From last month’s article, Why do a Seller’s Inspection?, we continue the discussion on the legal implications of “Information Asymmetry.”
BY OSCAR LIBED OF INSPECT HAWAII
Photo: courtesy of Inspect Hawaii
What is Information Asymmetry?
In contract theory and economics, Information Asymmetry deals with the study of decisions in transactions where one party in a transaction is in possession of more information than the other. Typically, that imbalance means that the side with more information enjoys an advantage over the other party.
What is the Landmark Case that advanced the Home Inspection Industry?
A catalyst that helped to advance the Home Inspection Industry was a 1984 court ruling, Easton vs. Strassberger. After purchasing the property in 1976, it was discovered that the property had soil issues and experienced extensive damage due to a slide just prior to the sale. The Buyer, Easton, sued the Seller and the Seller’s agents for “fraudulent concealment and intentional and negligent misrepresentation.”
The California Court of Appeals ruling sent a message loud and clear that agents and brokers had a duty to conduct due diligence and disclose facts materially affecting the value of the property.
The Court ruled that real estate agents and brokers have “the affirmative duty to conduct a reasonably competent and diligent inspection of the residential property listed for sale and to disclose to prospective purchasers all facts materially affecting the value of the property that such investigation would reveal.”
This decision to require an Agent to conduct an inspection seemed unreasonable to ask, therefore, the real estate industry pushed California Senate Bill 1406, which legislated to mandate disclosure in California.
The disclosure laws required Sellers to tell Buyers everything that they ‘know’ about the property being sold. This ranged from listing all items in the home that were found to be defective, to identifying items not functioning, or additions built without permits.
As a compromise to the Court ruling, the law also required that real estate agents perform their own “diligent visual inspection” (not a technically exhaustive inspection to uncover every defect on the property) and disclose any defect that they might find.
To reduce the liability of real estate agents from litigation, the California Association of Realtors altered their contract forms to include a provision for the homebuyer to hire their own professional inspector.
The reason for this is easy to see – it was a liability issue. Also, it was all about who was better qualified to give Buyers a truly thorough and revealing home inspection. Thus, the home inspection business emerged on the west coast as an industry. Subsequently, other States followed California’s practices and it evolved nation-wide.
In summary, home inspections serve as a liability-reducing mechanism for real estate Agents and help to protect Buyers in a purchase transaction.
Photo: courtesy of Inspect Hawaii
Can the Agent ask the Home Inspector to alter or omit items in the Report if it will create issues for the Sale?
No. This action is a liability for both the Agent and the Home Inspector.
Photo: courtesy of Inspect Hawaii
What is a Home Inspection contingency?
A home inspection contingency is a clause written into a real estate contract that gives the Buyer the right to have the house inspected by a professional inspector within a certain period. It also allows the Buyer to cancel the contract (or negotiate repairs) if they are not comfortable with the inspector’s findings. Or, to accept the findings “As-is” and remove the contingency.
Given a competitive market, how many Buyers waived the Home Inspection contingency as a tactic for their offer to be more favorable?
Per Zillow, in 2021, one in nine (12%) said that they did not get an inspection on the property they bought prior to purchasing it — insignificantly different from past years (13% in 2020, 13% in 2019, and 11% in 2018). Most Agents do recommend a Home Inspection even in a competitive market.
If “Buyer Beware” is a warning to the Buyer when purchasing real estate, what is the warning to the Seller?
Simply put, “Seller Disclose!”
Selling a house in Oahu can be a daunting task, but it doesn’t have to be. By following these tips, you can increase your chances of selling your home quickly and for the best price possible.
1. Choose the right real estate agent
A good real estate agent can make all the difference in the sale of your home. They will have the knowledge and experience to market your home effectively and get you the best possible price. When choosing an agent, be sure to interview several and choose one who is familiar with the Oahu market and has a good reputation.
2. Price your home correctly
Pricing your home correctly is essential to selling it quickly. If you price it too high, you’ll scare away buyers. If you price it too low, you’ll leave money on the table. Get an appraisal to get an accurate idea of your home’s value, and then price it slightly below market value to attract buyers.
3. Stage your home
The way your home looks can make a big difference in how quickly it sells. Stage your home to make it look its best by decluttering, cleaning, and making repairs. You may also want to hire a professional stager to help you get the most out of your home’s presentation.
4. Market your home effectively
In today’s digital age, there are many ways to market your home. In addition to listing your home with a real estate agent, you should also list it on online real estate websites like Zillow, Trulia, and Realtor.com. You can also use social media to market your home, and you may want to consider hiring a marketing company to help you get the word out.
5. Be prepared to negotiate
It’s unlikely that you’ll get the asking price for your home. Be prepared to negotiate with buyers and be willing to compromise on the price. If you’re not willing to negotiate, you may be waiting a long time to sell your home.
6. Follow through
Once you’ve found a buyer, be sure to follow through with the sale. This includes providing the buyer with all the necessary paperwork and completing the closing process. By following these tips, you can increase your chances of selling your house in Oahu quickly and for the best price possible.
Here are some additional tips for selling your house in Oahu:
- Get your home ready to sell. This includes decluttering, cleaning, and making repairs.
- Hire a professional photographer. Good photos will make your home look its best online.
- Offer a buyer’s agent commission. This will make your home more attractive to buyers who are represented by agents.
- Be patient. It may take some time to sell your home in Oahu, but don’t give up. With the right preparation and marketing, you’ll be sure to find a buyer eventually.
I hope this helps!
MLS stands for Multiple Listing Service. It is a database of homes for sale that is used by real estate agents. When a real estate agent lists a home for sale, they add it to the MLS database. This allows other real estate agents to see the listing and show it to their clients.
The MLS is a valuable tool for both buyers and sellers. Buyers can use the MLS to find homes that meet their needs and budget. Sellers can use the MLS to reach a wider audience and get their home sold quickly.
The MLS is not available to the general public. Only real estate agents who are members of the MLS can access the database. This is to protect the privacy of sellers and to ensure that only qualified agents have access to the information.
If you are interested in buying or selling a home, you should contact a real estate agent. They will be able to help you access the MLS and find the perfect home for you.
Here are some of the benefits of using the MLS:
- Reach a wider audience. When you list your home on the MLS, it will be seen by a wider audience of potential buyers. This can help you sell your home more quickly.
- Get more exposure. The MLS is a powerful marketing tool that can help you get more exposure for your home. This can lead to more offers and a higher selling price.
- Get professional help. Real estate agents who are members of the MLS have access to a wealth of information and resources. They can help you price your home competitively, market your home effectively, and negotiate with buyers.
If you are considering buying or selling a home, you should contact a real estate agent who is a member of the MLS. They can help you get the best possible deal on your home.
Flat fee real estate agents charge a set fee for their services, regardless of the sale price of your home. This can save you a significant amount of money, especially if you are selling a high-priced home.
Here are some of the advantages of using a flat fee real estate agent:
- You can save money. As mentioned above, flat fee real estate agents charge a set fee, which can save you a significant amount of money, especially if you are selling a high-priced home.
- You have more control over the sale process. When you work with a flat fee real estate agent, you have more control over the sale process. You can choose how to market your home, set the price, and handle the negotiations.
- You can get the same level of service. Flat fee real estate agents offer the same level of service as traditional real estate agents. They will help you price your home competitively, market your home effectively, and negotiate with buyers.
If you are considering selling your home, you should consider working with a flat fee real estate agent. They can help you save money and get the same level of service as traditional real estate agents.
Here are some things to keep in mind when working with a flat fee real estate agent:
- Make sure you understand the terms of the agreement. Flat fee real estate agents typically offer a variety of services, each with its own price. Make sure you understand the terms of the agreement before you sign anything.
- Be prepared to do some work yourself. Flat fee real estate agents typically charge a set fee for their services, but they may not handle all of the details of the sale. Be prepared to do some work yourself, such as staging your home and showing it to buyers.
- Do your research. Not all flat fee real estate agents are created equal. Do your research and choose an agent who has experience and a good reputation.
Selling your home can be a complex and time-consuming process. There are many factors to consider, such as pricing, marketing, and negotiations. If you are considering selling your home, you may be wondering whether to use a real estate agent or sell your home “For Sale By Owner” (FSBO).
There are pros and cons to both options. Using a real estate agent can save you time and hassle, but it can also be expensive. Selling your home FSBO can save you money, but it will require more of your time and effort.
Benefits of using a real estate agent
- Real estate agents have experience and expertise in the real estate market. They can help you price your home competitively, market your home effectively, and negotiate with buyers.
- Real estate agents have access to a network of buyers and sellers. This can help you sell your home more quickly and for a higher price.
- Real estate agents can handle all of the paperwork and details of the sale. This can save you time and stress.
Benefits of selling your home FSBO
- You can save money on commission fees. Real estate agents typically charge a commission of 5% to 6% of the sale price of your home. If you sell your home FSBO, you will not have to pay this commission.
- You have more control over the sale process. When you sell your home FSBO, you are in control of the pricing, marketing, and negotiations. This can give you peace of mind knowing that you are making the best decisions for your home.
Which option is right for you?
The best option for you will depend on your individual circumstances and preferences. If you are short on time or do not have a lot of experience in the real estate market, using a real estate agent may be the best choice for you. If you are willing to put in the time and effort, selling your home FSBO can save you money.
Here are some things to consider when making your decision:
- How much time do you have to sell your home?
- How much experience do you have in the real estate market?
- How much money are you willing to spend on commission fees?
- How much control do you want over the sale process?
Once you have considered these factors, you can make an informed decision about whether to use a real estate agent or sell your home FSBO.
The National Association of Realtors released this information in response to lawsuits against them.
They claim all the issues shown in the image would happen if the buyer pays their agent for their services instead of the seller.
Their response assumes the MLS disappears, which would not happen.
If the buyer pays for their agent’s services, that is the only change that would happen. Everything else would stay the same.
Buyers might pay less for homes because the seller is not forced to pay a 2.5% commission to the buyer’s agent, so they can sell for less.
Also, their point in bold, “Compensation is always negotiable,” is not true.
With our MLS, after an offer is received, you are not allowed to negotiate it down at all. That is against their rules. So it is not “always” negotiable.
This was an interview I did on KITV news regarding the current state of the Real Estate market.
WRITTEN BY OSCAR LIBED of Inspect Hawaii
From last month’s article, Are Home Inspectors Deal Makers or Deal Breakers?, we continue the discussion on the “Good Home Inspector”.
A 2015 survey of 160 Realtors was conducted by a vendor of Home Inspection software services to determine the criteria in selecting a Home Inspector. Here are the results ranked in order of importance:
1) Thoroughness (It is what the Buyer wants. Since the Realtor is representing the interests of the Client, it is incumbent on the Realtor to seek this skill in a Home Inspector.)
2) Certifications and Licensing (There at two national Trade Associations that offer certifications: ASHI (American Society of Home Inspectors) and NACHI (National Association of Certified Home Inspectors). 36 States require Licensing and Regulation of Home Inspectors. Hawaii is not one of them. Realtors are keenly aware that any referral reflects on their reputation, so a Home Inspector with nationwide industry credentials is a safe bet.)
3) Schedule (There is a fixed deadline in the Home Inspection Contingency contained in the Purchase Contract. If the preferred Home Inspector is too busy and cannot meet this deadline, then the Realtor must find another Home Inspector who can.)
4) Quality of Report (For the same house, one Home Inspector can produce 25 pages and another one can produce 75 pages. Some of the “extra” pages are copies of the Standard Practices documents and detailed tutorials on the house defects. Most Realtors prefer a concise and straight-forward documentation of the defects versus reading a novel.)
5) Personal Demeanor (The two key skill sets of a Home Inspector are the “Technical skills” and the “People skills”. If the smartest Home Inspector cannot communicate their findings clearly and objectively to the level of the Client, then it reduces their effectiveness. Both skills are required to be a successful Home Inspector.)
7) Reputation (Realtors are good at “word of mouth” referrals, so Realtors will ask among themselves as to the quality of a Home Inspector. Social media reviews are also a research tool.)
8) Price (The reputation of the Realtor and the quality of the Inspection far exceeds the importance of price. Of course, price cannot be exorbitant, neither should it be “too low” as it implies a lower quality of work. To quote, Benjamin Franklin, “The bitterness of poor quality remains long after the sweetness of low price is forgotten.”)
9) Size of Company (A company with many Inspectors on staff may vary in quality of work and competency. Most Realtors prefer working with an Inspector they know versus an unknown one.)
Are Home Inspectors all the same?
The resounding answer is “No”. Like Realtors, Home Inspectors differ by knowledge, experience, customer service, and unique service benefits.
How does a realtor refer a Home Inspector to a Client?
Some Realtors will suggest 3 or more Home Inspectors for the Client to make the final selection. The Client pays for the Home Inspector, so it is ultimately their decision to choose a Home Inspector. They can even disregard the Realtor’s referrals and find their own Home Inspector. The responsibility is on the Client to make the final decision, not the Realtor.
Some Realtors will not offer any referrals and direct the Client to find their own Home Inspector. In this case, the Client will research the Search Engines on the Internet for Home Inspectors, read social media reviews, and call different Home Inspectors before they make a selection.
Why is it important to select a Good Home Inspector?
From the State Auditor’s Report on the Regulation of Home Inspectors, “Although certification programs are offered to Home Inspectors in Hawaii, we found indications that there are an undetermined number of non-certified individuals who are conducting home inspections in the State.”
What is “Caveat Emptor” regarding Real Estate transactions?
Translation: “Let the Buyer Beware!”
Here is the longer version:
Caveat emptor, quia ignorare non debuit quod jus alienum emit (“Let a purchaser beware, for he ought not to be ignorant of the nature of the property which he is buying from another party.”)
For any questions on this topic, please call Oscar Libed of Inspect Hawaii at 808-728-5707 or send an email to firstname.lastname@example.org