There is an old saying that if you wish hard enough for something, it will eventually happen. The same can probably be said for the so called housing bubble that we have been hearing about for over a year. There has been so much talk about it that both buyers and sellers have been taking it to heart. Some buyers have retreated temporarily from the market, convinced that the market is about to crash and they will be positioned to swoop in and purchase their dream home for pennies on the dollar later. Some sellers, especially those who are planning to retire soon and move to a less expensive area, have decided to sell now while the going is good and rent temporarily. That I can understand, but the buyers who are waiting for the market to crash may be waiting for a long time.

I have been living in the mid San Francisco area (Palo Alto, Menlo Park, Mountain View, Atherton, Portola Valley, etc.) since 1972. There was a huge run-up in prices in the late 1970s and people started to talk about a housing bubble then. It is true that circumstances changed in the early 1980s when interest rates rose to 18% and above for 1^st mortgages and even higher for seconds. It was very difficult to sell a house during that period, but eventually rates came down and houses started moving again. The same was true in the late 10980s vs the early 1990s, and again in 2000/2001 vs 2002. However, not once in all of this time have I seen housing prices drop to the level they were at before the run-up. People who bought during those prior run-ups, even those who bought right at the peak, are might happy they did so, as their homes have continued to appreciate despite the ups and the downs. The only real lesson to be learned here is to try to avoid SELLING during the downs! Think of housing as a long term investment and work with an experienced agent who has your best interests in mind and you can hardly go wrong.

Next installment:  The Agent Bubble and How It Can Affect You!

It is not uncommon for homeowners and/or sellers to skip the building permit process when remodeling their home or preparing it for sale. But before you consider taking this route, consider the following:

1. Every city has its own permit requirements, but in general any project that involves plumbing, wiring, or structural changes (including the reinstallation of water heaters, sheet rock, roofing, etc.) requires a permit. The reason for the permit process is to ensure that the improvements you add to your home are safe and installed according to current building code.

2. If you proceed without a permit and then sell the house, you must (in California at least) disclose that to the buyers. They will immediately question whether the work was done correctly, and this may devalue your property or even scare off some buyers, especially first time buyers.

3. If you add a room or convert a garage into living space without a permit, the appraiser cannot count that when he or she appraises the property. You may have sold the property as a 4 bedroom home, but it may end up being appraised as a 3 bedroom. So, the house may not appraise for the contract price and the entire transacton may be in jeopardy.

4. Even if you hire a licensed contractor to do the job for you, the codes change constantly and that contractor may not be aware of recent changes. By obtaining the required permit (and inspections) you and the buyers can be confident that the work is done according to the code in effect at the time of the project. 

Many contractors do not like undergoing the permit process. There are sometimes delays when an inspection is required, and if the work is not done correctly the contractor may have to tear it out and redo it. But wouldn't you rather deal with the delays and the inconvenience than deal with an irate buyer whose roof leaks the thrid day after they move in?

If a contractor tells you a permit is not required, it is best to check with the city yourself to make sure that is really the case. As I said earlier, every city has its own requirements and your contractor may not be familiar with the specific requirements in your particular city.

Also, don't forget that the permit itself is useless unless the project is inspected as required and "finaled" after the project is completed. That means the building inspector is convinced that the job has been done correctly.

Even if you are not preparing to sell your home, remember that the permit process is a means to ensure that the installation is safe and that it will endure because it has been done according to the most modern standards. And you can never tell for sure that will not be selling your home. Sooner or later your circumstances may change and you may decide to sell your home after all. In any case, it is definitely worth doing the job right in the first place. And that includes getting a permit whenever one is required.

When selling a home, what usually matters to most sellers is the bottom line… how much money they will have in hand after the sale is closed and all expenses are paid. Many sellers make a misguided connection between commission and the bottom line. For Sale by owners, in particular, usually feel that they can save the commission and end up with more money in hand. But rarely does that happen. And here is why:

1. You are missing the market. Very few buyers and even fewer agents go to For Sale by Owner websites looking for homes for sale. Almost all agents and almost all buyers search the Multiple Listing Service, either directly or indirectly, when looking for homes. There are some exceptions, of course, but they are few and far between. Whenever buyers are on any of the most popular home searching websites, such as Realtor.com, YahooRealEstate.com, MLSListings.com, ColdwellBanker.com, or any number of other sites, what they are looking at, in fact, is the MLS database. If yours is not there, they will not find it.

2. Most professional agents do not want to work with For Sale by Owner sellers. There are exceptions, to be sure. But real estate is much more complex than most people realize, and, being professionals, they prefer to work with professionals on the other side. Otherwise they may end up doing the work for both sides, with all of the liability and responsibility for both sides, but only get paid for one! If that doesnt bother you, it should, because real estate agents are the people who have the buyers. Very few buyers work without one. So, if the real estate agents deliberately shun For Sale by Owner sellers, you will, once again, be missing a lot of potential buyers.

3. For Sale by Owner sellers are notorious for either overpricing or under pricing their homes. Overpricing seems to be more common. In a lot of my conversations with For Sale by Owner sellers, they have told me that they thought the agents they had talked to prior to putting their home on the market had priced their homes too low, so they decided to sell for themselves. Part of a real estate agents job is to assist and guide the sellers in selecting the list price of the home. If you dont heed their advice, you are asking for a lesson learned the hard way!

3. Real estate agents do not like to work for free. So, if they do bring a buyer to your listing, they will expect to get paid if they sell it for you. There goes 3%, maybe less if you are working with an inexperienced agent. But in this area the experienced, full service agents still charge 3%.

4. In the meantime, you will find that all of those newspaper ads can be very, very expensive. You can easily spend what you would have spent on a listing side commission just advertising in the newspaper. If you add up the marketing costs (especially if your home does not sell right away) plus the commission to the buyers agent, you may find you have not gained anything at all. Or, you may end up with less that you had planned, especially if your house lingers on the market and the bottom feeders are the only people interested.

5. Part of the reason to hire a listing agent in the first place is because that person has special training in marketing and in negotiating. One simple little sentence, uttered at the wrong time or to the wrong person, can cost you many thousands of dollars, more than what you would pay that agent in commission. In this market you should have buyers trying to outbid each other for your property. If that is not happening, you are losing money. A professional agent knows how to generate multiple offers and what to do with them if and when they do come.

6. Last, but not least, there is the liability issue. There is no question about it. People in California are sue crazy. Give them any excuse and they will sue you. Recently a buyer sued a seller, after escrow closed, because a plane flew over the house one night and the seller had not disclosed that planes sometimes do fly over the house. This buyer brought a suit to have the entire transaction rescinded and to also collect damages from the seller. While there are no guarantees, part of the listing agent's responsibilities lie in trying to protect you, the seller, from this sort of thing happening.

I would love to reach out to the people selling the house that prompted this article to explain some of these issues to them. But their phone number is on the Do Not Call list. I cannot call them unless I have a specific buyer who might be interested in their home. The best I can do is mail a copy of this article to them and hope that they will contact me to see what else they can do to sell their house. If they do contact me, I will have one recommendation for them. Guess what that will be!

For more information go to: http://www.puttinguptheforsalesign.com/index.php/2006/03/03/home-sellers-is-your-listing-agent-the-reason-your-homes-not-selling 

© By Lynne Mercer, March 2006

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