We really liked one of the homes and we want to make an offer. How does that work?

 Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 7

This is the seventh post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. There is a follow-on series to the posts for real estate sellers.

FAQ – We really liked one of the homes and we want to make an offer. How does that work?

Great, let your Realtor® know, so that he/she can do the preparation work for getting together to discuss an offer. Your Realtor will go get the Sellers’ Disclosure and the Lead-based Paint Disclosure and any other documents that may have been posted to the MLS that concern the property or might

be needed as a part of an offer. Depending upon what you may have already given him/her, your Realtor may also ask you to get an updated mortgage pre-approval letter from your mortgage person. That letter will normally accompany the offer.  Then, he/she will set up a time to meet with you to discuss the offer, especially if this is the first offer that you’ve made with this Realtor.

Your Realtor will have prepared a set of Purchase Offer documents prior to the meeting and will want to go through each one paragraph by paragraph, to make sure that you understand what you are signing. Remember that your Offer to Purchase (notice that it may be called different things depending upon the company) is a binding contract with terms and conditions that protect your interests and the interests of the seller. If you have made other offers with this Realtor, they may not go into such detail in later offers, but will focus instead on the specifics of the current offer.

If you are a first-time buyer and this is your first offer take the time with your Realtor to really understand all of the terms and conditions and the timelines of the various obligations that you are

assuming, if the seller accepts your offer. Make sure you also know what your “outs” are in the contract – the things that allow you to walk away and get your Earnest Money Deposit (EMD) back if you are not satisfied.  Don’t just assume that you can change your mind at any time or on a whim and get your EMD back. Understanding the timelines that are specified in the contract is very important. You can mess things up pretty bad for yourself if you miss the deadlines for accomplishing things that are specified in the contract. Most of those timelines have clauses that specify that, if do nothing by the deadline then you are accepting the whatever was specified by the clause “as is”. Some timeline clauses may even specify that, if you do not accomplish certain things by the specified deadline, the Seller may declare the agreement to be null and void.

The Purchase Agreement (PA) timelines might include things like getting the home inspection done within a certain number of days and informing the seller of any unsatisfactory items from that inspection within a set period of time. The PA will usually include a deadline for actually applying for the mortgage and getting a mortgage commitment within the specified time frame. Other things like applying for flood plain insurance may also be specified. The buyer also has the obligation of lodging any objections to the results of the title search or lodging any objection to the property’s flood plain designation. You may also have some specified amount of time to read through the Master Deed and Home Owners Association (HOA) By-Laws and lodge any complaints after the seller delivers them to you. You should make a list of the various deadlines that you have to meet as you go through the Purchase Agreement with your Realtor.

The Realtor will go over all of those things with you, to make sure that you understand and agree with them, prior to having you sign the offer. He/she will also have you read over and understand the Sellers’ Disclosure and the Lead-based Paint Disclosure, prior to letting you sign the Purchase Offer. It is important that you understand what, if any, issues that Sellers are disclosing about the condition of the property. IF you see things in those disclosures that alarm you or that you don’t understand, now is the time to raise those issues with the Seller.

So, now you are at the moment of truth – the offer price. As preparation of your meeting, your

Realtor will probably search for similar or comparable homes that have sold within the last 3-6 months and within 3 miles of the house that you like.  If it is in a sub, he/she will try to find all of the recent sales in that sub. He/she may do a Comparative Market Analysis (CMA) of those sales to help establish a possible value baseline for the house that you like. Since no two homes are exactly alike and the condition of the sold homes may vary widely, the CMA just helps the Realtor establish a “ballpark” within which to evaluate the home that you like. If all of the comparable homes that have sold in the sub (or area) were within a range of $175,000 to $220,000, it would make little sense to bid full price, if this seller is asking $250,000. Perhaps, as the seller may believe, he has the best house in the sub; however, it is unlikely that he has a house worth $30,000 more than any other house that has sold in the sub. In the same vein, if the house is in decent condition, it would make no sense to “lowball” the Seller with an offer that might just offend him. Listen to your Realtors advice on the pricing issue.

Your Realtor will give you their opinion of what a fair offer price might be, based upon their assessment of the house and their evaluation of the market that you are competing in at the moment. Listen to their advice. Now is not the time to decide to see if you can toss in a “low-ball” offer to see if they’ll take it and a good Realtor will not let that happen. The house may be overpriced, but let your Realtor make the call about how far it is overpriced and recommend a reasonable offer price. You want to make sure that you do not tick off the seller so much with your initial offer that he rejects it out of hand and won’t deal with you anymore. You also need to have a firm “stop” price in mind, which is as far as you are willing to go for this house. Don’t get caught up in the negotiation back and forth and end up bidding more that you are willing to pay.

If it is a good house in a tight market, the Realtor may even advise bidding above the asking price.

Bidding wars are not uncommon in hot markets with tight inventory and you may be one of several offers that the sellers will have to evaluate. Your Realtor will work to position your offer as strong as possible. He/she may advise increasing your down payment amount or maybe even using a conventional mortgage rather that the FHA mortgage that you had in mind. Why? Because a larger down payment make it look like you have the wherewithal to get to the closing table and a conventional mortgage is less potential hassle for the seller than an FHA mortgage. That might give you an edge in the sellers’ evaluation of the offers in hand. 

Sometimes there are bargaining points in the deal that are almost as important to the sellers as the price, such as possession. The sellers may have advertised the possession as “negotiable”. You may wish to start with an offer of possession at closing and see what they come back with or your Realtor may have discussed that point with the sellers’ agent and have some idea what they need. Staying as flexible as possible on that issue may give you another edge in the deal.

Seller’s Concessions are almost always a sore point for sellers. They don’t understand why you are asking them to pay part of your closing costs. It looks weak and makes it appear like you might not really be able to afford the place. If you are in a hot market, not asking for Sellers’ Concessions is another edge for you. If you must ask for them in order to be able to do the deal, make it the least that you can get by with and still close the deal. You may also have to offer a higher sale price to get them to agree to cover your closing costs with a Sellers’ Concession. Ask your mortgage person how that might work.

If you understand everything and have agreed upon an offer price, go ahead get everything signed.

Remember that you will have to write an EMD check and give that to your Realtor for deposit in the real estate company’s escrow account. In Michigan that check cannot be held until the seller agrees to the offer, it must be deposited within 48 hours of being given to the Realtor.

Congratulations! You made an offer. Now you wait. It is customary to give the sellers 24-48 hours to respond to any offer. If it is a hot market, don’t be surprised to receive notification that “multiple offer situation” exists and instructions on how to submit your “best and final” offer. You can sit tight with the offer that you made or modify your offer to be more competitive. That’s up to you. 

Aside from the house itself, what other things should I being considering while I look for a new home?

 Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 6

This is the sixth post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. There is a follow-on series to the posts for real estate sellers.

FAQ – Aside from the house itself, what other things should I being considering while I look for a new home?

There are already many factors that you are probably thinking about as you visit each home. Where is it, is the most obvious? How far away is it from where you work and what kind of daily commute will you have? Some locations aren’t that far distance-wise, but they can be a bear to drive each day. If you have the time, I often recommend getting up early one morning and going to the location of a house that you are really considering buying and then go to work from there, to see what you hit and how long it takes. Also consider where the closest stores for things like food or drugs or even gas are in relationship to the house. Some people like being out in the middle of nowhere, but it can drive others crazy.

If you like to walk, consider the “walkability” of the location. What can you get to by walking? Are there sidewalks or would you have to walk in the road? Is the road paved or would you be walking in mud or dust parts of the year? There is a web site www.walkscore.com that explains the concept of a walkable neighborhood and gives you a way to rate the location that you are considering.

What kind of neighborhood is the house in? You can tell a lot about the neighborhood and the neighbors that you might have by just driving or walking around in the area. Are the homes and yards well kept? Are there cars (or other things) parked all over the streets and drives? Are there children out playing? Do the people you encounter wave and say high or just look at you like you are an intruder? The things that you observe aren’t likely to change just because you move in, so make sure that you are happy living with and next to what you see. The toughest thing to evaluate in the time that you have available are your immediate neighbors. If you happen to get lucky on one of your visits to see a next door neighbor out, make an effort to introduce

yourself and engage them in a conversation about the neighborhood and the neighbors. You can learn a lot from that one encounter.

How is the noise and light pollution at night? This is tough to gauge without going back to the location at night and just sitting there and observing how it looks and sounds at night. Most visits are done during the daylight hours, so you might not be able to tell that the parking lot lights in the industrial park or shopping mall next to the sub really light up everything at night or that the cars and trucks coming and going all night long in that same park or mall may make sitting out on your deck at night less than pleasurable.  

What about the schools in the area? We already talked about using some of the available school district rating web sites. If you have children of school age this is a biggie and not one to be rushed. You may want to0 visit the schools that your children will end up attending to see things like class size, curriculum and what extracurricular activities are offered. If you plan to put your children in private schools or a schools of choice school that is not where they would normally go, then you’ll need to evaluate the cost involved (if any) and how the children would get to and from school each day. If the children are of pre-school age, you may need to locate the closest pre-school or childcare facilities.  In addition to schools, what about the churches in the area? Is there a church of your denomination available? Maybe a Sunday visit to check it out is in order.

How are the roads to and from the homes location? If you get out in the country in Michigan, you’ll probably be on gravel (dirt) roads. In the warmer months the County will maintain the roads by grading them and probably will also spray them with calcium chloride to control the dust; however, they will still get rough (especially so in the winter months when grading is not possible) and there will still be dust. It’s a price that people pay to live out in the country in Michigan. Even if you are in the suburbs, it is possible that your neighborhood could have really bad roads. That happens in site condo complexes when the HOA doesn’t collect enough money to maintain the roads that it owns. It can happen even in platted subs or on the streets of Villages and cities, if they don’t have the means to maintain the streets. Don’t expect that street that is rough as a cob to get any better just because you moved in.

What is the heating fuel used in the area? You’ll notice as you visit and drive around the neighborhood whether there are “pigs” in the yards. No, not real oinkers, but the large metal tanks that hold propane, which are called pigs in real estate parlance. That is a sign that there is no natural gas pipeline in the area and that your choices for heating are propane, heating oil or electric, all of which are more expensive than natural gas. You could get lucky and find a geo-thermal house, which is a cheaper way of heating, but that is rare. This is again a trade-off for houses that are way out in the country, where the gas lines haven’t been run. Make sure that you get a handle on the winter heating costs for those homes. Ask the current owners for a recap of monthly costs from the last heating season.

If you have pets, especially dogs, think about accommodating them. Does the neighborhood or HOA allow fences or even electronic fences? Some Condo Associations or HOAs are very restrictive about fences (most don’t allow any fences) and almost all have rules about dogs, such as the size of dogs that are allowed and the rules for controlling the dogs when they are outside. If you are thinking of moving to the country with your little dogs, think about the problems caused by coyotes and foxes in this area. You can’t just let them run free in your big country yard when the local animals see them as a tasty snack. The same applies to cats.

It is fairly easy to find Internet site with statistics about the crime rates in any area, so check that out. There are also a number of sites that have demographic information about the area. In southeast Michigan the SEMCOG site is a good starting point for community profiles. There are other sites that will allow you to check out the presence of sex offenders in the area or to search for other things that might be of concern to you. 

Unless you wish to live like a hermit, consider the cultural and social amenities/activities in the area. In addition to the schools and churches, are there places like libraries and museums and theaters within reasonable distance? Are there things going on in the community that support the arts? Are groups like the local Chamber of Commerce, the Rotary Club, the Optimists’ Club and other social groups active in the community? What opportunities exist for you to get involved in things or to volunteer to serve? Getting involved in local community groups is the best way to get to know your neighbors and to become part of the fabric of your new community.

If all of this sounds like a lot of extra work, remember that buying a house is not like buying a pair of

jeans; you can’t just return the house if it turns out that it doesn’t fit you. Take some time to look into some, or all, of these things before you jump in and buy a new place that you’ll have to live with for quite some time.

I’m visiting homes but not finding anything that I like. What can I do?

 Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 5

This is the fifth post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. There is a follow-on series to the posts for real estate sellers.

FAQ – I’m visiting homes but not finding anything that I like. What can I do?

First, let me ask what it is about the homes that you are visiting that you don’t like? Obviously, they meet the criteria that you currently have your Realtor® using to search for you or you wouldn’t be visiting them. It’s time to stop and think about your search criteria. Try to put into words what it is

about the homes that you are seeing that just doesn’t appeal to you, so that your Realtor can try to make adjustments in the search criteria. The least helpful thing you can tell your Realtor is “I’ll know it when I see it.” How is he/she supposed to use that to select homes to show you. Sometimes it is helpful just oit sit with your Realtor and go over the homes that you have seen, so that he/she can hear what you are saying about each one.

Perhaps it is time to re-evaluate your search price range. A limited price range or an upper limit that is too low, will severely restrict what you get to see. Many times looking slightly above the upper limit that you have currently set with your Realtor will open up a whole new range of options. Sometimes there is even enough negotiation room in those higher prices to get them down close to where your old limit was anyway. Setting an upper limit that is too low also means that you may only see homes that are in less than good condition. That can be especially frustrating, if you are looking for a move-in ready condition house.

The local market in southeastern Michigan is currently not favorable for buyers. It is a “sellers’ market” because there is very low inventory and more people looking to buy that there are houses available. That means that sellers are asking for, and getting, higher prices that they would normally and that properties are selling more quickly than normal. Buyers are at a disadvantage in negotiations and have less to choose from on the market. That is certainly a receipt for buyer frustration. It means that buyers need to be ready to quickly make an offer on any properties that they find that suit their needs.  

The key to that last statement is the word “needs”. In this type of market, you have to focus more on what you need in a house that what you may want in a house. Many of the things that fall into the category of wants can be added later. That means that you should take a hard look at your search criteria and adjust the “must haves” to reflect your real needs. Just taking a desire like granite counter tops out of the criteria can open up lots more choices for you. Also expanding your search area, which may add to your daily commute a bit, can greatly expand the candidates for visits.

Some search criteria have a very big impact. Adding things like “fenced back yard” because you have a dog that you’d like to be able to let out in the yard can cut your choices by more than half. Desiring more than an acre of land with the house has the same impact, since most modern site condo complexes have been built on smaller lots. Asking for a three-car garage, instead of the more standard two-car garage also limits your choices. The majority of houses were built with three bedrooms, so demanding four or more also cuts down the list. Ask you Realtor what he/she thinks are the most restrictive things on your criteria list and then discuss with him/her what the options might be if you change or eliminate that criteria.

Sometimes you may actually be visiting the ideal home that meets your criteria, but you get blinded to it by things in the home that can easily be fixed or changed. You have to ignore things like paint colors and even the clutter that the current owners have grown used to living with. Maybe the current owners have re-purposed a room or two and you can’t see those rooms as you might use them.

Perhaps there is great unused space in the basement that could be finished to become the missing elements that you desire. Perhaps you can’t see beyond the overgrown and neglected current landscaping and envision how the house might look if you corrected the mess that it currently looks like. Or maybe you can’t get past the obvious repairs that will be needed. Fight through those things and use your imagination. You are holding yourself back from having your dream house because you can’t dream enough.

So, step back and reevaluate two things – your criteria for a new home and your approach and attitude about evaluating what you see on visits. Both may need to be adjusted. Sit and have another frank talk with your Realtor about what he/she has been showing you and what you’d like to see now. You might also review your notes from all of the houses that you’ve already visited and see if any might now be worth a second look (assuming that they haven’t already sold) with your new evaluation criteria in mind. Your new home is out there and now you are better equipped to find it.

As an alternative to continuing to look at used homes,perhaps you should add new-build homes to your search. The lack of enough new-build homes on the market has contributed to the "tight" inventory situation, but there are new build developments in all markets. New build developments are not normally in the lower end of the market and usually occupy the mid- to upper-end of the move up market, so that probably won't fit for the first-time buyer; however, if you are ready to move up, or maybe even if you are downsizing from your McMansion, these mid-market developments can be just the thing for you. Obviously, they will be move-in ready when completed and unlikely to need anything for several years. 

Southeast Michigan 1st Quarter Market Summary

 The first Quarter of 2017 saw a very “tight” real estate market, with the lowest inventory EVER across the country and in this part of Michigan. Buyers are frustrated by the lack of choice and the fact that the low inventory has caused the values of the houses that are for sale to rise rapidly. It was and remains a Seller Market.  Below are some of the statistics from the first quarter of this year along with come comments from the 1^St Quarter Market Summary that Real Estate One recently issued.

Inventory Down 26%

1.6 Months Supply

YTD Units Down 14%

Avg $/SF Up 12%

Market Times Down 25%

$209k Avg Sale Price Up 13%

Supply/Demand Favors Today’s Seller: There is a significant shortage of available quality listings combined with a

large number of carryover buyers who didn’t find what they were looking for last year. This has created a strong early

market with little inventory.

Values and Interest Rates are Both Expected to Increase in 2017: Buying today allows a buyer to secure more home

and pay less interest over the life of the loan. As the year progresses, both of these current buyer advantages will

lessen.

1st Qtr 2017 vs. 1st Qtr 2016

• 2163 Sold Units — Down 12%

• $108/SF — Up 9%

• 29 DOM— Down 51%

• 1481 Available Units — Down 37%

To read the entire report - http://www.realestateone.com/pdfs/monthly/april2017.pdf

What should you do if you are a Seller? First of all, don’t get greedy. Seek the advice of a Realtor to help you set the price for your home that will bring the greatest value for the house, without scaring off would-be buyers. Second, have a plan for what you will do if the house sells quickly (because it will). Don’t wait until it sells to start planning and looking for where you will go next.

Buyers should be ready to make an offer if they find something that they like. You will not have time to start the mortgage pre-approval effort after you find the house that you want. Don’t play low-ball games; that won’t work in this market. Be prepared for multiple offer situations and know your limits. Be flexible in what you are looking for and be ready to make some compromises. Know your priorities and stick to them.

There are many theories as to why we are in this tight market. The simple truths are that fewer people are selling and moving on than was expected and there are fewer new homes being built than are needed. The so-called Baby Boomer generation was expected to sell off their homes and downsize in retirement, but many have chosen to “age in place.” The people who might normally be moving up from their starter homes into a mid-market home have stayed in place due to fears about the weak economic recovery and continuing job concerns. Many new home builders exited the market during the Great Recession and chose not to get back in when the recovery began. There was also a huge exodus of construction workers which has resulted in a labor shortage in many markets. The end result of all of this is a market in which supply is not keeping up with demand and values of any homes that come on the market are rising. Eventually this will work itself out, but it may take several years.

We do expect some easing in the market in the late spring and would-be home sellers bring more houses to market in the warmer months. Of course that is also the time when more buyers come out looking, so things are expected to remain “tighter” than normal through the remainder of the year. Mortgage rates will probably go up a bit during the year, but they are really no longer the gating factor in the market.

Ready for visits, what’s the etiquette for that?

 Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 4

This is the fourth post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. There is a follow-on series to the posts for real estate sellers.

FAQ – I’m ready for visits, what’s the etiquette for that?

Well, let’s discuss both how to get the most out of your visits and what the etiquette is while on those visits. It is important that you have that home comparison checklist that I mentioned in the second post. You could use the one at the HUD site -  link to the HUD suggested home buyers' checklist – or

you can go find a different checklist using Google. The important thing is to have something that will allow you to go back later and compare the homes. Don’t rely solely on your memory; believe me when I tell you that all of the houses that you visit will start running together in your mind. You’ll want to make notes as you go, or sit in your car before the next house and put down your thoughts about the last house. Your Realtor will be asked to supply feedback on the visits to the home owners and he/she will want to make sure that they reflect your thoughts and not just their own opinion of the properties.

As you go through the house, try to stay focused upon the important things that you should be looking for and don’t get distracted by the current owners’ decorating ideas or family pictures and keepsakes. Try to imagine the place as you might furnish or decorate it with your stuff. As you go into each room, look down to see what the flooring looks like. If it’s wood, does it need refinishing? If it’s carpet does it need cleaning or replacement? Are there stains from pets? If it’s carpeting, is it worn to the point of needing replacement? Look up to see if there are stains on the ceiling that might indicate water damage. If there are, you’ll need to have your agent ask what happened and if the cause of the water intrusion was fixed?

In the bathrooms, look around the tub or shower stall for signed of leaking and any damaged or missing tiles. Check under the sink in cabinet for signs of leaking and around the toilet for signs of any issues or mold. In the kitchen also check under the sink for signs of water leakage, especially under the garbage disposal. If you can see behind and under the refrigerator and stove, check there too for signs of damage, especially if the refrigerator has an automatic icemaker. It’s OK to open kitchen drawers and cabinets, to make sure that they operate properly and to see how much storage is really in them. In both the kitchen and baths look to see if there are GFCI plugs, which are required if you are going to use an FHA or VA mortgage.

Check all door walls for easy operation and any signs of leakage or water intrusion. Look for cracked or cloudy windows, which indicate broken seals that should be replaced. Check closet doors, especially the bi-fold type for easy operation. In the basement, check the dates on the furnace and water heater for when they were installed and last maintained and whether or not they are high-efficiency types. Check around the basement walls for signs of cracks or water intrusion and any mold. Some settling cracks in both the walls and even the floor may be normal and not cause for undue alarm; however, large displacement cracks anywhere are pointing towards bigger problems and need to be assessed by an inspector or maybe even a foundation expert. If you encounter multiple light switches that don’t work it might be an indication of an electrical issue or they may just be switches that control wall outlets to which no lamps are attached. Check the garage, looking again for large cracks in the floor.

All of these preliminary checks are just looking for obvious things that you will want your agent to ask about. If you proceed with the house, there will be the opportunity to do a thorough professional inspection to explore these and any other issues. Remember that anything that you find can probably be fixed for some amount of money; the issue becomes who will that money come from – you or the seller.

As for the etiquette for home visits, let’s start with children. If you have children and you insist on bringing them with you on home visits, you must remain in control of them during the visit and keep

them with you. Children should not be allowed to run (or roam) around the house on their own. Remember that you are a guest in the sellers’ house and that you, and your agent, are responsible for any damage that your unsupervised children may cause, even if it was “on accident.” You should ask the agent if it is OK before using any toilet in the house and make sure that it is as clean after your use as before. Some houses that you visit may have the water turned off, or the toilet that you want to use may have a problem and the water be off. Don’t embarrass yourself and your agent by using a toilet and then discovering that it won’t flush – do a test flush before using it. Its best to take care of that need before you go out on the visits.

It is OK to open closet doors to see how big the closets are. It is not OK to open any dresser drawers in bedrooms. Those dressers are not and will not be a part of the house. Opening kitchen cabinet drawers and doors is OK. Do not start or test any appliances. That will take place as part of a home inspection. Do not move or remove any personal items of the owners. Look, but don’t touch, should be the rule for your children and for you. It is really not appropriate to lay on any of the beds or to sit on furniture. These are not things that will come with the house. Avoid playing with the controls for blinds, other that perhaps to pull back vertical blinds so that you can access a door wall. Don’t try to

open and close windows, that too is a home inspection thing. You may open the circuit break box to look at how many breakers are in it and what expansion may be left, but do not reset any breakers and be sure to close it when you are though.

The most basic way to look at what the etiquette should be for visits is to apply the Golden Rule and not do anything in their house that you would not want done in your house. Listing visits are an opportunity to access the house at the macro level. You will have time to get to the micro level during the home inspection. Remember too that you are going to try to compare this home against other homes that you visit, so try to be consistent in what you look for in each home. You will usually have some drive-time between homes, so use that to discuss the last home and make more notes.

Setting up an itinerary for an outing to visit multiple houses is a challenge for your Realtor and you should try to stay on the schedule that has been set up. Cutting visits too short or staying too long can both mess up the schedule. Remember, also, that you have ask the owners to get out pf their own home for the duration of your visit. It is both rude and inconvenient for them if you to get there too early or to be there too late. Stay on schedule.

One of the worst things that you can do on a visit outing is to arrive at a house for a showing and decide that you don’t even want to go in, because of the neighborhood or how it looks from the street. Try to do enough preliminary sorting before you ask the agent to schedule a showing, even taking the time to do a drive by, if you aren’t sure about the neighborhood. Don’t waste everyone else’s time because you are too busy to do your homework.

Sometimes you will visit homes where the owners have chosen to stay in the house during the visit. It

is an awkward situation, since you can’t talk freely during the visit. In the worst cases the owner may accompany you during the visit, making what they believe to be “helpful” comments about the house. Grin and bear it. You can comment on the house as you drive to next house.

Finally, don’t try to do too much in one day. Seeing 3-4 houses on an outing is about as many as you can get through without having them start to get confused in your mind, even with your checklist. It is exhausting for you and your agent to try to cram 8-10 houses into a one-day outing and it is probably not productive either. Outings to see houses can be fun, but they can be exhausting, too. Try to stay focused upon the task at hand and take good notes. 

My Realtor said that a new home may not be just a house, what else can it be?

Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 3

This is the third post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. There is a follow-on series to the posts for real estate sellers.

FAQ – My Realtor said that a new home may not be just a house, what else can it be?

During your interview with the Realtor that you chose, he/she probably asked if you have considered a condo or something other than just a house in a sub or out in the country. What else is there? Well, Michigan is unique in having something called a “site condo”. In fact, most (but not all) of the homes that were built in any kind of development since the early-1980’s were built as Site Condos. You can read a good legal description of the laws that established this type of development by clicking here. The long and short of it is that there are platted subdivisions and there are site condo developments and the average person would have no idea which is which by just looking at them.

a condo or something other than just a house in a sub or out in the country.

So what is the difference? In a platted subdivision each homeowner owns the land that the home sits of and the house and nothing else. The subdivision may have a Home Owners Association (HOA) but most of them are voluntary, unless it was specifically required in the deed. The roads in the sub are maintained by the local governmental body –usually a township, Village or City. There are deed restricted communities that are platted subs, but which have very specific rules or restrictions spelled out in the deed to the property. You should be informed about that when you are looking and certainly have an opportunity to review those restrictions. 

Usually, if you get out in the country the plots are bigger and are governed only by Township and other government rules or zoning restrictions. Platted subs and platted land out in the country are governed under the Michigan Land Division Act, formerly the Michigan Subdivision Control Act of 1967. A rule of thumb is that the further you get out into the country the looser the rules and regulations seem to get. So, if you want government and homeowners’ associations off your back, head to the boonies.

In a site condo development each owner owns his plot and his house AND, just like in a condo complex, is also a co-owner of some “common areas” with all of the rest of the homeowners. These houses were built under the rules of The Condominium Act of 1978, which requires that each owner MUST belong to the Home Owners Association (HOA) and share in the costs of maintaining the common areas, including insurance for them. And, in well over 90% of these site condo developments, the common areas include the roads. So the HOA is responsible for maintenance and snow removal for your subdivision roads, if it is a site condo complex. You, as the home owner, are responsible for the upkeep of your land and the house. So, remember that if the roads get rough or aren’t plowed in the winter, it’s because you and the other home owners didn’t collect the money to maintain them – you can’t blame government for that.

And there are rules! Every buyer in a site condo complex receives (or should receive) a copy of the Master Deed and HOA By-Laws. Within those documents are all of the terms and condition that you are bound by when you buy into that condominium complex. Your Realtor will make sure that you have the right to review those documents and have the ability to get out of the deal if you find them to be too onerous. Sometimes it might be wise to review them before you even make an offer. You should also be leery of developments with extremely low HOA fees. That just means that they are not collecting enough money to really do the job and things like roads may deteriorate until such time that they may have to impose a big special assessment against each homeowner to pay for new roads. The HOA has the right to do that.

Of course your new home could be an actual condo. Condos come in several different styles and some are what’s called detached condos where they don’t have shared walls with other home owners. They all have lots of common areas – basically everything outside of the house, including the roads are considered to be common areas. That could include things like swimming pools, club houses. garages or carports which may be assigned to specific condo units, and park areas or play grounds.

The rule of thumb for true condos is that everything outside of your unit is the responsibility of the condo association for maintenance and upkeep. That include things like the roof, porches and decks

and may even include the exterior doors. Of course it includes the roads and the pool or any other common elements. That is why condo association fees are usually a few hundred dollars a month - there’s a lot that the association is responsible for maintaining of repairing. There’s also insurance on all of the common elements. So don’t go looking for a cheap monthly association fee; because that probably just means that they aren’t collecting enough money to do the job properly. You have the right to review the HOA budget and the amount of working capital that they have in reserve for repairs and upkeep.

So, what else might a new home be? Well, it could be a Co-operative (Co-op). Co-ops are actually companies that own everything in the complex – land and the building on the land – and lease them out to stockholders in the company. You don’t actually “buy” the unit that you may occupy; rather you have an ownership interest (sort of like stock) in the company that owns everything and because of that ownership position, you are allowed to occupy part of the space (the units) that the company (the Co-op) owns. It’s sort of like a condo; but, in this case you are also part owner of the condo complex. Click here for a good article in the Washington Post about the differences between condos and co-ops. It turns out that the infamous Watergate complex was and is a co-op; but, don’t let that deter you.

Of course there is also a whole spectrum of manufactured homes. Mobile homes that one finds in a mobile home park are manufactured homes, but not all manufactured homes are mobile homes. There is a category of manufactured homes called modular homes which, like mobile homes, are manufactured indoors; however, these homes are manufactured in modules which are transported to

the home site and installed on a foundation, which may be a basement or over crawl space. Modular homes may be one or two stories when assembled on site and become “real estate” when they are installed. Modular homes meet all local building requirements. Realtors can help on buying and selling modular homes. On the other hand, Realtors may not deal with mobile homes, which are treated more like a vehicle sale. Mobile Home salesmen have a different license and can only deal in mobile homes.

Mobile homes, even if the wheels have been removed are not considered to be real estate. In many states, if the mobile home is permanently mounted on a foundation it may be considered to be real estate from that point on. Modular homes are built in the factory to local building code standards, while mobile homes are usually built to less stringent standards. Of course, with a mobile home you are likely to be in a mobile home park and to have to pay rent each month for your parking spot. That rent covers the cost of maintaining a common septic system or sewage treatment plant and the shared water delivery system for the park. It may cover other shared cost of the park. Check with the management of the mobile home park for details on that, since I’m a Realtor and don’t deal with mobile homes.

Each of these different type of homes has their own advantages and disadvantages, depending upon how you look at things. Buying into any of them still works out better than continuing to rent an apartment or living in the basement with mom and dad. Be sure to ask your Realtor to keep you informed as you look as to whether what you are looking at is a regular house on a platted piece of property or one of these other types of homes. 

I’ve got a good Realtor® lined up, what’s next?

I’ve got a good Realtor® lined up, what’s next?

Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 2

This is the second post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. This is a follow-on series to the posts for real estate sellers.

FAQ - I’ve got a good Realtor® lined up, what’s next?

It’s great that you’ve found a good Realtor to work with. Let’s flesh out the team that you need to have with you on this grand adventure.

If you don’t already have a mortgage person the Realtor should be able to provide you with recommendations to 2-3 good mortgage people, usually people that he/she has worked with in the past. That is really a preliminary step that you need to get out of the way before you take step one in MSHDA program in Michigan that may be available or suggest other approaches. They will probably also see if you qualify for any of the VA or USDA programs that still offer zero down programs for first time (or lower income) buyers. If nothing else works, they might suggest a gift from parents and help you understand the special documentation that will be required to make that work. Your mortgage person will take the lead on that program. You will probably find that your Realtor and your mortgage person work hand-in-hand through the whole process.

the buying process. If your Realtor has determined that you will need help with the down payment, he/she may direct you to some of the down payment assistance programs like the

So, you can see that your Realtor is doing quite a bit of work for you already and you haven’t even started to look at houses yet. Sometimes the result of all of this preliminary work is that you will find out that you are not really ready to buy a house yet. Your mortgage professional will get back to you, once they’ve pulled your credit report and let you know if there are issues in it that mean that you really don’t qualify for a mortgage. A good mortgage professional will also share with you a strategy that you can implement to get your credit in order. In the meantime, your Realtor will stay in touch and update you on the market from time to time, until you are in a position to get into the process.

Assuming that your mortgage person has pre-qualified you up to some limit and your Realtor has been able to determine a starting set of criteria for the search; you are almost ready to start. Almost ready! What now?

It is inevitable that you will see many houses in the listings that the Realtor will be sending you to consider and certainly you will be visiting more than one. Things can start to run together in your 

mind very quickly once you are into the process, so it is good to get organized before the deluge of new information hits. A good tool to have in hand before you start is some sort of comparison sheet for the houses that will allow you to record each address and list or check off the features of each, such as size in Sq Ft, number of bedrooms and baths, size of garage, size of property, exterior and interior amenities and anything else that you think will be helpful for comparison and evaluation purposes later. Here is a link to the HUD suggested home buyers' checklist. There are lots of other such checklists out there, so just Google Home Buyers Checklist to see others. Each time that you visit a home you should receive at a minimum the MLs Data Sheet for the house, so you can staple that together with your checklist to help you recall each house later.

Either before your first outing to look at houses, or right after that first outing, you should probably make yourself a list of the “must haves” and the “nice to have” features that you are really looking for in a new home. That list may evolve over time and you should share it with your Realtor, so that you and they are on the same page. Just like on some of the HGTV real estate shows, you Realtor may have to show you a house that has everything on your must have list, but which is way outside of your price ranger, in order to also show you that maybe you can’t afford everything on that list. As Dr. Phil might say. It’s time to get real!

Your Realtor will probably be sending you listings several times a week and may set up an automated search for you that could send you lists every day. It might be helpful to sit down with your Realtor and go over how to read and interpret those MLS listings. There’s usually a lot of good information in them, if you know how to read them. You should also give your Realtor feedback on any changes to the search criteria that he/she may need to make to better reflect what you are looking for in a new home. I also usually suggest that Buyers do a quick drive by of listings that they think they want to go

see. Sometimes just driving through the neighborhood to seeing the homes surrounding the house in the listing will eliminate to from the list to be visited. You should be able to tell from the MLS data sheet what school district the house is in, so you might want to do your school district evaluation before visiting, too. There are a number of good sites available to help you with that evaluation, including School Digger, Public School Review and Great Schools.

You can probably do a quick “desk audit” of the listing that your Realtor send you and eliminate a few just from reading the listing. Remember tell your Realtor why these didn’t fit for you, so that they can make adjustments to the search criteria. If you have the time, I always advise doing drive-byes on the ones that you may wish to visit. You will probably eliminate a few more that way, just because of how they look for the curb or how the neighborhood looks. It really throws the schedule off when you are out with your Realtor to visit multiple homes and you eliminate one or two without even going in. It’s also not very nice for the people who had to get out of the house and then you didn’t even visit.

In the next post we’ll cover the different types of homes that are out on the market, so that you understand the differences before you encounter them. The post after that will go over the etiquette for those visits and give you some tips on what you should be looking for as you walk through each house. 

I’m looking to buy my first home; why do I need a Realtor®?

 Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 1

This is the first post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. This is a follow-on series to the posts for real estate sellers.

FAQ – I’m looking to buy my first home; why do I need a Realtor®?

You may be a first-time home buyer or maybe you’ve bought homes before, but it’s been a while and things change; so this series of posts is designed to walk you through the process of buying a house. You can probably find all of the information that you think you need to look for a house on-line these days on sites like Realtor.com or Zillow; so, why do you need a Realtor®? I get that; and, you are correct that you can find lots of information about houses that are for sale at those kinds of sites and

hundreds of others that are out there. However, merely finding something that you think you might like is just the tip of the real estate buying process iceberg. I hope that this series of posts will help you understand better why you need to seek the counsel and advice of a professional in the field – a Realtor®.

First, let’s deal with the term Realtor®. How is that different from just a real estate agent or a broker? All three terms refer to someone who has taken a state approved 40-hour (in Michigan, it may be more in other states) real estate licensing course and passed the state test to receive a real estate license. A broker in Michigan has gone on to take an additional 40 hours of real estate education and passed a much more intensive test. Even getting to take that extra education and the test usually also requires that the broker candidate must have some defined amount of experience in the field of real estate as a licensed agent. Brokers are licensed to manage other real estate agents as well and may also own and operate a brokerage with multiple agents. State real estate laws dictate that all real estate agents, whether they are Realtors or not, must work under the management and control of a brokerage. Associate Brokers are agents who have passed the brokers licensing requirement, but who still choose to work under the management of a broker.

So, all three have passed the state test and have been issued real estate licenses; what makes a Realtor NAR Code of Ethics and Standards of Practice. They must also join their state’s Realtors Association. Why is that important? Well, that begs the question, “Is ethical behavior by the person that you are working with for your real estate transaction important to you?” The state Realtors Associations have processes that they follow to make sure that any unethical behavior by a Realtor is corrected and Realtors may be punished by fines for ethical lapses. Realtors all belong to some local real estate association, which requires that they be member of NAR and adhere to the NAR Code of Ethics.

more than just a real estate agent? A Realtor must join the National Association of Realtors (NAR) and must agree to abide by and be governed by the

The NAR Code of Ethics defines the duties and responsibilities that Realtors owe to their clients and to each other. Perhaps the most important concept embodied by the Code of Ethics is the Realtors’ fiduciary responsibility to the client. That means that the Realtor must put his/her clients’ interests above their own interests. Being a fiduciary for the client means that it is more important that the clients interests be protected than the Realtor worrying about his own interests, including his/her commission on the sale. It is that fiduciary responsibility that stock brokers have been fighting so hard against recently. Financial planners accepted some time ago that they owe their clients fiduciary responsibility and adopted practices to ensure that they do keep their clients’ interests first; but stock brokers are still looking out for number one, rather than their clients; so, they have successfully resisted accepting fiduciary responsibilities. Remember that when your broker calls you with that next “hot tip”. He is probably already counting the commission he will make on the sale, whether the stock is a star or a dog.   So the bottom line is that you should find a Realtor, not just a real estate agent, because that agent, like a stock broker, doesn’t owe you any fiduciary duty.

It’s the Realtor’s job to help you through the whole real estate buying process; a process which starts well before visiting any of the houses that you saw on-line. So, just like the advice that I gave to the sellers in that series of posts, I always advise that you find a GOOD Realtor. That doesn’t mean just going with the sister of your best friend who happens to be in real estate or the guy that your uncle

Bob says sold him his house 15 years ago (if they are even still in the business). It doesn’t mean calling the person on the last real estate sign that you happen to see or the one that has put their name on all of the shopping carts in your area. And you’d probably never see that guy that you see in the TV ads, just one of his Buyer Agent assistants.

A GOOD Realtor is going to take the time to get to know you and what your needs and desires are in a new home. He/she is going to guide you through the process of getting ready to go looking for homes, which usually starts with getting a mortgage pre-approval and sitting and having a detailed discussion about what you want and need in a new home. He or she will work with your mortgage person to understand what you can afford and what, if any, help you may need with your down payment or closing costs. That will help the Realtor guide you towards homes that you can really afford and negotiate terms that you can live with.

How do you find such a Realtor? Well, recommendations from past customers are a good starting point; so ask around your office, your church or your neighborhood for recommendations from people that you know will be honest with you. Get more than one recommendation and do a little Internet snooping of your own. Any GOOD Realtor will probably have their own Web site with testimonials from satisfied customers. You might also Google their name and see what other stuff about them shows up. Sometime complaints or bad reviews are only found on other web sites or on social media.

Once you have 2-3 Realtors in mind that you feel might be good fits for you, arrange for interviews with them all. You can tell a lot about a person and how they might work with, and for, you by talking with them about your needs. If you find yourself just listening to a bunch of bragging about how great they are and how fortunate you are going to be to have them work for you, find the nearest trash can and throw away their contact information. Sure, you want to work with someone who has had success in the past, but that should be secondary to the way that they approach working with you in the present.

The GOOD Realtor will ask a lot of questions and listen more than talking. At the end of the session they should be able to clearly tell you what they heard from you during the conversation and be able to define the perfect home that you are looking for and any constraints that you have. They should also be willing to openly and honestly tell you where you might be overreaching or setting yourself up for disappointment, especially as far as the price limit that you have is concerned. The bottom line at the end of the interview with the best Realtor for you is that both you and they feel comfortable with the process that you are about to embark upon.

We’ll move into the home buying process in the next post. 

What are some unique things that I may not have asked about as the Seller?

 Understanding the Real Estate Process from A – Z – A Seller’s Guide to Real Estate – Part 12

This is the twelfth post of a series in an FAQ format that I hope will help would be sellers better understand the real estate process that they are about to go through. There will be a follow-on series for real estate buyers.

FAQ – What are some unique things that I may not have to asked about as the Seller?

There are an infinite number of variations that could occur to the process of selling your home. The 11-post sequence that was just finished took you through a fairly straightforward sale. That is not always the case. I have listed and expanded upon a number of variations below, in no particular order.

Question – The Buyers’ offer says that they will be using an FHA/VA/USDA RD mortgage; how does that impact me?

Conventional mortgages are the norm for homes above $400,000. In Michigan most buyers of properties that are listed for less than $375,000 will end up using an FHA-backed mortgage, but some may use their VA benefits and do a VA-backed mortgage. A few may take advantage of the USDA’s (Yes, it’s the same USDA that inspects meats) Rural Development (RD) loan program. Each area of the country can have different FHA loan limits, with California (of course) having the highest at $625,000. You can find the FHA loan limit for your area by Googling FHGA Loan limits for (your county and state goes here).

Each of these loan guarantee programs has its own set of rules and qualification requirements, but all three impose special requirements on the seller that are different from the requirements of a conventional loan. I will expand on them further in the series for Buyers. Here I will just look at the things that the Seller needs to be aware of that are different from a conventional mortgage.

The differences are mainly in the appraisal. All mortgage loans require an appraisal, so that the bank can assess the protection that the home provides as a protection against the risk involved in making the loan. You house is the asset that secures the loan and banks prefer to have assets backing the loan that can be sold readily and which carry sufficient value to make sure that they get their money back if it needs to be sold after a foreclosure. For FHA/VA/USDA mortgages the loan programs require the appraisers to also assess the health risk hazards that the property might have, such as electrical circuits that are not properly protected against shock, if they are in areas like the kitchen or baths and trip and fall hazards, such as stairs of more than three steps without handrails. They are also required to peek into the attic to see if there is visible evidence of mold in the attic space.

Because people know that the FHA/VA/USDA appraiser will be looking for those things the appraisals are often called an inspection; however, they are not really inspections like the buyers will have done by a qualified home inspector.  If the FHA/VA/USDA appraiser finds a health or hazard issue they will write it up and the Seller MUST have the issue remediated. There is a provision to have the work re-inspected by the appraiser before he/she will sign off on the appraisal and the mortgage can move forward. Many times the appraiser will charge for that return visit and the Seller may be asked to pay a nominal fee for that service. On most VA loans a termite inspection is also required. On a VA purchase loan, borrowers in all but nine states are not allowed to pay the pest inspection fee. Check with your mortgage company or ask your Realtor® about whether you have to pay for that inspection. Obviously, if they find termites, you’ll be on the hook to remediate that, too. 

For more on these different mortgage options just Google each one. The added requirements and risks involved in the FHA/VA/USDA mortgages have caused some Sellers to market their homes for sale with Conventional mortgages or cash only and that is their right; however, it will significantly reduce the buyer pool and most likely prolong the selling process.

Question – The Buyers have offered me a Land Contract. What is that all about?

Land contracts are sometimes called Seller Financing, because that’s really what it is. You, the Seller, are assuming the role of the mortgage company and financing the sale your own house to the Buyers. Usually a hefty down payment is required, which may be all that you need right away anyway; and the “loan” that you are making to the Buyer is financed at a rate that is a little above what they might get at a bank. Why do they do that? Usually because they have damaged their credit to the point where they can’t qualify for a mortgage. Maybe they had a short sale, a foreclosure or a bankruptcy in their immediate past. For whatever reason they are now asking you to take the chance on them and be the mortgage lender for this sale. The Land Contract is just that – a contract between you and them that defines their obligation to pay you back and your rights to repossess the property through foreclosure if they don’t pay you back. This was a quite popular option just after the Great Recession, but has settled back into a seldom used option for Buyers. See this NoLo web site for a good tutorial on Land Contracts.

Question – I have to move to my new job and leave my house empty before the closing is scheduled to happen. What should I know about that?

There are many reasons that a house may sit empty while wait for a sale or for closing. Perhaps it is the need to move to a new location for job reasons or perhaps the property is in an estate of someone who had passed away and is now sitting empty.  Whatever the reason, you as the Seller (maybe the executor of the estate) need to understand a few things that are different. One of the biggest is that the homeowners’ home insurance policy that covered you or them (the deceased) does not apply if the

property is left empty. If something like a break in or even a fire where to happen and cause damage, the property would not be covered under those old policies. There are special home insurance policies available to cover empty houses and you should have one of those. They are more expensive than regular homeowner’s policies; but, there is also more risk involved, especially for break-ins. At the height of the recent recession many homes were broken into by copper thieves who cut out all of the copper plumbing, and sometimes even the electrical wiring, to sell to scape metal dealers.

In the wintertime, any house that will sit empty should also be winterized. The house’s water will be shut off and the plumbing drained so that if the heating system fails for any reason the pipes won’t freeze. That service usually casts between $300-500 and is the Seller’s responsibility. If a Buyer makes an otherwise acceptable offer, a point of negotiation is determining who will pay to have the place de-winterized and re-winterized for the home inspection. It is reasonable to ask the Buyer to pay for re-winterizing it, but the Seller is usually responsible for making arrangement to have the place ready to inspect, which could also involve turning back on the utilities if they had been shut off (not a good idea, by the way). It’s not worth queering the deal over this small amount.

It is also the Sellers responsibility to keep the empty property maintained while it is for sale and while awaiting the closing. That can involve snow/ice removal in the winter and grass cutting in the warmer months.

Question - We couldn’t reach a final agreement on a contingency or the deal fell through and now the Buyer wants his Earnest Money Deposit (EMD) back. Do I have to give that back?

In most circumstances the answer is “Yes”, you do have to return the EMD. That money was likely being held in a special escrow account at the Buyers agent’s office. The Buyer agent will present a form to be signed that specifies the disposition and distribution of the EMD funds. Remember all of those contingencies that we discussed in an earlier post; well you probably just hit one that could not be resolved to the Buyers’ satisfaction and the terms of that contingency undoubtedly specify the Buyers get the EMD money back.

One situation that can lead to you getting to keep some or all of the EMD is if the Buyer, having removed all other contingencies just gets “Buyers’ remorse” and backs out of the deal. I have had that happen once in my career. I represented the Buyer in that case and he lost over $4,000 by backing out at the last minute with no valid reason that met the terms and conditions of the Purchase Agreement contract. Did he have a reason? Sure, but that reason wasn’t covered in the terms of the contract. In most cases the listing real estate company may split the forfeited EMD with the Seller. The forfeiture of the EMD is view as compensation to the Seller for having removed his property from the market for some period of time.

Question – What happens if I refuse to fix something that is found during the home inspection and refuse to offer any monetary concession for it? 

Let’s assume that you aren’t balking over some minor thing that cost less than $1,000. Just do those or offer the Buyer a concession at closing. For bigger issue, like, maybe, the Buyer asking for a new roof or some other repair that is going to cost thousands; you may wish to get a few quotes for the work and average them, so that you can offer the Buyer a compromise where you pay for a part of the work and the Buyer pays for a part (usually 50-50). Just flat out refusing to negotiate with the Buyer on the needed repair is likely to be a deal breaker and result in the deal being cancelled.

In addition to the deal falling apart, you would now know about an issue with the property that you may not have known about before and you may have to disclose it on your Seller’s Disclosure Statement. If the home inspection revealed extensive mold in the attic, you can’t just go “Nah, nah, nah, I don’t hear you” and not disclose that known fault. There are very specific questions on that disclosure form that address those things and you would now be committing fraud if you didn’t disclose it. The best course of action is to try to negotiate some split with the Buyers; but you really have to go ahead and do the mold remediation anyway. 

The demand for a new roof is a bit more subjective. The reason that Buyers ask for that is usually because their home inspector told them that a new roof will be needed soon. You might get a roofing company or two to look at your roof and let you know if they think it needs to be replaced immediately or can last a few more years. The same applies for Buyer demands for replacement of the mechanicals (heater and hot water tank). Yours may be old, but they may not necessarily need to be replaced, if you have maintained them well. Show the Buyer the recommendations of the companies that you contacted and negotiate.

Question - The Buyer is not putting any money down on the sale, should I be concerned?

Not necessarily. There are still a few mortgages available to Buyers, under the VA and USDA programs that have zero down payments. They will still have some Earnest Money in the deal, but that is often very low, too. The programs themselves are very valid and do work. What is hard to properly evaluate is the Buyers themselves. You may want to look a little closer at the Buyers qualifications for those programs, to make sure that he/she isn’t going to get a few weeks into the deal and get turned down by the VA or the USDA. VA buyers should already have their VA qualification documents, before they make a VA-backed offer. Your agent and their agent should have a good conversation about what steps they’ve already taken to meet the requirements.

Question – My property taxes are due before closing, should I go ahead and pay them or wait?

This is a 6 of one, half a dozen of the other question. The end result will be the same in terms of what you get out of it. The title company will pay any taxes that are due out of the proceeds and they will refund any taxes that you have paid for which you deserve a refund. If there is any penalty that would result from you not paying it now, it doesn’t make sense not to pay it. If there is no penalty, then it may not make sense to you to take money out of the bank only to put it right back in within a few weeks. It’s up to you. Listen to the advice of the title company on this one.

Question – I’ve got some furniture and other items that I don’t really want to move. How can I sell those items to the Buyers?

You can certainly put a price on them and see if the Buyers are interested in having them. Many times your taste and the taste of the Buyers may be completely different, so don’t be offended if they don’t want your stuff. Call Salvation Army or Goodwill. They’d probably love to come pick up your stuff. Any deal that you make with the Buyers for furniture or other personal property items (lawn mowers or patio furniture) is between you and them and you should negotiate how they will pay for the items that you are leaving for them. That is all outside the real estate deal and outside of the closing.

Question – What if I decide not to sell and want to rent it out instead?

That’s certainly up to you. You should probably have your Realtor do a market analysis of the rental market in the area, so that you can determine a fair rental rate to ask for the place. You may also wantHere’s an interesting bog post by one such company - Propertyware. Accumulating rental properties is a great way to build wealth, but only if you know what you are doing.

to look into companies that can manage the rental property for you and take care of upkeep on the property. Some companies also do the vetting of potential renters for you, saving you the headache of trying to analyze their credit report and do background checks.  If this is one of many rental properties that you own, you might look into a property management firm (if you don’t already have one) or property management software that help you with the financials,

Question – What are the tax consequences of selling my house?

First, I’m not a tax expert, so I’ll refer you to your tax person. For most Sellers, this sale is probably not that of the last home that they will own; so, they will go on to buy something else. Depending upon whether they are moving up the property ladder or downsizing the tax consequences will be different.  The gain from selling your home is treated like a capital gain for tax purposes and there are all sorts of rules about that which only a tax expert understands. Here is a good article by lawyer Stephen Fishman on the NoLo site about avoiding capital gains taxes on the sale of your home.

Question – Am I still on the hook for defects that the buyer may find in the property after the sale has closed?

You may be. It depends upon whether you knew about the issue and failed to disclose it to the Buyer on the Sellers’ Disclosure form. You don’t get a free pass by saying, “Oops, my bad. I forgot about that.” The Buyers lawyer will have a field day with that excuse. It is also very likely that the Buyers’ lawyer will interview friends and neighbors to determine how aware you were of the issue and how long you knew about it before the sale. Situations like this lead to charges of fraud and cold result in both civil and criminal lawsuits and charges. If you know that there is an issue the rule of thumb is disclose, disclose, disclose. That is not to say that there may be issues in the property that you honestly were unaware of when you filled out the Sellers’ Disclosure. That happens a lot with mold issue. Very few homeowners go up into their attic spaces looking for mold, but the inspector will and may find some spots of mold. It is possible that the Buyers didn’t have a very good inspector and they don’t discover the mold problem until later. In that case you would seem to have a reasonable defense against charges of fraud. Consult your attorney!

Question – My home was foreclosed upon a few months ago and we are in the “redemption period”. How does that impact the closing?

For one, the company that now owns the house due to foreclosure undoubtedly had to agree to the sale at the sale price. The closing may be interrupted while someone takes a check to the foreclosure company for the amount that they agreed to take for the house (i.e. the redemption price) and picks up a receipt and release of the property. Once those documents are brought back to the closing the closing can proceed. Sometimes this process can be done via Faxes or Emails and wire transfers.

There are doubtless many other scenarios that could generate questions from the Seller. I hope the few that made up this series of posts helped the reader understand better the process involved in selling a house and the Sellers roles in that process. Next, I will post a similar series looking at the process from the buyer’s perspective.