So, here it is New Years Eve and a very unhappy buyer just heard from his mortgage lender that the appraisal on the property he is purchasing came in $50,000 under the selling price! Purchase price $795,000, appraisal $750,000. There is no appraisal contingency in this contract (where the buyer would have the option of asking for a price reduction to the appraisal price, or walking away from the contract if the seller will not do it, or anything in between). So, the scramble is on to find out how this happened, why this happened, and how to make everyone happy (no easy task).
Tune in folks, this one will be interesting!
Monday, December 31, 2007
Last Post of the Year!
Happy New Year to all. Hope in the short time I have been posting information that someone out there has found this to be of interest and maybe even helpful.
I'd truly appreciate any comments - good, bad or indiferent! I'd also like to know if any reader has any particular subject that might be of interest or if anyone has any real estate related questions, it might be interesting to other readers to share experiences.
In any case, I'll be posting next year (tomorrow). As always....
BE INFORMED AND CHECK BACK HERE OFTEN! HAPPY NEW YEAR!
I'd truly appreciate any comments - good, bad or indiferent! I'd also like to know if any reader has any particular subject that might be of interest or if anyone has any real estate related questions, it might be interesting to other readers to share experiences.
In any case, I'll be posting next year (tomorrow). As always....
BE INFORMED AND CHECK BACK HERE OFTEN! HAPPY NEW YEAR!
Sell with A Team or an Individual Agent?
Being a savvy seller dictates that you interview several agents before making the decision as to who will best represent your interest in selling. If you ask an individual agent what the pros and cons are of working with an individual, invariably you will hear things like:
"You'll be just another client, you'll never hear from that great agent who signed you up again"
"You'll get my undivided attention and I'll always know what's going on with every aspect of your sale"
"I don't do more than XX deals at a time so that each one gets the attention they deserve - a team needs to support the team, it's a numbers game to them"
"I have more flexibility with the commission I charge, I don't have to support a team, the broker provides my support."
Ok, so that makes sense.... Let's ask the agent who works as a team how I would benefit from the team as opposed to an individual agent:
"My team consists of 5 licensed agents and 2 support people. There will always be someone available to answer your questions, see to the many details of a successful listing and sale, and you benefit from the buyer base that our buyer's agents have."
"We have a person in our office full time who is experienced in coordinating advertisers, photographers, and trade people you might need, from electricians, plumbers, painters, handymen, locksmiths, cleaners, etc. That same person tracks every showing of your property and follows up with every agent to get feedback. Feedback is essential to understanding what needs to be done if your house does not sell quickly."
"Another full time person in our office is not only a licensed agent, but acts as our closing manager. She will continually follow up on inspections, the borrower's bank to be sure the loan is fully approved, the title company to be sure title work is done timely, earnest money is deposited, appraisals are done, and a long list of other details necessary to a successful closing."
"We have a team meeting once a week to discuss any listings or sales that are pending and the status of each, so that every team member knows at every juncture what the status is and can step in at any time in an emergency."
"I will call you once a week to give you an update on all aspects of your listing and/or sale, you can call my office any day, there is always someone available to help."
Hmmm..... This sounds awfully good. Actually there are more arguments for working with a team than against - may be one of the reasons that more agents are forming their own teams.
So, you need to make your own decisions, weigh all the options.... I will post a list of questions you might want to consider asking a potential listing agent on an interview. Hope you find this helpful.
REMEMBER - BE INFORMED AND CHECK BACK HERE OFTEN!
"You'll be just another client, you'll never hear from that great agent who signed you up again"
"You'll get my undivided attention and I'll always know what's going on with every aspect of your sale"
"I don't do more than XX deals at a time so that each one gets the attention they deserve - a team needs to support the team, it's a numbers game to them"
"I have more flexibility with the commission I charge, I don't have to support a team, the broker provides my support."
Ok, so that makes sense.... Let's ask the agent who works as a team how I would benefit from the team as opposed to an individual agent:
"My team consists of 5 licensed agents and 2 support people. There will always be someone available to answer your questions, see to the many details of a successful listing and sale, and you benefit from the buyer base that our buyer's agents have."
"We have a person in our office full time who is experienced in coordinating advertisers, photographers, and trade people you might need, from electricians, plumbers, painters, handymen, locksmiths, cleaners, etc. That same person tracks every showing of your property and follows up with every agent to get feedback. Feedback is essential to understanding what needs to be done if your house does not sell quickly."
"Another full time person in our office is not only a licensed agent, but acts as our closing manager. She will continually follow up on inspections, the borrower's bank to be sure the loan is fully approved, the title company to be sure title work is done timely, earnest money is deposited, appraisals are done, and a long list of other details necessary to a successful closing."
"We have a team meeting once a week to discuss any listings or sales that are pending and the status of each, so that every team member knows at every juncture what the status is and can step in at any time in an emergency."
"I will call you once a week to give you an update on all aspects of your listing and/or sale, you can call my office any day, there is always someone available to help."
Hmmm..... This sounds awfully good. Actually there are more arguments for working with a team than against - may be one of the reasons that more agents are forming their own teams.
So, you need to make your own decisions, weigh all the options.... I will post a list of questions you might want to consider asking a potential listing agent on an interview. Hope you find this helpful.
REMEMBER - BE INFORMED AND CHECK BACK HERE OFTEN!
Sunday, December 30, 2007
WHERE DOES THAT COMMISSION GO?
I know it's difficult for sellers to consider a 6% commission for selling their house. If there house sells for $500,000 that's a $30,000 commission - $15,000 for the Listing agent and $15,000 for the buyer's agent. It's important to consider a lot of things before you make your decision. To offer less than 3% to the buyer's agent might be selling yourself short. If the potential buyer has two or three properties they are seriously considering, it only makes sense that the buyer's agent is going to nudge them along to the property with the larger commission!
On the seller's side, you need to take a look at the marketing plan of the agent you are considering. Keep in mind that the Listing agent (as well as the buyer's agent) splits the commission with the broker. Agents have different commission splits depending on the company they work for and their production. Typically, a new agent splits the commission 50/50 with the broker - so that listing commission of $15,000 is down to $7,500 to the agent. An agent on a 50/50 commission split typically has the broker paying 50% of some of their costs as well such as newspaper ads, signs, postage. The agent pays the bulk of the cost of marketing, however, including virtual tours, listing fees, brochures, web postings, etc., etc., etc.
The more successful agent will have a much higher split - 75%-90% of the commission. If the agent is on a 90% split, that's $13,500 to the listing agent. But the costs go sky high as well. The agent who is successful and productive has developed systems and networks that have brought their success. They control multiple web sites to showcase your property, do constant marketing and mailing, know the market like the back of their hand when it comes to pricing and how to overcome potential downsides, have support teams in the office - often times including buyers agents on their team. Their network of other top producing agents as well as trades people, mortgage bankers, staging specialists, photographers and videographers, and pool of potential buyers, provides the best service and best chance of selling your home quickly and at a good price!
Where we are the listing agent on a property that sells for $500,000, our typical cost is between $4,500 and $5,500 in marketing, materials and support. Will we cut our commission? Yes, we will, but when a commission is cut, so are the expenses - makes sense!
So, what this boils down to - if you are considering selling your house - don't just hire on a friend, interview several top producing agents in your area. Ask lots of questions, get detailed marketing plans! Don't get excited about an agent that is free to hold your house open every weekend - less than 5% of sales come from open houses - you need the agent who can get to the other 95% of buyers.
We'll talk some other time about FSBO sales (For Sale By Owner), Discount Brokers, anything else you might fine useful. As always, hope this sheds some light. Please feel free to comment or ask questions, this is fun!
BE INFORMED AND CHECK BACK HERE OFTEN!
On the seller's side, you need to take a look at the marketing plan of the agent you are considering. Keep in mind that the Listing agent (as well as the buyer's agent) splits the commission with the broker. Agents have different commission splits depending on the company they work for and their production. Typically, a new agent splits the commission 50/50 with the broker - so that listing commission of $15,000 is down to $7,500 to the agent. An agent on a 50/50 commission split typically has the broker paying 50% of some of their costs as well such as newspaper ads, signs, postage. The agent pays the bulk of the cost of marketing, however, including virtual tours, listing fees, brochures, web postings, etc., etc., etc.
The more successful agent will have a much higher split - 75%-90% of the commission. If the agent is on a 90% split, that's $13,500 to the listing agent. But the costs go sky high as well. The agent who is successful and productive has developed systems and networks that have brought their success. They control multiple web sites to showcase your property, do constant marketing and mailing, know the market like the back of their hand when it comes to pricing and how to overcome potential downsides, have support teams in the office - often times including buyers agents on their team. Their network of other top producing agents as well as trades people, mortgage bankers, staging specialists, photographers and videographers, and pool of potential buyers, provides the best service and best chance of selling your home quickly and at a good price!
Where we are the listing agent on a property that sells for $500,000, our typical cost is between $4,500 and $5,500 in marketing, materials and support. Will we cut our commission? Yes, we will, but when a commission is cut, so are the expenses - makes sense!
So, what this boils down to - if you are considering selling your house - don't just hire on a friend, interview several top producing agents in your area. Ask lots of questions, get detailed marketing plans! Don't get excited about an agent that is free to hold your house open every weekend - less than 5% of sales come from open houses - you need the agent who can get to the other 95% of buyers.
We'll talk some other time about FSBO sales (For Sale By Owner), Discount Brokers, anything else you might fine useful. As always, hope this sheds some light. Please feel free to comment or ask questions, this is fun!
BE INFORMED AND CHECK BACK HERE OFTEN!
Saturday, December 29, 2007
The Great Termite Debate
Every home in the United States is in peril of termite and other wood destroying insect damage, and just about every lender requires a clear termite as a condition of making a loan. Real estate contracts typically have a separate termite provision that allows for the purchaser to make a termite inspection and, in Maryland at least, requires the seller to do treatments where recommended and repair damage (up to a limit of 2% of the selling price).
This has become a real problem in some cases. If the buyer's termite inspector reports no visible wood destroying insect activity but recommends a treatment as a condition of offering a warranty guess what? The seller is required to do the treatment, and this typically ranges from $750-$1500. There are some termite companies that seem to always recommend a treatment, whether they see signs of damage, previous treatments or not.
How can you avoid costly treatments and unnecessary treatments as a seller? GET A PRE-TERMITE INSPECTION AND WARRANTY! When we sign listing paperwork with sellers, we always suggest this (along with a pre-inspection which will be addressed separately). A termite company we recommend charges $60 for the inspection and gives a full one year warranty if there are no signs of wood destroying insects. When a contract comes in, we make sure the potential buyers are given a copy of this termite certification and warranty which is transferrable to them. Most often that precludes the buyer from even doing a termite, at the very least we have a basis for NOT doing treatment if they call in their own company who recommends treatment as a condition for warranty. If termites are found, it gives the seller the opportunity to shop around for the most economical treatment - a luxury they may not have if the buyer who has identified a problem insists on their own company doing the treatment. Sellers are under no obligation to use the buyer's company, but we've seen deals fall apart over disputes like this.
If there is termite damage found, again, the seller has the opportunity to get quotes and fix the problems economically, or in the case of minor cosmetic damage, fix it themselves as opposed to the licensed contractors the buyer will most certainly insist on.
Even if you have a contract with a pest control person, check before hand if the contract is transferrable to the new owner with no charge. Let me give you a nightmare termite scenario that might put things in perspective.
The owner of the home for sale had the home treated when purchased about five years ago as there were termites found along with minor termite damage to some paneling and woodwork in the basement which was minor and cosmetic and was left as is. They maintained the contract over the five year period at a cost of slightly over $350 per year and had the house inspected every year. The purchaser, as is their right, called their own termite company who did not find any active termites, but did call the old damage to their attention - even stating in the report that it was old damage. In order for them to write a new warranty they wanted $785 to do their own treatment. The seller immediately contacted the company through whom they were under contract who came out and did an inspection. They would NOT treat as there was no evidence of termites - that's their right as well. They would NOT transfer the warranty to the new owner without an additional payment of $375 even though it had been continually under warranty for five years. In the end, the seller wound up paying the $785 for the treatment (the settlement attorney took the buyer's side).
So, the next word to the wise, if you have a contract, make sure it is transferrable at no additional charge and get it in writing.
AGAIN, BE INFORMED AND CHECK BACK HERE OFTEN!
This has become a real problem in some cases. If the buyer's termite inspector reports no visible wood destroying insect activity but recommends a treatment as a condition of offering a warranty guess what? The seller is required to do the treatment, and this typically ranges from $750-$1500. There are some termite companies that seem to always recommend a treatment, whether they see signs of damage, previous treatments or not.
How can you avoid costly treatments and unnecessary treatments as a seller? GET A PRE-TERMITE INSPECTION AND WARRANTY! When we sign listing paperwork with sellers, we always suggest this (along with a pre-inspection which will be addressed separately). A termite company we recommend charges $60 for the inspection and gives a full one year warranty if there are no signs of wood destroying insects. When a contract comes in, we make sure the potential buyers are given a copy of this termite certification and warranty which is transferrable to them. Most often that precludes the buyer from even doing a termite, at the very least we have a basis for NOT doing treatment if they call in their own company who recommends treatment as a condition for warranty. If termites are found, it gives the seller the opportunity to shop around for the most economical treatment - a luxury they may not have if the buyer who has identified a problem insists on their own company doing the treatment. Sellers are under no obligation to use the buyer's company, but we've seen deals fall apart over disputes like this.
If there is termite damage found, again, the seller has the opportunity to get quotes and fix the problems economically, or in the case of minor cosmetic damage, fix it themselves as opposed to the licensed contractors the buyer will most certainly insist on.
Even if you have a contract with a pest control person, check before hand if the contract is transferrable to the new owner with no charge. Let me give you a nightmare termite scenario that might put things in perspective.
The owner of the home for sale had the home treated when purchased about five years ago as there were termites found along with minor termite damage to some paneling and woodwork in the basement which was minor and cosmetic and was left as is. They maintained the contract over the five year period at a cost of slightly over $350 per year and had the house inspected every year. The purchaser, as is their right, called their own termite company who did not find any active termites, but did call the old damage to their attention - even stating in the report that it was old damage. In order for them to write a new warranty they wanted $785 to do their own treatment. The seller immediately contacted the company through whom they were under contract who came out and did an inspection. They would NOT treat as there was no evidence of termites - that's their right as well. They would NOT transfer the warranty to the new owner without an additional payment of $375 even though it had been continually under warranty for five years. In the end, the seller wound up paying the $785 for the treatment (the settlement attorney took the buyer's side).
So, the next word to the wise, if you have a contract, make sure it is transferrable at no additional charge and get it in writing.
AGAIN, BE INFORMED AND CHECK BACK HERE OFTEN!
Friday, December 28, 2007
Follow up on Photo Finish
The final walkthrough on a property prior to closing is the time for the buyer to see the house as it will be when he moves in. According to our contracts, as I said previously, the property must be in substantially the same condition as it was at the time the contract was ratified (final signatures were all in place, earnest money changed hands), utilities must be on and the house must be broom clean. An agent should instruct his sellers, at the very least, on these basics, however, a good agent will go beyond the basics. It's not a good idea to plan your move the day of the closing, you should give yourself time to fix any "surprises" - you move the dresser and there's a large crack in the wall you didn't know was there, a window is broken by a careless mover, the carpet is rolled up and there's a great big stain right smack in the middle of the floor (all of these things and more have recently happened). Believe me, it will be a lot cheaper to fix these surprises yourself prior to the walkthrough than to have the buyer's agent insist on holding back money from closing (escrow) to have the problem resolved. You'd better prepare youself to kiss that escrow goodbye or forfeit a much larger sum than it should have taken to remedy the problem.
One giant surprise came into play on a move - there was a free-standing corner cabinet in the dining room that the buyer did not want left in the house. When the seller had the cabinet moved, the beautiful hardwood flooring that had been installed by the previous owner didn't extend under the cabinet - something our seller never knew, they had bought the house with the cabinet in place! Of course, the buyer's wanted enough money held out to replace the flooring in the whole room, and of course the company they called quoted a price big enough to build an addition! At this point, the sellers are in a total panic. This unfortunate situation was remedied by a flooring company we rely on to do fair and reasonable work. They stepped in the same day, laid flooring that was a very close match, then lightly stained the whole floor - it came out great, everyone was happy and the final cost? $500! We were lucky here with our connections - this could have potentially cost a lot more and held up the closing for days (if not longer)
On the buyer's side we did a walkthrough prior to closing where the utilities had been turned off. Of course, a walkthrough with a flashlight is a far cry from ideal, but although everything looked fine, we couldn't try appliances, heat, ac, hot water, etc. At closing we asked for a $1,500 escrow to be held for one week, enough time to get the utilities turned back on a do a thorough walkthrough. Good thing we got the money, it cost the seller over $1,400 (he did get back a little bit), as the refrigerator that was less than 2 years old wouldn't get cold and the water wouldn't get hot. He could not have the refrigerator serviced for 10 days (unacceptable), and the hot water tank was aging and it was recommended it be replaced. There is no doubt that had he checked these things out himself and made sure the utilities were on, he could have save himself about $1,000.
So, as a seller - make sure everything is in as good condition and in working order BEFORE the buyer does his walkthrough. If you have touchup paint stored, ASK if the buyer wants it left (it cost one seller $150 at closing because paint cans were left the buyer didn't want and the garage door opener was lost - easily remedied by a trip to the dump and a Home Depot type store). Make sure the utilities are left on and make sure EVERYTHING is gone, from attics, basements, crawl spaces, sheds, garages, all those places where the things we thought were lost are hiding.
As a buyer - if you've chosen a competent realtor, they will know what to look for, they will know how to negotiate in your best interest if there is something amiss. Remember, check EVERYTHING, run all the appliances, run the heat and ac (if possible), plug something into sockets, trip GFCI plugs. Check empty closets, cabinets and crawl spaces for signs of leaking or damage or mold that was not apparent when they were full. Give youself enough time to do a thorough job of it - don't do a quick pass through 1/2 hour prior to settlement, and don't schedule the movers if at all possible the same day as closing - give yourself enough time to right anything that needs righting. Remember our photo finish, the buyer wound up paying for the movers for several hours while they sat around waiting for the sellers to finish cleaning off the walls!
That's it for now, hope this was at least a little enlightening.... remember,
CHECK BACK HERE OFTEN, WE'VE JUST SCRATCHED THE SURFACE!
Your comments, suggestions, gripes, cudos are encourated!
One giant surprise came into play on a move - there was a free-standing corner cabinet in the dining room that the buyer did not want left in the house. When the seller had the cabinet moved, the beautiful hardwood flooring that had been installed by the previous owner didn't extend under the cabinet - something our seller never knew, they had bought the house with the cabinet in place! Of course, the buyer's wanted enough money held out to replace the flooring in the whole room, and of course the company they called quoted a price big enough to build an addition! At this point, the sellers are in a total panic. This unfortunate situation was remedied by a flooring company we rely on to do fair and reasonable work. They stepped in the same day, laid flooring that was a very close match, then lightly stained the whole floor - it came out great, everyone was happy and the final cost? $500! We were lucky here with our connections - this could have potentially cost a lot more and held up the closing for days (if not longer)
On the buyer's side we did a walkthrough prior to closing where the utilities had been turned off. Of course, a walkthrough with a flashlight is a far cry from ideal, but although everything looked fine, we couldn't try appliances, heat, ac, hot water, etc. At closing we asked for a $1,500 escrow to be held for one week, enough time to get the utilities turned back on a do a thorough walkthrough. Good thing we got the money, it cost the seller over $1,400 (he did get back a little bit), as the refrigerator that was less than 2 years old wouldn't get cold and the water wouldn't get hot. He could not have the refrigerator serviced for 10 days (unacceptable), and the hot water tank was aging and it was recommended it be replaced. There is no doubt that had he checked these things out himself and made sure the utilities were on, he could have save himself about $1,000.
So, as a seller - make sure everything is in as good condition and in working order BEFORE the buyer does his walkthrough. If you have touchup paint stored, ASK if the buyer wants it left (it cost one seller $150 at closing because paint cans were left the buyer didn't want and the garage door opener was lost - easily remedied by a trip to the dump and a Home Depot type store). Make sure the utilities are left on and make sure EVERYTHING is gone, from attics, basements, crawl spaces, sheds, garages, all those places where the things we thought were lost are hiding.
As a buyer - if you've chosen a competent realtor, they will know what to look for, they will know how to negotiate in your best interest if there is something amiss. Remember, check EVERYTHING, run all the appliances, run the heat and ac (if possible), plug something into sockets, trip GFCI plugs. Check empty closets, cabinets and crawl spaces for signs of leaking or damage or mold that was not apparent when they were full. Give youself enough time to do a thorough job of it - don't do a quick pass through 1/2 hour prior to settlement, and don't schedule the movers if at all possible the same day as closing - give yourself enough time to right anything that needs righting. Remember our photo finish, the buyer wound up paying for the movers for several hours while they sat around waiting for the sellers to finish cleaning off the walls!
That's it for now, hope this was at least a little enlightening.... remember,
CHECK BACK HERE OFTEN, WE'VE JUST SCRATCHED THE SURFACE!
Your comments, suggestions, gripes, cudos are encourated!
207 Years Old and Counting!
Stay tuned, readers, we have had a contract accepted on a house built over two hundred years ago - it's been totally renovated but the skeletons are arising with the inspections...... I will be writing about this in the coming days....
Photo Finish
Well, the closing finally went off today..... The seller and his wife along with an agent from my office frantically washed off plaster and lightly sanded off bumps. The purchaser agreed to accept the property as it was (it actually looked pretty good) if we would pay for a cleaning service to go in and get the grime from the sanding and washing cleaned off. In an effort to close and move on, the buyers agent and I agreed to kick in $100 each for the cleaning service and everyone went away happy.
The moral of this story? When you are moving out of a property prior to closing, the best advice is NOT to plaster over small nail holes, just leave them, this is substantially the way the property was at contract signing (the nails were there then, they can stay there!)
I'll log in with some additional information on walkthroughs from both a buyer's and seller's perspective.
NEVER A DULL MOMENT. AS ALWAYS, FEEL FREE TO ASK QUESTIONS OR MAKE COMMENTS, SHARE YOU OWN TALES OF WOE, BUT CHECK BACK HERE OFTEN FOR MORE!
The moral of this story? When you are moving out of a property prior to closing, the best advice is NOT to plaster over small nail holes, just leave them, this is substantially the way the property was at contract signing (the nails were there then, they can stay there!)
I'll log in with some additional information on walkthroughs from both a buyer's and seller's perspective.
NEVER A DULL MOMENT. AS ALWAYS, FEEL FREE TO ASK QUESTIONS OR MAKE COMMENTS, SHARE YOU OWN TALES OF WOE, BUT CHECK BACK HERE OFTEN FOR MORE!
Last Minute Problem
Some closings go as smoothly as silk, others can be quite challenging - todays is working its way towards one of the challenging ones. We are scheduled to close on a property at noon today with the final walkthrough being conducted this morning at 9:30. The buyer totally "freaked" when she walked through as the owner had spackled over nail holes where pictures had been removed but had left white spots about 6" in diameter all over the walls (all were painted a variety of colors). The buyer has movers at her home ready (and being paid by the hour).
So, what to do? The property needs to be delivered in "substantially the same condition as of the date of the contract and broom clean". Obviously, there were not white circles of spackle all over the walls. In this case, the buyer has a legitimate complaint. The seller will not make any concession, he honestly feels that he was doing the buyer a favor above and beyond what was called for. The owner is now on his way back to the house to remove the spackle - water soluable according to him and the buyer is waiting to do a second walk through - while the movers are waiting around by the hour.
We're off to the races, I'll let you know what happens..........
So, what to do? The property needs to be delivered in "substantially the same condition as of the date of the contract and broom clean". Obviously, there were not white circles of spackle all over the walls. In this case, the buyer has a legitimate complaint. The seller will not make any concession, he honestly feels that he was doing the buyer a favor above and beyond what was called for. The owner is now on his way back to the house to remove the spackle - water soluable according to him and the buyer is waiting to do a second walk through - while the movers are waiting around by the hour.
We're off to the races, I'll let you know what happens..........
Thursday, December 27, 2007
"AS IS" ISN'T ALWAYS AS IS
Well, another interesting happening today - we did a final walkthrough on a house sale prior to closing. This house was purchased completely as is, however, we did have a general inspection contingency. What was missed, even by a competent inspector, was the fact that there was no water meter. The house had been severely damaged by fire and restored, but it looks like they may have restored the plumbing in the basement and never had a new water meter installed! How did this come up? We had called the water company for a final water reading and found out where the meter should have been - no meter. So, at closing there was a hefty escrow taken to assure that the water bills and meter situation will be cleared up before being turned into the buyer's name. You learn new things all the time - don't think I've ever seen an inspector look for meters.
But I am straying from the point of this post - the fact that there was a general inspection in lieu of a normal home inspection contingency and what that differece actually is.
In a nutshell, the difference between a home inspection contingency and a general inspection contingency is that on a home inspection you can do your inspection and present a "laundry" list of items for the seller to repair or negotiate. Here in Maryland, electrical, mechanical and plumbing are "must fix" items on a home inspection. Outside of that, if there are other items found, such as broken windows, structural irregularities, broken or clogged gutters, cracks in the sidewalks, any number of things, you can ask for them to be remedied or ask for a dollar amount credit to take care of them youself. If you buy a home "as is" - typically an estate, a foreclosure, a very low selling price, a foreclosure, or bank owned, you can put a general inspection clause into the contract. This allows for you to bring in a home inspector but does not allow for you to seek repairs - even the "must fix" items as they are also excluded from most general inspection clauses. What it does allow you is an "out" of the contract with no penalty. If the inspection turns up too many items or items of real concern such as structural, you can declare the contract null and void and your earnest money deposit is returned to you.
Here's a little hint - even on an "as is" sale, even with a general inspection, that will not preclude you from presenting an addendum to the contract asking for a reduction in price or that an allowance be made for some repairs - the seller can just say forget it. In reality, if the request is justified or founded, it is in the seller's best interest to make some sort of concession - the house has now been off the market for a time (even if it's only a week), and they have been made aware of defects that they must now, by law, disclose to any new potential buyers. Sort of like being caught between a rock and a hard place
So, just a word to the wise - whether buying or selling - "as is" is not always as is and can potentially create problems!
BE INFORMED AND CHECK BACK HERE OFTEN!
But I am straying from the point of this post - the fact that there was a general inspection in lieu of a normal home inspection contingency and what that differece actually is.
In a nutshell, the difference between a home inspection contingency and a general inspection contingency is that on a home inspection you can do your inspection and present a "laundry" list of items for the seller to repair or negotiate. Here in Maryland, electrical, mechanical and plumbing are "must fix" items on a home inspection. Outside of that, if there are other items found, such as broken windows, structural irregularities, broken or clogged gutters, cracks in the sidewalks, any number of things, you can ask for them to be remedied or ask for a dollar amount credit to take care of them youself. If you buy a home "as is" - typically an estate, a foreclosure, a very low selling price, a foreclosure, or bank owned, you can put a general inspection clause into the contract. This allows for you to bring in a home inspector but does not allow for you to seek repairs - even the "must fix" items as they are also excluded from most general inspection clauses. What it does allow you is an "out" of the contract with no penalty. If the inspection turns up too many items or items of real concern such as structural, you can declare the contract null and void and your earnest money deposit is returned to you.
Here's a little hint - even on an "as is" sale, even with a general inspection, that will not preclude you from presenting an addendum to the contract asking for a reduction in price or that an allowance be made for some repairs - the seller can just say forget it. In reality, if the request is justified or founded, it is in the seller's best interest to make some sort of concession - the house has now been off the market for a time (even if it's only a week), and they have been made aware of defects that they must now, by law, disclose to any new potential buyers. Sort of like being caught between a rock and a hard place
So, just a word to the wise - whether buying or selling - "as is" is not always as is and can potentially create problems!
BE INFORMED AND CHECK BACK HERE OFTEN!
Anatomy of the cost of Buying & Selling
It's shaping up to be a quiet day in the Real Estate world. First thing up this morning is a review of a HUD-1 statement for a closing later on today. A HUD-1? Yes, that's a form required by law (HUD stands for Housing and Urban Development) that is basically a statement of what all the charges are and where the money goes (and comes from). Both buyer and seller get this statement at the closing.
The purchase price of this home is $490,000 - the amount of the new loan is $392,000, so the purchaser must bring $98,000 to the closing? NO, the buyer must bring $101,758.30 - there are $13,758.30 in closing costs to the buyer, less a $10,000 credit from the seller according to the negotiated contract. This is obviously the sign of a buyers market - very few of the contracts we see don't have some sort of seller credit.
The selling price of $490,000 less the mortgage payoff of $319,048.56 gives the seller $170,951.44. No, actually it gives the seller $124,425.97 - it cost the seller $46,525.47 to sell this house. The 9.47% of the purchase price it cost the seller could have been worse - the seller is a licensed real estate agent and therefore paid no commission on the selling side!
None of these figures take into consideration that there was also a $4,096.40 fee paid by the mortgage company to the mortgage broker - that was paid outside of the closing - a small amount considering the amount of interest the borrower will pay over the life of the loan.
So, let's break this down a little:
On the Buyer side:
$295 - Administrative Fee to Real Estate Company
$325 - Appraisal Fee
$20 - Credit Report
$525 - Commitment Fee to Mortgage Company
$79 - Tax Service Fee
$18 - Flood Certification
$7.50 - Document Delivery Fee
$345 - Processing Fee to Mortgage Broker
$13.30 - Verification of Employment Fee to Mortgage Broker
$4.95 - Mers Fee to Mortgage Company (so they can track the loan if it sells)
$224.76 - Insurance for 3 months
$1,203 - County Taxes for 3 months
$2,458.73 - Reimburse Seller for county Taxes prepaid through 7/1/08
$313.06 - Interest for 3 days (from closing to end of month)
$195 - Settlement Fees to Settlement Agent
$140 - Title Search
$30 - Title Insurance Binder
$25 - Notary Fees
$909 - Lender Title Insurance
$1,030 - Owner Title Insurance
$75 - Courier / Copy Charges
$4 - Wire Fee
$80 - Recording Fees
$2,450 - City/County Tax
$1,225 - State Transfer Tax
$1,518 - State Recordation Tax
$180 - Survey
$65 - Termite Inspection
On to the Seller's Side of the Transaction:
$7,804.30 - State Withholding Tax
$300 - Water Escrow pending final bill
$14,700 - Commission to Buyer's Agent
$5,000 - Bonus to Buyer's Agent
$5,052.90 - 2007/2008 RE Taxes
$195 - Settlement Company Fees
$15 - Notary Fees
$125 - Filing of State Withholding
$20 - Courier / Copy Charges
$125 - Payoff Service Fee
$4 - Wire Fee
$2,450 - City/County Tax
$1,225 - State Transfer Tax
$1,518 - State Recordation Tax
$450 - Homeowners Warranty
The purchase price of this home is $490,000 - the amount of the new loan is $392,000, so the purchaser must bring $98,000 to the closing? NO, the buyer must bring $101,758.30 - there are $13,758.30 in closing costs to the buyer, less a $10,000 credit from the seller according to the negotiated contract. This is obviously the sign of a buyers market - very few of the contracts we see don't have some sort of seller credit.
The selling price of $490,000 less the mortgage payoff of $319,048.56 gives the seller $170,951.44. No, actually it gives the seller $124,425.97 - it cost the seller $46,525.47 to sell this house. The 9.47% of the purchase price it cost the seller could have been worse - the seller is a licensed real estate agent and therefore paid no commission on the selling side!
None of these figures take into consideration that there was also a $4,096.40 fee paid by the mortgage company to the mortgage broker - that was paid outside of the closing - a small amount considering the amount of interest the borrower will pay over the life of the loan.
So, let's break this down a little:
On the Buyer side:
$295 - Administrative Fee to Real Estate Company
$325 - Appraisal Fee
$20 - Credit Report
$525 - Commitment Fee to Mortgage Company
$79 - Tax Service Fee
$18 - Flood Certification
$7.50 - Document Delivery Fee
$345 - Processing Fee to Mortgage Broker
$13.30 - Verification of Employment Fee to Mortgage Broker
$4.95 - Mers Fee to Mortgage Company (so they can track the loan if it sells)
$224.76 - Insurance for 3 months
$1,203 - County Taxes for 3 months
$2,458.73 - Reimburse Seller for county Taxes prepaid through 7/1/08
$313.06 - Interest for 3 days (from closing to end of month)
$195 - Settlement Fees to Settlement Agent
$140 - Title Search
$30 - Title Insurance Binder
$25 - Notary Fees
$909 - Lender Title Insurance
$1,030 - Owner Title Insurance
$75 - Courier / Copy Charges
$4 - Wire Fee
$80 - Recording Fees
$2,450 - City/County Tax
$1,225 - State Transfer Tax
$1,518 - State Recordation Tax
$180 - Survey
$65 - Termite Inspection
On to the Seller's Side of the Transaction:
$7,804.30 - State Withholding Tax
$300 - Water Escrow pending final bill
$14,700 - Commission to Buyer's Agent
$5,000 - Bonus to Buyer's Agent
$5,052.90 - 2007/2008 RE Taxes
$195 - Settlement Company Fees
$15 - Notary Fees
$125 - Filing of State Withholding
$20 - Courier / Copy Charges
$125 - Payoff Service Fee
$4 - Wire Fee
$2,450 - City/County Tax
$1,225 - State Transfer Tax
$1,518 - State Recordation Tax
$450 - Homeowners Warranty
Any Questions or Comments? This is what it cost both the buyer and the seller to transfer ownership of this house!
BE A SAVVY BUYER OR SELLER - MAKE SURE YOU KNOW WHAT THESE COSTS ARE AND MAKE SURE YOU QUESTION EACH AND EVERY ONE!
More Later Today!
Wednesday, December 26, 2007
Kickoff!
I would like to say that I have spent long hours debating over whether or not to start a blog, but I didn't - I read yet another gloom and doom article about the state of the Real Estate Market and decided it's time to give some insider information to Mr. and Ms. Homeowner (or potential homeowner).
I'm not sure where this blog will take us, but it is my intention to share some valuable information as well true stories of dreams and nightmares in the industry. I will write about home inspections, negotiations, commissions, pricing, buying, selling, negotiations, etc., etc., etc. If anyone reading this has stories to share or questions to ask - I'll be happy to post any that seem relavent or informative (or funny or sad) and will do my best to answer your questions.
I will try to take you day by day through an active, top producing real estate office. There are good and bad agents, good and bad experiences and a bustle of activity that is sometimes overwhelming. Hope you will find this blog worthwhile and maybe even entertaining! Today is the day after Christmas and tomorrow it's back to work - no doubt a crisis of some sort is waiting. Check in with me tomorrow, it will be my first post describing the action and the outcomes - this could be fun!
I'm not sure where this blog will take us, but it is my intention to share some valuable information as well true stories of dreams and nightmares in the industry. I will write about home inspections, negotiations, commissions, pricing, buying, selling, negotiations, etc., etc., etc. If anyone reading this has stories to share or questions to ask - I'll be happy to post any that seem relavent or informative (or funny or sad) and will do my best to answer your questions.
I will try to take you day by day through an active, top producing real estate office. There are good and bad agents, good and bad experiences and a bustle of activity that is sometimes overwhelming. Hope you will find this blog worthwhile and maybe even entertaining! Today is the day after Christmas and tomorrow it's back to work - no doubt a crisis of some sort is waiting. Check in with me tomorrow, it will be my first post describing the action and the outcomes - this could be fun!
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