Emotion – Real Estate’s Friend or Foe?

For the most part, being a real estate professional is one of the most rewarding jobs one could possibly imagine. Of course like every vocation though, there are drawbacks. Today I would like to expand upon the word ‘emotion’ as it relates to real estate.

For Buyer’s, more often than not emotion plays a large part of the buying decisions. You can rationalize a home all you want but at the end of the day, you must be attracted to it enough to envision your life in this domicile. (guess you could say it is similar to getting married…?!) 🙂

Here are a few places where both Buyers and Sellers could hurt themselves and ultimately their ability to negotiate deals successfully.

Inspection Reports

• First of all, when a Buyer requests an Inspection Report on a home that they are interested in purchasing, the Seller is under NO obligation to repair anything
• Most Sellers will cooperate in getting important items corrected however, on occasion some Sellers are so offended by the inspection report (because they believe that their home is perfect the way it is) that they stomp their feet and on occasion knock themselves out of a contract
• On the flipside, Buyer’s sometimes demand that every item is fixed on the list and if you understand inspection reports, it is not uncommon for these reports to be full of minor cosmetic issues such as: a light bulb needs replacing; there’s a small 10 inch hairline crack in middle of the driveway; a downspout tray is not lined up properly, etc.
• So just for the record, for every Seller that blows up a contract over small stuff, there is an equal opportunity Buyer doing the same thing, and that is just wrong!

Appraisals

• Sorry, but in today’s Buyers Market, the Buyer and Seller have very little to do with the final contract price. This sound incredulous? Well, sorry but it is not. The Buyer, if seeking a loan, will secure an appraisal and if the appraisal comes in less than the contract price, the Seller better be prepared to negotiate or risk the loan. Here is an example.
• The Cronk’s agree to purchase home from the Grinch’s for $300,000 and fully execute a contract. The bank appraisal comes in at $280,000 and the Cronk’s don’t have an additional $20,000 in cash to make up the difference. Therefore, the Grinch’s agree to rewrite the contract and accept $280,000 or, the Cronk’s are forced to walk. Seem unfair? Well it is not unfair at all as the appraisers today have to work from a very strict set of guidelines (due to banking debacle of 2008).
• The norm though in these situations are that if the Sellers want to sell bad enough and if the Buyers like the house enough, a new price will be negotiated by the Brokers somewhere between $280,000 and $300,000. It is important to know that the Buyer has the majority of the power though, not the Sellers
• Sellers want to believe their home is worth more than market value and become EMOTIONAL as heck about this. And while they are entitled to do so all they want, they have to face the facts at some point and realize that they have zero chance of selling their home and moving on with their lives unless they accept market value, not their idea of market value.
• Big Picture: If Sellers can take emotion out of this appraisal equation, remember that the day after you close on the home you will eat spaghetti the same way, put your shoes on the same way and fall asleep watching TV after 10pm just the same.

Good Realtors probably minored in Psychology because unfortunately we are forced to deal with emotional and occasionally irrational folks. The deals that go the smoothest are typically those where both parties have realistic expectations while the ones that drag out are either caused by banks or, someone not using sufficient logic.

Therefore, the next time you are involved in a real estate transaction, please check your emotion/ego at the door! Happy Realtor. Happy Life! 🙂