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Tag Archives: client protection

Wayback Wednesday… Title Insurance…

Wednesday, 14 September 2011 08:00
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Abraham Lincoln, the sixteenth President of th...

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A couple of years ago I wrote a quick little primer on Title Insurance.  (Check out the link for more details…)  Title Insurance is one of the subjects I am questioned about regularly… even by buyers that have previously purchased 3 or 4 homes.

It can be confusing… there are two distinct flavors of Title Insurance, Owner’s and Lender’s.  And while sitting at the closing table, buyers are usually paying for a pant-load of other items.  Sometimes they draw a line and decide that skipping the Owner’s policy is a way to avoid spending another few hundred dollars.  Other times, they just give in and spend the money without knowing what they are buying.

Neither of those situations are good for the buyer.  Some buyers ABSOLUTELY need to have Owner’s Title Insurance.  For others, it is a luxury, or even a waste.  (Sorry, but if you have a loan, you WILL be paying for Lender’s Title Insurance… they will require it, and despite the fact that you won’t benefit, you get to pay for it).

Of course, I would be remiss if I didn’t remind you that I am not a lawyer, and I don’t even play one on TV.  You should always ask your attorney about the legal ramifications of a decision like this.  But keep in mind, the closing attorney is selling the insurance product, and they DO make money from it.  Some of the closing attorneys I have worked with have flat out told buyers that they would NOT answer questions about the suitability of the insurance product because of their conflict of interest.

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Wayback Wednesday… An Oldy, but a Moldy

Wednesday, 07 September 2011 08:58
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mold on bread

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Poor mold.  People are trying to save the whales and bring back the Dodo Bird, but most everyone would be happy is mold were extinct.  But it isn’t…  Mold is alive and kicking, and more of a problem than ever.  And it usually hangs out with some other unsavory characters, Rot and Termites (that are all followers of Moisture).

A couple of years ago I was involved with a moldy property and I learned a few things.  I posted up some good information about Mold, where to find it and how big of an issue it can be.  And it can be a REALLY BIG problem.

Of course, it wasn’t my first run in with the stuff.  Back when I was a reasonably new real estate agent in Gwinnett County, GA, I worked with one of my investor clients on a property that had some pretty significant mold issues.

Real estate prices were crashing around it.  The previous owner had custom built the house, and it was pretty obvious that either they really didn’t have “builder” experience (as opposed to “building” experience), or they ran out of money partway through the project.  The whole “builder v building” experience thing is another post someday, though.

The homes was large and had wonderful high ceilings, a large garage, nice flow patterns and was well sited on the lot.  But, in this luxury home in a subdivision that had homes worth as much as a million dollars, there were no crown mouldings, no granite counters and cabinets that looked like stockers from Home Depot (not knocking HD, but the house deserved at least semi-custom cabinetry).

But the basement was where our story was…  It was nasty.  The home had been unoccupied for at least 9 months and was loaded with mold.  We knew that the HVAC was going to have to be changed… it would be cheaper than cleaning it out.  But the basement was almost beyond salvation.  The solution was to gut it and leave it unfinished.  It had been finished, and was pretty well finished, but was going to have to be “unfinished” in order to remediate the mold problems.  All of the drywall was junk… and we also knew that some of the structural wood would need to be replaced.  Most importantly, we knew that it would need to spend a good long time with proper airflow.

The bank that repossessed the house had DESTROYED their collateral by turning off the power.  Because the HVAC wasn’t running for those 9 months, the bank likely saved about $3000.  But in saving that $3000, the value of the home likely dropped by $200,000.  Not a good trade…  The house should have been able to sell for $500,000, but instead barely managed to bring $300,000.  Of course, the bank wasn’t real bright anyway… they turned down our offer at one point, and then lowered the price to our offer less than two weeks later.

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Wayback Wednesday… THIS Should be the Centerpiece of What the NAR Does for Consumers!

Wednesday, 10 August 2011 08:00
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Logo of the National Association of Realtors.

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To begin with, the NAR is the National Association of REALTORS®.  Their “job” is that they represent real estate agents legislatively.  For lack of a better phrase, they are our trade group and kind of like a trade union.  I’m not fond of everything that they do, but I do feel that they have a place.

One of the stated missions of the NAR is to protect consumers.  There are a few ways that they go about this, including requiring members to live up to a Code of Ethics.  And while I think there are some weaknesses in the Code of Ethics, it is something.  Another thing that the NAR does is provide (often self-serving) market stats and interpretations to the public… through the media.

Also along the lines of consumer protection, the NAR sometimes mentions… seemingly in passing… cases of Eminent Domain abuse by various federal, state and local governments.  Governments abusing their Right of Eminent Domain is something VERY basic…  It goes to the heart of Property Rights, that when we purchase a piece of property, we OWN it and can enjoy it as we wish.

Four years ago I had a post about Eminent Domain abuses that were going on at that time.  I wish I could say that things are better, but they aren’t.  In fact, some localities are looking at their tax base and wondering how they can tweak it in order to bring in more revenues.  Unfortunately, for many politicians, that means pushing people out of their homes in order to bring about some grand new plan.  And in some cases, there are politicians that are on the receiving end of some generous “thank you notes” from the developers hired to bring about the grand plans.

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Wayback Wednesday… Dirty Little Secrets…

Wednesday, 27 July 2011 08:00
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A tablet with the phrase "For sale by own...

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There are a couple of Dirty Little Secrets in Real Estate.  I wrote about one of them a few years ago this week.  Those people that want you to sell your home “FSBO” through them for a flat fee have one of those secrets.  They don’t care if your home sells.  They get paid whether your home sells or not…  In fact, I’ve been to presentations where some of these companies were talking about their business model.  It was mentioned that if the house DOESN’T sell, they have a chance to double down on the revenue.

But that isn’t the only secret.

Another one is that your real estate agent is only guessing at the “market value” of your home.  And the same holds true for appraisers, adjusters and anyone else that is pegging a “value” to a home.  There is only one way to determine an accurate type of value for a home, and that is replacement value.  But that isn’t market value.  See, the problem is that market value is determined by a buyer and a seller agreeing on the price of a house.  And it is valid at the closing table… for THAT buyer and THAT seller.  The second that title changes hands, that value starts becoming vaporous again.  Some of us are pretty good at guessing what the market value MIGHT be, but it is a guess.

I don’t want that to sound self-serving.  If you really want, I’ll sell your house for a flat fee.  We can agree on everything right up front… what is going to be done, when it will be done, what is or isn’t included…  You’ll even get a healthy discount for going that way.

I don’t mind being open about this industry.  Dirty laundry HAS to be aired in order to get clean.  This isn’t GIANT dirty laundry, but I think it is something that needs to be disclosed.

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Wayback Wednesday… Add-on or Get Out?

Wednesday, 13 July 2011 08:32
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I’m not getting this question nearly as much as I used to… but it is still a valid question for many “would-be” buyers (or sellers)…

Should I improve my current home, or just buy a new one?

It isn’t nearly as easy of an answer as it might first seem.  Here is my take on it 3 years ago.  But there are some changes…  Read the old post if you have a moment, then come back and finish this one.  I’ll give a few highlights.

Let’s say that you live in a house that has eroded from $250,000 to $225,000 (10%), and you are looking at a house that went from $500,000 to $450,000 (also 10%).  If you took the $25,000 loss on your existing home, you would save $50,000 on the step up home.  So, you are $25,000 ahead.

Home of Benjamin Harrison, 23rd president of t...

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Well… the house that you might have taken a 10% loss on 3 years ago might be staring at a 25-30% loss now… maybe more, maybe less.  But (this is important) that might be starting to change… might… depending on your neighborhood and even the style of house.  So, we might start seeing some of those great deal disappearing.  At the same time, we might find that a few more prospective sellers can get out of their current home without losing their shirts.  If you can’t afford to sell, then the deals are irrelevant.

Also, in the old post I mentioned interest rates… they were around 6% then, and they are around 4.5% now.  This CAN’T last.

Combining these two items, home affordability hasn’t been better in a VERY long time.  But, you still have to be in a position to make the move… be able to sell your home (and either have equity or the ability to pay off the balance.

Also in the old post I talked about not building too far outside of the “neighborhood norms”.  If the average house in your neighborhood is a 3-4 bedroom, 2-3 bath ranch, building a 6 bedroom two story home is NOT going to pay you back.  I’m not saying that you can’t do it (but check local ordinances and covenants, THEY might say you can’t), I’m saying that you shouldn’t expect to be able to sell it without pain.

Even if you NEVER plan to sell the house, think about resale.  I have sold more than one “I’m never going to move from here” homes for sellers.  Life changed and so did their needs.  They went and bought new “I’m never going to move from here” homes.  Even if you are right… you are never going to move from here, at some point, somebody in the family is likely to sell the house.

 

If you decide that you want to move up (or down or sideways), give me a call.

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