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Saturday, March 29, 2014

First-time Buyers – What do I need to know about condos?

This is the second in a series of posts for first-time home buyers. Since I’m not sure how many there will be, I’m not putting a number on the series at the start. Obviously these posts might also be valuable to someone who is not a first-time buyer.

Answer - One could think of a condo as a half-way house between an apartment and a free-standing home. At least you actually own something with a condo and will be building equity; but, what that “something” is that you own can vary and what you need to understand may be different from condo complex to condo complex.

Condos come in a few different flavors. There are high-rise condos that may actually look like big office towers, but with balconies.  There are attached units that may have single story or multi-story layouts (sometimes called townhouses); and there are detached condos which have no shared walls with other units. Then there are lots of variations of those themes.

All of these condo types have this in common – there is a condominium association which owns the physical structures involved and other shared property called common areas. Common areas might include a pool and pool house, a park or playground, the roads in the complex, detached carports or garages, sidewalks and even the balconies or patios associated with the units. The definition of what those shared or common areas are and who is responsible for maintaining them will be found in the Condo Association Master Deed and By-laws.

When you buy into a condo complex you are required as a covenant of the deed to your unit to become a member of the Condo Association. You will be required to stay a member in good standing the entire time that you own the unit. That means that you’ll be required to pay the condo association fees, usually a monthly amount. Those fees are used by the association to pay for the maintenance of the common areas, including things like new roofs, road repairs, exterior painting and insurance (Property, Casualty and Liability) coverage on the common elements.

So what do you own and what are you responsible for? Think of your unit as an empty box. Everything inside the box, including the last coat of paint on the walls is normally yours and your responsibility. Some things that you can see from inside the box, like exterior doors and windows are actually the responsibility of the condo association. Even the deck or patio out back that is attached to you unit really belongs to them. Check your by-laws for what you can and cannot do out there on those decks or patios.

Inside, anything that you want to do is fair game, so long as it does not adversely impact the structure. You
can finish the basement, if it was not finished. You can replace he kitchen cabinets and counter tops. You can probably switch the natural fireplace to a gas log, but going the other way might involve reworking the flue and chimney system and that is association property, so that would be off limits. You can paint the interior rooms any color that you would like, but the outside color, including the stain on the deck, is the responsibility of the association and you should not touch them. You cannot plant flowers around your deck or patio, but the association may have rules allowing you to place potted plants on the deck or patio – check with the association management.

As for insurance, it is critical that you have your insurance agent read through the association’s Master Deed and By-Laws , so that he/she can determine what type of coverage you need. Here’s a good read on the topic of condo insurance from BankRate.ocm. You should not assume that you only need to insure your personal belonging, as you might have done in an apartment. There are also often clauses in the By-Laws about liability that you may have to the association, should some act of negligence on your part cause damage to units other than yours or to common areas. Make sure that your insurance agent understands everything that is in those documents and recommends a policy for you that has you covered.

Condo owners sometimes get surprised by special assessments that are levied by the association and become your obligation to pay. Usually these are for things that the association did not properly budget for in the first place and did not have enough in their capital reserve fund to pay for. The big cost items are things like road repair or replacement, roof replacement, major window and entry door replacement projects and exterior painting. It is important when considering a condo purchase that you ask to see documentation (usually an annual or quarterly report) on the capital reserves of the association. It may feel great initially that they have a really low monthly association fee, until one of those big projects comes up and you get hit with a special assessment. Assessments like that are normally spread out over time; however, you may be required to pay off any remaining balance when you try to sell the unit.

You also need to understand that your use of the common areas and behavior while doing so are subject to association rules. You can’t just throw a pool party for 10-15 friends around the pool. There are rules and regulations about all of that. There are even rules about how many cars you and your visitors can have in the complex and where they can be parked. Welcome to the annoying world of adult rules!

I've already stated that you need to have your insurance agent review the Master Deed and By-Laws, but it should be clear to you by now that you need to review them well before you get to that stage. In fact, you need to review them before you make an offer or within some short grace period after an offer is accepted to determine whether they are something that you can live with or not. It’s also a good idea to try to talk to someone who lives there to get their take on how it is to live within the rules of the complex. Once you are in place you should also go to the association meetings, so that you know what issues the association is dealing with that might impact you. If you are concerned about the association’s budgeting for contingencies or upcoming maintenance issues, that is the place to raise that concern.

An ideal condo situation for many is the detached condo, which is a condo unit that has no common walls with neighbors (and thus less concern about noisy neighbors) – it literally is a stand-alone unit. Detached condos are fairly rare, at least in this area in Michigan. All of the stuff that was mentioned above still applies and even though it looks like you have your own little house, the association is still in charge of everything outside and you still can’t plant your own garden or flowers.

For some getting an end unit in a row of condos is the best thing. You only have neighbors on one side and you usually end up with some extra windows on that “open” side. In high-rise condos there is some premium associated by many with the ground floor (a lower jump if you have to escape that way) and a great premium with the top floors (great views), especially if there are penthouse layouts available.

Site condos -

A variation on the condo theme is the site condo, which is a Michigan invention that became popular in the mid 1980’s. Basically developers found in the mid-80’s that they could get through the Michigan’s approval process for condo developments in less than half the time and at less cost than going through a complete subdivision platting process. They decided that they could build homes that were a step beyond detached condos, but which would still fall under the State’s development rules for condos.

The idea of a site condo is that the owners own and are responsible for the little piece of land upon which their home sits and for the house itself (inside and out); but that the plot and house exist within a condo complex which also owns some common areas and requires that the homeowner be a member. Importantly,
the “common areas” include the roads within the complex, plus any other areas like playgrounds or parks spaces or even the entrance to the complex (you've all seen the little entrance islands with the sub name on them – the association owns that, too). So, collectively, the owners are responsible for all of those things and for insuring those areas.

For the most part a site condo development is so much like a typical plated subdivision that one can’t tell the difference; until it’s time to repair or replace the roads. In plated subs the roads are the responsibility of the local governmental body – the Township, Village or City. In a site condo complex, it’s the homeowners who are on the hook. That is one big reason to make sure that you check to see if the HOA is collecting and saving money for road repairs in your site-condo sub.

The other things that can be dramatically different are the rules that you may have to live under in a site condo sub. Some site condo HOA’s have very strict rules about what you can and cannot do to your property, especially on the outside. Some go so far as to have committees that must approve any exterior changes r additions and even what colors you can use on the exterior. If you can live with the restrictions that are impose by the site–condo HOA, then don’t buy there in the first place.

Mortgages for condos have their own set of rules and can be much more complex than mortgages on standalone houses (here’s an article from the Washington Post which explains that); plus, many of the on-line mortgage companies may not understand the Michigan concept of the site condo. Here’s a good read on the hoops that you might have to jump through to get a condo mortgage. Here’s an article about the FHA rules for a condo loan. 

Finally, if you intend or want to use your VA benefits to get the mortgage for your new home, be aware that not all condos or site condos are VA approved. Gaining VA approval for a development is something that the builder must do during the built phase, there is no process for getting an approval after the project is completed. It’s not a hard process nor very onerous for the builders; but, it’s an extra paperwork step that many failed to take when they are building and now it’s too late. Without that VA approval you cannot get a VA mortgage for that condo or site condo. Click here to go to a Web site that you can use to check to see if a development that was built under the condo rules is VA approved or not.

hope that this dissertation helps you better understand condos and site condos (if you are in Michigan) as you start your hunt for a new home. Good luck.

Thursday, March 27, 2014

First time Home buyers – before you even consider buying a house

This is the first in a series of posts for the first time home buyer. In most posts in this series I’ll be discussion topics directly related to the home buying process. In this post I examine what you need to do well before you get into the home buying process and look at the question – “What should I do to get ready to be a home buyer?”

First let me say, welcome to the big time. You may have made other buying decisions already – a car usually being the biggest purchase before a home – and you may even have made some other big financial decisions, those may have involved student loans. But here you are starting to think about buying a house. Good for you. Let me give you a piece of advice that too many of
use learn too late – get yourself a financial adviser first.

When you get to this stage in life (and hopeful even before), you should stop trying to “play it by ear” and professional help to get your financial life in order. Now you may think that it’s too early, that you don’t make enough yet to worry about having a financial advisor; but, I would argue that it is the perfect time to start, before you dig yourself into too many big holes.
A financial advisor at this stage in your life (and in any stage for that matter) is not about how much you make, it’s about what you do with what you make. It’s about working with a pro to set up a budget for yourself and getting the discipline to start saving for the things that are important in life, like a home and like your retirement. The good news is that it is actually much more affordable than you may think. Most financial advisers charge an up-front fee to set you up as a client and get you started with a Financial Plan; but that fee is really nominal in the grand scheme of things. You should discuss fees and how the adviser will work with you in the future before signing up. Most get a good portion (sometime all) of their fees from the investments that they make for you.

You may be saying, “Holy crap, I’m only in my 20’s, why should I be thinking about retirement
now?” Because the longer you r wait, the deeper that hole gets. It doesn't matter if you can only put $10-20 per paycheck into your retirement fund now; what matters is that you are putting that money in and giving it time to grow. Have your adviser show you what your $20 per pay check today works out to be worth 30-40 years from now.

Your financial adviser will recommend the same disciplined approach concerning a house purchase. He/she will help you set up a budget and understand what you can and cannot afford for housing at this stage in your life.  He/she will be able to discuss with you all of the factors other than the price of the house that you’ll need to consider and budget for; things like insurance and taxes and furniture and maintenance.

It may well be that a good financial planning session will reveal that you are not yet ready to become a homeowner. If that’s the case, at least you’ll know it ahead of making a mistake and will have a plan to get in position for that step in your life. We make jokes about “putting on your big boy (or big girl) pants”; but buying a house is a serious move and you need not only to put on those pants, but to start acting like a big boy or girl and get the professional help you need to start and maintain a more disciplined approach to life and your finances.

For those who scoff at the need for a financial adviser I am reminded of a TV commercial some time back that showed a guy on the phone with his doctor. He has a butter knife in his hand and the doctor is saying to him, “Now, first make a three inch incision in your chest right below your left breast.” The guy has a befuddled and frightened look on his face. There are just some things that you can’t do for yourself and good financial planning is usually one of them. You don’t have the tools and the training. I realized that in my own life, albeit it a little late (in my 30’s instead of my 20’s), but it has proven to be one of the best things that I ever did. If you've in my area of Michigan I can recommend some good financial advisers. If you are elsewhere here’s a good article from the Wall Street Journal about how to find and choose a financial adviser. 

Good luck. You’ll look back upon the decision to do this as a key to your success in life.

Tuesday, March 25, 2014

OK, we closed. I have the money. Anything else I should know?

Part 12 of 12 in the series of the answers to frequently asked questions of sellers.

Answer – Good for you. Now get that check in the bank and get on with life. If I can help you find a new place to live, let me know.

If you lived in Michigan you should have received a form to allow you to rescind the homestead exemption on that house. Be sure to file that or have the title company file it. If you plan to buy another house or maybe already have another house in Michigan, you can only “Homestead” one property at the time; so get the old house off the books and Homestead the new one.

If there was an escrow amount held to cover the last water bill, make sure you follow up on that, so that you can get any balance that is left back. Some places only bill quarterly; so, don’t forget about it. If the bill is sent to the house, make sure that the new owners know what to do with it. 
Most of the time, they can just forward it to your title company for payment.

If you had occupancy after closing, make sure that you leave the place “broom clean” when you leave and take the keys into wherever it was agreed upon for the turn-in. Make sure that you sign a turn in form and get a copy. The buyer is supposed to submit that form to the title company that is holding the occupancy escrow, so that you can get any balance back. If there was a damage deposit, be sure that you got a damage release signed by the buyer, so that you can get that back or negotiate with him on a damage settlement amount and then claim the balance.

If you haven’t already done so, inform your home insurance company that you have sold the house and moved out, so that they can calculate a rebate for the unused insurance premium and get that to you.

Make sure that you put the closing packet somewhere safe and when you get the payoff letter for the mortgage (if you didn't get one at closing) put it with the paperwork.

Depending upon what you do now – buy another home or not – you should also get with your tax adviser so that you’ll understand the tax consequences of this sale and what you may need to plan for to deal with that.

Sunday, March 23, 2014

What should I expect at the closing?

The inspection and appraisal went well and we are scheduled to close next month. What should I do now?

The 11th of  12 posts about the real estate process for the seller.

Answer - Congratulations and I hope you enjoy the rest of your life, wherever that takes you. And speaking of that, have you got a mover lined up? I generally don’t recommend having your stuff loaded up and driving off as you head to the closing. There are still things that could go wrong and the deal could still fall apart. At least if you have the movers scheduled for the day after closing (remember that you’ll be paying rent for two days), you can stop them if the closing doesn't happen.

Remember that the buyer will want to walk through the house 24/48 hours before the closing to make sure that it is substantially the same as when he/she made the offer. Do not take that chandelier that you like out of the dining room and replace it with a cheap Home Depot one. That may well queer the deal and justifiably so.

Below  is a checklist for sellers of things to do or remember before the actual closing. Most of  this is common sense, but it’s always good to have a list just to make sure that you don’t overlook or forget something.

You may wish to read things on this site about the tax consequences of a sale – don’t worry it’s generally good news.

If you are turning over possession at closing, remember to take all of the keys with you and the garage door openers (if any). It is also a nice gesture to make up a packet of all of the documentation that you might have about things in the house, such as the heater or the appliances that you are leaving. You can take that to closing with you and discuss it with the new owners or just leave it out in and obvious place in the house for them.

As the seller, the only real thing that you need to make sure that you have with you for the closing is your driver’s license, since the closer from the title company will need to make a copy of that as proof of the identities of the parties signing the documents. Your Realtor will probably be there with you.  

Closing checklist for sellers –

  • Make sure that you leave the power and gas on at least through the day of closing. When you call the power and gas companies to let them know that you are selling the house and need a final reading, set that up for the day of closing and tell them that the billing should be transitioned to the new owner the day after closing. They may ask you for the buyers name, so have that handy. That way, if the new owner forgets to call the utility companies until the day of closing the utilities will not be shut off until after closing. If they haven’t called the day after closing, oh well, they lose and the utilities will be cut.
  • Remember to call for any final water or water and sewer bills and have the final reading scheduled for the day of closing. Some water billing authorities may ask you to take the final reading and call it in to them. If you have already moved out of the house and have a paid final water bill that covers the time up to closing, bring that with you to closing. Normally the title company will hold in escrow an amount ($200-300) deemed sufficient to cover any unpaid water bill.
  • Make sure that you let your insurance company know when the day of closing will be and keep the property insured through that date, so, again, if the buyer forgets until the day of closing, the property is still insured while you still own it. If you are to occupy the house after closing, it is the new owners responsibility to have insurance on the property; however, you should switch your insurance to renters insurance to cover your personal property for the time that you will be occupying (renting) the house.
  • If you have had any work done to the house between the signing of the Purchase Agreement and closing, be sure to get Paid Receipts from the tradesmen and/or companies and bring them with you to the closing. If the work was called out in documents relating to the closing – the Purchase Agreement or an Addendum – you may have to prove that the work was paid for and that no future leans may be made on the property by those tradesmen or companies. You ay have to bring Unconditional Release of Lien forms signed by each tradesman. Check with your title company.
  • If the Purchase Agreement contained an Addendum, or had an Addendum added later, that placed contingencies on the closing of the sale, such as a Well and Septic Inspection Addendum or a Contingent upon Closing the Sale of another Property Addendum, then there should also be releases signed by all parties for those contingencies. Some contingencies will have the release wording include within the contingency itself and others will require a separate document.
  • The expectation that is normally in writing in the Purchase Agreement is that you will leave the house in substantially the same condition it was in when the Purchase Agreement was signed and “broom clean”. This means that you should not leave things that you don’t want any more in the house or garage – throw them out on the last garbage day. If you have items that you think the new owner might find of value, like extra paint for a room, or extra furnace filters or anything else that a normal homeowner might want, have your agent ask the buyer’s agent to ask the new owner if he wants the items left or not.
  • Anything that is left behind becomes the property of the new owner and he/she is not responsible for storing or caring for your stuff, nor is he/she obligated to give you back something that you “forgot to take.” If you have items that you wish to leave and come back to retrieve, you must have a written agreement with the buyer to cover those items and the arrangements that you have agreed upon for them. Occasionally, buyers and sellers may agree upon things like the seller returning to dig up one or more specifically identified plants within an agreed upon timeframe, especially if the sale is closed in the winter months.

On closing day you will need to bring a driver’s license or passport to identify yourself for Notary
purposes. You may also have to bring money to closing – you should know about that well ahead and get the exact amount needed when you inspect the closing packet. You will need to bring that to closing in the form of a Cashier’s Check or Certified Check from your bank. You will be expected to hand over the keys to all doors that have locks (including storage sheds and garage doors), and all garage door openers, unless you have arranged for post-closing occupancy. The turn-over of keys and garage door openers will take place at the end of any occupancy period.

As a courtesy, if you have saved any of the manufacturers documentation and owners manuals for appliances, mechanicals (heaters, air conditioners, water softeners, etc. it is generally expected that you will pass those on to the new owner. After the closing it is appropriate that you also pass along any helpful information that you might have about the house or anything in it that you think may help the new owner make a smooth transition into the house. This is not the time to say, “Oh, yeah, I forgot to tell you that the roof leaks when it rains hard”, but, you might mention any quirks that you've learned to live with in the house, like, “The upstairs toilet runs on sometimes, just jiggle the handle and it’s OK, or, “I normally change the furnace filter every 3 months in winter and once in summer.” Let common sense and common courtesy be your guide on this. Tell the new owners what day of the week is trash day and here to put it for pickup. Some home sellers will voluntarily give the new owners a telephone number where they can be reached, if the buyers have questions later, but that is up to you, too.

Good luck to you.

Saturday, March 22, 2014

There are things that are unacceptable in the offer. How do I handle that?

The 10th in a series of 12 posts for sellers of answers to their frequently asked questions about the real estate process.

Answer – If there are issues that you cannot accept as written in the current offer, you will need to reject it or make a counteroffer. Counteroffers are usually made using the Purchase Agreement document and making changes right on the face of the document. Those changes reflect what you are telling the Buyers that you will accept. In most cases you may wish to let your Realtor® contact the other side and discuss the issues before marking up the Purchase Agreement. This is called verbal negotiation and is used to feel out the parties involved and resolve the language to be used to make any changes to the PA.

Sometimes the negotiations are carried out via email or text messages. It has not yet been conclusively determined yet by case law how binding any of these verbal or electronic negotiations are until they are reduced to paper and signed by all parties. Your agent should have you initial, sign and date any changes that you make to the Purchase Agreement document and send the document back to the Buyers as a counter offer.

At that point you have made a counter offer and will have locked yourself into a negotiation
process with the Buyers. You should not entertain other offers during this negotiation process, if you have made a counter offer. Counter offers, like the original offer, should have some time limit specified, at the end of which the counter offer is either accepted or become null and void. You don’t want to throw an open-ended counter offer out there, since you are effective off the market until that offer is resolved one way or another.

Another thing to remember is that by counter offering you have rendered the original offer null. If the Buyer rejects your counter offer, you can’t just go back and say, “Oh, well; then I accept your original offer.” Recent case law has confirmed that the Buyer is under no obligation to honor his original offer once you have counter offered. Perhaps the buyer is offended by your handling of the counter offer; or, maybe they found another house that they like equally well and want to make an offer on it. All they need do to end this process is reject your counter offer or let it expire; since there was never a contract reached based upon those offers.

If the offer was really terrible, don’t take it personally. Everybody wants to try to get a deal. Some just act more aggressively on that impulse than others. Some, however, are just on fishing trips to see if they can steal a house from a desperate seller. If the main issue is price, you should have a good heart-to-heart talk with your Realtor before you just reject the bid. He/she can provide you with some insight into what may be a good counter-offer price to use. Remember that arriving at a final sale price is often a negotiated process – so negotiate.

Your Realtor may also be able to discuss with the buyer’s agent whether or not this buyer is really serious about your property or just fishing around on several properties. Anything that your agent can find out about the buyer(s) and what is motivating them to make the offer that they made might help. He can also evaluate the “strength” of their offer by looking at things like the amount of the earnest money deposit and the level of commitment indicated in whatever “pre-approval” was submitted. Many times the so-called pre-approval is really nothing more than a fairly meaningless pre-authorization form letter.
If your Realtor and you agree that this was just a low-ball fishing trip by a buyer trying to see if he can steal your house, reject it and move on. I often have the seller use a wide point magic marker to write “REJECTED” across the face of page 1 of the contract and fax or email that back to other side. They get the point. Some agents have the Seller counter offer with a price that is $1 less than the original price – that also gets the point across, but is still a counter offer and locks you in for some period.

If what you don’t like is a possession issue, be as flexible as you can. A buyer usually wants to take possession at closing and making him/her wait an inordinate amount of time after closing to move in is a hardship and a hassle for the buyer. Remember also that you become a renter in your own home as soon as the sale closes, so it is not only inconvenient for the buyer, it’s costing you money too. Possession after closing of a week or two is reasonable; however, asking for a month or two is not.

Other issues that you may object to should carry less weight, especially if they are niggardly little items like objecting to supplying a Home Warranty to the buyer or refusing to throw in the refrigerator on the sale. Are you really ready to lose a $300,000 sale over a $3000 Home Warranty or a used $1000 refrigerator? Spend some more time thinking before you answer that. In real estate we tell sellers that they just bought their house back for that $1,000.

There is another way that we use to reply to an offer in Michigan without making a formal counteroffer. It  is called the “Sellers Response to Offer”. In that case you and your agent create a reply document that basically says, “I don’t accept your offer; but, if you were to submit a new offer with these changes, I would look upon it more favorably (note that you still aren’t saying you would accept it).” The Seller’s Response to Offer will also clearly state that this is not a counter offer and that you will continue to entertain other offers.

The Seller’s Response method of non-acceptance of the original offer keeps the negotiation process alive with that buyer without tying you down to the offer in any way, like a counter-offer would. You are not counter-offering; you are providing the buyer with information that he did not have before about what would be a more acceptable offer. Using this technique, you can still look at other offers while you wait to see if the original buyer will make a new offer, based upon your advice. It is certainly a much better way to deal with things than an outright rejection and much less restricting on you than a counter offer.

If this is not your first offer and all have been what you consider to be too low; it’s probably time to have a good heart-to-heart talk with your Realtor. Sit with your Realtor and go over the feedback that you’ve had from showings and review the offers that you’ve rejected in the past. The market tis trying to tell you something and it’s probably time for you to listen. It may be time to start compromising on those things in those offers that you couldn’t live with; otherwise you may be living in your current house for a long time. Don’t blame your Realtor for the failure of your house to sell. He/she has been doing their job by getting showings and offers and I’ll bet they’ve been trying to tell you all along what you need to do to sell. Make a list of those “I won’t sell unless…” items and have that discussion with your Realtor again. 

Wednesday, March 19, 2014

Question – We got an offer, now what?

This is the 8th in a series of 12 posts of frequently asked questions about the real estate process from the sellers’ perspective.

Answer - Well, great! Now you accept it or reject it or counter it. This is another area where your Realtor can make a big difference, in this negotiation phase. Money is the obvious point of most contention, but there are others – possession is a biggie, personal property or property that was to be excluded may be another issue. Your Realtor should sit with you and go over the offer page by page to explain any terms and conditions that might be contained in it. Some rather innocent looking terms (many times buried in the actual PA form itself) can have costly consequences.

Read carefully any terms or conditions concerning who will be paying for any items that the buyers have specified, to include inspections and tests, surveys, home warranties, extended coverage title insurance and others. Your Realtor can explain all of those things and will know what the local customs are concerning who pays. Remember that you can change or modify any of the proposed terms and conditions, including who pays for things, as a part of a counter-offer.

Your Realtor should share with you, and go over, a Sellers’ Net Worksheet, which is a form or worksheet to show the seller what the impact of all of the costs of the sale are – the mortgage payoff, the real estate commissions and any state mandated taxes and fees, along with the cost of the title insurance policy that the seller must provide. If you are in a state like Michigan that charges property taxes ahead instead of in arrears, the Realtor will also calculate how much you’ll be getting back from your property taxes, once they are prorated to the date of the closing. The name of the form says it all – the Realtor will show you the net that you will have after all of the costs are subtracted and any tax proration added back in. This will show you what you will walk out of the closing with in-hand. It might indicate that you’ll have to bring money to the table in order to close. I hope that wasn’t a surprise. That is a form of short sale.

Perhaps the most common issue that causes offers to be rejected (other than a low-ball bid) is a contingency in the offer, most often that is a clause making the sale contingent upon the successful sale and/or closing of the buyers’ current house. In that case it is important to let your Realtor evaluate the situation and advise you. Your Realtor will work to find out how likely the sale of the home in question is within the time frame that is specified in the contingent offer. He will look at the listing for the other house and may do a quick CMA on it to see if it is properly priced. If the house has been on the market for quite a while already, he/she will want to understand why it has not sold and what if anything the buyer is now willing to do differently to help it sell within the contingent window.

It may well be the case that your Realtor will advise you to reject the offer. Certainly he/she will
advise you to make sure that the contingent offer allows you to continue to market the house to other potential buyers and that the contingency has a clause that sets a time limit (usually 48 to 72 hours) after another acceptable offer has been received, during which time the original buyers may remove the contingency and proceed with the sale or give it up an void the contract. In this area, your listing will be marked CCS – Contingent Continue to Show – in the MLS. While that is not the same are showing it as Pending, it may turn off other would-be buyers who might not want to get theior hopes up over a house that someone else has a first position offer in on already.

Your agent will request of the contingent buyer that he/she provide some further proof of their ability to bring the sale to a close after their house sells, such as financial statements or a mortgage pre-approval document, if they didn’t already supply that. If the buyer has sold his current home and is waiting for that to close, your agent will likely ask to see a copy of that sale contract and supporting documentation.

Your agent should also go over the proposed occupancy after closing and explain that to you. If you had advertised that you needed days or weeks of occupancy after closing in order to get ready for your move, the Purchase Agreement will cover that and should provide an estimate of the cost or at least a daily rate that you will be charged. Remember that as soon as you close, you become a renter in the house and must pay the new owner (your new landlord) for that stay. The title company will retain an amount equal to the daily rate times the number of days that are specified after closing. The PA may have also provided for some amount of a damage deposit to also be retained by the title company. You will be making provisions at closing on how to handle the disbursement of that money later.

This is yet another stage in the process where you should listen to the advice of your Realtor. He/she is familiar with the wording of Purchase Agreements and will know what to look for to protect your best interests in the offer in-hand. It is also another point at which you may wish to allow your attorney to review the document. Because time is of the essence, offers normally come with fairly short deadlines for a response, so don’t drag your feet on arriving at a response.

If the offer that you have in hand has none of the issues above, and is acceptable in all other aspects, then accept it and we’ll move on to what comes next. You accept the offer by signing in the spots reserved for the sellers on the Purchase Agreement form. In the modern world that may well be an electronic signature.

Tuesday, March 18, 2014

It's been six months and my house hasn't sold. What's wrong?

Post # 7 out of 12 posts for sellers looking at the real estate process from their point of view.

There is an unspoken sub-title to the question above - Should I change my agent?

Answer - There is a popular book titled “When bad things happen to good people”, which tries to teach people how to cope with the curve balls of life. Dr, Phil would just say, “Get real. Deal with it.” In real estate we have lots of articles about “When good houses don’t sell.” The bottom line in real estate is usually always the same – price, price, and price. It used to be location, location, location, but in today’s market we have come to realize that price is just as important that even location in determining how quickly a property will sell.

I suspect that this is not really news to you and that your agent has been gently (maybe too gently) trying to get you to consider a price reduction. My advice is DO IT NOW! Untie your agent’s hands and let them sell this puppy. You've had your six months of fun telling all your friends and relatives that you live in a $400,000 house, now let your agent see if he/she can move it for the $350,000 that the market says it is worth. Listen to his advice.

Hopefully some of the people that you turned off with the price when they first came through are still interested and still looking. Your Realtor has probably kept track of the people who've come through and could get word back out to them of the price change. If you haven’t let it get completely stale, a price reduction will also have a little kick-start effect on your listing and could generate a spike in showing activity, especially if you drop into a new price tier. Buyers and Realtors tend to search in tiers with break points at the $100,000 levels. Getting your overpriced listing at $325,000 down under $300,000 will do wonders for it (and no, you didn't just lose $25,000 – your house never had that $25,000 in value and the market told you that already).

If, your Agent feels that the house is priced competitively and you just haven’t been getting much traffic through it or interest in it, sit with your agent and go over with him/her the marketing efforts over the six-month period. See if you feel comfortable that the agent is doing everything within reason to market the house. If the last time that you saw or heard from the agent was six months ago when you signed the Listing Agreement, that is a red flag that you may need to find a new agent.

Don’t try to micro-manage the marketing process, especially in a field that you really don’t know. Not every agent uses the same marketing techniques, so some may not hold open houses or some may not do virtual tours or some may not advertise in the little free Real Estate books or in newspapers. In today’s real estate market many of the traditional old marketing tools just don’t do much anymore. The focus these days is on line and on mobile apps. Ask your Realtor to show you the listing on line and on a mobile app to see what it looks like and if it can be improved. Ask to see the YouTube video or whatever video the agent maybe using. It could well be that your agent is using the most appropriate marketing channels for today’s market and the right people are seeing his/her marketing efforts but just don’t like the house. Your agent should update his/her original pricing CMA and see if they think the house is still appropriately priced. Listen to his advice.

If you have an agent who did nothing but place the house in the Multi-List Service and sit back and wait for it to sell, maybe you do need to look around for a new agent. That happens sometimes, especially with very big, very busy agents. You should certainly expect to be getting regular feedback from your agent about any showings and/or open houses that they hold. After a reasonable period, perhaps after the first 30 - 60 days, your agent should have had enough market feedback to advise you on whether or not the house is priced right and whether there are any other factors that could affecting the marketability of the property. He/she should be talking with you on a regular basis. Listen to his advice.

No one wants to hear “your house is ugly”. That’s like someone saying something like that about your wife or daughter; but maybe it’s true. House styles come and go and there are many styles that were once all the rage that fewer people want these days. That could be the main issue. Some of the split level styles – bi-levels and tri & quad-level houses have fallen out of favor and will naturally attract less showing traffic. It's not that they're ugly; they just don't appeal to modern buyers as much as other styles. Ranches and colonials are fairly timeless and still; have appeal; but the big thing these days is the Cape Cod style with a story and a half (at least in my market).  Some people have made things worse by adding on a room that doesn’t fit or maybe doing a partial new floor above the old top floor. Additions like that may have made sense to the owner at the time that they were built, but they can make the place very hard to sell. You Realtor should have factored that into his/her price recommendation, but maybe you didn’t listen to that at the time. Listen to his advice.

Finally, don’t be a bully or a butthead. Some sellers seem to take great delight in trying to bully
their agent into accepting a listing price that the agent knows is too high. If they succeed in that they sometimes continue to play the role of the bully in other aspects of the relationship with the Realtor. Ranting and raving and threatening over every suggested price reduction or other marketing suggestion is counter-productive and a good agent will not put up with that. They will fire you well before you can fire them. Setting your jaw and refusing to budge on price after repeated feedback that your price is too high is just being a butthead. You really don’t want to sell. In either case, you don't need a new Realtor; you need a new attitude. Listen to his advice. Did I mention that before?

Monday, March 17, 2014

I've got to move; should I leave my house empty?

I've got to move to another state to get started in my new job, or I've bought another house locally and it’s ready for me to move in, should I move my furniture to my new location and leave a vacant house?

The 6th in the series of 12 posts for  sellers – answers to frequently asked questions

Answer - Not if you can avoid it. It’s just a lot harder to sell an empty house (here’s an article that tells you why). I know that it’s a real hassle, in addition to an extra expense to have two places, but if you can leave the house that we’re trying to sell here furnished it makes it easier to sell. It sounds cruel, but you are better off to rent an apartment in your new location and live by yourself; while your family stays behind until the place sells.

If you've already bought a new place in the new town, move all of that clutter junk out of the storage place into your new house – you’ll feel right at home and the clutter will still be out of the house that we’re trying to sell. Move any excess furniture to the new home, but leave the old place furnished if at all possible.       
Buyers have difficulty “seeing” how the house would look with furniture. Even if they don’t like your stuff at least it helps them envision how the space is used. If you absolutely can’t avoid moving your stuff out, so be it. Try to leave at least a table and a few chairs so that your agent has someplace to sit with a buyer to discuss things and somewhere to sit if he/she holds and open house. If you do vacate the house, use that opportunity of it being empty to get the carpets and floors cleaned and maybe getting some painting done. An empty house really shows all the wear and tear spots and with nothing else to attract the eye, any dirt or scratches or picture nail holes or other defects stand out.

An empty house makes an inviting target for vandals and thieves. Copper thieves in particular like to find vacant houses that they can strip. Even if your house is in what you would consider to be a “busy neighborhood”, thieves are bold enough to go in, even in broad daylight. No one ever said that they were smart, just brazen. Nothing says “rob me” quite like a vacant home with a real estate sign out front. Even if they don’t succeed in breaking in, copper thieves have been known to just hack off air conditioner condenser units and haul them away for the copper tubing that’s in most of them.

If you are involved in a foreclosure process and trying to do a short sale there is also the likelihood that the bank has hired a company to check out your house to see if you are still living there. If they find it empty, even with a real estate sign on the lawn and a lock box on the door, they will post notices of abandonment on it and if you don’t respond to those notices quickly enough they will seize the house and change the locks. It is very difficult to get the house back when that happens. Make sure that you inform your Realtor of any default or foreclosure notices that you receive, so that they can be on the lookout for any postings to the front door. Still, it is not your Realtor’s job to protect your house from seizure by the mortgage company.

The last thing to think about is the fact that your old homeowners insurance policy will not cover a vacant house. You should investigate getting a vacant house insurance policy. Also if you are leaving the house in the winter, make sure that you get it winterized by a professional. If something happens – a break in or pipes bursting in winter – and you have not purchased a vacant house policy, you will not be covered and will not get any damage repaired by your old insurance company. Here’s a good read on that topic from If you must leave an empty house in winter, make sure you have it professionally winterized to prevent pipe freezing damage. There are some companies that offer policies for empty houses. They are more expensive than a regular homeowners policy, but much less expensive than dealing with the possible consequences of leaving the house empty and uninsured. Annette White from our Insurance One Agency can help you find a company to insure your empty house. Give her a call at Cell: 248-795-9152 or email her at

Oh, and here’s one more thing to make your day, if you are in a foreclosure or short sale situation. The Homeowners Association (HOA) may place a lien on the property for unpaid HOA fees, if you have decided to stop paying that, too. That’s just one more thing to have to worry about. Even if you’re not involved in a distressed sale, the HOA can also get involved if you have not contracted for lawn care when you moved out. If the HOA determines that your lawn is in violation of the HOA By-Laws, they may hire someone to cut your lawn and charge you for that, too. If you don’t pay that bill; oh well, there’s another lien on the house. Have a nice day.

Saturday, March 15, 2014

Ok, I’ve listed the place. What can I do to help?

OK, I've de-cluttered, cleaned the place up and listed it.
What can I do to help with the selling process?

The 5th in a series of 12 posts about the real estate market from the sellers’ perspective.

Answer -  Get out of the way! No kidding. Make it as easy as possible for the Realtor to do his/her job. Not only should you allow a lock-box to be placed on your house, you should make the showing instructions as painless as possible. That may mean that you must take on a lot of inconvenience.

You must be able to get out of the house on short notice and make it easy for the selling agent to schedule showings for others. The easiest house to show is one that is already vacant, although vacant houses are harder to sell (more on that later), so make it easy to schedule an appointment to show your house.

You don’t want to be there during a showing. The showing agent doesn't want you there and the buyers would feel awkward if you were there; so take a drive, go to the movies or store - just go. Let the real estate professionals do their jobs. Believe me when I tell you that all of your helpful information about the house, as you trail the showing around, is not what these people came to hear. Don’t hover. Disappear.

If you don’t already have either an answering machine or voicemail service on your phone, get one or the other. Be prepared to check those frequently and allow the selling agent to book and appointment by just leaving you a message and giving the showing agent the lockbox combo. Any time that you’re out, even to church or for dinner, check the machine or voicemail before you go home; there may be a showing in progress or scheduled for about the time that you would get home.
You really can’t help much with this aspect of the process. There are some tips for things that you can do before you leave to make the showings go better.

·         Turn on all the lights. The showing agent will not know how your house is wired and may not be able to figure out how to get the lights on. A good agent will try to turn off lights as they go, but there will be lights left on. If there is a showing after the one that you left for, leave a note for the first agent telling him/her to leave the lights on for that showing.
·         If you have a gas fireplace and it is winter, you might turn it on. I don’t recommend starting a real wood fire. There are just too many chances that something could go wrong with no one in the house.
·         If you have one or two very safe (in stable, glass containers) fragrant candles, you might light them. We've seen other tips like bake bread or pop popcorn or do other things in the kitchen to leave a nice odor in the air. We’ll let you be the judge of how much you want to do. Try not to leave bad odors in the air; however, lighting too many fragrant candles is just as bad and some people might think you are trying to hide something by masking a smell in the house.  
·         Also remember to take your dog with you and your cat too if possible. Buyers don’t really want to be accosted by your pets and many may have allergies to pets so get them out of the house. Hopefully your house doesn’t smell like a full cat box or like your dog, but if it does, deodorize the place as you leave and perhaps put the litter box out in the garage.
·         If you must  leave your pets in the house, please either cage them or place them in  small room that
can be closed off and put a note on the door advising the showing agent that the pet is in that room. That room will be something that the buyers will wonder about after the showing, since they couldn't see it.
·         It’s always a pleasant surprise for the visitors if they discover a plate of cookies that you've left for them and it reinforces the thoughts of “home”.
·         If it is winter, make sure that the drive and walk are cleared of snow and ice. A visit that starts with having to slough through snow to get to the door is not off to a great start and one where the visitors slip and fall on your icy walk is even worse.
·         In winter in particular, and in any season if you are asking the visitors to remove their shoes; provide a bench or seat for them to sit down and put their shoes back on. If you are concerned about them tracking stuff in to your foyer, put a throw rugs there for them to step on as they enter.
·         Make sure that your agent has flyers or brochures (whatever they normally use) available in the house fort visitors and put them out in some easily spotted location, like a kitchen counter or table.
Normally showings only take 20-30 minutes, so you don’t have to be gone that long. Agents will normally ask for a one-hour window to allow themselves some leeway on travel or other showings. And remember to not let clutter creep back into the house. Keep it clean and clutter free!    

Your agent should get some feedback from every showing and most will share that with you. Don’t get offended by anything that you read; instead try to learn from the feedback and make any changes that are suggested in the feedback or by your agent.

Finally, now that you've mastered the three C’s of real estate – Clutter, Cleanliness and Condition; you must focus upon your role in the three P’s of real estate – Price, Patience and Persistence. Hopefully you and your agent have set the price correctly (feedback will help you determine that); so you need to be patient and persistent. Real estate sales do not happen overnight, so patience is a real virtue here. As for persistence; you will need to get up every day and get the place ready to show before you leave for work or to do other things. Remember that showings can happen at any time. You've got to have the house ready at all times.

Friday, March 14, 2014

I think I’m ready to get my house listed. How’s that work?

The 4th in a series of 12 posts for would-be home sellers.

Let’s discuss getting the house listed. Your Realtor® will be asking you to sign a contract giving them the exclusive right to market and sell your house for some period of time, usually six months or more. Don’t get all wigged out by the six-month window. Houses are selling in average times much less than that right now; however, some don’t. The Realtor wants to be around for the payoff. They don’t want to do all the marketing and have some other agent come in and pick up your house in month four and close the sale after you've finally agreed to drop the price to where it should have been all along. It probably won’t take six months to sell your house, but they need sufficient time to do the right job of marketing it.
Make sure the Price is Right. The most important thing in real estate used to be location, location, location; now it’s price. Location is still important; but, at this point getting the property priced right is the key to making a quick sale (which when you do the math is the most profitable sale). Your Realtor will do a Comparative (sometimes called Competitive) Market Analysis (CMA) for your house. The CMA process is as much art as it is science. Realtors use the MLS database of recently sold houses in the immediate area and of houses currently on the market. They try to find comparable houses to yours, which is easier in a modern subdivision where one or a few builders build all the houses.  I tend to use the term "similar", rather than comparable, since I don’t spend hours laboring over making adjustments like an appraiser will. If it's got the same space, the same number of bedrooms and baths and mostly the same other amenities, that's good enough to include in the comparison database. It’s much harder with older houses or with house that have very custom architecture (try finding a bunch of octagonal shaped houses in the immediate area).
Realtors factor in such things as condition, improvements, updates or upgrades, extra features like a swimming pool, and other things that either add or subtract from the house’s market value. They normally come up with a price range and will make some recommendation about which end of the range they think the house should be priced. Don’t be offended if your house is priced below the average or median price in the comparison area; perhaps most houses in your neighborhood have finished basements and yours doesn't. There is always an explanation available about why it is priced the way it is (you just may not like the explanation). Don't expect the Realtor to agree with your argument that "it's good enough for me, it ought to be good enough for a buyer". The Realtor is trying to show you how your product compares to other products in the same market that buyers will also being seeing. Listen to your Realtor.
Things that Realtors don’t consider (and neither should you) include: what you “need to get out” of the house, what you put into the house, what someone else that you know sold their house for or what your dad, brother or uncle told you your house is worth or what the house appraised for six months ago when you refinanced it. It may well be that you are still underwater on your mortgage, so that you need to get more than the house is worth on the market. In that case, you should discuss with your Realtor whether a short sale makes sense for you; and then listen to your Realtor. 
As Realtors, we are looking at your house as a product within a market and comparing it to other products in that same market. You have to get to that mind-set too. You need to try to take as much emotion out of the sale as possible. Once it is put on the market you need to stop thinking of it as your home and start seeing it as a product that you are trying to sell. Ultimately the decision on what to list your house for is yours, but forcing the price too high will just drag out the process and could end up costing you more than starting at a fair market price; especially if it sits on the market for a while. Buyers start to wonder about what’s wrong with the house or they conclude that the owner isn't really interested in selling at a market price. So the best advice on this is to listen to your Realtor. Did I mention that before?
As for the Listing process itself. The Realtor will ask you to fill out a Sellers Disclosure document. Be very serious about filing in this document truthfully, to the best of your knowledge. This document asks you to identify any defects or issues that you know about and could be used in a court later if the buyer thinks that you deceived him with false statements. There are lots of places where “Unknown” is a possible answer; but, be careful when and how you use that answer. You are expected to know about and accurately report on the condition of the house. The Realtor will also be asking you to fill out a statement about the presence of lead-based paint in the house. Answer that truthfully to the best of your knowledge.
He’ll also be measuring rooms and getting other listing information for the MLS. It takes about 1.5 to 2 hours to go through the whole process of paperwork and measuring. The Realtor may want to take pictures then or will schedule a time to come back and get pictures for the listing. They’ll probably order a sign for your front lawn and put a lock-box on one of your doors, so they’ll need a spare key. They’ll also be setting up the showing instructions, so be as flexible and cooperative with that as possible, more on that in a later post.

The Realtor should be able to get your home onto the local MLS within 24 hours of the listing appointment. Within another 24 hours it will probably be all over the Internet and available for you to see at whatever real estate sites that you use. Read through the listing to make sure that the information is correct and let your Realtor know of any errors that you've spotted. It is not unusual if there is a flurry of showing activity that occurs right away. The real estate market is always hungry for new products, so expect some showing appointment calls right away. If you don't get showings within the first few days, that is usually an indicator that you and your Realtor may have missed the mark on price. Watch for that and talk to him/her right away. Don't let your listing go stale right away due to being overpriced - more on that later.