|
|
|
|
|
|
|
| The Realty Edge |
|
Articles and Advice |
|
 |
|
| Appraisal rules tough on additions By Dian Hymer Recently a homeowner in the hills above Oakland, Calif., applied for a refinance. An appraiser visited the property and measured both levels of the house. The appraiser called the homeowner a few days later to find out if the lower level had been added with a permit. The public record indicated the house had three bedrooms, two bathrooms, and 1,513-square feet. The actual house in its current configuration has four bedrooms, three baths and a recreation room, giving it considerably more square feet than the public record indicates. The owner didn't know if the lower level had been added legally, claiming the house was in its present configuration when he bought it about 30 years ago. Due to changes in appraisal guidelines for residential properties that took effect in 2009, appraisers usually don't give livable square footage credit for work that was done without building permits. Without the extra square footage, the appraised value will be less than it would have been if the work were done legally. This doesn't mean that the lender won't grant a loan. But, if your house appraises low and you were expecting a loan amount based on a higher figure, you'll be disappointed and perhaps unable to complete the refinance -- or, if you're a buyer, you may be unable to purchase. Let's say you wanted a loan for 70 percent of an $800,000 value, or $560,000. The appraisal comes in at $600,000. On a refinance, the lender probably won't lend more than 70 percent of $600,000, or $420,000, which is $140,000 less than what you requested. HOUSE HUNTING TIP: What can you do in a situation like this to increase the appraised value of your home? The first thing to do is go to the local planning department and request copies of all permits on the house going back to the original building permit. If you can find a permit for the additional work that was done, give a copy to the appraiser. The appraiser will have measured the unpermitted square footage. With confirmation that this space is legal, the appraiser will be able to include the additional square feet and increase the appraised value. Take a copy of the permit that confirms more rooms than is reflected in the public record to the county assessor's office and have them update their records. You may be reassessed based on the fact that your house has a legal addition, so your property taxes could increase. However, your house will appraise and sell for more if you can substantiate that the additional space was added with permits. If you discover that the work was done without permits, you can attempt to have the work legalized after the fact. This can be a complicated and expensive project, depending on when the work was done and how many square feet were added. If the addition is 10-20 percent of the size of the house, the permitting process will be less onerous than if the illegal space equaled 50 percent of the entire house. You will need to meet certain code requirements. For example, if a stairway leads to the unpermitted space, it must be 36 inches wide. Replacing an entire staircase can be prohibitively expensive. Walls may have to be opened to inspect the plumbing and electrical. If something doesn't meet current code requirements, it will probably have to be brought into compliance. You might have to add or change windows. Plus, if the building inspector discovers other items in the house that do not comply with current code requirements, you might have to correct these in order to receive final approval of the project. THE CLOSING: Sometimes contractors take out permits for work, but don't take the time to have the final inspection done. In this case, call the contractor and have him finish his job. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
|
| Sizing up purchase deposits By Dian Hymer In most states, it's customary, or required by law, for the buyers to include a good faith deposit when they make an offer to purchase a home. The deposit should not be given directly to the seller, but held by a trustworthy third party that maintains a trust account specifically for home purchase deposits, such as an escrow or title company, real estate firm, or real estate broker. The deposit can be in the form of a check made out to the third-party company or it can be wired into the appropriate account. The size of the deposit you make is usually determined by market conditions and local custom, except for specific types of sales, such as probate sales or sales of homes in a housing development where a minimum deposit is required. HOUSE HUNTING TIP: Your deposit will become part of your downpayment if the sale goes through. Depending on how your contract is written, your deposit should be refundable if you are unable to satisfy a contingency, after exercising due diligence to do so. Your contract should include contingencies for inspections, satisfactory condition of title to the property, your ability to line up financing, and the lender's approval of an appraisal of the property. For example, if your inspections reveal defects that can't be satisfactorily negotiated with the seller, your deposit should be returnable if your contract provides for this. However, the deposit won't be released by the holder to either the buyers or sellers without a release signed by both parties indicating how to disperse the funds. Be sure to check with a knowledgeable real estate attorney to determine who is entitled to the deposit if you back out for a reason that's not provided for in the contract. Real estate agents who also are not attorneys cannot advise you on this issue. If you end up in a dispute, the deposit holder won't release the money to either party until the dispute is resolved. How large a good faith, or earnest money, deposit you make will depend on several factors. In any case, your deposit should indicate your intent to abide by the terms of the contract and close the sale. There is usually no set amount required by law. In California, where home purchase contracts can include a liquidated damages clause, deposits are often 3 percent of the purchase price. This clause puts a limit on damages that could be awarded to the sellers if the buyers don't close the sale. If buyers and sellers agree to include this clause in the contract, state law limits the amount that can be awarded to the seller to 3 percent of the purchase price. In many areas of California, deposits tend to be 3 percent of the offer price, even if the contract doesn't include a liquidated damages clause. Like most elements of a purchase contract, the amount of the deposit is negotiable. So, if you offer a $10,000 deposit on a $500,000 house, the seller might counter your offer and ask for a deposit of $15,000, which is 3 percent of the purchase price. The deposit can be made in two steps. You could offer $5,000 as an initial deposit, and increase that amount to a total of $15,000 upon removal of contingencies. In a hot seller's market, you might want to offer the full amount up front, or make a larger deposit than you would if you weren't potentially competing, to show your sincerity to the seller. THE CLOSING: If you're buying a short-sale listing that might take two or three months for lender approval, you might want to keep the deposit to a lower amount so that you don't tie up more money than necessary for a long time period. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
|
| Death of a real estate deal By Dian Hymer Take a proactive approach to buying or selling a home. By anticipating what could go wrong with your real estate transaction, you can take care of potential problems before they derail the deal. Years ago, inspection issues were the likely culprit if a home sale fell apart. Defects were uncovered during the buyers' inspections that weren't known to them before they went into contract to buy the property. Sellers can reduce their exposure to transaction failure by ordering presale inspections before the property goes on the market. Many of today's buyers use FHA financing, backed by the Federal Housing Administration. If your home is in great shape, there is a lower probability that FHA will require that work be done before closing. In one case, the work required by FHA couldn't be done in time and the sale failed. HOUSE HUNTING TIP: Financing has become the biggest headache in the current market. Lender tightening on buyers' qualifying criteria and on appraisals continues to stymie many deals. And, the tightening isn't over yet. FHA is popular with low-cash-down buyers. The default rate on these 3-5 percent cash downpayment loans is rising. It's almost certain that FHA will modify their qualifying requirements this year. Buyers can save themselves a lot of grief by making sure they're qualified for the financing they need before making an offer. Have your credit checked. Credit reports often contain erroneous information. This can keep you from qualifying for the best mortgage at the lowest interest rate. Repair your blemished credit report before your application goes to underwriting. Expect the unexpected. Recently, homebuyers received underwriting approval and were told their loan documents would be ready to sign in a few days. Next, they were told that one more piece of information was needed before their loan documents would be drawn. This is not uncommon. You can reduce the chance of this happening by working with a good loan agent or mortgage broker who has a lot of experience working with today's mortgage lenders, and who can anticipate what underwriting will require. Make this documentation available as soon as possible. An offer made contingent on the sale of the buyers' home is riskier than one that's not contingent. Before sellers accept a contingent-sale offer, they should make sure the buyers have a salable home that's priced right for the market. If the buyers' home doesn't sell, it could waste a lot of time for nothing. Low appraisals are common in the current market and can make a transaction unworkable. Lenders want to make sure there's enough equity in the property in case home prices drop further. Buyers and sellers should be aware of the fact that the appraisal on the property may come in low, even if there are multiple offers at a higher price. It doesn't mean the property isn't worth the higher number. In this market, market value won't necessarily match the appraised value due to lender's cautiousness about lending. Buyers and sellers should be prepared to renegotiate if the appraisal comes in low and the lender won't lend the buyers the amount they need to close. This could involve the seller accepting a lower price and the buyers putting additional cash down. If they can't come to agreement, the deal is off. About one in three short-sale transactions don't close. These are sales where the lenders agree to accept less than the balance owed. The sales are subject to lender approval and lenders may reject the buyer's purchase contract. THE CLOSING: It's a good idea for buyers and sellers involved in a short sale to keep a cash reserve that can be offered to the lender as a last-ditch effort to obtain lender approval. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide." |
| Hot Links |
| National Assoc Women's Council of REALTOR'S http://www.wcr.org/ Why use a GRI? http://www.grinetwork.org/General/Whatis.asp What is ePRO? http://epronar.com/roster.asp?x=37516 WCR Santa Clarita Valley Chapter http://www.WCRSantaClarita.org SRES: Seniors Real Estate Specialist http://www.seniorsrealestate.com/sarec/ |
|
| Your Newsletter is Powered by: |
 |
|
 |
