Thursday, May 31, 2012

Advantage Realty Group Blog: Successfully Negotiating Inspection Results

Advantage Realty Group Blog: Successfully Negotiating Inspection Results: Picture this.....12 Months ago you decided it was time to find a new home.  Possibly you were going to buy your first home and take that b...

Successfully Negotiating Inspection Results

Picture this.....12 Months ago you decided it was time to find a new home.  Possibly you were going to buy your first home and take that big step from renting to gaining a piece of your own real estate and the American Dream!  You thought long and hard about what you wanted in your home and what area you'd most like to live.  You contacted a lender and got pre-approved!

Your "license" to purchase in tact, you then reached out to a local real estate agent to take the next steps.  This agent started to send properties your way to review, you would pick your favorites and then you'd go out to view them in hopes "THE ONE" was going to be out there.  Eventually after seeing many homes, you found it!  The home you want is in your price range, its everything you wanted and your making an offer!  This home was built maybe 5 years ago, 10, 15, 25, or maybe 50 years ago even.  Doesn't matter......The home appears to be in great condition, the sellers have maintained it well, its not a "fixer upper" but its not "new construction" either.  Eventually after some back and forth negotiating you and the seller come to terms.  You couldn't be happier, your excited and ready to make this great home yours. 

Next steps after getting the contract completely finalized is you and your agent contact a local home inspector and schedule a day to get the home inspected.  You eagerly meet the inspector and hope the home has no "major" issues.  Major issues being the key word here. After a couple hours the inspector has a laundry list of imperfections in the home.  They give you a synopsis of everything and tell you that they will have a full report within a day or two.  That night you go home thinking about all the items that came up in the inspection.  Over-all your okay with everything and nothing is too drastic of an issue.  There was no MOLD found in attic, the A/C worked, the Furnace Worked though its 10 Years Old, the roof isn't leaking but the shingles aren't "new".  All these things you were aware of when you made the offer and you felt confident the price you are paying reflected a great deal you were getting!

Two days later the inspectors report comes.........

Now for those who haven't yet bought a home, let me explain a few things about inspectors.  They come in all shapes & sizes and varying degrees of expertise.  Some will take a home that was built in 1980 and then point out features that aren't up to code with new construction laws today scaring the bejeezus out of buyers.  Others who are more experienced know that many previous building code laws are not expected to be updated or applied to current new construction laws, there-fore will not scare buyers un-necessarily.   A home could be new construction and yet expect something to be found that could be a concern or imperfection.  See, many will give you the nuts & bolts of the condition of the home and others will give you the entire hardware store!   This is not a knock on inspectors, I've met some of the best in the business and they know who they are.  They get referrals and accolades for their knowledge and have very successful businesses.  There job is not easy and comes with a great deal of skills necessary to fully inspect homes from the old to the new. 

Back to your report in hand..... 

You've now gotten the report and while you've previously only had a few items you felt you were going to request of the seller, with "ammunition" of a laundry list of "imperfections" your plans change.  You and your attorney discuss and your attorney rifles out a letter to the sellers attorney requesting 15 items to be taken care of.  The seller receives the report request with anticipation of a few items but reacts strongly to seeing you "nit pick" so many minor issues along with the handful they may have expected.  You now have emotion involved and the seller responds by agreeing to only 5 of the items.  You are upset, they are not going to tackle all your concerns and the home in your mind has now become a money pit!  (you can see where this is going)...Deal falls apart, your out looking again and find the same imperfect homes wherever you go.

How can you best set expectations for a home inspection and navigate towards a successful purchase/sale? ....

Its important to realize that items you clearly can see are not new, for example windows that are functional, are not items you should expect to have replaced by sellers due to age.  Same goes for furnaces, water heaters, roof etc...If they are defective by all means your going to expect and request the seller to offer a credit or to repair.  If they are not, take into account the concern when you make your offer and budget for a future expense a few years down the road.  When your inspection reports come up, items that take little to no time/money to fix in many cases should be agreed are not worth killing a deal.  Items of great expense and those where a licensed plumber/electrician/HVAC tech and so on are necessary should be requested to fix and in most cases sellers will oblige.  Bottom line is that there are reasonable expectations for sellers that their home is not a perfect home and that some concessions will need to be made.  Its also important however as a buyer to keep things in perspective and not to throw the entire bucket list of concerns, many minor at a seller which will inevitably threaten your sale.  Pick those with the help of your attorney and agents advice that all feel reflect viable concerns and should be addressed. 

I hope this bit of wisdom comes in handy the next time you buy a home!   Should you ever have any questions please feel free to contact me direct!  Thanks and Happy House Hunting - Ben Kastein

Monday, January 23, 2012

When It Makes Sense to Keep an Underwater Home

By Tara-Nicholle Nelson

Inman News®

Editor's note: This is the first of a two-part series.

Q: At the top of the market, I owned three properties: my first home (in a marginal neighborhood, now about 100 percent upside down), my own residence (a big fixer in a great neighborhood), and a triplex I bought as an investment (an OK neighborhood, needed some work, fully rented, but now upside-down by about 30 percent).

When the market turned, I had a couple of bad tenants in my first home and the triplex that set me way back financially, and I was unable to borrow the money I needed to fix the house I lived in. I did a short sale on the fixer, got temporary loan mods on the other two, and moved back into my first home.

Problem is, they're both so upside-down and don't seem likely to come back up anything soon. I'm 45 years old and have a great job, but I don't like the neighborhood I live in now and I can barely ever save anything because these properties -- which I thought would help fund my retirement -- eat me alive.

Also, I just got word that my loan mod on the triplex is going to expire in January. Should I just sell everything and start over?

A: First, know this: You are not alone. More than 25 percent of home mortgages nationwide are upside-down.

While the majority of Americans have held onto homes with declining and stagnant values in the hopes that the market will recover to avoid locking in their losses, the data is clear on the fact that those who own homes worth less than they owe are the borrowers most likely to fold, short-selling, strategically defaulting or negotiating a "deed in lieu of foreclosure" with the bank.

I don't think data exists on this point, but I suspect these are the borrowers most prone to give up on the excruciating and prolonged path of home retention efforts the most easily. "Why throw good money, time, energy and emotions after bad?" they wonder.

A few years ago, I would probably have fallen into the cheerleader camp, exhorting "Hang on! Hang in there!" Now, though, going into the fifth or sixth year of this real estate recession, depending on whom you talk to, I'm more jaded and realistic.

As I see it, you have two different scenarios that make up your dilemma, and there are a couple of different ways to think about them. First, let's limit the scope of our conversation to the situation on the home you actually live in. Next week, we'll look at the broader constellation of issues you have, including both your residence and the investment property.

My advice to people in your situation is to always go through the preliminary step of getting clear on whether their personal residence still works for their lives as a personal residence.

If you own a home that works well for your life, is affordable and seems like it will continue to be a good fit for your life and your finances in the foreseeable future, I'm generally inclined to advise homeowners to avoid making market-based decisions about whether to continue to hold on to it, whether or not it happens to be upside down.

On the flip side, I've seen numerous situations in which families have expanded or shrunk or need to relocate, rendering the upside-down home a serious mismatch. In these cases, it makes sense to more seriously consider whether to divest.

I'd encourage you to ask yourself that question -- "Does this home 'fit'?" -- regarding your personal residence. You mention the neighborhood weighs against that finding of fit; you might also be thinking that the neighborhood could prolong the "value recovery" timeline.

Take a more holistic viewpoint and make a decision about whether the home overall still works for your life or not -- outside of the context of it being underwater. Whether it does or does not, this knowledge will get you started down the path of cultivating the clarity you'll need to put a full action plan and decision-making process in place. We'll discuss what the rest of that plan looks like next week.