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| DAN SIEGEL's Realty Update from A PERSON Who Knows Real Estate |
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Articles and Advice |
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| Presale inspections for smoother sales By Dian Hymer Homes are selling for less. Everyone's trying to cut back. Yet, many real estate agents think it's wise for sellers to provide presale inspections for buyers to review before they write offers. Is the cost, which could run from a few hundred to $1,000 or more, worth the expense? Last year, a home seller in the hills above Oakland, Calif., did a lot of work renovating a home before putting it on the market. Her agent recommended a home inspection, which involves a more comprehensive investigation of the property. A wood pest or termite report covers damage caused by wood-destroying organisms, and conditions that would be likely to lead to future infestation. A complete home inspection usually covers the roof to the foundation and everything in between, although this differs from one inspector to another. The seller in the above example was financially exhausted after taking care of the fix-up work and decided against providing a presale home inspection. The house was priced under market value and showed well. It brought in multiple offers and sold well over the asking price. However, the buyers' home inspection revealed that the foundation needed replacing. The deal stayed together, but only after a much lower price was negotiated. Changing the price in the middle of a transaction can be a red flag to the lender, particularly if it's a significant price reduction. The lender could require the work be done by closing, which could delay the closing by months. If the buyer's loan commitment expires, the transaction could collapse. HOUSE HUNTING TIP: One benefit of providing presale inspections on your home is that you have the opportunity to correct defects before marketing the property. This will make your home more salable and increase the odds of a smoother transaction. Another benefit is that by providing as much information about the property as possible upfront, you decrease the risk of a transaction falling apart when buyers discover information about the property they weren't aware of when they made their offer. One seller failed to provide a foundation report to the buyers before they made an offer. When the buyers were given the bad news, the transaction fell apart. If you have reports on your home, make sure that the buyers receive copies of them before they decide whether or not to buy your home, especially if the reports reveal conditions about the property that could influence the buyers' decision to buy or what they would pay. Sellers often see no good reason to pay for inspection reports upfront because the buyers will want to have their own inspectors investigate the property. Buyers should have the property inspected by their own inspectors. The purpose of getting presale inspections is not to preclude the buyers from having inspections -- it is to educate the sellers and buyers about the property condition before they enter into a contract. Sellers are in control of who inspects their home when they pay for presale inspections. Make sure to use inspectors who are well respected in the area. The buyers' comfort level with your presale reports will be higher if their agent can vouch for the inspectors. Even though the buyers will probably do their own inspections, having presale inspections can cut down on negotiations that can occur after the buyers do their inspections. However, don't be surprised if the buyers ask for something as a concession for removing their inspection contingency. Recently, buyers of a home in Oakland's Rockridge neighborhood asked the seller to have the garage roof replaced, even though they were given a roof report and replacement proposal before they made their offer. Their offer was based on taking the property in its present condition. THE CLOSING: The seller said no and the buyers removed their contingency. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
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| How does your garden grow? By Paula Hess If you’d like to have a garden, but think you don’t have the space, think again. Urban gardening techniques are allowing small-space gardening to take root in unlikely places, such as balconies, raised planters, roofs, windowsills, and postage stamp-sized backyards. Condominium dwellers and homeowners alike are getting their fingers dirty and growing their own produce, succulents, and flowers in these tiny slivers of dirt. According to Texas A&M horticulturalists, nearly every plant that grows in a spacious garden can grow in containers, such as hanging pots, windowsills, or even tubes--bags of potting soil with slits for the plants to protrude. Some plants are ideally suited for container growing, including tomatoes, peppers, eggplant, green onions, beans, lettuce, squash, radishes, and parsley. Texas A&M offers pointers on everything from soil preparation to container selection at http://aggie-horticulture.tamu.edu/extension/container/container.html. Topsy-turvy Turnips? One urban gardening option gaining popularity is germinating plants upside down from hanging containers. That is, the plants dangle upside down from homemade planters, such as five-gallon buckets, or commercially available planters. A recent New York Times article at http://www.nytimes.com/2010/05/20/garden/20tomato.html spotlighted this technique. These hanging options allow those without a yard to grow fresh produce, and those with a backyard garden to add a rack of hanging planters and boost their gardens’ yields. Condo dwellers can get in the act too with easy-to-make hanging window pots. For a step-by-step pictorial on making your own upside-down soda bottle container, see http://www.cheapvegetablegardener.com/2010/05/2-liter-bottle-upside-down-tomato-planter.html. Succulents If your interest in gardening is ornamental versus gastronomical, then succulents are an ideal match for you and California’s climate. Not only are these plants suitable for indoor and outdoor settings, these heat-tolerant and drought-resistant plants require little maintenance if you become an erstwhile gardener. According to Debra Lee Baldwin, author of Designing with Succulents and Succulent Container Gardens: Design Eye-Catching Displays with 350 Easy-Care Plants, “Succulents are carefree plants for small-space gardens.” She notes that succulents come in all shapes, sizes, colors, and varieties—from delicate sedums with rice-sized leaves to trees that are reminiscent of the vegetation in a Dr. Seuss book. Succulents can accent any setting—windowsills, sitting areas, walkways, and, of course, yards. The author’s Web site features how-to videos at http://www.debraleebaldwin.com/ and http://www.succulentchic.net/ and a beautiful array of examples of the design possibilities. In no time, you’ll be creating your own windowsill boxes of sansevierias (mother-in-law’s tongue). A Tree Grows in Brooklyn What started as an experiment to grow vegetables in a Brooklyn apartment window has evolved into a collaborative online community’s effort to empower inner-city residents to grow food in windows. This Internet-based collective shares ideas and techniques for building and using low-cost hydroponics to grow vegetables. Visit http://www.windowfarms.org/ to learn how to create your own 365-day garden of edibles using low-impact materials or recyclable materials in your outbound trash. You also can purchase starter garden kits from the site. Either way, these gardens will brighten any window. More Resources • Cactus and Succulent Society of America (www.cssainc.org/) • HGTV (http://www.hgtv.com/topics/container-gardening/index.html) • Container Gardening Guide (http://containergardeningtips.com/) • National Gardening Association (www.garden.org/home) |
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| Not all buyers are worth a counteroffer By Dian Hymer After mustering the emotional energy to make an offer on a listing, it can be devastating if you hear nothing back from the seller. In most cases, if the offer isn't what the sellers are looking for, they will issue a counteroffer detailing the price and terms they can live with. When a seller doesn't respond at all to your offer, it's usually because the offer is so low that the seller thinks it's a waste of everyone's time. Ask your agent to talk to the listing agent to find out why the seller didn't counter your offer. Then, make another offer if you think the house warrants a higher price. If the sellers want too much for their house, take a breather. Let the listing sit on the market awhile before you make another offer. The risk of this approach is that another buyer could come into the picture who is willing to pay the sellers' price. Nothing is lost if you wouldn't have paid that price. Your agent should keep in touch with the listing agent during your wait-and-see period. Ideally, you'd like to know if the sellers are going to reduce the price before it shows up on the multiple listing service. A price reduction to market value could elicit interest from multiple buyers. Risk-averse sellers can be skittish about working with buyers who have a low cash downpayment. It's wise to include a mortgage preapproval letter with your offer. Also, some sellers aren't in a position to accept an offer that's contingent on the sale of the buyers' home. Another reason buyers don't receive counteroffers is because there were multiple offers. The sellers can accept only one offer in primary position. If there were five offers and yours was the lowest, you're not likely to receive a counteroffer. Multiple offers are occurring in low-inventory, high-demand markets. Buyers were out early this year due to lower home prices, low interest rates and homebuyer tax credits. HOUSE HUNTING: A typical reaction from buyers who lose in a multiple-offer competition is that they would have paid more. When you're competing against other buyers, you need to make your first offer your best offer. This seems counterintuitive because you run the risk of paying more than you might need to. One way to ensure that you don't pay too much is to include an appraisal contingency in your purchase offer. Generally, an appraisal contingency allows the buyers to withdraw from the contract if the house doesn't appraise for the purchase price. In today's wary lending environment, lenders are requiring appraisers to be conservative on appraisals, particularly in declining markets. Be aware that some buyers in a competitive situation will not include an appraisal contingency in their contract. If they have a large enough cash downpayment and the appraisal value is less that the contract price, the lender may still approve a loan amount that will enable to the buyer to proceed with the sale. THE CLOSING: Buyers who want a house badly enough will often pay more than the appraised value if they have enough cash to make up the shortfall. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
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| Neighbors pry over condo sale etiquette By Benny Kass DEAR BENNY: My wife and I own a condo in a two-unit building. Our downstairs neighbor, who bought the property only two years ago, recently put her unit on the market. Her inability to cover her mortgage obligation is the reason she is forced to sell now, instead of waiting for the market to improve. During the last two months, the listing agent has had three open houses per week: two hours on Tuesdays, and three hours each on Saturdays and Sundays. This is creating quite a bit of interference in our lifestyles in terms of commotion, driveway blocking, etc. In addition, the asking price now has been significantly reduced, thus lowering our "comparable" value. Do we have the right to limit formal "open houses" to the more respectful one time per week? Do we have any rights in the agent's publication of the lowered price (i.e., "Price Reduced" on the for-sale sign on our building)? Do we have any rights of "approval" of the financial condition of a prospective buyer? --Mark DEAR MARK: If you lived in a condominium with more units, your board of directors could impose reasonable restrictions. Most condominium legal documents prohibit actions that create a nuisance. But, unfortunately, it's you against your neighbor. Have you talked with her and explained that her agents are disturbing your peace and quite, and that your driveway -- which I assume is a common element -- is constantly being blocked? Short of cooperation, I am afraid that your only remedy is to seek an injunction in court, although there is no guarantee that you will be successful. As for your other questions, there is nothing you can do about the low sales price. Property owners have the right to sell their property at any price they want; they can also give it away should they so desire. In a cooperative apartment, the board of directors generally has the right to reject a prospective purchaser based on inadequate financial situation. However, very few condominiums have this right. Your only hope is that a purchaser's lender will look very carefully at the financial situation -- not only of the purchaser but also of the association. In today's market, lenders are very conservative. DEAR BENNY: I would like to know what can be done to the president of our condo association, who spent approximately $4,000 on projects that the board didn't approve and weren't emergencies. At the time I was a board member. These two projects were never discussed with the board as required by our bylaws. --Sue DEAR SUE: You have a number of options. But first, I have to ask you a question: Have you talked with the other members of the board of directors? Are they on board with you or are they supporting the president? Assuming that all of your other board members are in agreement, the board has the right to remove the president from office. Board members are elected by the unit owners, and only the unit owners by a majority vote can remove a board member. (Note: This answer is general in nature; you have to review your own legal documents -- declaration and bylaws -- to determine the process for removing a board member.) However, in most condominiums the board elects its own officers, and the board can also remove an officer. In your case, assuming that (1) you have properly noticed the time and place for a board meeting, (2) you have a quorum present at the meeting, and (3) a majority of the board members are in agreement, the board can ask the president to step down and the board will elect a replacement. As noted above, however, that board member will still remain on the board. Next, the board can call a special meeting of the owners for the sole purpose of removing that board member off the board. Again, you have to look at your bylaws and strictly comply with its requirements. Every legal condominium document I have ever reviewed contains a provision as to how a board member can be removed, but you may want to ask your association attorney for assistance. Finally, the board should formally ask the association attorney for a legal opinion as to whether the expenditure was permitted under your legal documents. If the attorney confirms that it was not a valid expenditure, the board should formally confront the president. This can be in an executive session of the board. Give him an opportunity to respond, and if he wants he can retain his own attorney to assist him. Once the board has met with the president and remains satisfied that this was not a valid expenditure, the board can (1) ask him to return the money out of his own pocket, and (2) after a hearing (which is usually informal) fine the president. Again, your association attorney will have to guide you on this process. Finally, and only if you and the association attorney are satisfied that the president did not have the authority to authorize this expenditure, you can publicly censure the president by sending a memorandum outlining the facts to all unit owners. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. |
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| How pros drill through masonry By Paul Bianchina When it comes to drilling holes in concrete, concrete blocks, stone and other masonry, using a standard drill can be a real exercise in futility. The rotary motion of the drill bit -- even a carbide-tipped masonry bit -- is simply not sufficient to power through tough masonry surfaces. Instead, you need a drill that combines rotation with an in-and-out hammering motion. This combined action helps to break down the masonry as the bit advances, making for much faster drilling without burning the bit. There are two basic types of drills that offer this rotational and hammering combination: The hammer drill and the rotary hammer. The two tools are often confused, but there is a definite difference between them. Hammer drills A hammer drill looks very much like a standard drill, and is available in both corded and cordless versions. Hammer drills have a heavy-duty keyed or keyless chuck, and will accept standard drill bits and screwdriver bits in addition to carbide-tipped masonry bits. They tend to be a little less powerful than a dedicated rotary hammer, but since they can be used for both hammer drilling and conventional drilling and driving, they are more versatile. Like everything else in the tool world, you get what you pay for. Some lower-end hammer drills, especially cordless ones, are frustratingly short on hammering power, and their inexpensive construction makes for a short life span. So if you're considering investing in a hammer-drill/drill/driver combination, look for one with the quality, durability, and features that will allow it to do all three tasks well. One example of a high-end cordless hammer drill/drill/driver is the DeWalt DC927KL ($349). DeWalt is well known for high-quality tools that are designed with the needs of professional contractors in mind, so this is definitely a drill that will meet and exceed everything that the home handyman is looking for. The DeWalt Hammer Drill uses their new 18-volt nanophosphate lithium ion batteries for more durability and longer life. To handle the stress of the hammering action it's a little heavier and more ruggedly built than a conventional cordless drill, but DeWalt has added a rubberized, non-slip grip for comfort. The DC927 also has an all-metal, three-speed transmission that lets you match the speed of the drill to the type of work you're doing. By turning a simple mode selector collar, you can choose the appropriate speed for hammer-drilling, conventional drilling or driving fasteners. The heavy-duty all-metal chuck is 1/2 inch, and when you combine that with the auxiliary side handle you have a tool that will easily handle larger wood-boring bits and hole saws in addition to hammer-drilling concrete. The drill's variable speed is controlled by the trigger, and there's an adjustable clutch as well. The complete kit includes a one-hour charger, two batteries, an adjustable and removable side handle, and a case. Rotary hammers Rotary hammers are more powerful than hammer drills, and while they'll also do some standard drilling, their real purpose is drilling in masonry. Rotary hammers deliver heavier hammering action than the typical hammer drill, and some models also have a hammer-only setting, which allows them to be used with a chisel bit for light- to medium-duty chipping. True rotary hammers also use a different type of chuck and drill bits, known as SDS (slotted drive shaft). This type of keyless chuck slides back and forth to install the bits, rather than rotating. SDS chucks provide a non-slip grip on the bits that better withstands the hammering motion, but they will not work with conventional drill bits. If you have or anticipate a fairly regular need for drilling in concrete and masonry surfaces, a rotary hammer is probably a better choice than a combination hammer drill. An excellent example of a professional-quality corded rotary hammer that would also be suitable for homeowners is the 11258VSR from Bosch ($159), another company that manufactures excellent tools. Faster than a conventional hammer drill, the Bosch Rotary Hammer is also very comfortable to use, and the SDS chuck is easy to operate and grabs the bits securely. Bosch has designed this drill to be quieter and produce less vibration than comparable rotary hammers, so you can use it for longer periods without fatigue. And because this tool is built specifically with hammer-drilling in mind, you can count on durability and long life. The drill can be operated in hammer-drill or drill-only modes, and is switched with a simple dial on the side of the tool. The handle is comfortably padded, and the variable speed is trigger-controlled and reversible. Bosch also offers an optional snap-in three-jaw chuck adapter, which allows you to use the tool with conventional drill bits. The 11258VSR comes with a comfortable and adjustable side handle, an adjustable depth gauge to help you drill holes to specific depths, a selection of three different SDS carbide-tipped masonry bits, and a carrying case. Note: All product reviews are based on the author's actual testing of free review samples provided by the manufacturers. |
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| Call 310 A PERSON for answers to your real estate questions A person is waiting to hear from you By Dan Siegel People tell me they wanted to call me with a real estate question but they lost my card or my number, forgot which company I'm with or couldn't remember how to spell my name. So, I decided to change my phone number to spell something people could remember. After many attempts, I came up with 310 A PERSON (273-7766). Hopefully you will think of me as "A PERSON who treats you like A PERSON." Please don't hesitate to call me with any real estate questions. When you call 310 A PERSON you can usually expect to reach me directly. If I'm not available to take your call, I promise to personally call you back within one day - usually sooner. If you can remember that my phone number spells A PERSON then you should be able to find me on the web as well at www.aPerson.com. My email is dan@aperson.com. So, now you have no excuse not to keep in touch... and I'm sure you have questions. I'm looking forward to hearing from you. Dan |
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| Avoid home improvement gimmicks that hammer resale value By Paul Bianchina Q: We are considering listing our vacation home, and I have a question for you on whether it would be worth it to invest the money putting siding on it or selling it as is? The home is located on a golf course and has a magnificent view of the first hole and surrounding lakes and mountains. We had the house exterior coated about six years ago and it was supposed to offer lifetime protection from the elements (at a cost of $6,000). Unfortunately it did not. We had some bad spots patched and repainted but now they look bad again and we are not sure what would be best. We could do a better patch job and have the exterior primed and painted (hopefully the paint will "stick" to the exterior coating), or we could have vinyl siding put up, or we could sell the house "as is." The interior of the house is in good shape; we just had new Pella windows and doors installed within the past year. What do you think? A: In general, in a down real estate market such as we now have, I think the more a seller can do to make their home attractive the better their chances are of finding a buyer. It's also important that the house shows that it has been well maintained, which is another reason to make whatever repairs are necessary before listing. In my personal opinion, selling a house "as is" should always be the last option, unless personal finances make that the only option. That being said, it's difficult to advise you on whether to repair and paint the existing siding or have the house completely re-sided. This is where your own research and the assistance of an experienced real estate agent come into play. You need to take a walk or a drive around your immediate area, and see what comparable houses right on the golf course look like -- especially any that are up for sale. This will give you a good indication of what buyers will expect to see in the neighborhood. Your real estate agent can call up comparable listings and sales for the area, so you can better understand what a realistic sales price will be. If it costs a certain amount to have the house re-sided, and if you can realistically expect to recoup that investment in a higher sales price and a faster sale, then that's the way to go. If you can patch and paint for a lot less money, and that's what all the other homes in the area have done, then that might be the better option. All in all, I would probably lean toward painting, but be sure to verify that the exterior coating can be painted over. You also mention using vinyl siding, which appeals to some people and doesn't appeal to others. So before taking that route be sure that a vinyl-sided house is in keeping with what others in the area have done. Also, make sure that it's allowed by your homeowners association. One final thing, and this is directed at other readers, not at you (since I suspect you've already learned your lesson). Please don't fall for "miracle" products! Stick with reputable, proven products from reputable, proven suppliers and installers. Q: My bathroom is very small but does have one west-facing window that allows in natural light. Any ideas to make this room appear larger? A: There are a few tricks you can utilize to your advantage to make a small room seem larger: • First of all, stick with light colors on the walls and ceilings. That doesn't mean you need to be limited to just white, but stay light and neutral. • Paint the trim a lighter color than the walls. This is a visual trick that makes the walls appear to recede somewhat. • The use of mirrors is always a good idea to make a room look larger. If possible, position the mirror so that it reflects the light coming from the window. If you can't do that because of where the mirror needs to be positioned in relation to the sink, then instead of a mirror you might consider some sort of shallow wall hanging that is bright enough to reflect light. • Avoid window coverings that extend into the room. If you need a window covering for privacy, use a thin, light-colored blind or shade that mounts inside the window surround. • Add a light tube. This is an acrylic dome mounted on the roof, along with a tube that extends down to the ceiling. The dome lets in natural light, and the tube directs it to the room. |
| 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 company. 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 aren't also 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. |
| 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. |
| Assessed vs. market value By Benny Kass DEAR BENNY: In 2006, the assessed value of my house had climbed to $756,000 and then dropped to $714,000, trailing the declining market. I filed an abatement based on erroneous information that my town was using, and was successful. My house was reassessed at $531,300, very close to my suggested valuation. About the same time, I refinanced my house based on a bank appraisal of $678,000. Since then, my house valuation has decreased each year and it now has an assessed value of $442,600; our area is being re-evaluated this year. Here is my dilemma: I firmly believe, based on almost daily research, that the market value of my house is somewhere in the low $500,000s. I think by filing this abatement, I shot myself in the foot. I know buyers look at the assessed value, which is easily accessed on our town Web site. In my case, this differs dramatically from two years ago as well as the appraisal I had during the same month my abatement went through. Can I realistically list my house at what I consider to be market value and expect a real estate agent to explain these events to potential buyers, or am I stuck with an asking price closer to the current assessed value? --Karen DEAR KAREN: I don't think you shot yourself in the foot; in fact, you have been paying real estate tax on the lower assessed value. You can list your property for any amount you feel it is worth. Some real estate agents may balk if your valuation is too high, but if you have the research (comparables) showing what other similar houses in your area are selling for, you should be able to convince the agents of the value of your house. From my experience, assessments in many parts of the country are not consistent with a home's true value. Many older homes are not carefully inspected, so the government assessor does not always know what kind of improvements have been made. Keep in mind that based on today's economy we are in a buyer's market. Regardless of the price you set for your house, potential buyers will lowball their offers. Obviously, you do not have to accept any offer and have the absolute right to counter with a higher price. When an offer is made either to a seller or a buyer, the recipient has three alternatives: you can accept it, you can counter, or you can reject it outright. One suggestion: Because most buyers do not pay all cash, they will need to get a mortgage. Lenders will obtain an independent appraisal before committing a loan, and appraisers are coming in very conservatively with their valuations. So, to satisfy yourself, I suggest that you consider obtaining your own appraisal before you sign up with a real estate agent. It will be worth the $300-$500 dollars that most appraisers will charge you. DEAR BENNY: I own a condominium unit in a fairly large association. Over the years with good management, we have amassed a sizable reserve account. Recently, the board announced that because we are earning only a very small amount of interest on this account, it wants to start investing these funds in the stock market. The announcement stated that with interest rates starting to increase, the board believes that the stock market will be a good place to earn more money for our association. Can the board do this? --Charles DEAR CHARLES: If absolutely every owner in your association agrees to go to Las Vegas and gamble with your reserve account, I would reluctantly have to say this would be legal (although clearly inappropriate). Notice that I said that every owner must affirmatively agree. Your board of directors has a fiduciary duty to all of the owners who elected them to their positions on the board. If they want to spend their own money on the stock market -- or in Las Vegas -- that of course is their business. They certainly have the right to spend their own money as they see fit. But your reserve account does not belong to the board; it belongs to every owner in your association. The clear obligation of the board of directors is to invest your money in secure, insured investments -- even if that means that your money may not be earning as much as everyone would like. Reserve accounts are very important to the well-being of any community association. If, for example, your elevator or your roof needs replacement, and if the association does not have enough money in reserve to pay for these matters, each owner -- including you -- may be faced with a special assessment. This may cost you a lot of money. More important in today's market economy, lenders are insisting that a condo association have adequate reserves before they will commit to a mortgage loan. Indeed, the FHA loan -- which today is probably the most important mortgage around -- requires associations to have a minimum reserve requirement of 10 percent of the annual budget. For example, if your association's budget is $400,000, you have to allocate $40,000 annually for future reserves. A reserve simply means that the association should have money set aside "in reserve" to cover the cost of future emergency or major repairs. Reserves are (or should be) an essential part of every community association. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. |
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