What do I have to disclose in my Seller's Property Disclosure?

Dave,

A few years ago we had some significant water damage that was done because our next door neighbor left his irrigation sprinklers running overnight and the water flooded his lawn and ran down into our yard and into our basement. We have discussed selling several times since this happened, but are just not quite ready! When discussing this with one of my friends, he said that I would have to disclose the flood when we do decide to sell. I am still not sure I agree with him, as the neighbor's insurance paid the claim and we did not have to file anything with our insurance carrier. Even if the flood was not our fault, was not due to any problem with our house and did not impact our insurance, do I still have to disclose it when we go to sell?

Jerry

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Jerry,

As common practice, I too do not always buy what my friends are selling, however, in this case, I am going to side with your buddy. I have found that the only thing worse than being wrong is being wrong and my buddy being right! All kidding aside, in my opinion, you do need to disclose the flood when/if you decide to sell your home, even if it was not caused by a defect or problem with your home.

In the state of Colorado, each seller is asked to fill out a Sellers Property Disclosure and it is designed to be and give a historical snapshot of your home to a prospective buyer. You should always fill it out to the best of your knowledge and not omit any significant event, even if it was caused by an outside event of which was not related directly to the home. Many problems are caused by outside events, like wind, hail, some fires, floods etc. Look at it like medical records. If you were in a bad car accident at one point in your life, it was the other driver's fault, but you were fully recovered, it would still prove prudent and valuable to your doctor to include this point in time in your medical history. Same is true for your house. The good news, in this instance, the event is easily explainable and apparently has not re-occurred, but most importantly it COULD re-occur and that possibility of re-occurrence is important to relay to a potential buyer. 

“Many sellers are afraid to tell about problems they have had with their home. It is quite similar to kids, no parent wants to disclose that they have had problems with their kids, but all of us have had problems and amazingly in spite of us parents, our kids grow up to be productive members of society even with a few bumps along the way.”

Many sellers are afraid to tell about problems they have had with their home. It is quite similar to kids, no parent wants to disclose that they have had problems with their kids, but all of us have had problems and amazingly in spite of us parents, our kids grow up to be productive members of society even with a few bumps along the way. Very few of us want to disclose that we have problems with our kids or our homes, but we all have problems here and there and it is okay. If you have owned a home for any real length of time and have not had any problems, then you are without a doubt in the minority. On any property disclosure you want to answer each question to the best of your ability and make sure that you provide how each transgression happened and most importantly, how it was repaired or remedied. The solution and fix is more important, in my mind, then the problem. Buyers understand that problems happen and almost always are fine with them as long as the fix was proper and professionally handled. 

The buyer is going to want to see that the problem has been remedied professionally and in the solution there has been some corrective action taken to prevent it from happening again, even if the neighbor is forgetful. This might include a French drain or some kind of grading between the two homes that would divert water out on either side of your home to the street. The bottom line, disclose. If you are wondering if you should disclose, then you probably should disclose. I am sure you can relate to this. If I am wondering to myself, should tell my wife, then I probably should tell her and deal with whatever the repercussions may be up front. It is always easier that way even if it does not always feel easier. It may not be on that same level, but I am sure you see where I am going with this. I hope this helps clear up how to treat disclosure.

Dave Kimbrough
The Kimbrough Team

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How Effective is Staging Your Home When Selling?

Dave,

We would love to get your opinion on if we should or shouldn’t stage our house while it’s up for sale. Our plan right now is to be completely moved out before our house goes on the market. We have seen all the shows on getting your home staged to sell and we’ve recently started to question if we are making the right decision.

We’ve heard that houses that are not staged get lower offers than house that are. Should we change our plans to completely move all our belongings before selling the house? Is staging a house really worth it? 

Shawn and Kathy, Fruita

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Shawn and Kathy,

Great question with many options and angles, so let’s get right to it. I have said it before, but I will say it again, I love to watch HGTV and the DIY Network, but unfortunately it is not “reality” television. Sure, their intent is to inform, but their primary goal is to entertain! I think it would be a good life practice to not assume or expect real life to reflect what you see on television! A little more real life and a little less entertainment might actually be more helpful and enjoyable in the long run, but I digress and am starting to really show my age…Ugh, you know when you get that “I’m becoming just like my Mom/Dad moment? Well I just had it! Okay, back to the task at hand, does a house show better furnished or unfurnished? 

It has been my experience that 80% of the time I recommend to home owners that their home will show better furnished, however this answer is somewhat dictated by your furnishings! The furnishing knife cuts both ways. I have sold houses where the furniture is so nice that it is actually a distraction to buyers. They can come away from the showing loving the house, but saying “my furniture is not that nice and the house will never look that good when we move in!” The buyers assume, and in some cases rightly so, that the cost to get it to look that good again will be too significant. On the other hand, when the furnishings are meager, old, worn out, super personalized or just plain ugly and out dated, the buyer often times can’t see past them and they distract from the positive features of the home. Many times in this instance, the house can take on the personality/condition of the furniture and leave a bad or less than desired impression. Being somewhere in the middle or on the nicer side is the place to be. 

“When you make the decision to show it furnished or empty, go with one or the other…don’t hedge and try to live in both camps.”

When you make the decision to show it furnished or empty, go with one or the other…don’t hedge and try to live in both camps. Generally I am not a fan of half staging, with the exception of when you have a difficult layout and furniture placement is not easily identified or you are staging a brand new home. A half furnished home brings a bevy of questions that have everything to do with the situation of the seller and little to do with the house. If the only furnishings in the house are a blow up bed, kitchen table, futon and 65 inch TV and Xbox it will invite lower offers than if the house was empty…half furnished homes show poorly and give off the vibe of a family or home in flux! A situation in flux can give the impression of desperation, even if desperation doesn’t reside there! The smell of desperation to a buyer is like the scent of blood to a shark…get ready to welcome lower offers and the longer an empty home is on the market, the stronger the scent becomes!

A fully furnished and lived in home will typically provide no indication of motivation and the same can be said with an empty home! With an empty home, the buyers may make assumptions, but any good real estate agent can quickly dispel any of the buyers’ preconceived notions of assumed motivation and get things back on a level playing field. I personally think empty homes provide the opportunity for buyers to envision where they will place their own furniture!  If they start placing furniture in their minds, you are getting closer to setting the hook. 

In close, focus on the basics but either stay in your home until you get a contract or completely move out! There are always one off situations where you just have to punt, but in most cases those are your best two options. Hope that helps!

Dave Kimbrough
The Kimbrough Team

Would owner financing on the sale of our home benefit our retirement portfolio?

Dave,

My wife and I wish to sell our home and retire to Arizona. We are in a position that we would  consider doing “owner financing” when we decide to sell. Our money market investments are a lousy return and doing owner financing with the sale of our home appears to us as an opportunity to earn 4% - 6% with minimal to moderate risk. The way we look at it, if the buyer fails to make the payments, we simply get the house back and reassess our options. Is this right? What experiences, good or bad, have you had with sellers who have done an “owner carry” with the sale of their homes? Any advice would be appreciated, Merry Christmas.

Jim and Marybell, Grand Junction

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Jim and Marybell,

Great question! The move to Arizona sounds like an excellent idea, as we near the dog days of winter. Please remember, I am not a financial adviser and will only be providing an opinion that is based on my personal experience. Should you decide to move forward with an owner carry on the sale of your home, I would urge you to discuss any ramifications with your financial adviser or accountant. If done correctly, this can be wonderful addition to your retirement portfolio.

There is no doubt money markets are not a high yield investment, actually they are a terrible rate of return at this point in time, but they are very safe, with virtually no risk. Money markets also provide you a high degree of liquidity that you will not receive if you do “owner financing”. Prior to stepping into an owner financing option with your buyer, you should first consider how important liquidity is in your retirement plans. Also, consider the fact that you will still have a home in an out of state location and this can prove difficult and burdensome, even under the best of circumstances. Let’s assume that you decide this is the route for you, then I can say the success of your owner carry sale is determined by the terms set up at the time of sale.

You need to decide on an interest rate that will work for you. As I am sure you are aware, current interest rates are hovering around 4%, so I would expect it realistic to get somewhere in the 5.5% - 6.5% range. You also need to decide if it will be an interest only payment or if some of the monthly payment will go towards the principle amount owed. To make things cleaner, I would suggest an interest only payment with a balloon on the full amount owed.  After coming to terms on the interest rate, you need to decide what length the loan will be, more often than not I see a 3-5 year balloon. You can get your attorney to help you work up the note and deed of trust that will spell out the exact terms of the loan and where the payments will be made, what happens in the case of default, etc. Accuracy on this document is of vital importance.

“The last detail, but the most important, is the down payment.  The owner carry deals I have seen be successful are the ones where the buyer puts some “skin in the game”, meaning that they bring a substantial amount of down payment money.”

The last detail, but the most important, is the down payment. The owner carry deals I have seen be successful are the ones where the buyer puts some “skin in the game”, meaning that they bring a substantial amount of down payment money (10-20%). The down payment encourages the buyer to stay in the deal and gives you some cushion should things not work out as anticipated. The down payment acts as your insurance policy. Another option is to charge a higher interest rate with lower down payment and this will provide you with more monthly income, if the highest rate of return is your primary goal. With this tactic there is more risk, but you get a greater rate of return. In the back of your mind, always be prepared and understand what will need to be done should your new buyer fail to perform at some point down the road. Prepare for the worst and pray for the best! : )

All things being equal, owner carry terms can prove to be a wonderful vehicle for income and quite possibly could fit in perfectly to your retirement plans. Set it up right and it should provide a good source of revenue! Merry Christmas.

Dave Kimbrough
The Kimbrough Team

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Holiday decorating while selling a house?

Dear Dave,

My family just loves Halloween. We usually like to go all out with decorating, but this year we have our house on the market to sell. It has been for sale for about 6 weeks and we haven’t had any offers. What do you think about decorating a house for a ‘holiday’ when it is for sale? I know that every Realtor probably has a different opinion on this, but I would really like to know yours.

Thank you,

Carrie and Tom - Fruita, CO

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Carrie & Tom,

I am a firm believer in enjoying this time of year! I personally think it would be a crime not to decorate and enjoy the holidays.  In my opinion a home never feels more like a home than it does during the Thanksgiving and Christmas season and I see no reason not to extend that to include Halloween.  No pun intended, however I don’t believe you will scare anyone away by decorating! I do encourage you to decorate tastefully and try to err on the side of too little rather than too much. With Halloween, I would make a concerted effort to not decorate with things that are too gruesome or scary and make an effort to decorate with all ages in mind. Believe me, if your kids love the way you decorate the likelihood is the families that come to look at your home during the holidays will love it also. 

Remember that buying a home is still very much a “feel” thing for most buyers and the more senses you get involved and the more “like a home” you make your home feel the more likely you will be to sell. I can tell you that more often than not, when a buyer gets a feel about a home and they can picture themselves or their family living there, your chances of them making an offer go up significantly. Also, don’t be afraid to bake some cookies, pies, cake or at the least light a candle that plays up the holiday season. We have purchased cinnamon pine cones in the past and for less than 10 bucks it will fill your home with a wonderful aroma.  This is the greatest time of year to have fun and get immersed in the season, enjoy it because it will be gone too soon. Remember time is the one thing we can’t get back, so enjoy it, have fun and make this a season to remember.

The key take away here is tasteful and not overdone, yet have fun and enjoy the season. The spirit of the holidays is contagious and my bet is someone will catch the spirit at your house this season. Don’t be the least bit shocked if you sell between now and the end of the year!

Dave Kimbrough

The Kimbrough Team