were either withdrawn from the market or whose listings expired. Three of them are currently for sale again. One of them sold eventually. And four of the sellers appear to have given up for the time being.

While the details change with each subdivision the overall message in the market stays the same. It's a tough market for sellers and only the seriously motivated have a chance at selling. It remains a great opportunity for buyers!

Economic Updates

There's news on the economic front today that sheds light on the housing market.

The first news is the existing home sales for March. The numbers show a drop of 8.4% over February's numbers. This is the largest drop in 18 years, taking us back to the really ugly real estate market of 1989.

The second piece of economic data just out is the consumer confidence numbers. The number declined for the second month in a row. Much of the reason for the decline seemed to have to do with gas prices at the pump. And that is certainly a factor in our local housing market.

Remember that these are national numbers. Real estate is local, local, local! Our solds actually increased here, March over February. That's true in every county I looked at in the area. That includes, Fauquier, Culpeper, Prince William, Warren and even little Rappahannock! That's the good news. The bad news is that we're down year over year and inventory once again increased in March.

The other interesting thing about these numbers on a national level is that there are a number of analysts saying that the numbers were down in March because of bad weather in February. Since our February was really ugly from a weather perspective and we still managed higher numbers in March, I'm a little cynical about that explanation!

Culpeper Possibilities

I had the great pleasure this past week of sitting down with three students from the University of VA Darden Graduate School of Business. Sara Cerminara, Polly Howe and Katie Horsman are working on their MBAs and wanted to sit and talk about Culpeper real estate.

It was an interesting conversation and I was impressed by their questions. Even better, they got me thinking about what Culpeper could be and what areas for growth might make sense.

First of all, kudos to Culpeper for some of the work they've already done. Things like attracting the Library of Congress facility were clearly a great move! Culpeper clearly appears to have a head start over many surrounding counties in attracting the kind of businesses that can help their community grow.

Clearly Culpeper will need to focus on local economic development in order to continue to prosper. Looking to build a community based on commuters to Northern VA and DC would seem to be a poor long term strategy. And the more I think about this the more I think it makes sense to look more towards creating a community of interest between Culpeper and Charlottesville.

The corridor between these two communities is already seeing extensive growth. There is a good transportation route between the two communities. There would seem to be an opportunity here to work together to build something that doesn't rely on Northern Virginia or DC for growth, jobs, etc.

Given the educational, employment and commercial opportunities in Charlottesville, I believe Culpeper should be working to create a dialog with this community to foster closer ties. Anybody know of efforts already under way in this area?

Thanks, ladies, for getting me to think a little more deeply on some of these topics!

Three Housing Articles

Slate is running a series of articles this week based on a book by Witold Rybezynski. The book is called Last Harvest: How a Cornfield Became New Daleville and it explores the design, construction and marketing of a new subdivision. I haven't read the book yet, but it's on my list!

But the excerpts in Slate this week and I though you might all appreciate the chance to take a look.

The first one is entitled "Why Do We Live in Houses, Anyway?"

The second one is "The Ranch House Anomaly" and I'd actually dispute part of what he has to say there. Ranch houses, or what we call ramblers here are actually making a comeback thanks to baby boomers who no longer want to climb stairs. They're just better designed, more open ramblers than the ones from the 50s and 60s.

The third and final article is "How a Cornfield Became New Daleville" This article is actually a slide show showing how a subdivision takes place. It was the most fascinating of the three articles and definitely contains information pertinent to what's going on in our communities today here in Virginia. This is the article that definitely made me want to read this book.

Take a look at these and let me know what you think!

Storm Damage

As I'm sure you're well aware, there was a heck of a wind storm earlier this week. We saw trees down everywhere and many lost power. But hopefully most of you didn't lose what the owners of these houses did:

In case you're wondering that is not normal! Even in a strong wind storm you shouldn't see siding stripped away like that.  I've driven around a lot of neighborhoods since the storm went through. This is the only neighborhood with this kind of damage on multiple homes.

But you know what? A month from now when buyers come through they won't have a clue that this happened. They won't know that they should be asking questions about the quality of the construction.

So, if you're out looking at homes, always ask who the builder was. I'd recommend talking to a few of the neighbors and see how they feel about the quality of construction in their homes. And, if you're a buyer, immediately after a storm is a great time to explore neighborhoods and see how the storms affected the homes there.

One home with damage doesn't mean shoddy construction. But if there's a pattern in a particular subdivision all built by the same builder, it's worth some further investigation!

Attending Industry Conferences

I just got back from a three day conference sponsored by the Women's Council of REALTORS. It's one of the oldest professional organizations in the real estate world, started when the good old boys from the National Association of REALTORS wouldn't allow women to join!

Now women are welcomed into all the organizations and men are also members of WCR!

But I didn't so much want to talk about this organization or conference in particular but rather, why it's good for my customers and clients that I attend such events.

First of all, I learn new things! Sometimes I'll pick up a new marketing strategy that will help me with getting a client's house sold! Sometimes I'll pick up information on fraudulent things that are showing up on contracts and that I need to be aware of. There's always something that ends up benefiting both my clients and myself.

A second reason for going to conferences is to meet other REALTORS from all over the country. This helps my clients when they move to other areas. I often already know someone where they're going. And I can make sure they have an agent who will take good care of them! And, if I don't already know someone, the professional organizations I belong to provide potential agents who may be able to help my client. If I don't know someone I will interview them before sending a client to them. I want to make sure first of all that they're a professional I'd feel good about dealing with. I also want to make sure that in terms of background, personality and specialty they're a good match for my clients. There are agents who specialize in senior citizens. I'm not going to send that young family being relocated across the country to work with that agent. It's just not a good fit.

The goal is, since I can't take care of them myself, to get them the same level of service as if I could!

If you know someone moving out of the area, make sure you ask them how they're choosing their real estate agent in their new location. Throwing darts or choosing randomly from a web site probably isn't the best bet! I'm always happy to help them find the right individual.

Good News in the Housing Market

I'll bet you all had given up on getting any good news on the housing market front! But here it is, front and center in many of today's financial publications!

Fannie Mae and Freddie Mac have just announced that they're going to provide help to subprime borrowers. The CEO of Fannie Mae will testify before Congress today that they are coming out with a new loan program to help borrowers transition out of some of the high risk ARMs. And credit requirements will be loosened to help more people qualify. In addition, Fannie Mae and Freddie Mac will be buying more 30 year fixed and 40 year fixed mortgages on the secondary market.

You're selling your home and wonder how that helps you? I'm glad you asked!

This should mean a reduction in the number of foreclosure properties coming on the market. Foreclosure properties drive prices down. Financial institutions have absolutely no emotional attachement to the houses they sell. They never, ever say with great indignation "I am not giving this house away!" They simply do what it takes to sell the house. In this market that means lowering prices dramatically below similar properties on the market. That makes it tough on every other seller in the neighborhood, both from the perspective of holding the line on price reductions and on getting the property to appraise at what you do sell it for. So this is definitely good news.

I also think it's quite possible that a secondary result of today's news may be a slight lowering of interest rates. More money available from Freddie Mac and Fannie Mae in the secondary mortgage market could help on that front as well.

These days, sellers need to look a little harder for the good news! But there is some out there today!

March Market Updates

Before we get started can I just say that I like good housing news as much as the next guy, and probably more! I'm looking for it, I swear I am. The numbers just aren't cooperating!

March numbers are in for the local markets and they're not pretty.

Culpeper shows that total inventory increased to 643. The number of new listings coming on the market increased from 91 in February to 145 in March. Meanwhile there were 54 new contracts ratified and 52 sales closed.

In Fauquier the inventory is up to 723. 212 new listings came on the market in March, up from 135 in February. 94 new contracts were ratified and 62 sales closed.

In Rappahannock, as usual, there's less variation. There are 66 properties currently for sale. 10 new properties came on the market in March, 3 less than in February. Three listings went under contract and 5 sales closed.

In Prince William county the inventory is now 4527. 1764 new listings came on the market in March compared to 1172 in February. 508 new contracts were ratified and there were 418 closed sales.

Inventory is back up to right around October/November, 2006 levels.

In other not good news this week, D R Horton, a major national homebuilder announced spectacularily bad financials again as well as a warning that they see the market weakness continuing for the next three quarters.

OK, clearly the bright spot here is for the buyers! And I'm very happy for them and it was definitely their turn!

Sellers, if there's a bright spot here it's that it is absolutely crystal clear that you shouldn't be selling if you don't need to! How's that for finding that silver lining!

You're turn to tell me about all the good news you're seeing out there!

South Wales Market

It's time to take a close up look at the South Wales subdivision in Jeffersonton in northwest Culpeper County.

There are currently 18 homes for sale here. The low price is $450,000 and the highest priced is $599,900. The days on market ranges from just under two weeks to well over two years.

During the last year 10 properties sold. That means that at current sales rates there is enough inventory to last almost two years. If you put your home on the market today and everything currently on the market had to sell before yours did you could plan on selling yours in early spring of 2009!

The lowest price anything sold for in the last year in this subdivision was $375,000. The highest price anything sold for was $635,000. On average the sales price, including incentives was 97% of the final list price.  The fastest anything sold was in 9 days. The longest anything was on the market (and sold) was 277 days.

Twelve homes over the course of the past year have either been withdrawn from the market or the listing has expired. None of those homes have yet been sold. That means in addition to the 18 currently on the market there are 12 more owners who want to sell.

One more factor that doesn't show up in any statistics is the talk about Dominion's proposed new power lines. Since they would follow the current right of way through South Wales there is some uncertainty about what will happen regarding this proposal and what the ultimate effect will be on the homes here. Uncertainty in an already slow market has a tendency to make buyers move on. While we can't measure this effect, it could be impacting home sales here to some extent.

What should you expect if you live in South Wales? You should expect price reductions! If everyone who wanted to sell had their house currently on the market there would be three years worth of inventory.  While spring and summer is typically peak buying season, there are nowhere near enough buyers out there to absorb this kind of inventory.

Again, if you don't have to sell, your home should not be on the market in these conditions. If you do have to sell, you will need to make sure your home is in great condition and will have to price it aggressively.

They're Back!

Centex, that is!

Remember last year when they were going to do a deal that would give Warrenton $22 million and they would build homes in a 55+ community with prices at $900K?! At the time I speculated that the world had truly gone beserk if they believed there was a big market of retirees looking for $900K homes in which to retire. At least I was willing to be they weren't looking for those homes in Warrenton, Virginia!

And, eventually, the deal did fall apart. Centex executives no doubt came to their senses!

But a deal has been put back together. And while the money Centex is contributing is now down to $15 million, I suspect this is a smarter deal all around and much more likely to actually come to fruition.

I did notice, though, that there's no mention of the price of the homes that will supposedly be built here. I'm guessing they won't be anywhere near $900K!

What do you think?!

Making Your Home Easy to Show

If you're a seller right now you probably don't need me to tell you it's a tough market right now. But are you doing everything you can to help yourself get your home sold?

One place where owners can unwittingly slow the sale of their home is by how they handle showings. First of all, you need to make it as easy as possible to show your home. That means a lockbox on the door and minimal notice required. Minimal notice is a quick phone call to say they'll be there in an hour. "Appointment only - 24 hour notice" is a good way to have your home for sale for a very, very long time.

Let me paint you a picture. I've got out of town buyers coming in for the day. They want to see as many homes as possible but have to make a decision and write an offer on one that day. Because the market is the way it is right now there are many more homes that meet their criteria than I could possibly show them in one day. So I need to look for ways to narrow the number down to something manageable in one day, say a dozen homes.

One of the ways I'm going to do that is showing instructions. When I'm showing that many homes in one day, with the exception of the first home we see, it's almost impossible to guarantee when we'll be there. And, so it's just easier to discard anything that requires a set appointment and/or 24 hour notice.

And since relocating buyers are one of the few categories of buyers who really do have to buy right now, you don't want us skipping your house! So make it easy for me and all the other agents who really do want to help you sell your home!

And, please leave when your home is being shown. I know there are occasions when it's absolutely impossible to do that. But it really is not helpful, in most instances, to have you there. People need time with a house in order to fall in love with it. No one will fall in love with it while you're looking over their shoulder! It's hard to imagine it as theirs when you're constantly there to remind them it's yours! And, no couple decides to buy a house without a frank discussion of pluses and minuses. They won't have that discussion with you standing there. And if they don't have it then, they may never have it. You need to get out! It's really that simple!

It may be appropriate for you to eventually meet the prospective buyer and share with them some of what you've learned about the house over the years you've lived there. The first time they see the house is not the time!

OK, there may be an exception if you're a celebrity. Harrison Ford, if you're out there with a house to sell, I'd probably let you stay while buyers came through. Except that then they're going to be too busy looking at you to pay attention to your house! So...maybe even the celebrities should get out!

That's it! Those small things really will make a difference in helping to get your home sold! And, trust me, right now you need every single advantage you can get!

Protecting Your Interests

This is the next segment in our continuing segment of how to interview a real estate agent. Today's segment applies whether you're interviewing an agent to buy a home or sell a home.

Today we're talking about agency. Ask your agent "Will you commit to representing only my interests in the transaction?" With this question you're asking them to forego the possibility of doing what is known as "dual agency".

But let's back up and talk a little bit about definitions. Agency in a real estate transaction has to do with whose interests the agent represents. Single agency would mean that the agent represents the interests of only one principal, either the buyer or the seller, never both. Virginia, and some other states, have also created something called "designated agency" this is where although the agent represents only your interests, their broker represents both sides. For example, a ReMax Regency agent is the listing agent and another ReMax Regency agent is representing the buyer. In this instance, Chuck Cornwell, the managing broker would be a dual agent representing both parties. My opinion on designated agency is that in larger firms you usually don't have much of an issue with conflict of interest, but there is always that possibility.

Dual agency is when the agent who is listing the property is also, supposedly, representing the buyer. In effect, I would say that they truly represent no one's interests other than their own! One of the principle skills you pay an agent for is their negotiating expertise. But in a dual agency situation they can not advise either buyer or seller on negotiating tactics, proper pricing, etc. I don't know how you can possibly justify your commission if you've just taken out a major component of your value to your clients!

By the way, disclosed dual agency is not illegal in the state of Virginia. Notice the disclosed, however! The possibility of dual agency must be disclosed before the agent ever takes you to see the property in question.

I don't practice dual agency. But, like most agents I frequently get calls from someone who has seen a sign on my listing and calls me to see it. Before we go in I tell them that I represent the sellers interest only and that they should be careful not to share any information with me that would hurt their negotiating position. And, even after this discussion, many people still will tell me how much they love a place or exactly how much they can afford to pay for a property. My obligation to the seller means that I MUST SHARE THAT INFORMATION WITH THE SELLER!

That's with me telling buyers what they're up against. There are too many agents who simply say they represent the seller without any discussion at all of what that might mean for the potential buyer. And, there are some who never discuss agency at all until they sit down to write the contract!

I've said it before here and I'll say it again, the only one who benefits from dual agency is the real estate agent who collects double the commission!

So, ask any potential agent if they will represent your interests and only your interests! It's an important question!

Builder's Deal

Late last week a national builder who has quite a few developments in this area took out a full page ad in a local paper. They were advertising no mortgage payments for the remainder of 2007 if you put a contract on existing inventory now.

There are several things we know from reading this ad. First of all, the builder has no confidence in a quick rebound for the local housing market. Like all of us, a homebuilder does not easily give up profit potential. Unlike your average homeowner, however, a builder is not at all emotionally involved. He sees the unsold homes simply as a product, as inventory. He'll do what it takes to get rid of them.

Secondly, the builder undoubtedly believes prices will continue to drop or at the very least stay very, very soft for the peak selling season.

And, given this offer, the builder is right. If you're selling a resale home in the same price range, you've got a very tough job competing with this. That's especially true if you're unlucky enough to be selling a home in one of these very developments! But even if you're home is elsewhere and is a comparable home in terms of size and features, you had better be prepared to lower your prices considerably. If you're the buyer comparing a brand new home and no mortgage payments for 7 months or looking at your home, nice but already lived in and mortgage payments beginning immediately, what would you choose?! There aren't many of us that would choose the lived in house.

So, sellers should be prepared for another round of price cuts. If they can find a way to swing it they might think about a marketing campaign offering to make the new owner's house payments for the rest of 2007 in order to compete with the builder.

And, in some cases, sellers should be prepared to take their homes off the market and wait it out. Inventory is still very high and clearly the builders don't think it's getting better any time soon! Recovery in our local housing market is probably now not on the agenda until at least 2008. Of course, the Fed could elect to drop interest rates and surprise me! A girl can dream!

HOA Documents

When you sell your home you are required by the contract to produce a resale packet from your homeowner's association. This document provides all the restrictive covenants, rules and regulations that govern the association. It provides a look at the association's financials so the potential buyer knows whether the association is financially healthy or whether they're likely to get hit with a large assessment in the future. (Can anyone say Warrenton Lakes?!)

It also provides information on whether or not there are any violations on the property or outstanding fines that have been levied against the current owner. If there are those need to be addressed prior to settlement.

For this packet of information, by law in the Commonwealth of Virginia, the association is allowed to charge up to $100. Given that the bulk of the packet is produced by sticking a stack of paper in a copier, that seems sufficient. And, no surprise, while the maximum is $100, I've not yet ever seen an association charge even a penny less than that amount!

On the other hand, I've increasingly seen HOAs that are trying to game the system and find ways to get more than their $100. They add "delivery fees" or something they call a "handling fee". I don't care what they call it or how much they say you have to pay them for this packet. The law says you do not have to pay them more than $100.

Do not give in to this kind of extortion! The law is on your side here and you should definitely fight back if you are asked for more than $100.

Wildwood Forest

Sometimes getting more specific about market conditions in individual subdivisions can be an easier way to understand the current market. When you're talking about an entire county and hundreds or even thousands of homes it can sometimes be a little overwhelming. And, of course, real estate is very, very local! Things in one subdivision can be sitting for many months with no activity while another subdivision shows everything moving in less than 90 days.

With that in mind, I decided to take a look at Wildwood Forest. It's a relatively small subdivision, approximately 90 homes, in Amissville in the northwest corner of Culpeper County.

Eight homes have sold in this subdivision in the past year.  The last one sold in September of last year, over 6 months ago. The lowest net price any property sold for was $355,000. The highest net price anything sold for was $508,270. The sold for, on average, 96.5% of their final list price.

During this year period, there were 25 properties listed for sale. Eight of them sold. Three of them remain on the market and the remaining 14 were eventually withdrawn.

Given the rate at which properties are currently selling, there's enough supply here currently for four and a half months. Basically, what that means is that if homes continue to sell at the same frequency they have been selling in this subdivision, and nothing new goes on the market here, it will take four and a half months for current inventory to be sold off.

The fastest anything sold was in 5 days. The longest anything was on the market was 1327 days and that one never did sell. If you throw out the 1327 DOM property (since it seriously skews the results) you get an average days on market of about 90. That actually puts this subdivision ahead of most of Culpeper County.

The three properties currently for sale here range in price from $459,000 to $499,900. Given that nothing's sold in here for six months and that the last sale in here was for $459,900, and given that prices, in general, over that period have fallen, it's entirely possible that current prices are slightly inflated.

I'd be interested to know if you find this kind of analysis interesting and if any of you study specific subdivisions in this level of detail.

Comparables and Appraisals

We've talked a little bit in the past about appraisals and we've talked about the use of comparables when deciding on a listing price. But I had something a little out of the ordinary come up this week and thought it might be of interest to everyone.

An agent called to say she was writing an offer on one of my listings in Warrenton. She also told me she was using the last settled comp (comparable) in that subdivision as a basis for the offer price. Now that seems perfectly reasonable. That's especially true given that settlement on this particular home occurred only about a week ago.

However, there are special circumstances at play here that definitely warrant a closer look. This particular unit is reasonably similar to my listing. However, it was never actually for sale in the multiple listing service. It was entered into the MLS solely for comparison purposes. A good clue that this is the case is when something is entered into the MLS as "sold" with zero days on the market. I called the agent for a little more background because there was something else unusual here. Generally if it's never really been for sale and is entered only for comparison purposes the List Price and the Sold Price are the same. However in this instance there was about $55K difference between them.

Basically, the home had been owned by a foundation that was liquidating assets. A private buyer became aware that this home was going to be sold and approached the agent about buying the property without it going on the market. The foundation was willing to take substantially less cash for a quick, cash sale with the property sold as is.

Now, I am a little concerned about this because certainly this will come up when an appraisal is done on my listing. But part of the appraisal process says that in order to compare "like properties" they should both have been exposed to the full competitive market. Clearly that didn't happen with this unit. And, I'll make sure I make the appraiser aware of this.

I also made the agent writing the offer aware of the background so that she understood the flaws with basing her offer solely on this comparable.

It's too soon to tell what the outcome will be as we haven't yet received the offer. But sometimes a comparable isn't really comparable!

Disclosures and Disclaimers

In Virginia a seller can choose whether than provide the would-be buyers with a property disclaimer or a property disclosure. I say "in Virginia" because this is fairly unique in the real estate world. In most states a disclosure statement is a must.

So, what are these two documents and what do they mean to you as either a buyer or a seller?

The property disclosure is a document that goes through all the major systems of your home and asks you what you know about them. It asks about problems you've encountered and fixed, the age of certain items, etc. While it is not an exhaustive inventory of everything connected with your home and the history of each item, it certainly can provide a substantial amount of information.

The property disclaimer is a much shorter document. Just about the only actual information it provides is whether or not the property is in a historic district. As far as the condition of the house goes the disclaimer says that the owner makes no representation as to the condition of the home. In a nutshell, it says the buyer is on his own.

The vast majority of sellers in Virginia elect to use the property disclaimer. And that's not entirely surprising. It requires less work on the seller's part, certainly. Check whether or not the property is in a historic district and sign your name! You're done! No need to rack your brain on when it was that you had the air conditioning unit replaced.

The other reason I'm frequently given for not using the property disclosure is that people are afraid of being sued over an honest mistake. While I've never personally seen a lawsuit based on a mistake on a disclosure, it's hard to argue that in our litigious society someone, somewhere, someday might not be tempted to sue. I'm not a big fan of fear-based decision making but it is a big factor in why most people choose the disclaimer.

One instance when I would definitely suggest a disclaimer makes more sense is when you are selling a home you do not occupy. If, for example, it's an investment property that's been rented out, the odds are you don't know everything that's going on with the home. It's best not to guess. And, even if you moved out two months ago, houses do not stay the same over time! Again, this is a good time to use a disclaimer.

If you're a buyer and see a disclaimer, I wouldn't assume that something's wrong with the house. Clearly there are a lot of sellers using disclaimers for reasons that have nothing to do with the condition of the property. However, if you do happen to run across one where the owner has used a disclosure I think it's potentially worth assigning some extra weight to that fact.

What have your experiences been with disclaimers and disclosures? If you moved to Virginia from elsewhere in the country were you surprised at the lack of mandatory disclosures here?