I'm pretty fascinated with the legal profession in that they really do have their areas of expertise just like many other professions. But the one thing that comes up time and time again is the world of "contract law" and how it affects the real estate industry. In fact, it is probably the most negotiated aspect of real estate including purchase prices. I say this because there are many more "terms" of a contract than there is purchase price. Let's face it, if a contract price is negotiated more than three or four times it's pretty rare. You start low, I respond high, you come up a little, I come down a little and we usually end up within 20% of the middle. Yes, this market has changed things a little, but fundamentally that's the negotiation on price. Terms? Not even close. Look at any real estate contract and there are paragraphs upon paragraphs upon the terms of the deal: and that's in addition to the terms that will be negotiated.
What does this have to do with the title? Plenty, especially if you're a licensed real estate agent or you're working with a licensed real estate agent. You see, it's fine for someone to negotiate on their own behalf. However, almost no one does it. And hiring a real estate agent to help you buy, sell, lease or land contract a property for you is a game changer. Only people who are licensed to practice law in Ohio are allowed to practice law in Ohio. I know it sounds redundant, but it isn't. Filling in the real estate contract is not practicing law, it's filling in a form. There's more to it than that, but let's leave it as is for now. But defining a lease or a lease/purchase or let alone a land contract is not filling in a form but rather creating a contract. And doing it on another's behalf is not allowed.
I'm going to work backward a little bit. A very loose definition of a Land Contract is a "Contractual arrangement used in some states under which a buyer purchases real estate from a seller over a period of time, usually by making periodic installment payments. Title is not conveyed to the buyer until the final payment is made. Also called an article of agreement". Seems pretty simple, right? Wrong. Unless you own the real estate outright (no mortgage whatsoever, even one that's paid off), it's almost always illegal to do a land contract. Why you ask? Because all mortgages have a clause in them that says as soon as you sell your property you must pay off the mortgage. In a land contract, the deed doesn't not transfer but that does not mean you haven't sold the property. Splitting hairs? Your mortgage company doesn't think so. If you have questions regarding a land contract, contact your attorney. I'm not an attorney and I'm not giving any legal advice at all (disclaimer put in here on purpose).
I'm jumping to the front here and talking about a lease. You rent the property for a stated period of time for a stated amount. That's the end of that conversation.
A lease/purchase or lease to purchase is different. Different than a lease and nothing like a land contract. A lease/purchase agreement is when you agree to lease your property for a fixed period of time at a fixed amount and you have a contract for that same person to close on your home at the end of the lease period. In a lease/purchase agreement you have not sold the home; you are in contract to sell the home, but you haven't sold the home. That's a big difference to the bank (although you may have other issues and I'm not one to address those and therefore I'm not recommending you do anything before you speak with your attorney). However, if you've hired a real estate professional to help you market your home they can write the contract for the sale part but not for the lease part. And that's important for you because you want to make sure you're protected and you really want your agent protected as well. If there is a problem in the future, you want to be able to make sure you've done everything properly from a legal standpoint. And if you're the buyer you really do want the same thing. The last thing you want is a knock on your door and someone standing there stating you have 24 hours to move out and by the way, the down payment you gave the owner? Gone.
So to sum up: I'm not an attorney and I'm not giving any legal advice. Hire an attorney (you cheapskate) to work for you. What am I doing here? Informing, nothing but informing. I did this because it's the way a lot of real estate is being handled right now and will continue to do so in the future. There's no reason to be penny-wise and pound-foolish. Hire an expert to help you. It's well worth it not just in the long run, but in the short run as well.
Questions for me? Email me at jkahn@bdpsolutions.com.
Thursday, September 23, 2010
Wednesday, September 22, 2010
Fall Home Maintenance
Each season, especially here in the Midwest, brings an opportunity for me to write about some basic home maintenance. Not necessarily how to do them, but what to look for. First off, let me say that at anytime during the year if you see something that doesn't look quite right then it probably isn't. I have twenty years of experience in the construction industry and I still remember what my first boss told me the first time I went to the field to look at homes under construction: "if it looks like it isn't right, then it probably isn't". These words have stuck with me since then and I still keep them in my head every time I go to look at something.
The first thing you need to do is walk through your home as if you were a person who may be interested in purchasing it. Let's start in the basement. Is there a change in what you smell as you walk down the basement stairs? If so, then most likely you have some type of moisture in your basement. Your basement should not smell any different than the rest of your home. Let your nose lead you to the source of the smell. If you have insulation on your walls (and your basement isn't finished), lift up the insulation to see if it's wet, damp, moist or has "black stuff" growing on it. If so, then you have moisture on your walls. If it's wet you have a problem and need an expert to come in and help you with your water problem. If it's any of the others, put a dehumidifier in the area (one that can run constantly with a hose to a sump/drain). Also look up to see if there is any water on the underside of the floor above. Do this near the bathrooms, kitchen and even near where the hose bibbs are to the outside. Lastly, change the furnace filter and the humidifier pad (if you have a humidifier). Don't forget to turn the humidifier on as soon as the temperature consistently is in the 50-degree range and lower.
Next up is to walk around the first floor. Check to make sure all of the windows are closed properly and that there is no air leaking through. On double-hung windows, it's easy for the top sash to creep down some so make sure that they're all locking properly and that will give you the best seal. If you have casement windows then make sure all locking mechanisms are engaged properly. On very tall windows it's common for one mechanism to catch but the other not to catch (the top one is usually the tricky one). Look at the floor around the kitchen sink, dishwasher, toilets and vanities for any sign of water. If you see water, you need to take care of it right away. Look up at the ceilings and make sure you don't see any odd spots. Yellow on the ceiling usually means there's water coming from a source upstairs. If you have a vaulted ceiling or live in a one-story, that same yellow is from water but it is from the roof. Have it checked by a professional.
Lastly is the upstairs. Do the same window check, do the same water on the floor check and do the same ceiling check. If you have an attic furnace then you need to replace that air filter as well. Same with a humidifier pad if you have a humidifier in your attic system. While you're in the attic, look around (don't go climbing from truss to truss because you don't want to slip and go through the ceiling below). Do you see any light coming through your roof? Do you see any water spots on the underside of your roof sheathing? Any animals/rodents/bees nests up there? On all of those, get a professional in to take care of them now. And on your way down from the attic, make sure the attic access closes securely. No need to let the nice warm air that you paid for get up in the attic and then outside.
Speaking of the outside; this is where you need to let your eyes do the work. There are some obvious things to do; make sure your irrigation system has been shut down properly, disconnect ALL hoses from the hose bibbs so the ice doesn't backflow into the pipes, look for any loose or "lifted" shingles on the roof, look for any wood trim that needs some paint or replaced due to rot, look around the foundation to make sure the yard slopes away from the home, change any burnt out light bulbs in any of your exterior lighting. Just simple things.
Lastly, I want to reiterate the furnace filter changing. If you do this on a quarterly basis, your furnace should last you for years. If not, then you run the risk of dirt/dust buildup and that has to go somewhere so it ends up in the motor or the heat exchanger. Both bad places. Probably 50% of service calls on furnaces within the first 5 years can be avoided if you replace your filters on a regular basis. Have pets? Replace them monthly. It's an investment, not an expense.
If you have any specific questions, feel free to email me directly at jkahn@bdpsolutions.com.
The first thing you need to do is walk through your home as if you were a person who may be interested in purchasing it. Let's start in the basement. Is there a change in what you smell as you walk down the basement stairs? If so, then most likely you have some type of moisture in your basement. Your basement should not smell any different than the rest of your home. Let your nose lead you to the source of the smell. If you have insulation on your walls (and your basement isn't finished), lift up the insulation to see if it's wet, damp, moist or has "black stuff" growing on it. If so, then you have moisture on your walls. If it's wet you have a problem and need an expert to come in and help you with your water problem. If it's any of the others, put a dehumidifier in the area (one that can run constantly with a hose to a sump/drain). Also look up to see if there is any water on the underside of the floor above. Do this near the bathrooms, kitchen and even near where the hose bibbs are to the outside. Lastly, change the furnace filter and the humidifier pad (if you have a humidifier). Don't forget to turn the humidifier on as soon as the temperature consistently is in the 50-degree range and lower.
Next up is to walk around the first floor. Check to make sure all of the windows are closed properly and that there is no air leaking through. On double-hung windows, it's easy for the top sash to creep down some so make sure that they're all locking properly and that will give you the best seal. If you have casement windows then make sure all locking mechanisms are engaged properly. On very tall windows it's common for one mechanism to catch but the other not to catch (the top one is usually the tricky one). Look at the floor around the kitchen sink, dishwasher, toilets and vanities for any sign of water. If you see water, you need to take care of it right away. Look up at the ceilings and make sure you don't see any odd spots. Yellow on the ceiling usually means there's water coming from a source upstairs. If you have a vaulted ceiling or live in a one-story, that same yellow is from water but it is from the roof. Have it checked by a professional.
Lastly is the upstairs. Do the same window check, do the same water on the floor check and do the same ceiling check. If you have an attic furnace then you need to replace that air filter as well. Same with a humidifier pad if you have a humidifier in your attic system. While you're in the attic, look around (don't go climbing from truss to truss because you don't want to slip and go through the ceiling below). Do you see any light coming through your roof? Do you see any water spots on the underside of your roof sheathing? Any animals/rodents/bees nests up there? On all of those, get a professional in to take care of them now. And on your way down from the attic, make sure the attic access closes securely. No need to let the nice warm air that you paid for get up in the attic and then outside.
Speaking of the outside; this is where you need to let your eyes do the work. There are some obvious things to do; make sure your irrigation system has been shut down properly, disconnect ALL hoses from the hose bibbs so the ice doesn't backflow into the pipes, look for any loose or "lifted" shingles on the roof, look for any wood trim that needs some paint or replaced due to rot, look around the foundation to make sure the yard slopes away from the home, change any burnt out light bulbs in any of your exterior lighting. Just simple things.
Lastly, I want to reiterate the furnace filter changing. If you do this on a quarterly basis, your furnace should last you for years. If not, then you run the risk of dirt/dust buildup and that has to go somewhere so it ends up in the motor or the heat exchanger. Both bad places. Probably 50% of service calls on furnaces within the first 5 years can be avoided if you replace your filters on a regular basis. Have pets? Replace them monthly. It's an investment, not an expense.
If you have any specific questions, feel free to email me directly at jkahn@bdpsolutions.com.
Tuesday, September 21, 2010
When's The Market Going To Come Back?
The title of this blog, "When's The Market Going To Come Back", is a question I get ALL of the time. As someone involved in home building, remodeling and real estate I am looked to as an authority on the subject (and I'm very thankful and flattered for that). The last question happened Sunday while I was eating lunch with my family at Chipotle (love their service, pricing, quality and the lime chips - www.chipotle.com). We ran into a family and my younger daughter goes to school with the three kids (they are triplets). We got to talking about ballet, The Nutcracker and middle school. The mom looked at me and inquired about a listing I have where we live (www.6265dublingranville.com) as to its price, why the people were selling, etc. All of the typical questions. I answered them all and invited her to see the home to which she said that she wasn't moving but did want to see it. Open House coming up so I invited her (and all of her friends).
We finished our conversation and said our pleasantries and our goodbyes and then they left. Then all of a sudden from the table behind where they were sitting I hear "when's the market going to come back"? I looked over and saw a lady sitting by herself. Nothing particular stood about this lady; she was dressed very casually (it was Chipotle), didn't have any makeup on (yes, I could tell from twenty feet), had somewhat of a smoker's voice and I was quite surprised she spoke up. However, I learned a long time ago that you just never know...
I responded with "that depends a lot on where you live and at what price point your home is currently at". She looked at me and said "that's fair, we live on R***** Court in N** A*****". She lived in a home that was close to the seven figure mark. That piqued my interest; I almost broke my own golden rule of you never know...
We chatted in great length about the area in general, her specific part of the neighborhood, her price point, when she bought her home, why she wanted to sell (her only son was already in college) and that they actually wanted to build another home in the area but much, much smaller (they have about 7000 SF now), what business she and her husband were in (they were - multiple - business owners), etc. So after about ten minutes of a very nice and engaging conversation she looked at me and said "soooooo, when's the market going to come back"? I chuckled not at her question but at her persistence. I am learning more and more almost everyday that people just want to know when they won't lose money on their homes. I gave her a very quick response of "2-5 years based on the inventory on the market along with the development that's currently happening". She was shocked to say the least.
I put up my hand and smiled and said "wait, don't get mad at me let's just look at the numbers". I proceeded to explain to her the current inventory and its pace of sale and how that will relate to the market coming back. Then I said something that shocked her even more: I stated that the market coming back was much more of a mental measurement than a calculated measurement. Here's why: people will take action based more on what they perceive to be happening as opposed to what may actually be happening. Don't believe me? Take for example the real estate market five years ago when things were BOOMING. People bought homes as an investment that they were convinced would appreciate by 10% a year, year on year. The statistics showed them that it was impossible to maintain that growth but they did it anyway because they BELIEVED that it was true.
So here's my answer for today: the market comes back in 3-5 years but for right now, we will see "the new normal" in 1-2 years. What's the new normal? People having the confidence to purchase a home and knowing they won't lose, or make, 10% a year on it.
My conversation companion looked at me and said "that makes sense and it really works for us. Our son will be out of college and that's perfect timing for us. Give me your card because I would like you to meet with my husband and me to continue the conversation". I couldn't ask for anything more.
We finished our conversation and said our pleasantries and our goodbyes and then they left. Then all of a sudden from the table behind where they were sitting I hear "when's the market going to come back"? I looked over and saw a lady sitting by herself. Nothing particular stood about this lady; she was dressed very casually (it was Chipotle), didn't have any makeup on (yes, I could tell from twenty feet), had somewhat of a smoker's voice and I was quite surprised she spoke up. However, I learned a long time ago that you just never know...
I responded with "that depends a lot on where you live and at what price point your home is currently at". She looked at me and said "that's fair, we live on R***** Court in N** A*****". She lived in a home that was close to the seven figure mark. That piqued my interest; I almost broke my own golden rule of you never know...
We chatted in great length about the area in general, her specific part of the neighborhood, her price point, when she bought her home, why she wanted to sell (her only son was already in college) and that they actually wanted to build another home in the area but much, much smaller (they have about 7000 SF now), what business she and her husband were in (they were - multiple - business owners), etc. So after about ten minutes of a very nice and engaging conversation she looked at me and said "soooooo, when's the market going to come back"? I chuckled not at her question but at her persistence. I am learning more and more almost everyday that people just want to know when they won't lose money on their homes. I gave her a very quick response of "2-5 years based on the inventory on the market along with the development that's currently happening". She was shocked to say the least.
I put up my hand and smiled and said "wait, don't get mad at me let's just look at the numbers". I proceeded to explain to her the current inventory and its pace of sale and how that will relate to the market coming back. Then I said something that shocked her even more: I stated that the market coming back was much more of a mental measurement than a calculated measurement. Here's why: people will take action based more on what they perceive to be happening as opposed to what may actually be happening. Don't believe me? Take for example the real estate market five years ago when things were BOOMING. People bought homes as an investment that they were convinced would appreciate by 10% a year, year on year. The statistics showed them that it was impossible to maintain that growth but they did it anyway because they BELIEVED that it was true.
So here's my answer for today: the market comes back in 3-5 years but for right now, we will see "the new normal" in 1-2 years. What's the new normal? People having the confidence to purchase a home and knowing they won't lose, or make, 10% a year on it.
My conversation companion looked at me and said "that makes sense and it really works for us. Our son will be out of college and that's perfect timing for us. Give me your card because I would like you to meet with my husband and me to continue the conversation". I couldn't ask for anything more.
Monday, September 20, 2010
My (Your) Pet
Let me start off by saying that I like animals; pets to be more specific. I've had my share of dogs, and really enjoyed them. However, at this time, I don't have any pets. You see, in my world we build a new home every 3-5 years and then sell it and do it all over again. My big concern is that someone will love my home but not buy it because of a pet. I know, "they should understand". But in this market it's tough for someone to overlook anything at all.
If your home is on the market or you're thinking about putting it on the market, then there are a few things you need to do. First off, DO NOT get rid of Fido, Fifi or Tiger. It's your home and they're your pets and keep it that way. However, do go around and clean; clean like you've never cleaned before. Look for the stray hairs on the baseboard, look VERY closely at all the carpeting and try to see what others cannot. This will put you one step ahead.
Secondly, have a friend who isn't a "pet person" to come over and give you an honest opinion of your home. These people typically have very sensitive noses and quite possibly allergies. If they can smell and and see it then so can people looking to purchase your home. Listen to them, take their advice and for goodness sake do not be offended by what they're saying. They're there to help you: you should be thanking them.
Thirdly, if there is an issue, bring in a professional cleaning company to make it go away. If it's beyond that, then it's time to start replacing carpet and painting walls. You'll need to do it anyway so why not do it before someone eliminates your home? Remember, you want to put your best foot forward ALL THE TIME.
Lastly, I'll share a true story with you. I have a listing and they have cats. The people very interested in the home also have cats. But, here's the kicker: the potential buyers of the home are saying that the smell of cat urine is so overwhelming that they're afraid to purchase the home because they feel that their cats will also start urinating all over the place. The seller's contend that there is no smell and that the potential buyer is just negotiating. I'm not an expert, but I do understand that if you're too close to a situation then sometimes you don't see it for what it really is. Skipping ahead a little, the potential buyers decided to bring a "black lamp" to see any stains on the carpet. "Holy Cow" was what the seller's agent told me. There was almost none of the basement carpet that was clean; it was layered with cat urine. Believe the buyer's agent? I did, because I know the seller and how defensive they are about the cats. So unfortunately it is now on me to have the conversation with my buyer. It wasn't pleasant and they still don't believe the buyer (who has offered to show me, but without the seller there). Pretty strong conviction to say the least.
To wrap up; be objective, proactive and smart about listing your home. Don't help potential buyers eliminate your home. Help potential buyers choose your home.
If your home is on the market or you're thinking about putting it on the market, then there are a few things you need to do. First off, DO NOT get rid of Fido, Fifi or Tiger. It's your home and they're your pets and keep it that way. However, do go around and clean; clean like you've never cleaned before. Look for the stray hairs on the baseboard, look VERY closely at all the carpeting and try to see what others cannot. This will put you one step ahead.
Secondly, have a friend who isn't a "pet person" to come over and give you an honest opinion of your home. These people typically have very sensitive noses and quite possibly allergies. If they can smell and and see it then so can people looking to purchase your home. Listen to them, take their advice and for goodness sake do not be offended by what they're saying. They're there to help you: you should be thanking them.
Thirdly, if there is an issue, bring in a professional cleaning company to make it go away. If it's beyond that, then it's time to start replacing carpet and painting walls. You'll need to do it anyway so why not do it before someone eliminates your home? Remember, you want to put your best foot forward ALL THE TIME.
Lastly, I'll share a true story with you. I have a listing and they have cats. The people very interested in the home also have cats. But, here's the kicker: the potential buyers of the home are saying that the smell of cat urine is so overwhelming that they're afraid to purchase the home because they feel that their cats will also start urinating all over the place. The seller's contend that there is no smell and that the potential buyer is just negotiating. I'm not an expert, but I do understand that if you're too close to a situation then sometimes you don't see it for what it really is. Skipping ahead a little, the potential buyers decided to bring a "black lamp" to see any stains on the carpet. "Holy Cow" was what the seller's agent told me. There was almost none of the basement carpet that was clean; it was layered with cat urine. Believe the buyer's agent? I did, because I know the seller and how defensive they are about the cats. So unfortunately it is now on me to have the conversation with my buyer. It wasn't pleasant and they still don't believe the buyer (who has offered to show me, but without the seller there). Pretty strong conviction to say the least.
To wrap up; be objective, proactive and smart about listing your home. Don't help potential buyers eliminate your home. Help potential buyers choose your home.
Friday, September 17, 2010
My Neighborhood
Like everybody else, I have seen a decline in the value of the homes where I live. Yes, I have been frustrated just like everyone else. Actually, I've been more frustrated because my home is for sale. I've decided to take a little bit of my own advice: stop, look and listen (corny, but it's effective). Stick with me.
You see, I built my own home about five years ago. At the peak of the peak of the market. As a builder, everyone thinks I built my home for free. Let me be the first to say that I wish that were true but it wasn't. Did I build it for a better price than other people in my neighborhood? Does a barista at Starbucks get a discount on coffee? Of course I did.
Here's the kicker: I am in the same boat as all of my clients who have their home for sale. I needed to stop worrying about what I couldn't control (the market), look around and determine if I'm okay with selling my home in this economy (I am) and listen to my own advice. What is that? That the real estate market, like any/all markets, is cyclical and this too shall pass. When? Well, my crystal ball prediction(s) will have to come in the next post.
You see, I built my own home about five years ago. At the peak of the peak of the market. As a builder, everyone thinks I built my home for free. Let me be the first to say that I wish that were true but it wasn't. Did I build it for a better price than other people in my neighborhood? Does a barista at Starbucks get a discount on coffee? Of course I did.
Here's the kicker: I am in the same boat as all of my clients who have their home for sale. I needed to stop worrying about what I couldn't control (the market), look around and determine if I'm okay with selling my home in this economy (I am) and listen to my own advice. What is that? That the real estate market, like any/all markets, is cyclical and this too shall pass. When? Well, my crystal ball prediction(s) will have to come in the next post.
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