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| Southern California Real Estate Update |
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Articles and Advice |
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| Understanding home appreciation By Inman News Think of appreciation as the paper profits in real estate. Your profits exist only on paper--in this case, your deed--until you actually sell the house. If you buy a house in a rapidly appreciating area, there is no guarantee that property values will be the same or higher when it comes time to sell. The economy may sour or your neighborhood may lose its luster. If you buy at the height of an upswing when demand drives up prices, you may overpay. Just like in the stock market, the flip side of boom is bust, or at least correction. If you overpay and prices settle out 10 percent lower down the road, you may not recoup all of your investment. Appreciation is nice to have, but not what you should bank on when you buy or sell a house. Almost every aspect of the national economy affects real estate appreciation: employment levels, business climate, housing supply and demand, affordability and of course, interest rates. A healthy economy and low interest rates drive demand, which pushes up prices and appreciation. Regional economic changes come into play as well, at times causing housing prices to see-saw up and down. Demographics play a significant role, too. In the 1980s, housing demand soared as the huge number of people born in the 1940s and '50s hit the market. Prices went up and many areas experienced appreciation that was greater than the rate of inflation, making real estate a profitable investment. As this group has settled into homeownership, lower demand in many areas has slowed appreciation to below inflation, making real estate less profitable than other kinds of investments such as mutual funds. Here are some tips for understanding the role of appreciation in your market and in the neighborhood where you want to buy: Look at recent sales. Get a comparative market analysis from your agent or go through public records at the tax assessor's office. You should be able to get a feel for sales volume, price direction and whether final sales prices exceed asking prices (a sure sign of a hot, appreciating market). Pay attention to local business news. Monitor reported real estate trends, but also find out about new industries coming to your area or other economic changes that may dramatically affect housing supply and demand. Know the neighborhood. Research the recent appreciation history of the area where you want to buy. Have prices risen steadily, see-sawed up and down, or been stable over the years? Historically, has the neighborhood been desirable, either because of its amenities or its affordability? Is there a lot of new development nearby? A sudden glut in the supply of new housing can lower property values in existing areas. Buying on the upswing. If you think about buying in a rapidly appreciating area, weigh your decision carefully. Decide if you should rent or buy by calculating the after-tax cost of renting, and comparing it with the after-tax cost of owning over five years. Renting may pencil out as the better bargain for now. If you decide to buy, buy only as much house as you need. The bigger the house, the greater the proportion you may overpay. If you have cash left over from your down payment, invest it elsewhere. Avoid a low-down-payment mortgage. If property values drop and you have to sell, you may not have enough equity in the house to pay off the mortgage and the selling costs, much less get any cash out. |
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| Below-grade plumbing a growing real estate concern Waste removal an uphill battle in basement revival By Paul Bianchina As land prices increase and builders and homeowners alike continue to look for cost-effective ways to increase living space, one "new" solution has been to go below ground. Basements, once a part of virtually every home, have seen a revival of sorts in recent years. But below-grade building has its own set of problems, not the least of which is how to get plumbing in below-grade bathrooms, utility rooms, shops or other areas to flow uphill. If adequate slope from the plumbing fixtures to the sewer line is simply not possible, your only other solution is a sewage discharge pump. In simple terms, sewage pumps accept the waste material coming from the fixture and push it up through a discharge pipe to the home's main sewer or septic lines, where it flows by gravity in the normal fashion into the sewer or septic tank. In actual practice they're a little more involved, and a successful job depends on good equipment, proper installation and the services of a licensed plumber who's experienced with these types of systems. THREE TYPES OF SYSTEMS There are basically three types of sewage discharge systems, depending on the particular application. The simplest is a discharge pump, which handles liquids only. Discharge pumps are very similar to a standard basement sump pump, and utilize a float activated pump to push water uphill to a discharge point. Discharge pumps are designed primarily for sinks and similar applications where it will only need to handle liquid waste without solids of any type. For below-grade bathrooms that have a toilet, you will need a sewage ejector pump. These more powerful pumps are capable of handling solid waste as well as liquids, and most can process solids up to 2 inches in diameter. Third on the list is the sewage grinder pump, which would be used where other types of wastes are present. These units have a separate grinding chamber, and are used primarily when constructing a below-grade kitchen or other area where food waste, grease and other tougher-to-handle solid materials are present. DESIGN AND INSTALLATION After deciding on the type of pump that is suitable for your particular application, the next part of the operation is decide on the right size of pump and how it will be installed. As with any type of electric pump, sewage pumps are rated in horsepower, ranging from less than one half horsepower to one horsepower or more. The size you need depends on how much material the pump will need to handle, the types of material being handled, and, most importantly, how far the waste material will need to be moved vertically. This vertical pumping distance from the fixture to the main sewer line – called "head" – is crucial to sizing the pump, and will typically be limited to about 10 feet of head for solids and 15 feet for liquids. For the typical sewage ejector pump installation, the pump and the float mechanism that activates sit inside a polyethylene basin that's approximately 30 gallons in size – about 22 inches by 30 inches. There is a 3-inch or 4-inch diameter intake line that brings waste into the basin, a 2-inch-diameter discharge line with a check valve to prevent backflow, and a vent pipe. Most of the pumps utilize 115-volt power, and some of the larger units can operate on either 115 or 208/230 volts. The pump and the basin are typically located as close to the bathroom as possible to minimize piping runs and installation costs. The basin is usually buried in order to place the pump below the level of the plumbing fixtures, and there is a lid on top of the basin that needs to remain accessible should the pump ever require servicing. Under normal circumstances, a sewage pump should provide years of trouble-free service, although a lot depends on the quality of the equipment and how well it was installed. Since they are electric, they obviously cannot be used during a power outage, so if the power is down you need to avoid using any fixtures that depend on the pump for discharge. If all of the fixtures in the home utilize the pump, or if you are subject to frequent power outages, you should consider the installation of backup power system. The other potential problem comes from things entering the pump that shouldn't – a child's toy being flushed down the toilet, for example – so be careful about what enters the system. Sewage pump packages can be purchased from plumbers and plumbing supply retailers, and start at about $350. Your plumber or retailer will assist with pump sizing and other selection criteria, and it is recommended that installation be left to a licensed plumber as well. |
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| Should sellers repair defects before selling? After years of living in a home, it's easy to fall into a habit of overlooking home maintenance chores. If there's no urgency, many homeowners procrastinate. Often problems don't get fixed until a major disaster occurs like a roof leak in the middle of a monsoon. Deferred home maintenance can become a problem, however, when you decide to sell. Most buyers want to buy homes they can move right into without having to make a lot of repairs. Sellers need to decide before they put their home on the market whether to fix deferred repairs or leave the work for a future buyer to do. Usually sellers who have the time, money and inclination will do better on the sale of their home if they fix problems before they list their home for sale. A home that is in move-in condition is one that appeals to a broad audience of prospective homebuyers. First-time homebuyers, and buyers with busy lifestyles, often won't consider buying a home that needs a lot of work. They haven't the time or experience to deal with the problems. The listings that are in the best condition are in the highest demand. They can attract serious attention from more than one buyer. If multiple offers occur, the price sometimes gets bid up. Regardless of whether there are multiple offers, a house that is in good condition will usually sell more quickly than one that needs work. And a quick sale often results in a selling price that is close to the list price. Sellers who don't make needed repairs before putting their homes on the market may have difficulty selling, depending on how much work is needed. Because "fixer-upper" homebuyers make up a small portion of the homebuyer market, there will be less overall interest in the property than there would be in a similar property that is fixed up. If your home needs a lot of work, it could take a long time to sell and it might sell for considerably less than it would fixed-up. Usually the longer a listing sits on the market unsold, the lower the ultimate selling price. Selling a home that needs a lot of work could delay the closing if the buyer's lender requires that the work be completed as a condition of granting the mortgage. One homeowner sold a home that needed about $25,000 of termite and dry rot repair. The buyer's lender said the work had to be completed by close. The buyer and seller both wanted a quick close. But the job was so extensive, and combined with intermittent delays due to rain, it took about two months to complete the work. FIRST-TIME TIP: Most sellers can't afford to fix everything that's wrong with their home before listing it for sale. It's important to prioritize to make sure that your money is spent on repairs that will have the most positive impact on prospective buyers. Call a knowledgeable real estate agent in your area for a consultation. Complete a walk-through of your home with the agent, with pen and pad in hand. List all the improvements the agent suggests you complete before selling. Then ask him or her to order the list in terms of most and least important. Then ask how much difference it will make in terms of selling price if you complete none, some or all of the recommended repairs. THE CLOSING: The amount of time and money you have usually determines how much work gets done. Dian Hymer is author of "Starting Out, The Complete Home Buyer's Guide," Chronicle Books, Revised 1998. Copyright 1998 Dian Hymer Distributed by Inman News Features |
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| Aluminum wire fire hazard Dear Barry, As a veteran Realtor, I've had many clients who shy away from homes with aluminum wiring. The home inspectors I know always raise a "red flag" when aluminum wire is found, and I'd like to know how this issue should be approached. When is aluminum a problem, and is it ever okay? --Carol Dear Carol, Aluminum wire is widely regarded as a significant fire hazard. Installed in homes and mobile homes from the late 1960s through the early 70s, it is routinely disclosed by home inspectors and warrants careful attention whenever found. Problems with aluminum wires occur primarily at the connections. Fittings often become loose, resulting in overheating, carbon build-up, and eventual fire inside the walls. Gradual melting and smoldering of the wire insulation may sometimes occur for a period of years before a fire actually ignites. Because of this, a detailed evaluation by a licensed electrical contractor is necessary to ensure that the entire electrical system is safe. A proper evaluation includes an inspection of all connections in the breaker panels and at every outlet, switch, light fixture and junction box in the building. This is obviously a very time consuming-and therefore costly-process, but that is obviously preferable to the risk of a fire. A common misconception is the belief aluminum wiring must be replaced. This is an over-reaching solution to a problem that merely requires modification of the connections. A qualified electrician can upgrade the wire ends so that the problems associated with aluminum are sufficiently eliminated. For more specific details in this regard, consult a licensed electrical contractor. Dear Barry, The property we are buying was originally built with a flat roof. It now has a sloped roof, and the seller says this added structure was built without a permit. This makes us uncertain about continuing with the purchase. Is there some way to ensure that the roof is okay? --Tien Dear Tien, Additions and building alterations are often performed without building permits, giving rise to disclosure issues and a sense of indecision during many home purchase transactions. First, there are the immediate concerns involving the quality of materials used and standards of workmanship employed. Additionally, there are uncertainties as to future complications with the local building department, not to mention disclosure consequences when the property is eventually resold. Some or all of these are apparently on your mind. An affective way to resolve these concerns is to obtain an as-built permit for the questionable work. As-built permits are available from most building departments to provide a venue for inspecting, correcting, and approving non-permitted construction. If the municipal inspector discovers defects or building code violations in the completed work, repairs and upgrades will be required prior to official approval. Once the inspector signs off on the permit, the work is just as legal as though a standard building permit had been obtained prior to construction. However, if the work in question violates zoning requirements, lot line setbacks, or is constructed in a manner that is significantly substandard, removal of the "improvement" may be ordered by the building inspector. In purchase transactions, where non-permitted additions are at issue, buyers often request that sellers invoke this late permit process. But sellers are not always willing to invoke this procedure, and buyers then have to decide whether to proceed with the transaction. To write to Barry Stone, please visit him on the Web at http://www.housedetective.com/. Copyright 2003 Barry Stone Distributed by Inman News Features |
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| Get rid of 'energy suckers' By Bernice Ross While we do have a fiduciary duty to focus on our client’s agenda, there are times, however, when we need to rid ourselves of people who drain us of our time and energy. "Psychic vampires" are the folks who make you long for a necklace of garlic to ward them off. In case the garlic is in short supply, here are some ways to rid your life of these energy suckers. 1. The agent in your office who doesn’t work and always wants to gossip. Instead of giving them excuses, tell them, "I’m going door knocking" or "I am going to cold call people to invite them to my open house on Sunday—why don’t you join me?" Chances are they’ll disappear the moment your mention prospecting. If they don’t, you may have gained someone who can help keep you motivated to prospect. 2. The seller with the over-priced listing who constantly calls to see why their house hasn’t sold. The next time they call respond with the following before they have a chance to start their rant: "Mrs. Seller, I’m so glad you called—I was just going to call you for a price reduction—would $5000 or $10,000 be better?" They’ll try to shift the discussion to the marketing, open houses, etc. but close again by saying, "Would 4 p.m. or 6 p.m. be better for you to sign the price reduction?" Each time they call back, ask for the price reduction the moment you hear their voice. 3. For the buyer who has looked at more than 50 houses and still hasn’t made an offer. If you can’t work up the nerve to fire them, refer them to another agent in your office. Better yet, just stop calling them. If they call you, ask them when they plan on coming in to the office to write an offer on one of the properties you showed them. If you never want to hear from these folks again and you never want any of their future referrals, have a hefty serving of garlic before each appointment and be sure to lean close when you speak to them. 4. For the friend or family member who constantly calls and wastes your time. Each time they call, turn their phone call into a prospecting opportunity by asking, "By the way, who do you know who is thinking about buying or selling a home?" If you really want to stop them from calling, the moment you hear their voice, ask them for a charitable contribution or to assist you on some personal project such as cleaning your garage. It won’t take long before they’ll avoid you and your requests like the plague. In all seriousness, the root cause in each case is your inability to say "No." When it comes to friends and business associates who waste our time, we don’t want to hurt their feelings. As a result, we end up paying the price instead. To shift this pattern, consider looking at your business the same way an attorney would—i.e. in terms of "billable hours." For simplicity, let’s assume you’re earning $60.00 per hour and each conversation costs you a $1.00 per minute. Consequently a 10-minute wasted conversation costs you $10.00—are you willing to toss ten dollars of your time in the waste basket because you are unwilling to say "No"? For buyers and sellers who are unrealistic, look at the cost of continuing to run after business that has a less than 20 percent chance of ever being placed under contract. Again, using the $60.00 an hour rate, taking those buyers out for 3 hours costs $180.00 in terms of your time plus approximately 40 cents per mile in terms of the wear and tear on your car. For that overpriced listing that won’t sell until there is a major price reduction, assume you spend 2 hours per week servicing the listing. Each month that listing doesn’t sell costs you $480 or $2880 over a six month time period. Treating your time as money is an important way to avoid having someone else’s agenda make your life miserable. The real question is how much longer are you going to allow these "psychic vampires" to prey on you? |
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Are Open Houses Safe? By Kathleen Beard Owner/Broker Old Pacific Realty Every week you see open house signs on busy corners inviting you to take a quick peek. Open houses have been a traditional marketing concept for the real estate industry for decades. Several years ago there was an independent study suggesting that open houses effectively only sell 3% of the homes nationwide. Regardless of the market share and the effectiveness of the open house, one question remains. How safe are open houses? Anyone can enter your home. Criminals just released from prison or jail, child molesters, thiefs and questionable individuals. There is no way to screen people who enter your home during an open house. As potential buyers walk through your home, they can view the location of a security system, what type of computer equipment you own, expensive Media and other valuable family assets. All of this is in plain view for anyone who visits your open house. Do you allow strangers to enter your home when you have a garage sale? Probably not. So why is an open house any different? Most Realtors have a guest book for all visitors to sign. Anyone that has been in the real estate industry can tell you that most people don't want to be bothered by real estate people, so they frequently write down false information. Do you think criminals are going to give you their correct name and phone number? Finally, most buyers are not pre-qualified when they enter your home. The majority of "walk-ins" will not be able to afford your home. People generally think they can afford many of the neighborhoods they visit, especially many first time buyers. People usually are 20% to 40% above their qualified buying power and have no idea what they are qualified to buy. So back to the topic, are open houses safe? According to news articles published across the nation, not only are Realtors attacked and robbed so are homeowners. Attacks don't happen every day, but holding open houses in an unnecesary risk families take in order to sell their homes. What other marketing is effective?Custom Web Sites may be created specifically for your home. Buyers utilization of the Internet, when searching for homes, has been an effective marketing tool. Submitting your home on several multiple listing services,(MLS)with a variety of photos taken by a professional. Knowing which location and areas buyers are coming from for the specific price range of your home is an important marketing tool utilized by many real estate companies. Direct mail campaigns are effective. Today advertising your home is accomplished by the utilization of many additional types of media formats which promote real estate. There are many other effective ways to market your home professionally with fast results without putting your family at risk by holding open houses. Kathleen Beard
Broker Old Pacific Realty |
| How can I reduce my closing costs? By Dian Hymer Often it's easier for buyers to qualify for a mortgage than it is for them to scrape together enough cash for the down payment and closing costs. Down payment amounts vary. Usually they're in the range of five to twenty percent of the purchase price. In addition, closing costs can run another $5,000 to $10,000, depending on where you buy and the cost of your loan. Closing costs are fees associated with a home purchase that are paid at closing. Buyers and sellers both pay closing costs. Who pays which costs is often set by local custom, but it can be negotiable. Typical buyer closing costs include such items as: fees associated with getting a mortgage, homeowner's insurance, titles and closing fees, inspection fees, proration of property taxes and transfer taxes (if there are any). FIRST-TIME TIP: One of the easiest ways to lower your closing costs is to get a zero-point mortgage. Points is the term used for the loan origination fee. One point is equal to one percent of the loan amount. A $180,000 mortgage with a 2-point loan fee will cost you $3,600 at closing. A no-point $180,000 loan will save you $3,600 in closing costs. But, expect to pay a higher interest rate on a no-point loan. There's an inverse relationship between the points you pay and your interest rate. Another way to reduce your closing costs is to close late in the month. Lenders usually collect interest for the current month at closing. If you close on the fifth day of the month, you'll owe the lender 25 days of interest at closing. If you close on the twenty-fifth day of the month, the lender will collect 5 days of interest when you close. Closing at the end of the month can reduce your closing costs considerably if your loan balance and interest rate are high. Asking the sellers to credit you money to pay for some of your closing costs is another way to reduce the amount of cash you'll need to close. Keep in mind that when you ask sellers to do this, it's the same as asking them to accept less for their home. For example, if you offer $200,000 with a credit from the sellers of $3,000 for your closing costs, this is the same as a $197,000 offer. In a competitive situation, where multiple buyers are trying to buy the same home, you may have to pay full price or more to be the successful bidder. If you need the closing cost credit to make the deal work, raise your offer price by the amount of cash you need and then ask for the credit. For example, if the list price is $200,000, offer $203,000 with a $3,000 credit for your closing costs. The property must appraise for the higher price for this to work. Also, lenders have restrictions on how much they'll allow sellers to credit for closing costs: often it's 3 to 6 percent of the purchase price. And, most lenders won't allow a credit that exceeds the actual amount of the buyers' non-recurring closing costs (costs paid by the buyers one time only at closing, such as points and title fees). THE CLOSING: If the sellers are renting back from you after closing, ask them to credit you their rent money at closing. Clear this with the lender in advance, otherwise, the lender might require that rent be given to you later, when the sellers vacate. If the rent is credited, it reduces the cash you'll need to close. |
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| Defects late in the deal What should you do if you discover a defect in the home you're buying after you've removed the inspection contingency? Most buyers hire qualified professionals to inspect a property before they buy it. The purchase contract usually includes a contingency that allows the buyers to do inspections. Depending on how the contingency is written, the buyers might have the right to withdraw from the contract without penalty based on these inspections. Or they might have the right to ask the sellers to repair the defects. In some cases, buyers ask for nothing from the seller. They purchase the property in its "as is" condition regarding the defects that have been disclosed to them, either by the seller or by their inspectors. The first course of action if you discover a defect after you've removed the inspection contingency, or after the deal closes, is to review the transaction documents and the inspection reports. One buyer became upset when he found water in the basement of his new home after the first heavy rain. He called his agent who reviewed the transaction file, including the seller's disclosure statement. Many states, like California, require sellers to disclose property defects to buyers when they sell. In this case, the seller had disclosed that water accumulated in the basement after heavy rains. Furthermore, the buyer's inspector found evidence that water had accumulated in the basement and mentioned this in his report. The buyer had been aware of this condition when he bought the property, and bought the property "as is" regarding this condition. HOUSE HUNTING TIP: It's not always clear who's responsible for repairing defects. The purchase contract should provide some guidelines. For example, the contract may include a clause that requires the seller to maintain the property from the time the contract is negotiated until closing occurs. If this is the case, and the furnace breaks down after the inspection contingency is removed, the seller may be responsible for fixing it. Some purchase contracts include a seller warranty provision. The specifics will differ from one contract to the next. But, such a clause often states that certain systems, like the plumbing, roof, heating and cooling, will be operative at close of escrow. If a covered system breaks, the seller may have to fix it. It's usually advisable to try to amiably work out any disputes regarding defects. In fact, your purchase contract may require that you mediate a dispute before taking it to the next level. Your contract may also include an arbitration provision. If so, arbitration rather than lawsuit could be your method of dispute resolution. Even if your contract does have an arbitration clause, you might be able to resolve a defect issue in small claims court if the damages aren't too large. Home warranty policies, which are available in most states, can provide an easy solution to problems involving property defects. Home warranty policies--which can be purchased by either the seller or buyer--cover a home's system. If something breaks, the warranty company fixes the problem. These policies have exclusions, and pre-existing conditions are usually not covered. But, for the minimal cost of a service charge, a defect can often by repaired at no additional cost to either the buyer or seller. THE CLOSING: If you're in doubt about who's responsible for repairing defects, ask your real estate agent or consult with a knowledgeable real estate attorney. |
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| What is pre-emptive offer? Hot markets make for quick sales By Dian Hymer Recently a couple was surprised to find out that a listing they were interested in had sold before they even had a chance to see it. This was particularly disconcerting because all the other listings they had considered were marketed for a week or more before offers were accepted. Then, in most cases, there were several other buyers vying to buy the property. But, the one that got away sold with only one offer, leaving the buyers wondering if they had missed out on an excellent opportunity. It turns out that the listing in question wasn’t the right house for these buyers. But, the quick sale does raise a question. In a hot seller’s market, as are occurring in many areas of the country, especially in California, why would a seller accept an offer quickly without the benefit of full market exposure? Some sellers feel under pressure to sell quickly. For instance, sellers who buy before they sell may feel more comfortable with a fast sale at a good price than they would waiting for weeks wondering if they’ll receive a better offer. That extra time could cost the sellers a lot if they are paying for two mortgages plus interim financing. Sellers with small children, and some elderly homeowners, find the marketing experience particularly disruptive. A fast sale can be worth it to these sellers, even though it may mean leaving money on the table. A quick sale can occur if a buyer makes a pre-emptive offer that the seller accepts. A pre-emptive offer is an offer that's made before the seller's designated date to hear offers, or before the property is exposed to the market. In this situation, the buyer writes an offer early and insists that it be presented to the sellers. The sellers don't have to respond. But state law may require that any and all offers be presented to the seller. There are drawbacks to both buyers and sellers with pre-emptive offers. If a seller is intent on waiting for market exposure before entertaining any offers, a pre-emptive offer will usually need to be very strong in order to entice the seller into changing his game plan. In other words, it needs to be an offer he can't refuse. With a pre-emptive bid, the buyer will never know if he paid too much. Likewise, if the seller accepts an offer before receiving market exposure, he will never know if he could have sold for even more. HOUSE HUNTING TIP: To ensure that you don’t miss out on a listing, make sure that your agent tells you about any new listing that might work for you. Some real estate agents subscribe to listing alert services that will notify you directly when a new listing that meets your specifications comes on the market. Find out as soon as possible how the seller is planning to deal with offers. The seller could be ready to hear offers as soon as the property is listed, so you might have to move quickly. In any event, don’t wait for a public open house to see the property if your agent thinks it’s a good fit. If after previewing the property, you want to make an offer, make sure the listing agents knows this. This way you insure you will be informed if another buyer makes a pre-emptive bid. It would be in the seller’s best interest to consider both offers. But there’s no chance of this happening, if the sellers don’t know that you want to buy the property. THE CLOSING: Real estate is a fast business that waits for no one. And sellers can accept offers whenever they want. |
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| What is a clean contract? By Dian Hymer Real estate agents often talk about the merits of a clean contract. A clean contract, or purchase offer, is simple and straightforward -- one that's not complicated by lots of contingencies, restrictions and conditions. A contingency in a real estate purchase is something that must be satisfied in order for the sale to go through. Contingencies protect buyers and sellers, but they also provide opportunities for real estate transactions to fall apart. For example, the buyers may need to sell another property to come up with enough cash for the down payment. If their property sells, the deal goes forward. If it doesn't, the deal is off. Other common contingencies are for inspections, for financing, and for approval by other parties (like attorneys or accountants). Less common contingencies are sometimes more difficult to satisfy. Perhaps the buyers only want to buy a property if they can modify it, or use it, for a specific purpose. For example, they might need city approval to run a day-care center. Seller contingencies can also complicate matters. For example, a property that's being sold to settle an estate might require court approval of the sale. In this case, the buyers don't know that the house is theirs until the sale is confirmed in court. Given the emotional nature of home buying and selling, most buyers and sellers prefer the cleanest contract possible. Buyers often shy away from buying homes where the sellers have complicating factors effecting the sale, like a requirement for court confirmation. Sellers often reject an offer if it's contingent on the sale of another property. In both cases, the degree of uncertainty is high. Being able to offer a clean contract may give you an advantage when negotiating with the sellers. This is particularly so if you find yourself competing with other buyers for a property. Put yourself in the seller's shoes. The fewer strings attached to an offer, the better the chance it has of going through. The more contingencies there are, the more opportunities there are for something to go wrong. FIRST-TIME TIP: Even though a clean contract may give you a competitive edge, you shouldn't delete contingencies from your offer if, in fact, you need to satisfy certain conditions in order to close the sale. For example, if you need to line up a mortgage in order to close, you will need a financing contingency. If you write your offer without a financing contingency, you may risk losing your deposit money if you can't get the loan. Rather than giving up the contingencies you need, shorten the time period required for satisfying these contingencies as much as possible. A typical financing contingency is about 30 days following acceptance. If you can shorten this by a week or two, the sellers will know they have a solid deal that much sooner. In order to shorten a financing contingency, you need to be planning ahead. Many buyers get preapproved for the loan they need. To get preapproved you must submit a loan application and documentation such as verifications of employment and down payment. You must have your credit checked. Then the lender gives you loan approval subject to you finding the home you want to buy. Buyers who aren't preapproved when they enter into contract to buy a home will need to submit a loan application within a day or so of acceptance to get approved within 2 or 3 weeks. THE CLOSING: To make a clean offer, get your financing set up and take care of as many conditions as possible before you start negotiating. |
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| What are garbage fees? By Dian Hymer Homebuyers are all too often surprised at the end of the deal when they discover they must pay new, unanticipated fees. Federal law requires lenders and mortgage brokers to disclose fees that will be charged in connection with getting a mortgage. This must be done within 3 days after the borrowers submit a loan application. Often the final settlement statement of fees doesn't match the initial estimate the borrowers received when they applied for the loan. One reason for this is that borrowers often change their minds about which mortgage they want between the time they apply for the loan and closing. Lenders' fees can vary significantly. Some lenders charge underwriting fees and others charge administrative or processing fees. Some charge both. Most lenders charge documentation preparation fees, but these can range anywhere from a few hundred dollars to $700 or more. There are miscellaneous fees that are charged at closing, in addition to customary closing costs like points or title insurance. These are commonly called "garbage fees." Taken one at a time, garbage fees usually don't amount to much. For example, a tax service (to notify the lender that your property taxes are current) costs about $70, a courier fee is about $30. A notary fee might run $40, a wiring fee costs about $30 and a flood certificate (which is often required by the lender) is around $25. Some mortgage brokers charge incidental fees on top of those charged by the lender, such as a processing or document preparation fee. In addition, the escrow or closing officer might add on a few more charges for drawing, recording and notarizing documents, or to cover courier and wiring costs. Add all of these fees together and you could end up owing hundreds of dollars more than you anticipated. FIRST-TIME TIP: To avoid surprises, make sure your loan agent or mortgage broker gives you a complete and accurate accounting of all the fees, including garbage fees. Specifically ask how much the garbage fees will run and get this in writing. If you change loans during the application process, ask for an update of the fees you'll owe. Check with the person handling the closing (attorney, closer or escrow officer) to see if any garbage fees will be charged in addition to those charged by the lender. Ask for an explanation if there seems to be a duplication of the fees charged. Buyers aren't the only ones who pay garbage fees: Sellers pay them too. Sellers should ask their real estate agent, closer or attorney to prepare a closing cost estimate when they accept an offer to sell their home. In addition to customary closing costs like the brokerage commission, the seller's lender will charge for a payoff statement (usually about $50) and a reconveyance fee (could be another $50 or so). Sellers also usually pay document preparation, wiring, courier and notary fees. These can add a few hundred dollars to the closing cost estimate. It's a good idea for both buyers and sellers to ask the person who's handling the closing a copy of the final closing cost estimate as soon as the figures are available. Review this before you sign to make sure that new charges haven't mysteriously appeared. THE CLOSING: Ask your closing agent for an explanation of any new fees. If he or she can't give you a satisfactory explanation for why the fees are being charged, ask that the fees be waived. |
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| Non-recurring closing costs By Dian Hymer Is it really a full-price offer if the buyers ask the sellers to pay for some of their closing costs? Not exactly. Sellers are sometimes miffed when they read through a purchase offer and discover, usually in the "additional terms" section of the contract, that the buyers want them to pay for some of their closing costs. Sellers may see this as a sneaky way to reduce the price. Here's how it looks from the sellers' perspective. Let's say the sellers are asking $200,000 for their home. The buyers offer to pay the sellers their price, but ask for the sellers to credit $5,000 to them at closing for their nonrecurring closing costs. In effect, the buyers are offering to pay only $195,000 for the home, not the $200,000 that appears in the price section of the purchase offer. Although buyers sometimes use a closing cost credit to lower the purchase price, this is not always the case. Many homebuyers, particularly first-time buyers, are short of the cash they need to pay for the down payment and closing costs. One way to generate cash so the buyers can complete a home purchase is for the sellers to assist with some of the costs in the form of a cash credit at closing. Lenders have restrictions on how much sellers can credit to buyers at closing. The amount varies with the lender, but it's usually in the range of 3 to 6 percent of the purchase price, or $6,000 to $12,000 on a $200,000 purchase price. Most lenders will only allow a credit for the buyers' nonrecurring closing costs. Nonrecurring closing costs are paid on a one-time-only basis at closing, like payments for title insurance and loan origination fees. Lenders usually won't permit credits for the buyers' recurring costs, like mortgage interest and hazard insurance. There are some lenders, however, that will allow credits for all closing costs. A credit from the seller to pay for the buyers' nonrecurring closing costs can't exceed the actual amount of those costs. The lender might allow a credit of up to $6,000, but if the buyers' costs only total $5,000, the maximum the sellers can credit is $5,000. FIRST-TIME TIP: The way an offer is presented to a seller can influence its chance of success. To overcome any potential resistance the sellers might have to a request for a credit, explain how the credit works before discussing the offer price. This way the sellers are less likely to be disappointed when they discover the offer is for less than the offer price indicates. Buyers who need a credit in order to buy may find themselves at a disadvantage if they're making an offer in competition against other buyers. To be competitive in this situation, it may be necessary to inflate the offer price to cover the amount of the closing cost credit. For example, let's say the property is listed for $200,000 and you need a credit of $5,000 to help pay for your closing costs. You can increase the offer price to $205,000 and ask the seller to credit $5,000, which is effectively a full-price offer of $200,000. For this strategy to work, the property must appraise for $205,000. THE CLOSING: A credit can also be used to resolve inspection issues that arise during the sale. Although lenders usually don't let sellers credit money to buyers for property improvements, they do allow credits for closing costs. The money the buyers save on closing costs can be used later to make improvements. |
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| Are you ready to be a do-it-yourself-er? By Paul Bianchina While relaxing in the yard, sipping a cold one, your mind may start to visualize that big new deck you've been wanting, or an addition to the family room... Do-it-yourself projects, large and small, can indeed save you money and bring you a lot of pleasure. They are a wonderful way of adding both value and a deep sense of personal pride to your home. But before you grab your tool belt, it pays to ask yourself some honest questions about your ability to undertake the project. This is not designed to intimidate you or dissuade you from undertaking the work – it's just a little honest assessment to guide you toward those things you can comfortably do, and those things that are best left to others. Do you have the knowledge? First and foremost, you need to ask yourself if you know how – or can learn how – to do the tasks involved in project. You need to break down the steps -- to build a deck, for example, you will typically need to design and lay out the deck structure, pour some concrete, cut and fasten a lot of lumber, apply paint or stain, and perhaps do some electrical wiring – and then decide what is involved with each step, which of them you can and want to do, what additional knowledge you might have to acquire, and how you would acquire it. Do you have the skills? Theoretical knowledge is one thing, and practical application is something else – otherwise everyone who studies golf magazines could be Tiger Woods. Once you've started doing your homework about what's involved in a project of the type you're considering – studying plans, looking at books and magazines, viewing similar completed projects, or visiting home shows or home tours – then take the time to understand the techniques involved and decide if you have those skills or are interested in learning them. Do you have the time? This is definitely one of the most often overlooked – or miscalculated – areas of any home improvement project. Building takes time, and even the most experienced carpenter can underestimate just how long something may take. That deck, for example, may chew up a good part of your summer weekends or all of your vacation time, so be sure that's how you want to spend your hard-earned leisure hours. Also, ask yourself how the time frame for the project – and try and be realistic with yourself about how long it will take -- will affect the rest of the family. You may, for example, be perfectly willing to undertake that bathroom remodel, but living for three months with a portable toilet and a garden hose for a shower may lead to a serious mutiny in the house. Do you have the interest? Another often-overlooked element of home improvement projects is whether or not you have the interest. Perhaps you've done some painting in the past and are very comfortable with both your knowledge and your ability in that area. That doesn't necessarily mean you have the desire to spend the next two months painting the outside of your house. Lack of interest or desire for a particular task can lead to a lot of frustration, and a job that is rushed or done poorly can actually detract from the value of your home. Do you have the physical ability? Many building tasks involve a lot of physical labor, so you should also be honest with yourself about your physical capability to undertake the work. Other questions to consider might include whether you're afraid of heights, or uncomfortable on a roof; can you climb and work on a ladder; are you willing to crawl under the house or into the attic if necessary; even whether or not you mind getting dirty. These may seem like silly concerns, but for your own safety you really need to be comfortable with your own abilities and limitations. Do you have the necessary help? Here again, the physical reality of building is that many tasks require more than one person. From simple tasks like stretching a string over a 35-foot foundation to physical labor such as wrestling a 250-pound beam into place, do you have access to assistance if – and when – you need it? Do you have the tools? Finally – tools and equipment. Construction projects often require a wide variety of quality tools, many of which you may not have. As part of your planning, you should consider what tools will be needed to do the work, then look at what you already have, what you might be willing to acquire, and what you could rent or borrow if necessary. |
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| How to choose the right contractor By Paul Bianchina For anyone who owns a home, do-it-yourself projects are a fact of life. Being able to undertake a project with your own two hands has a number of advantages. You have the feeling of pride that’s associated with your own accomplishments. You know the work is being done exactly the way you’d envisioned it, with the exact materials you want. You can schedule the work – and any resulting inconvenience – around your family’s schedule. And, of course, you can save some money. But there are some projects that, due to time constraints, your own skill level, or simply the overall size of the project, you don’t want to undertake on your own, so you make the decision to hire a professional contractor. And the first question that arises is almost always "how do I find the right one?" Know what you want – know what you need Before you even start looking for the right contractor, you need to know as much about what you want to have done as possible. That sounds simple enough, but a surprising number of people have only a vague idea of what they want to do, and that can result in lots of disappointments and misunderstandings. The more details you have ready to give the contractor – from room sizes and intended uses to colors and types of appliances and trim – the better your chances will be of getting the finished product you’re hoping for. You also need to know what types of companies perform the types of services you’re looking for. As the saying goes, you don’t hire a proctologist to do brain surgery - even though they’re both doctors, they have different specialties. If you want a contractor to repair your fire-damaged home, look for someone who specializes in fire damage, not a firm that only builds new homes. There are also times when you need a general contractor, and times when you don’t. If you want to have a new toilet installed, you need a plumber, not a general contractor. But if you want to have a room addition built, you want to employ the services of a general contractor with specific remodeling and room addition experience, as opposed to hiring five or ten individual subcontractors. Referrals The single best way to find a contractor is to get a referral from someone you trust. If you have a friend or a relative who had some work done on their home that they were pleased with, that’s a great starting point. You can get some honest feedback about the contractor’s skill level, price, scheduling, level of cooperation, and much more. There are a lot of contractors out there to choose from, and like most businesses, they succeed or fail mostly by their reputation, so a good referral is very helpful. There are other sources of referrals as well. If you see a room addition being built down the street and it seems like it’s going well, stop and talk to the homeowner. Most people are more than willing to share their experiences – good and bad – about the contractor they’ve hired, and here again you can get some great first-hand information. Material suppliers are also great sources. Ask the people where you buy your lumber or your plumbing supplies if they know of anyone who’s particularly good at the type of project you have in mind. Retailers have a reputation to protect as well – they want to keep you happy and coming back as a customer – so they will typically only refer contractors whom they know are honest and will do a quality job. Ask questions, then follow up When you have a referral or two, call the contractors to set up an appointment. Ask the following four questions: Do they do the specific type of work you’re looking for? It could be they no longer do kitchens or room additions, or they now do remodeling and have stopped building new homes. Clarify that up front. What is their schedule like? If you have a project that has to be done within the next month and the contractor can’t even start until then, there’s no point in wasting your time or theirs. Can they provide you with referrals? Most companies are more than willing to provide you with names and phone numbers for past clients - if they can’t or won’t provide you with referrals, don’t hire them! Between the time you call the contractor and the time they come out to your home, be sure and follow up on a couple of the referrals and get some feedback from the homeowners. For larger projects, you may even ask if you can come out and view the contractor’s work. What is their name and license number? Get the contractor’s full business name, address and business phone number, as well as their contractor’s license number. Immediately follow up on this information, and call the proper state or local licensing agency to verify the status of the license and that any required bonds and insurance policies are in place. |
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| A prenuptial for homes By Dian Hymer Focusing on resale potential before you buy a property is a little like considering the terms of the divorce settlement before consummating a marriage. Yet, this is precisely what savvy real estate investors do. They plan out their exit strategy before they negotiate a purchase. Home buyers who give consideration to resale potential before they buy can reduce their chances of losing money when they sell. Location is often touted as the prime value indicator for real estate. This is because properties in the best locations appreciate more during good real estate markets and hold their value better during down markets. The community in which you buy will have an effect on your resale potential, as will market conditions at the time you sell. There's usually higher demand for properties that are located in areas where the public schools are good. Because of the demand, these communities tend to be the most expensive. When faced with the alternative of costly private schools, many prospective buyers would rather pay for a more expensive home where they can send their children to the public schools. Mortgage interest and property taxes are tax deductible, which helps to offset the higher purchase price. Buying in a community that's on the upswing can result in a big payoff when you sell. These communities are usually located adjacent to more affluent communities that are beyond the price range of most buyers. Look for communities that are close to public transportation, and within a reasonable commute distance of a major metropolitan area. Location within a community can also affect a property's resale potential. Usually, homes that are on busy streets, or next to freeways, will sell for less than similar homes that are located on quiet side streets. Being located across the street from a school, which can be noisy, may also result in a discounted price. Buyers pay more for homes that offer easy access into the main living area. An entry that is level in from the street is ideal. A garage that opens directly into the kitchen area is also desirable. On the other hand, homes that are located up or down a lot of stairs are a hassle for most buyers. An inconvenient access can have an adverse effect on value. If you buy a home that has an incurable defect, like a busy location or too many stairs, make sure that you don't overpay. There's nothing you can do to remedy an incurable defect. It can also negatively impact the price when you decide to sell. The best time to sell a home that has an incurable defect is when the market is strong and the inventory of homes for sale is low. This is when buyers are willing to make compromises for the sake of being able to buy at all. In a slow, buyer's market, where there are plenty of homes for sale, buyers will take their time. They can afford to be choosy. You'll have to discount your price more in a buyer's market in order to look attractive relative to the competition. It's a good idea before you buy a home to check the permit history on the property. Make sure that you're not paying a premium for remodeling that was done without necessary building permits. In some communities, homeowners are penalized if the building department becomes aware of work done without permits. You could incur extra expenses that you hadn't anticipated. THE CLOSING: Deferred maintenance usually results in a lower sale price. Your best protection is to keep your home well maintained. |
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| Pre-approval vs. pre-qualification By Inman News Is pre-approval a general endorsement by a bank? No, when you are pre-approved, it is for a specific loan program from a specific lender. Not all lenders offer all loan programs. You may need to get approved with a different lender or for a different loan program with the same lender, depending on your financing options at the time you buy a house. Check with the agent or broker who helped you gain loan pre-approval before you write an offer. If you think you will need to get re-approved for a loan, make sure to allow enough time for this in the purchase contract. Is the pre-qualification a guarantee that I will get the loan? No. The lender or mortgage broker is under no obligation to grant you a loan. Most pre-qualification letters state that a buyer appears to be qualified for a certain loan amount. There is usually a disclaimer to protect the lender or broker in case you fail to qualify. Before a lender will actually loan money, you must complete a loan application. Is there anything official about a pre-qualification? No, loan pre-qualification is an informal process. After a review of your financial status, a loan agent or broker will issue a letter stating that if the information provided is accurate you should be able to qualify for a loan of a certain amount. Often, these letters are form letters. Even if a pre-qualification letter is personalized, it usually contains disclaimers to protect the loan agent. Consequently, some real estate agents feel that pre-qualification letters are worth little more than the paper they're written on. |
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| Your listing presentation Whose agenda is it anyway? By Bernice Ross I recently spoke with a successful broker-owner who had been "coached" by one of our competitors to stop her mailing program because "mailings don’t work." The result: over a $50,000 bottom line loss in her business. The question that immediately comes to mind is: "What went wrong?" The answer is one that applies not only to coaching, but to your business every time you are in front of a buyer or seller. Instead of focusing on what works for the client, the coach demanded that the agent shift to her business model rather than customizing a model to fit the agent’s strengths. Unfortunately, the same thing happens thousands of times each day as real estate agents work with sellers and buyers. It also causes agents who "show up" like this to lose millions of dollars of potential business. To spot where you may "running your agenda" and losing business, examine each of the following areas in your listing presentation. 1. Do you routinely tell sellers at what price they "should" list their property? If so, you’re running your agenda. To shift, give them the pertinent sales information, what percentage of properties that sell each month, what percentage DON’T sell, as well as the average market time. Then ask, "Where would you like to position your property so you will be one of the properties that will be under contract next month rather than still being on the market? 2. Do you tell the seller how you will market their property? Granted this is our area of expertise, but it’s much more effective to involve the seller in the process. Ask for the seller’s input on the ads, the brochure, as well as which pictures they would like to post on the Web. Jointly determine when the open houses and other marketing activities will be. Marketing now becomes about their agenda, rather than yours. If you’re worried their "agenda" may be too expensive, control their choices by asking them questions that have "limited" choices. For example, "It’s smart to show off the best features of the house on the Web—what five areas do you want to make sure we include in our photos to put on the Web?" OR "We’ve found that advertising on the Web produces 4-5 times more sales than advertising in the newspaper, especially if we have a 360 tour with beautiful color photos of your home. The Web also allows us to communicate more directly with buyers because of its interactive nature. But tell me, which do you prefer—marketing using the interactive format on the Web or do you prefer traditional passive newspaper ads? 3. Do you "Over promise and under deliver?" Real estate professionals are appalled to hear that we are perceived at about the same level as used car salesmen. A common trap for many agents is they get caught up in their agenda of "doing whatever it takes to get the listing." Once they’ve obtained a signed contract, what difference does it make if they don’t do everything they promised?" Of course the difference it makes is huge—they often lose the listing, they receive bad press in their market area, and they don’t receive future referrals. The smart move here is to promise about 75 percent of what you think you can deliver and then give the seller more than you promised. 4. Being "attached to the outcome" is another way your agenda can cost you money. Many agents fall victim to the "White Knight Syndrome" where they start acting as if they are the seller or the buyer. If you’ve ever said, "I’m not going to let my sellers do that!" your attachment evidences your agenda of wanting to control the transaction. To avoid this trap, be a conduit of information so your sellers can make the best decision possible. Remember, it’s their house, their money, and their decision. 5. Do you wait to follow-up with your sellers when it’s convenient for you? One of the biggest complaints about real estate agents is that we don’t follow-up with our clients on a regular basis. When you don’t follow-up regularly with your clients, you are putting your agenda above your fiduciary duty to your seller. Lack of follow-up is one of the quickest ways to kill future referrals. |
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| Should buyers and sellers meet? By Dian Hymer Real estate agents almost always advise sellers to leave when their home is shown to prospective buyers. Buyers are also advised to conceal their excitement about the listing if they do happen to run into the sellers. Why are real estate agents so nervous about chance meetings between buyers and sellers? Some agents worry that the buyers could jeopardize their negotiating position if the seller becomes aware of the buyers' enthusiasm for the property. In some cases, this might be so, but such an encounter could just as easily have the opposite effect. One couple returned to see a listing they were considering at night so they could appreciate the city lights view. The seller was home. The buyers and sellers engaged in a friendly conversation, which left the seller with a positive impression of the buyers. The seller subsequently received three offers. The couple he met at the property offered the lowest price of the three. The seller wanted these buyers to have the house if they were willing and able to pay the highest price he was offered. So rather than accept the highest offer, he issued a counteroffer to the buyers who'd made the lowest offer. They accepted. If he hadn't had the personal connection to these buyers, they wouldn't have received preferential treatment. HOUSE HUNTING TIP: There are many advantages to having buyers and sellers meet, but there are several issues to be aware of. Buying and selling a personal residence is unlike any other business transaction. There is an emotional component that can have an effect on the outcome of the transaction. If you were to meet the seller at the property and have an unpleasant encounter, this could hinder your chances of a smooth negotiation. Sellers who list their homes for sale with a real estate agent often do so because they don't want to interact directly with the buyers. They want to put the marketing and negotiations in the hands of trained professionals. A buyer should respect a seller's wishes if he doesn't want to meet with you until you have completed your negotiations. This includes any negotiations that might be required to resolve inspection-related issues. After that, it's usually beneficial for the buyers to meet with the sellers for the purpose of learning more about the property. If the seller has lived in the property for some time, he has had time to decipher idiosyncrasies that could take you months or longer to figure out. Recently, a buyer learned that if she lowered a shade in the kitchen during warm weather, she could avoid walking into an unbearably hot house when she returned at the end of the day. Make a list of questions you have before your meet with the seller. If you're buying a home with a garden, you might appreciate knowing what the seller recommends about ideal times to prune, or which plants will require more or less water when the season changes. Ask the sellers if they have any service providers—like gardeners or a handyman—that they would recommend. Write down their names and phone numbers. Contact these people as soon as possible if you want them to continue working for you. It could take you months to establish relationships with new service providers using a hit and miss, trial by yellow pages approach. THE CLOSING: If you do meet with the sellers, it's usually best to keep your redecorating and remodeling plans to yourself. The sellers may have a strong attachment to their own taste in such matters. Try to culminate your transaction on good terms. |
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| A fence can be offensive Dear Barry, Shortly after buying my home, a problem developed with my neighbor. She built a fence about three feet on my side of the property line and now refuses to take it down. Is it legal for her to do this? I'm afraid that she may claim ownership of that part of my property if I do nothing. Am I allowed to take down her fence if it is on my property? --Robin Dear Robin, Your question is one for an attorney, not a home inspector, but here are a few observations and ideas that may be of help. When someone presumes to use another person's property for a number of years, they can eventually assume permanent legal use on the basis of what is called a "prescriptive easement." Therefore, you need to set this matter straight while the issue is still young. First on the agenda is to obtain legal advice so that you know your rights and options under law. Unfortunately, legal procedures often involve protracted litigation, and this can be so costly that you come out losing, even when you win. In some cases, the creative, do-it-yourself approach can alleviate the need for courtroom dramas and legal fees; so here's a possible solution that should be reviewed with an attorney before proceeding: Step 1: Verify the actual location of the property line. This can be done by reviewing site maps or construction plans at the building department, or by hiring a licensed surveyor. Step 2: Go to the building department and obtain a permit to build a fence, precisely on the property line. If you are told that a permit is not required for a fence, tell them that the fence will be 7 feet high. The building code requires permits for fences over 6 feet in height. Then proceed to have the fence constructed by a licensed contractor and approved by the municipal inspector. Step 3: The neighbor's fence in now located within the confines of your yard, separated from your neighbor's yard by your permitted and approved fence. At that point, you simply remove the maverick fence that is within your yard. If, in response to these procedures, the neighbor sets foot on your side of the new fence, trespassing is still illegal. Simply call the police. Best of luck with this situation. Dear Barry, What are the most common signs of foundation problems, and how much do repairs of this kind typically cost? --Sam Dear Sam, There are two basic kinds of foundation problems: 1. Cracks and displacement, usually caused by unstable soil conditions, tree roots too close to the foundation, and/or faulty construction. 2. Decomposition of the concrete or mortar, usually resulting from age, ongoing moisture exposure, or a substandard concrete mixture. There is no formula for determining foundation repair costs. This depends entirely upon the extent of the problem, the size of the job, and numerous other variables that would effect the amount of labor and materials needed to make necessary corrections. If you suspect problems with your foundation, an inspection by a licensed structural engineer is recommended. To write to Barry Stone, please visit him on the Web at www.housedetective.com/. Copyright 2003 Barry Stone Distributed by Inman News Features |
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| Do I need an insurance contingency? Today, getting preapproved for a loan may not be enough to prepare you to be a bona fide buyer. You also need to know that you're insurable. Years ago, lining up homeowner's insurance was one of the last things you did before closing a sale. Now, buyers are finding that it's wise to make it one of their first priorities. Homeowner's insurance is required to close any home purchase where a new mortgage is involved. A mortgage lender won't give you a loan unless you have hazard insurance on the property with the lender named as an additionally insured. If you can't get insurance, you can't have the loan. Very few purchase contracts presently include insurance contingencies that make the purchase contingent on the buyer's ability to obtain acceptable homeowner's insurance. But, that situation could change, given current conditions in the insurance industry. Homeowner's insurance carriers have recently been hit with skyrocketing costs due to an increased number of mold and water-related damage claims. In an effort to control costs, carriers have become hyper-diligent about who they will insure, and what properties they will insure. For years, insurers have scrutinized applicants to make sure they were a good financial risk-checking credit reports and scores. Now, they also look at your claims record to see if you're a good insurance risk. HOUSE HUNTING TIP: Insurance carriers are also checking out the property to make sure its claim record is clean before they'll agree to write a policy. This means that you could have a squeaky-clean record, but you could be denied insurance if a claim or two has been filed on the property you're attempting to buy within the last 5 years. Most insurers participate in a claims-sharing database, the Comprehensive Loss Underwriting Exchange (CLUE). CLUE reports detail every claim made on a property during the last 5 years. A homeowner can obtain a copy of the Clue report on his home online at www.choicetrust.com for less than $15. A buyer cannot directly access the Clue report on a property unless the seller provides a copy. However, an insurance agent who has access to Clue can, and will, check the claims record. Insurers are also tightening up with already insured homeowners. Long-time insured customers may not be renewed if they have submitted a claim in the last year. To make matters worse, what you think is a casual inquiry, the insurer may interpret as a claim. A woman who had been with an insurer for over 10 years, called to ask if damage caused by a leaky roof would be covered by her policy. The insurer said that it would. The insured never made a formal claim. She replaced the roof and repaired the damage herself. The insurer dropped her at the next renewal date. Her benign inquiry qualified as an unpaid claim. If you call your insurer for general information, be sure to begin the conversation by saying: "This is hypothetical." Before you go house hunting, talk to an insurance agent to see if you're insurable. First-time buyers should consider taking out a renter's insurance policy. Insurers will often write homeowner's insurance for their existing customers. THE CLOSING: If your purchase contract doesn't include an insurance contingency, find out if the house is insurable at a price you can live with before you remove your inspection contingency. You can probably find insurance to cover a home with a bad CLUE report, but the cost may be prohibitive. |
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| Spice up your home with a few paint tricks By Paul Bianchina You've seen them do it on shows like "Trading Spaces" and "Extreme Makeover." You may have even seen it at a friend's house. And now you've decided it's time to move away from those plain white walls and try something different. With some basic tools, a couple of cans of paint, and a little experimental spirit, you can dress up one wall or your entire house with some simple special painting effects. The materials listed here should all be available at home centers, paint stores and larger department stores. With any of these techniques, you might want to practice in a closet or on a large sheet of cardboard or plywood first, to get a feel for the process and to see if you're happy with the color and texture. Also, your hands will be getting up close and personal with the paint, so a couple of pairs of disposable gloves are also a worthwhile investment. Sponging Sponging is probably one of the most popular and most enjoyable of the special effects painting techniques. To get started, you need two or more colors of paint, a paint tray, a natural sea sponge and some paper towels or old newspapers. To begin, paint the wall with the base color. This will actually not be the predominate color when you're done, but rather more of an accent color that shows through gaps in the sponged-on color. Let this coat dry before proceeding. Next, dip your sponge in water and ring it out so that it's just damp, which helps keep the sponge from picking up too much paint. Dip the sponge into the second paint color, blot it slightly against the paper towel to remove excess paint, and then gently press the sponge against the wall. Keep your touch light to create a subtle pattern of paint, as opposed to pressing hard or with too much paint on the sponge, with blurs the pattern too much. Don't overdo it by trying to cover too much of the base coat at once. Instead, try and achieve a light pattern of paint texture that has a look you like. Do the entire wall, and then if you feel that too much of the base coat is still visible, you can go back over it a second time. Allow this second color to dry completely before going back over it with a third color if desired. If the sponge will not reach into the corners, use a small paint brush to dab paint into these areas in a pattern that matches the sponge. Ragging Ragging is similar to sponging in technique, but the finished look is different, with a slightly heavier look that resembles some types of fabric. Once again, begin by applying a base coat color to the wall and allowing it to dry completely. You'll want to use a clean, absorbent, lint-free rag or towel that has some nap to it, like a washcloth. The type of cloth you use and how you hold it will determine the finished texture effects. Dip the rag in water, wring it out, then ball the rag up loosely in your hand and gently dip it into the second paint color. Blot off the excess on a paper towel, then touch the rag against the wall. Repeat this, re-gripping the rag as you go, to create different textures. Re-dip the rag in the paint as soon as it begins to lose the pattern you like. Ragging is usually done with only two colors, but you can add a third if you like – just make sure each color is completely dry before moving on to the next one. Washing As the name implies, this technique will leave thin wash of top-coat color over the base color, almost at though the wall has aged or been worn from use. Washing is best done with just one color over the base coat. Paint on the base color and allow it to dry. Using the same type of rag or towel used for ragging, dip the rag in water and wring it out, then dip it into the paint. You can actually allow the rag to pick up a little more paint with this technique, but you do want to be sure that you do not have an excess amount on your gloves that could smear onto the wall. Use the rag to apply the top color coat to the wall by actually wiping on the paint with a swirling motion – almost like you're washing the wall with soap and water - rather than dabbing it on as was done with the earlier techniques. Continue "washing" the wall with paint until the rag begins to dry and starts taking some of the paint back off. When you have removed a sufficient amount of paint to achieve the look you want, re-dip the rag in paint and move on to another section of the wall. The important thing here is to try and achieve some level of consistency with the finished look, rather than leaving large areas with a lot of paint on them and other areas with much less. |
| Hot Links |
| State of California Home Page http://www.ca.gov/state/portal/myca_homepage.jsp San Diego Information http://www.sandiego.gov Orange County Coast Keeper http://www.coastkeeper.org California Beach Information http://www.beachCalifornia.com Catalina Island Guide http://www.catalina.com |
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