What kills real estate deals? Part 2


Today we’ll take on the top 5 “deal killers,” and how real estate professionals can avoid these pitfalls.

Buyers and Sellers without professional help kill deals.

We see this on a regular basis, 1) sellers offer their property for sale without consulting a real estate agent, appraiser, or any other tool, 2) a buyer accepts the price, 3) everyone is baffled when the home’s value is much lower than the agree price. Do yourself a favor and call an agent or appraiser and get assistance on the single largest financial transaction you’ll ever make.

Hidden/non-disclosed defects kill deals.

“Disclose, disclose, disclose” - Its the partner in real estate to “Location, location, location.” Failure to disclose issues with the home could lead to a surprise on behalf of the buyer and underwriter - and neither typically react well to this. Further more, failure to disclose can result in legal troubles for the realtor that far exceed the state board’s punishments (As detailed in this article on legal ramifications: https://www.hg.org/legal-articles/violating-the-code-of-ethics-can-get-you-sued-26904). As an agent, if you know it, disclose it to all the parties. Inman lists failure to disclose as the #1 way that real estate agents get sued: https://www.inman.com/2015/08/25/10-most-common-ways-real-estate-agents-get-sued/

An agent can’t know everything, however, its your job to investigate, not overlook. Courts increasingly recognize the expertise that agents and brokers claim, and are holding them to that level of accountability.

Sales agreements above market values kill deals, and reputations.
Pricing properties takes years of experience. Sadly, this is not a skill that the current real estate education system emphasizes. A newly minted real estate agent has received 0 mandatory hours of education/experience in home valuation. Contrast that with a newly minted appraiser, who in Pennsylvania has a mandatory minimum of 200 hours of education plus a minimum of 1500 hours of experience in home valuation. We hope that in the future new agents will have many more opportunities opened up to them in this regard.

The CMA that an agent performs is vital in seeing a deal through to consummation and developing a good reputation. Priced too low and the property may sell, but you may have just guaranteed that no one in that family will ever use you again. Priced far too high, and the property may sit on the market for so long that the seller moves on to someone else. Three steps to a good CMA:

  1. Use sales primarily over active listings. These tell you what the market has accepted - not just what sellers want. In the last three years in Indiana County 50% of listings expired without a sale - over that same time real estate prices were holding steady, but listing prices were being driven higher. Now, after three years of this trend, home values are falling in the more rural areas of the county. Chasing the latest listing prices will often result in a waste of your time at best, and at worst a deal that falls through because the market value doesn’t support the listing price.

  2. Use the best sales available. Go back in time 3 years in the immediate neighborhood to find the perfect comparable, and allow that to inform your search for more recent sales. Find a few sales that are a little better/worse in every facet (size, lot, condition, quality, basement, parking, etc) and allow that to begin to form a range that your seller/buyer can fall in.

  3. Get advice. Some properties are unique - we see them all of the time, and they are hard to value. First, use your brokers experience to help you - they’ve got the title for a reason. However, when in doubt, we have brokers and agents who call us for our expertise in these areas. While USPAP doesn’t allow us to discuss value with someone involved in a assignment we are working on, we can certainly give advice on everything else that we aren’t working on. Further, sometimes a restricted use appraisal, which is often cheaper and shorter than a full appraisal, may be called for to determine a list/offer price for particularly complex properties - saving you months of work/headaches for a small fee.


Uninformed buyers using the wrong financing kill deals.
In a world of 5 minute loan applications, sadly buyers think that’s all they need to know about the largest investment they’ll make in their entire life. The fine print in the loan may exclude manufactured homes, homes below a certain condition, homes near gas stations, etc. As the agent, you are the front lines to ask the question - “Will your bank write a loan on ____________?” and turn the buyer loose to do their homework. Recently we performed an appraisal for a lender who would not write a loan on manufactured homes - upon inspecting the home it was discovered to be a highly modified double wide - deal killed… by the appraiser? No, because the seller/agent did not know/disclose, and the buyer did not know, and the loan was therefore the wrong type. Anything else would have been mortgage fraud.

The agents are the experts and have the responsibility to investigate and inform. Here are a few thoughts:

  1. Investigate the property - if something makes you wonder, order the tax card, or get a second opinion and find out what is going on. In the case above, ordering the tax card from the county would have saved weeks of headaches.

  2. Know the basic mortgage products

    1. Portfolio - often the least strict lending terms. These loans are held by the bank for the lifetime of the loan, and never sold of the secondary market - therefore the property does not have to conform to Fannie Mae standards.

    2. Conventional - homes under these lending terms must adhere to the Fannie Mae selling guide, and all deficiencies of safety and structural integrity must be cured prior to closing. (https://www.fanniemae.com/content/guide/sel030619.pdf)

    3. FHA/USDA/VA - These loans are most strict, with a variety of additional requirements (all chipping and peeling paint cured, etc) Click here for our printable guides on these inspections. (HUD 4000.1 for USDA/FHA: https://www.hud.gov/program_offices/housing/sfh/handbook_4000-1) (VA MPR’s: https://www.benefits.va.gov/roanoke/rlc/forms/ci_guide_2005.pdf)

  3. “As-Is” is a recipe for lower sales prices. The vast majority of sales in our area are Conventional or USDA/FHA/VA loans. If the seller refuses to consider repairs that would be required by these products, they are eliminating (in some cases) up to 80% of the buyers in a market. That can have a devastating effect on the final sales price of the home. There are more creative ways to address these issues that will result in higher sales prices (seller reduces price and buyer does repairs, etc).

Underwriters, who choose not to assume risky assets, kill deals.

Underwriters have a fiduciary trust to write loans that will be secure. When they don’t, we get 2008 all over again. Understand that the underwriter (and the appraiser by extension, working for the bank to investigate the property on their behalf) have this responsibility and take it seriously. Some properties are too risky, and in those cases, cash is the only option.