Resources For Buyers and Sellers

The 10 Most Important Questions Home Sellers Hope Their Buyers Don't Ask
A special report from Real Estate Expert Bob Bruss

Back to Seller's Library

Whether you are a home buyer, home seller, or real estate agent, this special report is one of the most profitable you will ever read. The goal is to help home buyers purchase the right home and avoid buying the wrong house (or condo, cooperative apartment, or small rental property).

If you are a home seller, you will be able to anticipate the tough questions the smartest home buyers will ask you (or your listing agent). Home sellers are quick to extol the features of their property. That’s fine, but what home buyers really want are benefits – as a home seller, be sure you and your realty listing agent emphasize the reasons why you enjoy living in your home.

Examples of benefits include top quality schools for superb education of the buyer’s children (sellers should be prepared with school test statistics and high school rate of graduation (above 80% graduation rate is considered very good) and percent going on to college), low crime rate for home safety and security, convenient location to save the buyer’s commute and shopping driving time, hospitable neighborhood to make new friends, favorable home market value appreciation rate (showing the home is likely to be a profitable investment) in the community, etc. Please see the last page for the latest information how to predict a home’s likely future market value appreciation.

Just to be clear, a home’s features might include a remodeled kitchen (but the benefit is easy and enjoyable meal preparation in a pleasant atmosphere), new wiring, new roof, or new plumbing (for probable low maintenance costs), and a swimming pool (for family enjoyment). The home’s features are what appear in the listing information on the MLS (multiple listing service) and on the listing agent’s Internet websites, as well as www.realtor.com (where over 70% of home buyers now start their searches). Remember, as a home seller, to emphasize the benefits which translate home features into advantages for the buyer of owning the home.

If you are a home buyer, you need to know the tough questions to ask of the seller (or the listing agent) so you won’t make an expensive mistake buying the wrong house or paying too much. However, always maintain an extremely friendly attitude toward the home seller and the listing agent. If you become an obnoxious buyer, the seller and/or listing agent are likely to rate you as a “troublemaker” or a negative thinker rather than someone with whom they want to do business. There are some home buying situations where you won’t be able to get all the answers to your questions, such as a probate or foreclosure sale, but try to get most of your questions answered one way or another.

If you are a home listing agent or a buyer’s agent representing the buyer, these “top 10” questions should be anticipated from savvy buyers. As a buyer’s agent, even if your buyer doesn’t ask these questions, if you want to gain a very happy buyer who will purchase a home from you, refer other buyers to you, and eventually come back to you when buying another home, and/or selling the home bought through you, politely ask these questions on behalf of your buyer.

THE TOUGHEST QUESTION A HOME BUYER CAN ASK THE SELLER. Shortly after I last wrote about this topic over three years ago, I received a very polite letter from a buyer’s agent and loyal subscriber in Ohio. She especially enjoyed my special report on “How to Avoid Buying a Bad Condo (or Co-op)” which includes a question I suggest all condo buyers should ask of residents in the condo complex. It is “What do you like best and least about living here?” That buyer’s agent suggested house buyers should ask the same question of house sellers. Great idea! Why didn’t I think of that?

1 – WHAT DO YOU LIKE BEST AND LEAST ABOUT LIVING HERE? As a house or condo seller, how would you honestly answer that question? Although I am not selling my house, I wrote out a list of nine items I especially like about living in my residence. I also wrote out a short list of things I don’t like about my home.

EXAMPLE : Heading my short list of dislikes about my home is a long central hallway! I’m probably just getting lazy, but often I will put items (such as shirts I just got back from the cleaners) in the middle of the hall floor at one end and pick them up only when I’m walking to the bedroom area at the other end of the hallway. When I eventually decide to sell my home, I hope my prospective buyers don’t ask this question but, if they do, I will answer it honestly. When I bought my home, I recall disliking that dark central hallway. I had plans to install those new tunnel sky lights, or at least better light fixtures. But I haven’t gotten around to it yet. Maybe next month!

As you can see, this key question is really most appropriate for buying a condo (where there can be lots of issues which usually don’t apply to single-family detached houses, such as a condo homeowner’s association dictatorship board of directors or president, who refuse to listen to condo owner opinions), but that great question also applies to houses.

EXAMPLE : As long-time subscribers know, I own a second-home condo. Several months ago, a prospective buyer was waiting in the entrance foyer for her realty agent to show her a unit which was for sale. As I was picking up my mail, she asked me if there was anything I didn’t like about the 63-unit condo complex. Thinking fast, I explained my condo unit has been in my family for 29 years, so we must like the building. Then I pointed out she should check the soundproofing of the unit she is considering for purchase because poor soundproofing is the number one complaint of condominium buyers. Other than occasionally hearing my neighbors, I said, I thought the condo building’s benefits far outweighed any disadvantages. I hope that condo buyer asked the same question of other current owners, especially her prospective adjacent neighbors.

2 – WHY ARE YOU SELLING THIS LOVELY HOME? Sometimes it’s a stretch to use the word “lovely,” but just leave it out if the place is an “el dumpo” fixer-upper. Or use that word anyway to see if the seller and/or listing agent has a sense of humor.

Over the years, I’ve lost track of the total number of houses and condos I have bought and sold. Most were rental investment properties. A few were my personal residences. Unless the listing agent or my buyer’s agent told me the seller’s reason for selling, I always probed to find out the seller’s true motivation for selling. My reason was to learn if I could do business with that seller.

EXAMPLE : If I learned the seller had little equity in the house, needed every dollar in cash, or was buying another residence, I usually couldn’t buy that house “my way” with a low cash down payment and seller financing. However, when I discovered the seller was retired, moving to be closer to children or grandchildren, and didn’t need lots of cash, that was my kind of seller! Retiree sellers (or their estates) became my favorite type of seller because I then showed them how, by carrying back a first or second mortgage, they could create a profitable, safe investment for themselves and I could receive easy seller financing with no lender hassles.

But don’t let a nasty real estate agent kill your sale. Over the years, as a frequent realty buyer and seller, I have come to the conclusion the biggest obstacle to home sellers is often the listing agent. They usually think they are protecting their home sellers. Other times, the listing agent is just incompetent! In addition to my personal experiences, as a college real estate instructor I have heard many stories from my real estate students confirming my opinion that some (thankfully, not all) realty agents are the biggest obstacles to successful home sales.

EXAMPLE : Over 20 years later, I still recall the worst “deal killer” listing agent I ever met. I’ll call him John (because that’s his name!). John had just listed the “perfect house” for me. It had a beautiful view, swimming pool, good location, and lots of rooms for my home office. The asking price was reasonable. My long-time buyer’s agent phoned one morning to tell me to rush over to inspect it at the Tuesday morning broker’s open house. She couldn’t accompany me because she was holding a broker’s open house for her own new listing. So I drove over to inspect the house. Listing broker John was sitting on the living room sofa watching TV. After I inspected the house, I asked John “Why are the sellers selling this lovely house?” He arrogantly replied “It’s none of your business.” I politely replied I just wanted to make a purchase offer which would meet their needs. Then he said “Cash is what they want.” Thinking it might be a difficult divorce situation, I declined to make a purchase offer. That house sat on the market unsold for 90 days until John’s listing expired. Eventually, the house sold with another listing agent. Later, I learned the retired sellers owned the house free and clear, were retiring to live in Palm Springs, and they carried back a mortgage for their buyer. I shouldn’t have let that obnoxious “deal killer” listing agent discourage me from buying that house with seller financing, my favorite way to purchase real estate.

3 – HOW MUCH DID YOU PAY FOR THIS HOME? This question is extremely important for home buyers (or any property buyer). The answer shows how much room the seller has to negotiate on price and terms. In most states, the seller’s purchase price is recorded in the public records. But even in the few backward states which don’t record this important price information, a quality buyer’s agent can find out this information through the local MLS or by other methods.

A related question to ask the seller or the listing agent is “What is the current mortgage balance and are there any other liens, such as a second mortgage, a home equity loan, or a mechanics’ lien? The answer shows prospective buyers how much cash the seller might need to pay off those secured obligations. Of course, buyers should also consider offering to buy “subject to” or “assume” payments on the existing mortgage debt if the terms are favorable or the balance can be discounted, such as a judgment lien.

Frankly, as a seller, when I am asked how much I paid for a property, my reply is “I got a bargain price when this was a run-down shack so my purchase price is irrelevant to today’s market value.” In other words, I have fun with my buyers and let them (or their agents) work to discover how much I paid.

EXAMPLE : If a home seller paid $200,000 for a house in 1985, and it is worth $500,000 today based on recent comparable nearby home sales prices, you know the seller has lots of room to negotiate on price and terms. Unless it is a hot local “seller’s market” for homes (meaning there are more qualified home buyers than residences listed for sale), this seller might not demand top dollar. Please remember the buyer’s first profit is earned when purchasing the home at the right price and terms. However, if you learned the seller paid $450,000 for the house last year and is asking $500,000 for it today based on comparable recent sales prices, there isn’t much room for price negotiation because the seller has selling expenses to pay, such as the listing agent’s sales commission (unless the seller can afford to take a loss on the sale).

4 – HOW WAS THE ASKING PRICE ESTABLISHED? Many inexperienced listing agents recommend a home’s asking price based on the seller’s need to get a certain amount. This is not the way to set home asking prices! This incorrect pricing method is closely related to the PFA (plucked from air) technique. Again, PFA makes no sense. Sometimes, it’s too low! More frequently, the asking price is too high.

But listing agents often accept overpriced listings and then hope to get later price reductions from their home sellers. Or, they will intentionally underprice a home, hoping to create a “buyer frenzy” of multiple bids for the underpriced home to drive the eventual sales price substantially higher than the initial asking price.

EXAMPLE : About two years ago, I wanted to obtain a home equity credit line secured by my second home condo. My primary purpose was to pay off a little $15,000 first mortgage at 9% interest and my secondary purpose was to have a prime rate equity borrowing credit line for emergencies. I went online, filled in the blanks on the bank lender’s application, estimated my condo was worth $150,000 (based on condo gossip with my neighbors), and I applied for a $75,000 (50% of market value) equity credit line. A few days later, the lender’s agent phoned to tell me I was wrong! She said their “drive by” appraisal (based on recent sales prices of comparable units in the same condo complex) shows my condo is worth $200,000 and the bank would gladly approve a $100,000 home equity credit line without an “inside appraisal.” I accepted! But I’m sure glad I wasn’t selling my condo based on my PFA valuation method. Incidentally, I found that Internet borrowing experience very satisfactory – the lender (Wells Fargo) was in Phoenix, the condo was in Minnesota, and I signed the home equity credit line papers in California!

The correct method for a home seller to set their asking price is to interview at least three successful local realty agents about listing the home for sale. Each agent, after inspecting the home, should prepare a written CMA (comparative market analysis). This form shows (a) recent sales prices within the last 3 to 6 months for comparable nearby homes, (b) asking prices of similar neighborhood homes now listed for sale (the competition), and (c) asking prices of recently expired competitive listings which didn’t sell (usually because they were overpriced).

The CMA forms also show each agent’s recommended asking and probable selling prices for the home. The primary reason home sellers should interview at least three agents before selecting the best agent for the listing is to avoid being misled by one agent who might “low ball” or “high ball” the asking price to mislead the seller. Home buyers, after inspecting a residence they really want to buy, shouldn’t hesitate to ask to see the seller’s CMA if it is available. This will show the buyer how the seller and the listing agent arrived at the asking price.

But the smartest home buyers, before making a written purchase offer, ask their own buyer’s agent to prepare a fresh written CMA. Thanks to computers, CMAs can easily be prepared by most buyer’s agents in their offices within less than 30 minutes. The CMA prepared by the buyer’s agent for the home buyer might show an estimated value for the residence considerably higher or lower than the asking price. This often happens if the home has been listed for sale more than 30 days.

5 – HAVE YOU RECEIVED ANY PROFESSIONAL INSPECTION REPORTS WITHIN THE LAST SIX MONTHS AND HAS ANY CORRECTIVE WORK BEEN COMPLETED? Today’s smartest home sellers, usually upon the advice of their listing agents, will obtain customary home inspections before putting their houses on the market for sale. Then the seller can decide if recommended repairs should be completed before listing the home for sale or if the seller should sell “as is” and let the buyer make the repairs, often in return for a repair credit.

EXAMPLE : The first time I had the customary inspections made before listing a rental house for sale, I discovered buyers will often accept the seller’s professional inspection reports. As I recall, I had a few hundred dollars of repairs completed by my termite inspector who then issued a pest control clearance certificate. My buyer accepted that report. But the buyer insisted on hiring his own professional home inspector who found some items my so-called professional inspector missed. Incidentally, that was when I discovered I should have hired an ASHI inspector because the American Society of Home Inspectors (ASHI) has the toughest experience and continuing education requirements for its members. To locate a local ASHI professional home inspector, go to www.ashi.com or phone 1-800-743-2744.

Customary local inspections vary by region and custom. Local realty agents can tell you which inspections are required or recommended in your area, such as for termites, radon, energy efficiency, building code compliance, etc.

The best home listing agents will have any recent inspection reports easily available for serious buyers to inspect. This saves time and removes doubt for prospective buyers.

6 – WHAT HOME DEFECTS DOES THE SELLER’S WRITTEN DISCLOSURE STATEMENT REVEAL? Most states now have laws or precedent court decisions requiring some form of written home defect disclosures. This requirement began in California after the famous 1984 court decision in Easton v. Strassburger (152 Cal.App.3d 90). This wise change quickly spread to other states.

In this important case, the seller and the real estate agent were held liable to the home buyer for damages resulting from failure to disclose there had been a recent hill slide adjacent to the house. A second hill slide after the buyer’s purchase caused more damage than the house was worth.

The result was the California legislature enacted a mandatory written disclosure form requiring California sellers of 1-to-4 residential units to provide a Transfer Disclosure Statement (TDS) revealing known defects in the property. This requirement cannot be waived. But it does not apply to lenders who foreclosed on a property when they sell that property.

This is a good law, now enacted by most other states in various forms, because it requires California sellers to disclose known material defects which affect the home’s market value. Many California listing agents now ask their residential sellers to fill out even more detailed disclosure forms. The purpose is to prevent future lawsuits against the seller and realty agents after the sale closes because a buyer can’t collect damages if a material defect was disclosed to the buyer before the sale closed. However, this California law does not apply to the sale of other types of property, such as a commercial building, where the old caveat emptor rule (let the buyer beware) remains in effect.

Today, most states have similar home written defect disclosure requirements. Even in the few states where there is no disclosure requirement, smart realty agents recommend their sellers provide written home defect disclosures to prevent future lawsuits . Most agents now also recommend that home buyers obtain their own professional home inspection reports even if the seller already has provided one.

If the home seller has not prepared a written disclosure form for serious prospective buyers to inspect prior to making a written purchase offer, that is a “red flag” warning to buyers that the seller doesn’t have a very savvy listing agent who insists on such defect disclosures at the time of signing the listing agreement. Of course, buyers should understand that some sellers might lie or “forget” to disclose a known home defect. That’s hard to imagine, but too often true!

This leads to the issue of “as is” home sales. An “as is” home sale means the seller must disclose all known defects in the residence but will not pay for any repairs. Many home sellers elect to sell “as is” because (a) they don’t want to pay for any repairs, (b) they presume the buyer prefers to make repairs to their own standards, and/or (c) the buyer will be satisfied with a repair credit discount off the agreed purchase price. However, even in an “as is” sale, the home seller must disclose known defects!

7 – ARE THERE ANY CURRENT OR PLANNED NEIGHBORHOOD ADVERSE MATERIAL FACTS OUTSIDE THE PROPERTY BOUNDARIES WHICH MIGHT AFFECT THE DESIRABILITY OF THIS HOME? I realize that is awkward wording, but out-of-town home buyers should be especially sure to ask this question. Home sellers almost always know if any significant civic changes are under discussion, such as street widening, a new nearby noisy freeway, or a planned special assessment for civic improvements such as new sewers or streets. However, buyers should verify any planned improvements affecting the property at the local city hall or other government agency.

EXAMPLE : Years ago, I bought a run-down dumpy house on a very busy street. I learned there was talk about the city widening the street from four to six lanes, involving eminent domain condemnation of all the houses on “my side” of the street. After a visit to city hall, I discovered there were no definite plans and even if the street was widened, I would be paid at least my purchase price for the house. So I bought that house, renovated it, and, 15 years later, the street has not been widened and the house is still there. As a result of a little investigation at city hall, I earned a substantial resale profit on that fixed-up house which other prospective buyers rejected.

8 – HOW MANY TIMES IN THE LAST YEAR HAVE YOU CALLED THE POLICE? WHY? ARE THERE ANY NEIGHBORHOOD NUISANCES OR PROBLEM NEIGHBORS CAUSING DISTURBANCES? This open-end question covers many potential problems which can affect a home’s desirability, such as barking dogs, noisy late night parties, and troublesome neighbors. If the situation is continuing, it should be disclosed by the seller to prospective buyers to prevent a future lawsuit for nondisclosure of a serious defect.

EXAMPLE : The leading court decision on this issue is Shapiro v. Sutherland (60 Cal.App.4 th 666) where the home sellers phoned the local police many times about their noisy neighbors. But the sellers “forgot” to disclose this problem to the buyer. The noise from the neighbors was so bad the buyer moved out almost immediately. He then sued the seller for rescission of the sale to get a refund of the purchase price. The court ordered rescission for the seller’s failure to disclose the very noisy neighbors.

A visit to the local police station will reveal local crime statistics for the neighborhood. Also, this is usually the place to search public records for any registered child sex predators living nearby (called Megan’s law). But home buyers should not expect home sellers to know the neighborhood crime statistics, nor to know if a registered sex offender lives nearby.

9 – WHAT PROBLEMS HAVE YOU HAD WITH THIS HOME? This open-ended question is intended to bring out past problems with the home which may have been solved. To illustrate, about 20 years ago my home’s roof developed several leaks. At first, I hired a roofer to repair them. But new leaks kept appearing.

So I decided it was time to have a new roof installed. I chose an attractive metal roof which has a “lifetime guarantee.” But I neglected to ask if “lifetime” means my lifetime or the roofer’s lifetime. A few years later, he went out of business! But my lifetime roof shows no signs of leaking so I am satisfied. If a buyer asks me what problems I had with the house, I would disclose the roof leaked about 20 years ago, but as far as I know it hasn’t leaked since I had the new roof installed.

10 – WHAT IS THE QUALITY OF THE LOCAL PUBLIC SCHOOLS? If you have school-age children, this was probably the first question you asked. Even if you don’t have children below age 18, the quality of the public schools has a very strong effect on whether or not families with children will want to move to your area, thus affecting buyer demand and future appreciation in market value.

The best real estate sales offices have the latest statistics for school districts and specific schools in the vicinity. Or, you might have to visit the school district offices to obtain this vital information. When you narrow your home choice to a specific residence, be sure to verify that it is within the school district boundaries (which are not always the same as city and town boundaries).

EXAMPLE : A few years ago, a single-mother friend of mine wanted to buy a home in the area’s best school district for her son. The public high school is rated one of the top 100 in the nation! But her buyer’s agent failed to check the school district boundary. Only after her purchase offer was accepted by the seller did she learn the home was not within the prestige school district. Fortunately, she was able to obtain an intra-district transfer for her son. Incidentally, the Realtor who listed that home for sale, knowing it was within the prestige city limits but outside the excellent school district, listed the school district number rather than its name, so out-of-town buyers like my friend would be misled. Shame on that Realtor!

A good place to start checking school district quality on the Internet is www.schoolmatch.com. Since 1986, this company has been checking and rating over 14,000 school districts. In 2004, over seven million parents accessed SchoolMatch services through a variety of website locations such as real estate brokerages, multiple listing services, chambers of commerce, and by personally contacting SchoolMatch offices in Westerville, OH.

SchoolMatch recently launched a new service which rates the top 32% of communities by high school attendance areas (but not elementary district boundaries which are sometimes different) for likely appreciation in home market values based on school quality and home value appreciation since 1994. The new website is www.houseappreciation.com which rates likely appreciation from AAAA to A. The AAAA rated communities had over 100% market value appreciation in the last 10 years whereas the A rated areas had a 60% average appreciation in the last 10 years.

CONCLUSION. Home sellers and their listing agents who are prepared should have no fear of buyers who ask the 10 key questions all home buyers should ask. By asking these questions, and any others the buyer wants answered, chances are the buyer will avoid purchasing the wrong house and will make a profitable choice.

Home buyers should not hesitate to ask sellers, listing agents, and the buyer’s own agent any other questions they deem important. The result should be a successful home sale for both the buyer and seller. More details are in my other special reports such as “Robert’s Realty Rules: How to Avoid the 10 Worst Home Seller Mistakes,” “Robert’s Realty Rules: How to Avoid the 10 Worst Home Buyer Mistakes,” “How to Avoid Buying a Bad House,” “How to Avoid Buying a Bad Condo (or Co-op),” and “How to Become a Super-Successful Real Estate Negotiator.”

Back to Seller's Library