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JUMP THROUGH HOOPS

THE BALTIMORE SUN

After surviving VA loan red tape, drilling a $4,800 well and negotiating the price down to the last cent, they weren't exactly happy when the buyer wanted them to re-stain their deck. They were even angrier when he walked from the deal.

"We waited and waited and waited. Then he backed out. The whole time he was acting like he couldn't afford the house, and it turned out he got $300,000 for his old house. And his accountant told him he'd better buy a higher-priced house or get killed on taxes," said the seller, who requested anonymity because her house is back on the market.

That buyer not only negotiated them down to the bottom dollar, but then turned picky. The seller learned through the grapevine that he'd already looked at 42 houses.

Similar buyers are becoming more common in today's market. "Let the buyer beware," is changing to "let the seller beware."

Real estate agents, lawyers, home inspectors, lending officers and sellers themselves agree that it's tougher than ever to sell a house. Not only is it a buyer's market, but those buyers are increasingly -- and sometimes unreasonably -- demanding. Coping with such fussiness is a delicate business, and many deals blow up at the settlement table over a leaning garage or a swimming pool not being filled in.

Some agents recommend the seller bend over backward. Others say there are measures sellers can take to ensure smoother negotiations and avoid at least some of the surprise nitpicking that can rear up during the long road to the settlement table.

"We've come out of the 1980s, where buyers were the weaker party and sellers had the power. Now, because of the increase in inventory, it's a buyer's market. They want to even the score," said Adam Cockey, managing director of W. H. C. Wilson & Co.

"The buyer is demanding more, just naturally," agreed Bill Flynn, president of operations at O'Conor, Piper & Flynn Realtors, one of the top three real estate agencies in Maryland. "There are more inclusions like, 'We saw you have a lawn mower. Is it working?' Or they might say they want the refrigerator, or feel that the property should be as close to perfection as possible."

"It's getting ridiculous," said Mary Bell Grempler, chairman of the board of Coldwell Banker Grempler Realty Inc. " 'Buyer beware' is out the window. They're protecting the consumer to the point where it isn't common sense."

Others agree that today's savvy, informed buyers and new buyer-agent relationships present a double-edged sword. Yes, the buyers don't get ripped off as much, but now sellers must jump through more hoops than ever.

Most real estate brokers believe the primary problem, or at least challenge, is the buyer's mind-set. Many buyers are investing a huge portion of their savings in the home, and have heard the horror stories about nondisclosure and "money pit" houses. They want the house and neighborhood to be as perfect as possible.

Biggest perfectionists

First-time buyers and corporate relocations are among the biggest perfectionists when it comes to demands, real estate executives say. First-timers don't have experience in buying a home, they are often investing all of their savings, so they want things absolutely perfect -- even in a 40-year-old home. Those who do a lot of relocation often expect to move again in the near future, so they demand homes in top shape -- in case they need to turn right around and sell them again.

"They're thinking of their dream house, and they [lower-priced homes] don't have all the bells and whistles they expect," said Marean Eikenberg, an agent with Coldwell Banker Grempler's Phoenix office.

"For example, $90,000 is a lot of money, but for a property in a specific location, you may be getting the lowest-priced house. Most people don't realize location is the main thing."

"They're more frightened of repair costs," agreed Patricia Jenkins, agent with Coldwell Banker Grempler. "They've maxed out on payments and can't afford anything else. Often it's their life savings."

Natural anxiety turns to unrealistic expectations as early in the process as choosing the location. Ms. Eikenberg said she hasn't run into many sticklers, but the ones she has come across often want higher-end locations for lower-end dollars.

"People want Phoenix for $100,000. They want properties in an area and don't realize that there's no way they can do it at their price. When you suggest another area they say 'Oh no. I don't like that neighborhood.' I usually don't work with them beyond that point."

Once the initial hurdles of pickiness have been crossed and the house has been targeted and the offer made, there's a second, even more formidable tier of potential demands: the home inspection report.

Home inspection pitfalls

Real estate agents feel that the practice of the buyer hiring a home inspector is basically smart, but add that the inspection reports often go beyond basic structural, mechanical and electrical basics -- causing buyers to panic, sellers to dig in their heels, and deals to sour.

"They use the home inspection clauses as an absolute second opportunity to renegotiate the contract," Mr. Cockey said. "Those contingencies, in many cases, are almost absurd. They present lengthy lists of improvements and corrections they want the seller to make. Generally the inspections stay to specific mechanical structural integrity, but the buyers want them all repaired prior to signing off on the contingency -- down to a cracked window, or paint. They confuse the cosmetics and it's rough on sellers."

Sellers often don't know what the big deal is.

"Often the seller has lived there for years. He's lived with the torn screen, the broken window, or the need for redecoration comfortably," Mr. Cockey said. "The buyer is standing pat on a wish list and the inspector works for the buyer. It's more official, but the extent or interpretation goes too far."

Structural vs. cosmetic

The resulting list of recommended repairs often raises hackles on both sides. Sparks typically fly when the inspection report points out things "on their last legs" that are still working and safe. For example, an inspection will often indicate that the roof has a 20-year life, when it's been on the house 23 years and the seller has had no problem. But the buyer reads the report and orders the seller to build a new roof just in case. Many an air conditioner or heater is "on its last legs" when they've been working fine for years. Again, it throws the buyers into a panic and means hundreds of dollars for the seller.

"Unreasonable" or "picky" are difficult to define -- but most Realtors agree that when the demands become more cosmetic than structural, they're crossing the line. Mr. Cockey remembers a buyer wanting a swimming pool filled in. Others tell stories about buyers insisting on certain antique chandeliers being included in the sales contract, or vertical rails in an antique staircase having to be redone because they're too wide.

Of course, many basic systems must be safe and working for a conventional lender to approve a mortgage. And the checklists get even longer when VA or FHA appraisers come into the picture.

In general, wells have to pump the county-specified minimum gallons per minute, they have to pass potability tests, the house must be free of termites, and many lenders require septic systems to be in proper order and certified. Radon is still hazy in regulations, but more lenders and buyers are requiring radon tests.

"Let's say a lender finances a property at 95 percent. If the buyer uses all his cash to get in and the septic fails, it could hurt the ability to repay the loan and result in foreclosure," said Allan Krausz, president of Greater Maryland Mortgage Group. "Lenders need to know the house is in good operating condition." More complex loans, such as VA and FHA, have gobs of additional requirements -- primarily focusing on safety -- such as no peeling paint and cracks in the concrete or driveway.

To cope with these standard requirements, and the layers of pickiness on top, sellers are often advised to do as much as possible up front to improve the home.

Give it sparkle

"Give it its best face on Day One," Mr. Cockey said. "Do the cosmetics beforehand. You can look around slowly or do it yourself. It's like changing your oil on time to avoid car damage later." Agents commonly walk through the home with the seller and make recommendations on repairs and upgrades. They'll even give the seller an estimate on the costs and help him or her build that into the price.

"Sometimes the seller says 'I don't want to rebuild it. I want to sell it,' " Mr. Cockey said. "But the buyer has a right to expect some redemption from problems -- or he'll pay a price that reflects a house with problems." Some agents like Ms. Jenkins feel the seller should go so far as to have the home inspected before putting it on the market -- but realize that most buyers want their own inspectors doing the analysis.

"They think that maybe the seller got someone who wasn't picky enough and why should they accept it," Ms. Jenkins said. "If you [the seller] do the inspection, you're suspect," Mr. Flynn said. "They think, 'Why did you do that? Were you concerned?' " Drawing the line on how much you will spend on improvements and what is and isn't a reasonable request is another thing that should be done early, according to Kevin Shepherd, partner in the real estate practice group of Venable, Baejter & Howard LLP.

"It's important to make the contract tightly drawn and be specific," he said. "Usually when the inspector discovers defects, the buyer uses it as leverage to get a better deal. It's then that you need specific language to indicate who repairs, the maximum price, and when the deposit goes back. Most good contracts put monetary limits on inspections."

Putting time limits on inspections and repairs is also advisable.

"When you enter into a contract, you want the contingencies to be satisfied or waived as soon as possible. Front-load the contingencies as much as possible," Mr. Shepherd said.

Selective sellers

Another tip is for the seller to request as high a deposit as possible to deter potential buyers who aren't serious, or who may use the home inspection report to squeak out of a deal.

Sure, the seller can always sue the buyer for tying the house up and then walking away because of a dispute, but Mr. Shepherd said that lawsuits are expensive and there must be a lot of money at stake to make them worthwhile.

Sometimes sellers will look at the list and pick those problems that they will improve, or perhaps offer a warranty or insurance policy to cover older systems for the first year.

Furnace insurance, for example, has become much more common over the last five years. Some Realtors are hesitant about such policies because they have loopholes, high deductibles, and may not cover as extensively as they portend.

One warranty, for example, offers coverage for "plumbing" but doesn't cover septic tanks or well or well pumps.

A smart real estate agent can help buyers remain realistic and sellers compromise as much as reasonably possible. That often consists of giving both the buyer and seller "reality lessons" in the very beginning.

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