One of my clients, Patrick Beeson, has written a great post on his personal blog about his experience looking for a home - his first - in Knoxville.  It’s a great read for anyone looking to buy a home in K-Town. Check it out!

I’ve been working with a lot of buyers lately, and - in addition to causing me to neglect this here blog - it’s made me think a lot about price expectations. More often than not, buyers tend to have somewhat unrealistic expectations of how much home they can get for a certain amount of money. This is especially true with people coming in from out of town who have heard stories of being able to get a brand new, 2000+ sq ft home in West Knoxville - possibly on the lake! - for just $150,000.  Um, yeah. Not.  It usually takes driving around for a few days and looking at some real dogs to convince them that this is not, in fact, the case.

So, in order to try to save myself some gas and also because I love digging in the MLS at the end of a long, hard week, I’ve decided to do a semi-regular series exploring what kinds of homes you can get in different areas of town for various price ranges. My plan is to start low - way low - and work my way up to the Cool Homes You Can’t Afford range. Sound like fun? Then let’s begin!

Our first price range is $0 - $50,000.Yes, there are single family residences listed in Knox County for less than $50,000 - 97 as of today, in fact. But as you might expect in this price range, a lot of them are foreclosures, most of them are small, some of them are in need of repairs, and almost none of them are in West Knoxville.

Here are some examples of  what you can get in this price range in North, South, East, and West Knox County:

North

3 BR, 1 BA, 900+ sq ft foreclosure in Fountain City ($34,900)

3 BR, 1 BA, 1000+ sq ft foreclosure on Cecil Ave. ($39,900)

1 BR, 1 BA, 600+ sq ft remodeled cottage on Gillespie ($42,900)

2 BR, 1 BA, 700+ sq ft foreclosure on Cecil Ave. ($49,500)

South

2 BR, 1 BA, 700+ sq ft fixer upper off of Cherokee Trail ($25,000)

2 BR, 1 BA, 800+ sq ft foreclosure off Sevier Ave. ($37,525)

3 BR, 1 BA, 1000+ sq ft fixer upper on Young Ave. ($40,000)

3 BR, 1 BA, 800+ sq ft off of Young Ave. ($50,000)

East

2 BR, 1 BA, 1300+ sq ft foreclosure in Morningside ($19,900)

3 BR, 1 BA, 1100+ sq ft off of Rutledge Pike ($34,900)

2 BR, 1 BA, 700+ sq ft in Sunset Park ($41,500)

2 BR, 1 BA, 800+ sq ft on Old Rutledge Pike ($49,980)

West

3 BR, 1 BA, 800+ sq ft fixer upper in Karns ($44,500)

That’s all for this price range. I’ll be looking at the next price range soon - just after I go back out and show about another 100 houses. Stay tuned!

This question comes from the Tennessee Association of Realtors Hotline, where agents can ask questions regarding Tennessee real estate law :

QUESTION: Is it still allowable for a real estate agent to apply a portion of her percentage of commission to the purchase price for a buyer? If so, what is the proper way to word this in a contract?

ANSWER: NO, this is no longer permitted. We recently discussed this issue with the Tennessee Real Estate Commission, and they are of the opinion that the new statute regulating cash gifts, Tenn. Code Ann. 62-13-302(b) will NOT allow the paying of closing costs for their client. This new law states “A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission’s general rulemaking authority the commission may regulate the practices of real estate licensees in regard to gifts, prizes or rebates that are
not otherwise prohibited by law.”

This is a change in the previous rules governing this type of activity. The Real Estate Commission is of the opinion that the paying of closing costs would amount to a cash gift. You can still offer to cut your commission, but this would require that the sales contract be amended in order to reflect that the price has been changed. For example, if you are offering to reduce your commission by $1,000.00, the sales contract would have to be amended demonstrating that the sales price has been reduced by $1,000.00.

To be clear, sellers are allowed to help with a buyer’s closing costs, but usually only up to 3% on a conventional loan.

And please don’t ask me to cut my commission. It makes me cranky.

Today (being Easter) is the first Sunday in I don’t know how long that I haven’t spent doing an open house & I have to admit I never quite know what to do with myself with a whole free Sunday. A Sunday with no open house is like peanut butter with no jelly.

Lowball offers are the new black. Every time I go to the office, I hear another horror story about someone’s client who insisted on submitting an obscenely low offer on a home, because said client has heard about how horrible the real estate market is. 9 times out of 10, two things are going to happen in this scenario:

1. Seller counters back at near listing price, offended by the lowball offer.

2. Seller rejects offer outright, offended by the lowball offer.

And a lot of times the buyer winds up losing the house either because someone else submits a reasonable offer, or because negotiations break down due to seller’s aforementioned offense at low ball offer.

I blame all this lowballing on the media hype over “the national real estate market.” The fact that there is no national real estate market escapes these people’s notice (more on that later). Buyers think that the collapsing “national market” means they are going to steal houses in Knoxville.

As I’ve said here before, just because every business pundit on every news channel in the country is saying the real estate sky is falling, that does not mean that it’s falling over Knoxville. Yes, we’re in a buyer’s market and buyers can definitely get away with asking for more concessions now than they could a few years ago. And that’s a great thing for all you buyers out there. But with few exceptions, you’re not going to get that $250,000 home for $200,000. Really, you’re not. Sellers in some parts of the country may be desperate to sell, but most sellers here aren’t. They’re just really anxious to sell and there’s a big difference between those two.

Having said all that, the lowball offer definitely does not have it’s propert time and place. But let’s start off by looking at where and when it is not a good idea:

• You really want the house.
• You’re doing it “just to see” if you can get it, even though the comps and condition do not support a number anywhere near what you’re asking.
• You want/need a lot of concessions from the seller.
• Your agent has strongly advised against it, knowing that you really want the house and/or the comps & condition don’t support it.

If any of the above is true, you can stop reading this post and go make a reasonable offer.

If you’re still in the running to lowball, you need to find out a few things. Ask yourself and/or your agent the following questions:

• Is the home overpriced?

Or maybe even grossly overpriced? Your agent can pull comps for you and help you find this out. If it is, your lowball offer is not really a lowball offer at all - it’s a reality check for the seller

• Is the house falling apart, but is priced as though it’s not?

Market comps ususally assume a home is in market ready condition. If the seller has priced his home at market, but the roof is falling in and it’s 1972 inside, a lower offer might be justified.

• How long has the property been on the market?

The current listing sheet may say the home has only been on the market 30 days. But a quick look in the MLS may show you that this is the 3rd time the home has been listed, and all told, it’s been on the market for over a year. Longer time on the market means more negotiating power for the buyer.

• Is the property vacant?

Has it been that way for a while? Nobody likes to have a house sitting empty, epecially when the house is in Knoxville and they are in Honolulu. Insurance companies don’t like it either. And nobody likes making two mortgage payments.

• Is the seller motivated?

This is something you can’t always know up front. But if you somehow find out the seller is getting divorced/about to go bankrupt and has to move that property, stat, then strike while the iron’s hot.

• Are you hoping/needing concessions in the contract?

I mentioned this before, but it bears repeating. This is a can’t have your cake and eat it too thing. If you need the seller to pay closing costs or pay for repairs up front, lowball is probably not the way to go. It adds insult to injury.

• Are you prepared to walk away from the house?

Repeat after me: the lowballer shall not get emotionally invested in a property. The lowballer must always be willing to walk. Lowballing is gambling, so be prepared to lose.

Ok, so you’ve asked the important questions and you have a yes answer to two or more. Now you want to lowball! Slow down, grasshopper. You have one, last very important task to complete -

Find out what the seller owes on the property.

It is very rare that a seller is able to afford to write a check at the closing table, much less agree to do it. In some situaitons coming out even will suit the seller fine, but paying someone to buy their home will not.

Once you know what the seller owes, you and your agent can formulate your offer accordingly

At this point, I will ask you one more favor. Please, please, please, please -

Because you do have an agent, right? And he or she is a professional, correct? Real estate is their job and negotiating contracts is their bread and butter.
If you don’t trust your agent enough to listen to their advice, then maybe you should find another agent. Seriously.

Once you have your agent’s blessing, go forth and lowball. It’s apparently the hip thing to do.

Last week I talked about why should use a buyer’s agent. But how do you find a good one?

The first, and most important, step is to ask around. We do a lot of referral business and chances are your friends or family have used an agent they think is worth recommending.

If you still have a choice to make, one way to narrow your results down is by looking for agents who have the ABR, or Accredited Buyer Representative, designation. This means that they have received additional in-depth training on how best to serve a buyer’s interests in matters such as determining the offer price and contract negotiations. This can be really helpful to you, especially if you are trying to negotiate closing costs and repair costs. It also lets you know that this is an agent genuinely interested in working with buyers, as opposed to an agent who is more concernced with listings. You can find ABR designated agents in your area at the ABR/REBAC website.

Once you have found some ABR designated agents, it’s time to interview them. Remember, this is a big purchase, and you have the right to choose who represents you. When you talk to potential agents, here are some good questions to ask:

• How long have you been licensed?

And longer isn’t necessarily better. New agents are hungry agents and will usually be much more willing to drive you anywhere you want to go and show you as many homes as you can handle. On the other hand, more seasoned agents have the advantage of knowing more about neighborhoods and having more contract negotiation experience.

• Do you work alone?

This is an important question, because some agents, especially big time ones, have assistants or team members who show clients property, and even negotiate contracts for them. You want to make sure the agent you first meet and feel comfortable with is the one who is actually going to be driving you around and negotiating for you. If the agent does work with an assistant or team members, ask to meet the person or people you will be working with on a regular basis.

• What role will you play in my home buying process?

Some agents work harder than others, and you want a hard worker. Here is a list of what a typical buyer’s agent will do for you throughout your transaction:

• Help you find information on mortgages and mortgage officers.
• Guide you through the pre-approval process.
• Provide you with copies of all forms that you will required to sign as part of submitting an offer and take time to answer any questions you have about them.
• Search the MLS based on your specifications and send youistings that meet your search criteria.
• Get you more information about homes, subdivisions, neighborhoods and schools.
• Schedule and coordinate all showing appointments.
• Show you a slew of houses.
• Help you make an informed offer by researching comparable properties that have sold in the same neighborhood/area as the home you are interested in.
• Negotiate with the listing agent on your behalf.
• Represent your interests only — not the seller’s.
• Help you select a home inspector and guide you through the home inspection process.
• Schedule the closing.
• Facillitate communication between the listing agent/sellers, your mortgage company, and the title/closing company, so that your home closes on time.
• Go to closing with you to handle any last minute issues which may arise.

This is not an exhaustive list. and you will find agents that go above and beyond this list. You will also find agents who fall short of it. The important thing is that you know what to expect from them up front.

• Do you require your clients to sign a Buyer’s Representation agreement and, if so, what does it entail?

Many states, like Tennessee, require a Buyer’s Rep agreement to be signed before or at contract. And this is a good thing, as it protects you and the agent. It is up to the individual agent in our state as to whether they use an exclusive or non-exclusive agreement. Generally speaking the exclusive agreement locks you into the agent for a period of time, whereas the non-exclusive does not. Both forms have a section for how an agent will be compensated should the buyer choose to purchase a for sale by owner home where the seller is not offering a cooperative commission to buyer’s agents. This is usually left to the agent’s discretion, but he or she will have to fill this section in before you sign. Some will require that a buyer agree to pay them a certain percentage of the sales price or a flat rate if they buy a FSBO with a non-cooperative seller. Sometimes an agent will also stipulate what, if any, compensation he or she expects if they show you property for a period of time and you decide not to buy anything. This is not that common is our area, but with rising gas prices, I’ve heard of more agents writing this into their buyer rep agreement. Some even charge a gas fee per day or week of showings.

• What if I find a FSBO property?

As mentioned above, your agent should lay out their FSBO compensation policy in the buyer rep agreement. However, some agents aren’t fond of FSBOs or simply don’t want to deal with them and will tell you that up front. It’s much better to know where your agent stands up front.

• What happens if I decide I don’t want to work with you anymore?

It happens. You work with an agent for a while and you either a) find out they’re a total creep, b) find another agent you like better, or c) just don’t jive as well as you thought. Personality conflicts happen and even if you signed an exclusive buyer rep agreement, it should be possible for the agent’s broker to reassign you to another agent within the company. These policies differ from brokerage to brokerage, so make sure you find out what your options will be up front.

Finally, make sure you feel comfortable with your new agent. This should be a person you like and trust a lot. Not only is he or she going to be helping you make one of the biggest purchases of your life, you’re also going to be spending a whole lot of time in the car with them.

Lowball offers are the new black. Every time I go to the office, I hear another story about someone’s client who insisted on submitting an obscenely low offer on a home, because said client has heard about how horrible the real estate market is. This drives most of us crazy because 9 times out of 10, two things are going to happen in this scenario:

1. Seller counters back at near listing price, offended by the lowball offer.
2. Seller rejects offer outright, offended by the lowball offer.

And a lot of times the buyer winds up losing the house either because a) someone else submits a reasonable offer, or b) because negotiations break down due to seller’s aforementioned offense at low ball offer. Either way, nobody winds up happy.

As I’ve said here before, just because every business pundit on every news channel in the country is saying the real estate sky is falling, that does not mean that it’s falling over Knoxville. Yes, we’re in a buyer’s market and buyers here can definitely get away with asking for more concessions now than they could a few years ago - a great thing for all you buyers out there. But with few exceptions, you’re not going to get that $250,000 home for $200,000. Really, you’re not. Sellers in some parts of the country may be desperate to sell, but most sellers here aren’t. They’re just really anxious to sell and there’s a big difference between those two.

Most home sellers out there right now aren’t looking to get rich. They’re just looking to sell their home for more than they paid for it, and definitely for more than they owe on it.

But it’s human nature to haggle. If people don’t negotiate, they don’t feel like they got the best deal they could.

While lowball offers are definitely warranted in some situations (I’ll be covering that topic in a future post), most of the time it’s that good old fashioned negotiating that gets you a good deal. Not a steal, but nothing to sneeze at either.

Like I said, it’s a buyer’s market out there. That means there are more houses for sale than buyers. Increased inventory means:

• More choices for buyers.

Instead of there only being one house for sale in your price range in a chosen area, there might be three or four or even five. This means you are much more likely to find exactly what you want, rather than having to comprise on certain things because there’s only one house available in the neighborhood.

• Longer days on market for most listings.

This takes away the need to rush into an offer. Time was when a client would find a house they loved, decide to sleep on it, and wake up and the house was sold. Bummer. While this can always happen, the odds are a lot lower now, which gives, you the buyer, a little more time to make your decision to pull the trigger.

• More negotiating flexibility.

Two years ago there was very little of this. Many times sellers were getting multiple offers on homes, so the sales price would actually be higher than list price. Having a little wiggle room, like 2-3% of list price, is pretty nice.

• Buyers can ask for more concessions.

This was also somthing that wasn’t nearly as likely to fly a few years ago. Need some closing costs? Ask for them. Want repairs made on the house? You might get that too. Home warranty? Certainly can’t hurt to ask.

Sometimes you can negotiate all of these things into your offers. Sometimes you’ll only get one or two. The trick is to be smart, not greedy. Think about what you really need (closing costs) or want (lower price) and go for it. But before you do, go find yourself a good buyer’s agent? Please?p>

I am constantly amazed at how few people know how Realtors operate. Even people who have been around the home buying and selling block quite a few times are unclear on what roles we play in a real estate transaction, what we can and can’t do by law, and even how we get paid.

One of things that always blows my mind is how many people buy a home directly from the listing agent. Now, this isn’t necessarily a bad thing for you, and, trust me, there is nothing we love better than selling our own listings.

But know this: you are absolutely 100% entitled to have your own agent represent you in your home buying transaction. And as much as I love getting the much bigger commission check that selling my own listing gets me, I will go on the record and highly advise you to use what we in the business call a buyer’s agent. A buyer’s agent is a real estate agent who is trained to work with buyers and when representing a buyer, represents only the buyer’s interests in a transaction.

Why use a buyer’s agent?

Well, let’s say you’re looking for a new house in the Knoxville area. You’re really excited and so you start religiously gathering and scouring home magazines, spending countless hours on Realtor.com looking for homes that have (hallelujah!) more than one picture, and going to a gazillion open houses and being harrassed by tons of real agents who want to sell you their listings or make you their client. Annoying, right?

Next, you email and call the listing agents, trying to get more info on listings that catch your eye and either a) don’t hear back from them, b) find out the house has sold/exploded/fallen into a sink hole, or c) you luck out and make some appointments to see some properties. Separate appointments. That you have to drive to in your own car. Using your own gas. $2.99 a gallon gas.

OK, so you get to these properties and find yourself thinking a) what on earth do the pictures on Realtor.com and this house have in common b) I wonder what time the train comes through the backyard, c) I wish this listing agent would stop trying to convince me that grasscloth is so out it’s almost back in, or d) wow, I really like this house.
Whew! Finally! That was a lot of work, but you did it.

Congratulations! Now, all you have to do is put in an offer! The listing agent will write and present the offer on your behalf, and depending on the agent, will either default to facillitator status (try to be completely neutral to both sides) or will continue to represent the seller –either way leaving you unrepresented in one of largest and most expensive financial transactions of your life. Yikes.

Now let’s look at the same scenario with you using a buyer’s agent. First, you meet with your carefully selected agent (more on this later) and discuss everything you’re looking for in your dream home. Your agent will start searching the MLS for you, sending all listings that meet your criteria.

After you look at all these juicy listings landing in your email inbox, you choose your favorites and tell your agent when you’d like to see them. He or she will schedule the showing appointments and prepare some information on each home, including a current listing brief and tax record.

Then you go look at houses. In your agent’s car. Using your agent’s $2.99 gas. Going with your agent, you are able to see 5, 6, or even 7 homes in just a few hours.

Still want to go to open houses? No problem. Just tell the host agent at each home that you are already working with an agent, and they should (by Tennessee state law) stay far away from you, leaving you to view the house in peace. Ah!

After going through the home viewing process with your agent for a few days or weeks, you find your house, the one you want to make an offer on. Your agent will help you determine an asking price by looking at recent comparable sales in the neighborhood. He or she will also help you with elements of the offer such as asking for closing costs or repair costs. Your agent then writes up the offer, submits it to the seller’s agent, and negotiates the offer on your behalf, with only your best interests in mind. You get the house you want, and feel like you got the best deal possible because you were well represented by a knowledgable professional.

Much better, right?

And here’s the best part: because buyer’s agents in our area get paid from a percentage of the seller’s listing commission, their services are absolutely free to you, the buyer. Rock!

So, now you’re probably wondering how you can find yourself a really good buyer’s agent, right? That’s coming up in a future post. Stay tuned!