HS 015 - Surviving The Market As A First Time Home Seller with Brian Crane
In this episode we dissect the process of selling your home for the first time. Learn what it’s like to be on the sale side for the first time!
Click here to learn more: http://bit.ly/HS015
What We Discussed:
1. What is a listing agreement?
2. Should you pay for inspections ahead of time?
3. Should you hire a realtor?
4. What is your role in escrow?
5. What was the interest rate in the 1980s?
Read our Interview Below!
Speaker 1: What’s going on everybody?
Welcome to the Home Schooled Podcast episode 15, I am you host Robert Musallam. On today’s show we have Brian Crane of Intero Real Estate. Brian is an industry veteran, he has been doing real estate in the Silicon Valley for a very long time and he is an encyclopedia of knowledge, all things real estate. But we specifically got him on the show today to talk to you about being a first time home seller and what the process is like the first time you sell a house, some of the things that are a little different than your first time buying and what you can expect being on the seller’s side for the first time.
And we also talked to him a little bit about being a move-up buyer and what that means for you now as a seller who’s got some equity and who will be buying a home soon. So before we get to the interview with Brian for the show notes head to homeschooledpodcast.com/episode15. Feel free to reach out to us there, but for now let’s get to our interview with Brian.
Alright Brian, thank you so much for joining me.
Speaker 2: Hey, happy to be here Robert. Thanks for having me.
Speaker 1: No Problem. Alright Brian so for those who don’t know you can you give us a little background and bio on yourself?
Speaker 2: Background and bio. I’m born and raised in Santa Clara County. I went to Santa Clara University, got a degree in finance, rolled into the mortgage brokerage industry and help to, my main job was helping buyers figure out how to navigate the mortgage market.
Speaker 1: What year was that?
Speaker 2: That was a long time ago Robert. That was in 1988, I got my broker’s license in 1990 and that allowed me to open up my own mortgage company and in ninety I ran Crane and Associates and about ninety-two I started selling real estate with Cornish and Carey and so I had basically two full-time jobs doing mortgage loans and real estate sales and in about 1994 I stopped doing the loans and I just focused on real estate sales. So from ninety-four on that’s all I had been doing. And I worked at Cornish and Carey back in the day, moved over to Contempo realty. I learned a lot from Gino Blefari who ended up being the CEO and founder of Intero Real Estate Services. In 2002 I left Alain Pinel Realtors and started at Intero as the one of the VP’s managing offices and helped found the company. We started the Los Gatos office from scratch and here we sit now with about a hundred and twenty realtors and we’re you know cranking along. [02.36]
Speaker 1: Okay so it’s safe to say you’ve been around the business in Silicon Valley for long time?
Speaker 2: It doesn’t feel like that long but yeah it’s been twenty-six plus years that I’ve been doing this.
Speaker 1: So real quick before we get started here, what was the interest rate on a mortgage loan when you first started?
Speaker 2: Yeah when I got started in 1988 the rates had just gone up and they were around 11% fixed and they had come from about nine and before they were nine they were at eighteen. So in the seventies, late seventies they were eighteen, in the early eighties they were in the teens and then they all by the late eighties, in eighty-eight they went to about ten, ten and half, eleven and then now we have this amazing opportunity.
Speaker 1: Yeah its free money now comparatively speaking?
Speaker 2: Its ridiculously low interests rates yeah. And back in the day I remember them quoting that the average interest rate was more like six or seven and these rates at nine or ten were just ridiculously high, which they were but they were saying that the average rate was six or seven percent and in the long term history of mortgage rates and in fact we’ve been well under six and seven percent for for probably over a decade now. So that’s been phenomenal.
Speaker 1: It’s crazy. Alright so we wanted to bring you on the show today to talk about being a first time home seller right. You hear a lot about the first time home buyer. Everybody wants to get into real estate but what about that person or that family that bought in a couple of years ago and now they’re starting to think okay this place is getting too small for me. I want to sell a house. You know how does that process work for them? How does, how does someone get started with deciding to sell a house? [04.22]
Speaker 2: Yeah it’s a good; it’s a great topic actually. And I would start with the basics. Every seller whether they’re a first time seller or not needs to work on the front end of that process On the front end meaning, there’s several things that they could do to be getting ready to sell their home. The first and foremost is to get a few inspections on the property. Because likely they haven’t crawled under the house or crawled through the attic or crawled over the roof and inspected anything since they moved in.
So getting some inspections on the property will setup a baseline of activities for getting the house ready to sell. The inspections might uncover some things that would be beneficial for the seller to actually fix before they go on the market to help them get a better price for the property. So that’s the starting point, the next piece would be in my opinion or maybe in the first piece is maybe interview and find a quality realtor that understands the process of helping them get from point A to point B. Most first time home sellers need the equity from the house they’re selling in order to put down as their down payment on the house they’re gonna be moving to.
We call that a move up buyer. So that move up buyer you know needs to take this thing in the proper order and in the proper steps and getting a quality realtor that understands that process upfront and can help you with getting the inspections lined up, reviewing the inspections to decide what to do to get the house fixed up. Also using that, those inspections to decide on an overall budget on what it’s gonna take to get the house ready.
An agent, a good agent can help you with all that. In addition to that staging its critical in oday’s market in staging that property an agent can help you with that as well and another super important part most sellers overlook is the disclosure process. So there’s a tremendous amount of disclosure in the State of California that’s required by law by each seller and this is an area where a good agent can help a seller avoid trouble down the road by potentially a disgruntled buyer coming in and potentially forcing the seller to revisit the transaction after it closes and that’s usually a court case or some sort of a claim against the seller for non-disclosure or something like that. [06.45]
Speaker 1: Okay, so I think that’s one of the huge differences between the buying and selling processes right as the seller’s somebody who’s been in the property for let’s say even call it two to three years you’re obligated to disclose I mean everything that you know about the property right and if you don’t, if you willingly withhold right there can be severe penalties for that.
Speaker 2: Yes, so the California law says basically that the seller is obligated to disclose anything that could affect the value or desirability, so it’s a very wide range of topics. Anything that can affect value or desirability so, so that’s the and as realtor we have the forms to try to help the seller discover or jog their memory as far as what are those activities that could, what are those parts of the property that could affect the value or desirability and its interesting because it’s not the current sellers opinion or desirability it’s what a normal buyer might perceive to be value or desirability. So, so it’s a pretty wide open thing and we take it super seriously and if we do that part right we insulate the seller from a potential problem down the road.
Speaker 1: Okay and so you know you sign a listing agreement and then what happens? You know you do all this paperwork and then what, what else you know can I expect through this process if I’m a first time home seller?
Speaker 2: Yeah so in the process of being a first time home seller you’d wanna enlist the help of a realtor. I would ask that realtor for a written plan on what they intend to do to help you with this process and they ought to have a well thought out plan in writing that they can show you, that they going to be executing on. So that’s a, that’s an absolutely critical step. So repeat, what was the next part of that question? [08.32]
Speaker 1: Just what, what you were right on. So what are the other things that I, that I wouldn’t have done as a buyer that I would be doing as a seller, that I would be experiencing for the first time?
Speaker 2: Yes.
Speaker 1: Some of the things that were crossing my mind were like you know Escrow. How does the escrow process factor out for me here as a seller?
Speaker 2: Well typically the seller is responsible for the real estate commissions, so that’s different, vastly different in a buyer’s situation, you’re not responsible as a buyer for the commissions and that’s the way that works. And then the rest of the closing costs are usually customary depending on the county that the seller is located, the house is located in. But the seller’s in general are generally in Santa Clara County anyway pay more of the title and escrow fees than the buyer do by custom. That is negotiable but its customary that the seller pay some of that. As far as the processes go, as we said you’re gonna do the inspections on the property. Oh one of the things I wanted to talk about was the concept of disclosure you mentioned Robert. And the other piece that a lot of first time home sellers say is they get disclosure mixed up with selling the house as is. Everybody wants to sell their house as is and as a good realtor I want to help you sell your house as is.
Speaker 1: Can you explain that really quick? What do you mean by as is?
Speaker 2: Great point. As is simply means that the seller is not obligated to do repairs per contract. So it doesn’t mean that the buyer can’t ask the seller to do repairs if they find that repairs need to be done its just says that seller is under no obligation to do any repairs. So as a realtor representing a seller my goal would be to have the seller sell the house as is, In other words we don’t want to get mixed up with a bunch of contractors in the middle escrow process fixing up the house and that kind of thing.
We wanna sell the house as is but it doesn’t preclude you from doing the proper disclosure. The disclosure is separate from the concept of as is and a lot of sellers not only first time home sellers but repeat sellers get those two concepts mixed up. We can definitely have an as is contract but it doesn’t preclude you from having to do your proper disclosure to a buyer. [10.47]
Speaker 1: Got yah, got yah. Okay so let’s touch on the contract really quickly. You know as a buyer you set your contingency periods and you, you know you negotiate that point with the seller and assume the seller accepts with all of the standard contingency periods in place right. So let’s just say seven day inspection, ten day appraisal, twenty-one day loan. To what extent, in what position is the seller have to cancel a contract within those contingency periods?
Speaker 2: The seller generally speaking doesn’t usually have a tremendous amount of contingencies to cancel the contract. There are a few contingencies that the seller could put in place but generally speaking the contract doesn’t allow those contingencies, a seller would have to add those contingencies and an example of that would be ‘You’re accepting this offer contingent on your ability to find a replacement property’. That’s a contingency that isn’t in the boiler plate of a contract but you know could be added by a seller. But essentially the seller doesn’t have a lot of out-clauses once they sign a buyer’s contract, unless the buyer defaults then the seller can take remedy.
Speaker 1: Can you explain that? How would a seller take remedy if a buyer doesn’t do what they’re supposed to do?
Speaker 2: Well there’s a pretty thorough written out process when a buyer fails to perform per contract. A seller has to essentially give the buyer a notice to perform which means A) Buyer you haven’t done what you said you were gonna do, you have three days to do that or we’re gonna cancel the contract. So the seller’s almost waiting in order to cancel the seller is waiting for the buyer to fail and if the buyer fails in the contract or breaches the contract then the seller can give them a notice to perform. Once the notice is given typically the seller has to wait three days and then they can send a cancellation and they can, they may have claim to the buyer’s deposit depending on the circumstances. [12.54]
Speaker 1: So it, I mean I know first time home buying can be stressful obviously being a seller for the first time can also be stressful cause it doesn’t seem like the contract at least the one that we use predominantly here with the car contract doesn’t allow the seller too much flexibility once they’ve signed it. To back out of the deal and you know maintain the property for themselves.
Speaker2: Yeah, no the contract is a buyer friendly contract, it’s a, it does not permit the seller a lot of out-clauses and the buyer does usually have some out-clauses as you’ve said earlier those are negotiated time frames for a variety of contingencies including the appraisal contingency, the loan financing contingency and the inspection contingency. The inspection contingency contains a tremendous amount of sub-contingencies quite frankly. But the buyer gets a lot of contingencies and the seller you know if they’ve decided to sell their home and the buyer performs on those contingencies they’re pretty much locked into sell it.
Speaker 1: So one of the questions I get asked most often by people selling their house for the firs time is if I get an offer, if I list it at a certain price and I get an offer at that price do I have to sell it?
Speaker 2: No, the seller is under no obligation to sell their house. Just because you list it at a certain price you are not under any obligation to sell it. Some of the realtors listing contracts could obligate the seller to pay a commission if they get a certain contract, however you know I haven’t seen that enforced. [14.37]
Speaker 1: Okay. I think it’s funny cause it’s such a troubling question and I wanna know where that myth came from just because they receive an offer they have no intention of signing means that they just have to hand over their property to somebody else.
Speaker 2: Exactly it, when you say it that way it’s ludicrous that somebody can be forced to do anything. Like one day they need to sell their house, the next day they don’t.
[cross talk] [15.02 – 15.07]
Speaker 1: Well circumstances change.
Speaker 2: Yes, circumstances change, the financial, the accountant says hey, you don’t have to sell your house after all or they win the lottery. There’s a million reasons why, the job that they thought they were gonna get falls through and now there’s no need to sell the house and move to Texas anymore. So there’s a million reasons why a buyer or a seller might decide hey no I don’t really wanna sell but once they sign the contract they’re pretty much locked into sell under those terms.
Speaker 1: Okay.
Speaker 2: Once they sign the purchase agreement.
Speaker 1: Brian I wanted to touch on something we talk about at the very beginning of the show here. You mentioned the move up buyer can you, can you kind of just more accurately articulate what a move up buyer is and who qualifies as a move up buyer?
Speaker 2: Yes, so a move up buyer needs to usually they’re usually looking for more house than they bought when the first bought and they’re looking to move up and we say move up as opposed to move down. There are move down buyers too. People, older folks generally selling homes that are in the million range, two million, three million range and needing to downsize but a move up buyer needs to sell their current house in order to buy their next house. They usually need the equity, they need the cash out of the down leg is what we used to call it to buy the up leg and so with that my favorite part as a realtor is helping a seller negotiate those timeframes.
Most sellers their biggest angst is the concept of we’re gonna be homeless. If we sell our house where are we gonna go and in today’s tight inventory market that’s an evenheightened concern. So one thing I kind of like to emphasize with seller is look in today’s great market for sellers we can find a great buyer that will allow you a tremendous amount of flexibility and so that’s what my goal would be as an agent to find a buyer for their house that is willing to allow them a long closing period so maybe instead of thirty days escrow maybe a sixty day escrow period.
With an option to close sooner in the event that we find our next property quickly and then also I want the seller to negotiate and optional rent back so they can stay in their house even after they’ve close escrow for maybe as much as two months. So what I’ve effectively done is bought the buyer or the home seller on the down leg, I bought them essentially sixty days to hundred and twenty days to go out and find their replacement property. Between the long escrow and the rent back option and now we’re going out as buyers once we get our house into escrow under those circumstances, we’re going out as buyers in a very strong position.
We have our house sold, we know exactly what we’ve gotten for it, we know what kind of cash we’re gonna have to work with on the up leg purchase. We’re able to write offers that are not contingent on the sale of our house anymore because it’s in escrow and ready to sell. So that’s a tremendous to most of the sellers I’ve ever worked with to know okay we got a plan here and the worst case scenario is after four months, you know a hundred and twenty days we don’t find the right house or we can’t get it together then the worst case scenario is we have to go rent for a bit but that scenario rarely plays out when you’re given four months to find your up leg, your next sale. [18.39]
Speaker 1: Wow some really good advice there. Alright Briane we’re gonna wrap up here, final question you know what’s one thing that you would like to impart on the first time home seller about the selling process above all?
Speaker 2: The one thing I would say that a first time home seller would really honestly after being in it as long as I have is to get an agent that understands their needs, that understands their concerns. And if their concern, the seller’s concern is they don’t wanna be homeless then let’s really emphasize finding the right buyer to give them that time. And the right agent is going to do the prep correctly and the prep can take two to three weeks, the selling of your home takes some time potentially, you’re gonna do those inspections, you’re gonna work through the disclosures, you’re gonna set up a potential repair or home readiness list, you’re gonna execute on that home readiness list and then you’re gonna you know that home readiness list could include painting, carpeting, a variety of different things toget the house ready and finally staging.
A good agent is gonna do a virtual tour of the property, have it really tuned up so when it hits the market you’ve got good traction so I’d say find an agent that knows the whole process, that understands it, that’s willing to be transparent about it. Transparent meaning tell the seller why you doing what you doing and why its gonna help them get top dollar.
Speaker 1: Fantastic answer. Brian I can’t thank you enough for joining me on the show, really appreciate it.
Speaker 2: My pleasure Robert, thanks for having me.
Speaker 1: That was my interview with Briane Crane of Intero Real Estate. For more information on what we spoke about today please visit homeschooledpodcast.com/episode15. If you like the show, if you like what we’re doing here please leave us a five star review on itunes, follow us on Facebook and Youtube to consume more content and more information in avariety of ways and as always if you have questions or comments or concerns please feel free to reach out to us anytime.That’s all from me today, I’m Robert Musallam for homeschooled signing off. [20.48]