Myth—“As is” means inspection is unnecessary

MYTH: One of those myths which will not seem to die is that there is no need to have a home inspection on a property which is being sold “as is” since the seller has already indicated they are not going to repair anything. Failure to get an ASHI certified home inspector to thoroughly evaluate the home you are about to put down hard cash for is by far one of the riskiest things you can do when dealing with real estate.

REASON: You can’t judge a book by its cover (or a house by a walk-thru) 

The need for an inspection has been recognized by laws in almost all the states which grant the buyer the right to have an inspection and further to have certain types of issues addressed (to their satisfaction) or they have the right to walk away, retain their earnest money and go on about their business to find something more acceptable. 

In today’s climate with so many homes being offered for short sale it is increasingly likely that a traditional seller will offer a home for sale ”as is” because they have no money to provide repairs in the event an inspection shows there are items which need repair. 

Additionally, the market is currently flooded with bank-owned homes (REO’s which have been acquired via foreclosure or deed-in-lieu.) In either case the home has been vacant for an extended period of time, almost certainly without utilities on, and likely with delayed maintenance prior to the borrower losing it. Mold you see is definitely an issue: mold which has not yet manifested itself should cause you greater concern. There are so many major problems which can lie dormant in a long vacated home that you couldn’t give me one, much less convince me to buy it, even at a deep discount. (I rented a very nice, expensive Florida home which had been vacant for 3 years; I could tell you stories). To buy such a property without the benefit of a home inspection is foolhardy. If your REALTOR doesn’t advise you to have one, you need to 

start looking cross-eyed at the person you have trusted to advise you in your housing matters.

REALITY: A side benefit of an inspection is to know what repairs you want to ask the seller to take care of as a condition of moving ahead with the transaction. The core purpose of a home inspection is to determine what is the actual condition of the property (structurally, mechanically, etc) in order to determine if you wish to buy it: whether repairs are made or not. You may find a problem which is so expensive to repair or cannot be fixed to your satisfaction no matter what is done, which could cause you to decide to walk away from the transaction. As a real estate salesperson I had a couple walk away from a home after the home inspection found major termite damage as well as an active infestation of termites which we had not seen during our tour of the home. It could have been fixed but they were not certain that they would ever feel quite right about the integrity of the kitchen floor when so much of it (and the support beams) had been eaten away by the little varmints.

An inspection is for your peace of mind about the quality and condition of the home you are acquiring. It matters not whether it is being sold ‘as is’ or otherwise. You still need to know you’re not paying for a ‘pig in a poke’. Get the toughest inspection company you can find and ask for their TOUGHEST inspector. 

Good luck with your purchase.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Home Inspection—Worth Every $$$$

Q: We recently sold our home using a REALTOR, a septic tank test was not done. The REALTOR did not suggest we have the house inspected and it did not occur to us that we should do so. Who should have had made the arrangements for the septic test and made sure everything was up to code?

A: Your question is an excellent one and points out the need for a pre-inspection to be completed by you, the seller, BEFORE you list your home. I have to lay responsibility for this one at your agent’s feet. Yes, it is your house and you are responsible for maintaining it but the biggest part of what you pay a real estate commission for is ‘sound recommendations from a professional whose training should have prepared them’ to tell you what I am about to tell you.

Your question was: Who should have made the arrangements for the test? It is unimportant who made the call, you or your agent, to a septic company to come out and do the inspection. Either your agent could have handled that on your behalf or made several recommendations so that you had picked up the phone and actually called someone.

The missing piece seems to be that there was no discussion about the NEED for such an inspection at the appropriate time. Pre-inspections save sellers a lot of heartburn and usually a lot of money as well.

In the industry, agents are pretty divided and very vocal about whether or not it is in the best interests of a seller to spend the money for an inspection which would have uncovered this problem (as well as any other major problems). I am adamant that a pre-inspection should be conducted on any property which is more than a few years old because of the strong possibility that problems exist which can best be taken care of BEFORE the listing has occurred.

Opponents of pre-inspections insist:

1. That the seller should not waste money on an inspection when the buyer is going to have one anyway
2. That the seller is unnecessarily spending $300-$400 which they could make better use of by putting in some flowers

Proponents of such inspections (I am the UNOFFICIAL president of this group)

1. Believe that you would avoid uncovering something which could be a deal breaker AFTER you have an accepted offer (don’t you hate when that happens?)
2. That the cost is a wise investment in the success of your real estate transaction
3. That if you uncover any significant problems you are in a better position to search out the right professionals to correct them and price shop for the best value as well as schedule that work at your convenience rather than be in a rush to get it done
4. That if the needed repairs represent a significant investment, then you can adjust what you’re considering listing the house for rather than have an unexpected expense eat into your profits at the end
5. That an investment for the “extra” inspections (mold, termite and septic system) of $200-$300 above the base cost could save you thousands of dollars at the back end since you can’t renegotiate the sales price AFTER the buyer hits you with repairs which are mandated as allowable under your state’s SELLER DISCLOSURE law. A septic repair/replacement would definitely be covered in most states and a repair could cost upwards of $1,000. The replacement of the septic system or an expansion of the field or the finger system could set you back MANY thousands of dollars. Likewise, a possible termite problem should keep you awake at night, UNLESS you had a pre-inspection and know that you don’t have any.

I could share several terrible, very, very horrible stories of bad things which happened because of major problems which were uncovered during an inspection when I represented the buyer. I will share only one—as briefly as I can. My buyers discovered active termites and significant termite damage during our inspection.

Additionally, there was a crack in the interior chimney wall. This was a lovely $350,000 home and the sellers could have and should have corrected those items before it was listed. The problems were, in fact, fixable. The sellers initially offered some half-baked resolution, which we rejected.

My clients were prepared to walk away and even leave their $3,000 earnest money on the table. They just didn’t want the house any more. A house they had loved and had picked as their retirement home. I prepared a very precise inspection response—quite frankly asking for more than they had to do and they refused. We requested and received a mutual release. We had to fuss a little bit, but their earnest money was returned.

The sellers of the home had already started construction on their new dream home, had had this house on the market for more than six months and now they had to start all over trying to find a new buyer. Plus, they still had to fix everything they should have fixed before. All for lack of a pre-inspection.

During my career as a REALTOR I helped many clients terminate the contract (and get their money back) as the result of significant inspection issues we could not come to terms over.

Much of the time we walked away from the transaction if the seller was not willing to give us EXACTLY what we wanted in the way of a fix. It is definitely not a position of strength for the seller to discover they have any major issue in the time leading up to a possible closing.

After helping numerous buyers ‘walk’ because we were not satisfied with the compromise of repair or other concessions from the seller, I eventually established a personal policy of refusing to list a home unless the seller agreed to a pre-inspection with one of the toughest inspection companies in the city and further agreed to repair the offending items before we listed.

Like I said, I have to drop this at the feet of the REALTOR for failure to adequately prepare you for just such a situation as later occurred. Additionally, I would be interested in whether or not the septic system is specifically addressed on a Seller’s disclosure form, if your state uses one. Any agent worth their salt would have checked to be sure you understood all the questions you were being asked on such a form.

The issue of pre-inspections gets my adrenaline flowing. I should probably go have a glass of tea.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Home Inspection

And the WORD for Today is:

Home Inspection—as used in real estate, usually means an inspection of various components of a home which a buyer elects to have done prior to purchase. The inspection should cover structural, mechanical, safety issues and any code violation as well as cosmetic items. The inspection should be performed by an independent, licensed inspector and should take approximately 2 hours on a home of 1500-2000 sq. feet. They buyer should definitely attend.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Your Real Estate Advisor: Inspections—Top to Bottom “Check-Up” for the House

Inspections—Top to Bottom “Check-Up” for the House

When you are thinking about buying a home, you need to know what kind of condition it is in BEFORE you complete the transaction. You need to know just because you need the information (even if you are buying it as is. It is critical that you get accurate information about a wide spectrum of components of the property). In the event this is a regular transaction (not REO or short sale), then you can use the results of the inspection report to negotiate repairs which you wish to have completed at the seller’s expense, prior to closing.

What’s included?

We will cover the basic items for a full mechanical and structural inspection. The inspection will be a visual inspection of these components. While this list does not cover everything which could be inspected, it does cover the more common items you should expect with a full inspection of your home.

((Area: Components Checked))

Furnace: Burners/elements, heat exchanger, blower fan, ducts, air flow, filter, the flue pipe, humidifier and the thermostat

Electrical System: Breakers, fuses, main panel, sub panels, main service wire, switches and receptacles, amp rating, light fixtures, door bell and all smoke detectors

Plumbing: Water heater and gas lines, water lines, waste pipes, all fixtures and faucets, drainage, sump pump, caulking and grouting

Interior: Walls, ceilings, floors, steps/stairs/railings, fireplaces, all doors and windows

Attic: Structure, the decking of the roof, insulation, Ventilation and water penetration

Crawl Space: Water penetration, water damage, the structural integrity of the walls, insect damage, the structural integrity of the support system for the 1st floor of home as well as the location and condition of insulation

Slab: Water seepage into ducts (under slab) cracks and/or settlement

Basement: Water penetration, any water damage, the structural integrity of the walls, evidence of insect damage, floor condition, structural integrity of the support system for the 1st floor, finished wall and ceiling condition

Exterior: Roof, flashing, skylights and chimneys, walls, soffits and facia boards, gutters and downspouts

Grounds: Driveway, walks/steps, patio/porch, retaining walls, railings, balconies and drainage

Appliances: (Check to be sure your inspector will check the appliances, not all companies do) (Most built in items will be checked). Range, oven, exhaust fan, refrigerator, dishwasher, disposal and trash compactor


There are additional components which may need to be inspected but are not part of the standard inspection. Your inspector may inspect these for an additional fee or it may be necessary to call a company who specializes in this type of inspection.

Those items include:

Well/Septic System Security systems
Water testing Insect Infestations (termite/other)
Radon Water softeners
Sprinkler systems Pools and/or spas
Asbestos

We’ll cover these in a future article. Remember: your best bet is to use an ASHI certified inspector and attend the inspection so you can ask lots of questions. It’s an investment in your future. I’m trying to look out for you.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Home Inspection Disclosure

And the WORD for Today is:

Home Inspection Disclosure—is a disclosure form provided at or prior to closing which states the purchaser understands they had the option to have an independent inspection. Under some circumstances the cost for the inspection can be included in the loan amount. 

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Walk-thru

And the WORD for Today is:

Walk-thru - is not by any stretch of the imagination an inspection. Unfortunately, many consumers who build a new construction home believe that the walk-thru with the building supervisor just before closing is, in fact, an inspection. IT IS NOT!! This is not the consumer’s fault since the building trade has done an excellent job at teaching the public that a walk-thru is all you need on a newly built home. See Trickeration. So now that you know what a walk-thru is NOT, what is it? A walk-thru is usually scheduled by the builder as an appointment with a company representative and you, the new buyer(s). This is their opportunity to showcase the “pretty” in your new home. You will see how to turn on all the gadgets and gizmos and marvel at the extras you added. As far as the functioning of your new home (the most important part) you will probably be shown how to run the dishwasher and tilt out the windows and push the buttons on the built-in microwave. If you are blessed to have a Jacuzzi then of course you’ll be shown how to work that as well. The walk-thru is really a last sales pitch by the builder so you will convince more of your family and friends to make the same leap of faith that you are completing. You WILL NOT during a walk-thru see or discuss the quality of workmanship on the roof or in the attic or crawl space, you will NOT know whether all the plumbing is connected correctly, you will NOT cover 55 mechanical and/or structural items which would be covered with an independent home inspection.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Short Sale Buyer: 10 Critical Areas of Concern

Short Sale BUYER

Ten (10) Critical Areas of Concern

If you are thinking of buying a home in today’s market, there is a pretty good chance that you will find a home you like which is upside down (seller owes more than the house is worth in today’s market and the sale will require that the lender approve a short sale). Buying a ‘short sale’ is not necessarily a BAD thing but it is definitely a DIFFERENT thing than a regular purchase and so you need to ask yourself some important questions before you embark on this journey. I am going to assume that if you know the right questions to ask that you will be diligent about getting some good answers before you move forward.

Here are areas where you need to do your homework:

1. AGENT—Is your real estate agent experienced in working with short sale buyers? Know how short sale transactions differ from regular transactions? Provided you with sufficient documentation to help you know what the current value of the property is?
   
   
2. TIMING—Are you aware that it could take months (several months) for you to get an answer and go to closing on a short sale? Can you afford to wait for an indefinite period of time? Can you STAY in your current housing until you get closed—however long that might be? Did you know you can decide to walk away anytime you want to even though you have made an offer? Simply tell your agent to rescind your offer if you want to consider another house. (You know to do that in writing, yes?)
   
   
3. NEIGHBORHOOD—Have you done the research you need to do to be sure that the back side of the neighborhood is as appealing as the front side? Are you comfortable with the mix of owners vs. tenants in the neighborhood? Is the neighborhood moving more toward tenants? Are homes well-kept or more of them in disrepair? Have you driven the area at night—do you feel comfortable with the nighttime look and feel of the area you will be calling home? Is there a significant numbers of homes empty—whether for sale or otherwise available for occupancy (rent, lease, etc)? Are property values still falling or have they hit a plateau? Where did you check? (and don’t tell me you just asked your agent). Are you comfortable with the levels of taxes in the area? Are there any special assessments which you need to consider? If there is a neighborhood association, how financially sound is it? Have you stopped and talked to neighbors to see what is REALLY GOING ON IN THE NEIGHBORHOOD?
   
   
4. PROCESS—Did your agent carefully explain the short sale process to you? Did you ask for a response based on how long you are willing to wait (2-3 months) or based on the traditional practice of allowing only a few days? You wrote an offer which was presented to the local owner/seller but then forwarded to their lender/servicer for consideration. Are you aware that the lender may/will consider multiple offers and then make a decision on ONE of them? Were you warned that the Lender may counter your offer—after a very long time—even months after you initially wrote the offer? Are you prepared to increase the amount you are willing to pay or risk losing the house? Have you pre-determined how much you are willing to pay? May I suggest that should be the amount you should offer in the first place?
   
   
5. RISKS—Are numerous but forewarned is better than being caught off guard. Risks include:
   
   a. The SELLER may file bankruptcy—and the house cannot be sold to anyone
   
   b. The LENDER may foreclose and the property become unavailable
   
   c. ANOTHER OFFER may be accepted instead of yours (even if the seller signs your offer that does not mean that the LENDER/SERVICER is going to approve your offer instead of another one which they have received)
   
   
6. LONGTERM—Have you carefully considered whether this house meets your long-term needs (say for the next 10 years)? Lifestyle? Location? Size? Amenities? Condition? Does it have ‘growth potential’?
   
   
7. FINANCING—Do you already have a firm loan commitment from your institution—not a pre-approval? You should start out with a /loan commitment/ to increase your chances of getting your offer accepted and to avoid any surprises down the road. Can your lender use the appraisal recently acquired by the selling institution in order to speed up the process at the end? Did you know that your earnest money check should not be cashed until AFTER you have an offer accepted by the LENDER who is the real decision maker on a short sale transaction? (That could be 3 months from now.)
   
   
8. INSPECTION—Are you aware that most states allow you to have inspections on any property which you wish to acquire (including REO’s, short sales and anything listed ”as is”?) Is your agent encouraging you to have a full property inspection as a way to be sure you fully understand the ACTUAL condition of the property you want to acquire? (Good agents will insist that you should, especially on a short sale which probably has not been well maintained if the home is in foreclosure). Are you aware that you can decide NOT to move ahead with the purchase if the inspection shows some substantial issues which are unacceptable to you?
   
   
9. REPAIRS—Are you prepared to cover the cost for any repairs which are needed immediately (and in the near future) once you close? Have you gotten estimates based on the items uncovered during the inspection?
   
   
10. GETTING TO THE CLOSING—Are you prepared to wait a few or several months to get to the closing date? Are you comfortable knowing you may be asked to increase your offer amount at the last minute, once the lender knows EXACTLY how much is needed to make the deal work under the guidelines from the Guarantor on the loan?

I am a firm believer that if you point someone in the right direction, they will usually get where they were headed. These are not ALL the questions you need to be asking but you are certainly headed in the right direction.

A short sale does not have to be a nightmare. Not with an experienced agent and a well educated consumer. Good luck with your new home experience.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Welcome!

Welcome to Home Ownership Matters’ Blog!

Why write this blog? Quite simply because the time is right. Because I understand where you’re coming from. I have been urged by many students in my training sessions to start a blog for several years. It seemed like a daunting task until I hired my current Marketing Assistant, Heather Meade. Her training and expertise has made this possible at a time when the housing crisis has made it more important than ever that consumers be given basic information to help them make informed choices about so many of the challenges associated with real estate today.
Who is Mildred Wilkins?

I am a foreclosure intervention and loss mitigation trainer, a speaker. I am a consumer advocate who also happens to write. Most importantly, I’m a person, just like you, who has had hopes and dreams and inspirations blow up in my face. I have grown and survived DESPITE those blow-ups. I have lived—therefore I teach.

Writing is our most basic and clearest form of communication. The internet, via such tools as this blog (and website; www.HomeOwnershipMatters.com) has made it possible to reach thousands of folks in real time. I invite you to share my real estate lessons. I love to tell my students; “I’ve already taken the class and paid the price for this lesson. You can listen and avoid having to take it yourself.” I have benefited in other areas of my life from listening to the folks who already did it the wrong way so I could avoid their pitfall. I had no such teachers in real estate, so I had to learn the hard way—MYSELF.

I’ve gone from being born Black and poor to uneducated parents in southern Alabama, to graduating with honors from college, to middle income with a position at Purdue University, to a stay-at-home mom, to a divorcee with two children. I did my 6 months on welfare.

I’ve done most of the wrong things related to home ownership—and survived to tell the story. I’ve purchased several homes. I’ve built a new home ---and walked away at closing leaving thousands in a deposit on the table. I’ve bought without an inspection—leading to disastrous problems being uncovered a few months later. I’ve gone through foreclosure—and ended up with the deficiency judgment to prove I was there. Miraculously, I had not filed bankruptcy until AFTER the judgment for the deficiency on the car ($8 K and the house $28 K were recorded). I filed bankruptcy, started over and rebuilt my credit. I’ve lost a child, gone into depression and destroyed my credit again.

Professionally, I worked as a full-time REALTOR for 10 years in Indianapolis; I’ve helped others to buy their dream home. As a Broker-Specialist for 2½ years for Fannie Mae I sold their foreclosed properties. I was required to participate in the forceful eviction process as a representative for Fannie Mae. I was in charge of clearing out the remains of homes abandoned by folks in desperation when time ran out and the sheriff’s sale was imminent. I’ve written a weekly newspaper column on real estate to address the common concerns and complaints of consumers who don’t know where to turn. I’ve received professional training on Loss Mitigation. I’ve spent hundreds of hours studying laws, regulations, guidelines, pending legislation—all relating to predatory lending, mortgage fraud, foreclosure, bankruptcy, fair housing, appropriate disclosure and other subjects which directly impact our housing issues.

What will be included in this blog?

Each day we will share with you information we consider relevant to home ownership. For the first month or so most of the entries will be related to today’s more urgent housing issues—all those components connected to struggling to make your mortgage payment. We will eventually move on to home maintenance, taxes, insurance, and all sorts of other things, so continue to log on. Read and share. You could be just the answer someone needed today.

Contents:

• Today’s WORD—Will be an attempt to help you learn how to ‘talk bank’. Regular folks seldom know what the bank people are talking about. You hear the words, you may even know the words, but what the words MEAN is a whole other thing. It’s hard to communicate when you don’t know the lingo—Hence, Today’s WORD. Read it, learn it, share it.
• Fast FACTS—It is a basic fact that when you are making decisions, not just when you are purchasing a home, but ALL decisions relating to your finances become housing decisions. For instance, filing for bankruptcy impacts your future housing options. We’ll share some pearls of wisdom related to housing. We’ll make a diligent effort to give you FACTS which are relevant for most of the country. We encourage you to hold them close; treat them like the pearls they are.
• Myths and Misunderstandings—One of life’s cruel realities is that it does not matter how sincere you are—IF YOU ARE MISTAKEN. Too many folks across the country today honestly believed they could refinance out of a variable rate loan before the rate increased. They believed because they were ASSURED by a broker that they could. They believed that the broker was: working in their best interest and regulated by the banking industry. They were wrong on both counts and now they can’t afford the home they love. They misunderstood how brokers and banking work. They did not know the meaning of the word—prepayment penalty. We’ll shed some light on some common myths—clear up a few misunderstandings and prepare you to make better choices. Pass it on!
• Articles from the desk of . . .—will be included about once each week. These articles are slanted toward real estate professionals and many have appeared in REALTOR magazines or Broker-Agent somewhere in the country. Taking a course on the subjects discussed is the best way to become more competent in dealing with today’s transactions but reading any or all of these articles will certainly have a positive impact on your business. There is an ARCHIVE of articles available, FREE, upon request. For the complete list, please e-mail Heather at homeownershipmatters@gmail.com.
• Did You Know?—I didn’t think so. Well, anyway, I thought should share. There are tidbits—mere tidbits—of information which can dramatically change how we operate and therefore, dramatically change our outcomes. I am ecstatic when someone shares such a tidbit with me. Whether ordinary or extraordinary, if I didn’t know then I could not incorporate it into my life. Even if they say “Millie, every body knows that” I will happily say, “I didn’t, until now”. Knowledge is truly a powerful thing–I have always had an immense respect for knowledge. I revel in trying to attain more. I humbly share any I have. Embrace knowledge–whatever the source. Use it—Share it. Benefit from it.
• “Your Real Estate Advisor”—will be resurrected and added to the mix within the next two months. That was the name of the real estate advice column I wrote in Indianapolis for 5 years back in the 90’s. (It is also the name of my second book). We’ll talk about EVERYTHING housing: buying, selling renovating, building, maintaining, remodeling, and losing. Don’t be selfish—share the info—with family, friends, maybe even somebody you don’t particularly like. Make them wonder.
• Give me a “Q”—we’ll take a commonly asked question and provide an answer. Please keep in mind that the answer will be MY answer. By that I mean that what you will get is my opinion. That’s because it’s my blog. I expect you to have different opinions and encourage you to share those. Unlike the “FACTS” section we can have lots of answers to a single question. I am promising neither a rose garden nor THE answer. I promised you AN answer. You mustn’t yell at me. I’m sensitive.

Enjoy the blog. It is intended to educate while keeping your attention. The words are all mine. Heather is responsible for everything else. You may reach her by commenting on this blog, or e-mailing homeownershipmatters@gmail.com

From the Desk of: REO Landmines

Let’s start with the basics: REO (real estate owned) refers to real estate which is owned by entities such as lenders, servicers or corporations. There are several ways property becomes REO but most often it is through default of the borrower who is either foreclosed upon or voluntarily relinquishes the property through deed-in-lieu. Corporations also become entitled if they acquired the home as part of an employee relocation package buyout.

Whatever mechanism resulted in the acquisition, a piece of real estate is now owned by an entity who needs to sell it. A special division, either called the REO or disposition division, is usually charged with the task of turning REO properties into liquid assets. As the foreclosure problem worsens the percentage of homes on the local market for sale which are, in fact, REO’s has increased. Strategies for dealing with the holders of these properties are somewhat different than purchasing from a private citizen. Those differences can be looked at as potential landmines if you are not familiar with the process.

Landmine # 1. Most REO properties are sold using a standardized contract which will be used throughout the nation. (for instance, HUD, Fannie Mae, VA). The language and terms in these contracts will supersede anything you write in your local purchase agreement, therefore, it is critical that you understand all the language in their standard contract.

Landmine # 2. Most REO properties are sold “as is”. While entities must allow for an independent inspection if one is allowed by state law, there is no requirement that any repairs be made as a result of the inspection.

Landmine # 3. Buyer are frequently charged a per day fee for delays in closing caused by their side of the transaction. Whether caused by the borrower, their lender or the realtor does not matter. It is not uncommon for the delay fee to be $100.00 per day.

Landmine # 4. Transfer of title will usually be granted with a special warranty deed or a Sheriff’s deed. Both provide a MARKETABLE title; not a CLEAR title. It is common for liens to remain attached.

Landmine # 5. When submitting an offer on an REO property, you buy the whole “kit and kaboodle.” What’s in the “kaboodle.”

Copyright 2007, Home Ownership Matters, LLC. All Rights Reserved.

(As always, if you have any questions, comments or feedback, we welcome and appreciate them. Just e-mail Heather at homeownershipmatters@gmail.com. Thanks for reading, and come back soon to see what else we've posted!)

Q&A: Mutual Release

Q. It seems to me that the seller of a property is protected from the buyer changing their mind and not moving forward with the transaction because of the earnest money which has been put down on the house. What protects the buyer from buyer remorse?

A. Contracts are legally binding

Terms of the contract cover whether or not the buyer can walk away due to inspection issues or if they fail to get mortgage approval or if the property does not appraise for a figure high enough to satisfy the buyer’s lender.

Earnest money as a deterrent

While the earnest money may be a deterrent to the buyer wanting to walk away from a transaction, the earnest money is being held in escrow and will not be released to either party unless both parties agree OR a court has made a determination of which party is entitled to the earnest money. So… in effect, both buyer and seller are protected unless and until they enter into a mutual release.

Multiple Purpose document

The mutual release is a wonderful, multi-purpose document. Its primary purpose is to get people out of a contractual agreement with the assurance that all parties are satisfied (enough) and will not bring any kind of legal action against any other party to the contract. We will all go home, forget we were ever involved in a contract with you and we will NOT call our attorneys next week (or ever).

Many real estate firms will use two specific mutual release forms; one tailored to things associated with the listing and one tailored to the purchase side of the transaction. It is also possible to use a GENERIC mutual release which has boxes so the appropriate reason can be selected from a list or a space for the specific reason in this case to be printed in.

Common Mutual Release Scenarios

The mutual release in real estate may be used to end the agreement when:

a. Inspection issues cannot be resolved, the transaction is stalled, agreement cannot be reached and closing is no longer desired. This is a very common occurrence in real estate transactions.

Form—Mutual release to the Purchase agreement

b. Seller needs to withdraw the property, for good reason, such as a family emergency.

Form: Mutual release to the Listing agreement

c. The buyer’s financing has fallen through, therefore, they are unable to close

Form: Mutual release to the Purchase agreement

A declaration of what happens to the earnest money would be stipulated in the mutual release.

A mutual release is a protection for all parties from future liability. I strongly recommend that you make every effort to reach a compromise and then translate that agreement into a mutual release—Signed by all parties to the transaction.

Good luck on dealing with the issues which are currently more pressing!

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: 'Pig in a Poke'

And the WORD for Today is:

“Pig in a Poke”—Buying a bank owned house can be much  like buying “a pig in a poke” (you don’t know if you got the runt until you get home and open the sack). You may be unfamiliar with this southern expression which means ‘you got took’. You not only got home and found you had the runt of the litter, he is malnourished as well. Gotta watch those sack purchases. 

All too often a buyer is so focused on negotiating the lowest price they can get without ascertaining the size/quality/condition of the item being purchased. Buying something as complex as a house without detailed information (including a thorough inspection) and substantial background information could end up totally negating any up-front savings you thought you had accomplished with long term, on-going expenses.

It is not a given that you will be ‘taken’, I am just saying the chances are high. “Buyer Beware.”

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Listing agent to help me buy

Q. Last week while visiting open houses, I found a house which I really, really like and want to purchase. The listing agent has been very helpful and since I don’t have an agent, she is encouraging me to go ahead and let her help me with the purchase before someone else gets it. Is it a good idea to let the listing agent represent me as well?

A. Agency is the relationship you establish when you select or engage someone to represent you. It is a legal arrangement where you become the principal and they, as your agent has a responsibility to protect your interests in helping you complete a transaction. It is implicit in this agreement that they have a fiduciary responsibility to put your interests first.

Dual agency

The situation you are asking about is commonly called dual agency, where one party represents both people. It is entirely legal, but can become complicated. The agent must disclose to both clients the existence of the other client (get you to sign a paper which says you understand and are comfortable with this arrangement). The legal requirement addresses the issue of appropriate disclosure; it does not address the issue of human nature. Human nature is such that most of us are going to choose between two individuals one of them whom we like a little better or for some reason feel a little closer to and work harder to get what they want out of a situation. In addition, in a house purchase, the listing agent has a relationship FIRST with the sellers. Even if there is an agreement to treat all parties fairly, if there is a major inspection issue (for instance) it is likely to be harder for the agent to press the people who listed with her to spend the necessary money when they already have an accepted price. On the other hand, if you had selected a buyer’s agent whose only responsibility is to represent you, then your agent can fight aggressively for having the repair done since they have NO connection to nor consideration for the seller.

Limited or dual agency is very popular with many agents who contend there does not have to be a conflict and they can handle any conflict which arises.

I disagree and believe that while dual agency may be legal, it is fraught with the opportunity for a buyer to receive less than full representation. The major fringe benefit for agents is that dual agency comes with dual paychecks. When I sold real estate, I declined dual agency unless it was an inter-family transaction where they simply needed a competent agent to process the transaction but they were already in agreement about the details.

I will never forget one transaction where I had the listing and my client did NOT understand why I did not want to represent a buyer who wanted her property. I explained dual agency and the problem which that MIGHT create. I told her I wanted her house to sell but I did not want to represent the buyer.

She took that to mean I didn’t think much of her house (which was a reflection of her lack of self esteem and lack of understanding of agency as I had explained it to her). Her house appeared to be in excellent condition, very well kept, neat, clean. Roughly a $65,000 starter home in Indianapolis. I would not have listed it had I not felt comfortable with its presentation and my ability to sell it. We get the house under contract with a young woman who had wanted me to represent her as well since she did not have an agent when she first looked at the property during an open house. I had insisted she had to go find another REALTOR since I would only represent the listing side.

Her inspection uncovered a major leak in the attic which required a full roof replacement for FHA financing. Neither my seller nor I had any idea there was a problem with the roof since there had not yet been a leak inside the house, but here we are with an accepted offer, scheduled to close in two weeks. She is looking at an outlay of more than $4,000 to put on a new roof which would eat up almost every penny which she expected to get from the proceeds AND she didn’t have the funds to do it in advance. We tried to negotiate to get the buyer to increase her purchase price, to no avail. My seller was unwilling to move forward to closing at the agreed price AND shell out the funds for the roof. We did not close because she could not (chose not) to correct the problem. I supported her position. I felt she had a legitimate position. She somehow felt that if I had represented the buyer I could have made her accept the house without the roof replacement and that I had cost her the sale. She did NOT relist with me.

I am sharing that I refused to participate in dual agency and still lost the transaction and some agents reading this will say I should have represented both of them. I am more convinced than I was before that transaction began that the worse possible situation for me would have been representing both of these women—essentially AGAINST each other—over a $4,000 roof issue.

In real life, too often agents do press one party to go ahead when they run in a scenario similar to the one above. When they do so, they fail to pass the test of integrity and do a disservice to the real estate industry and the clients whom they profess to represent. The general public has significantly less regard for all real estate salespeople, including REALTORS, than they did 10-12 years ago. We have lost their respect as a profession because of the multitude of agents who do not adhere to the standards which had placed us in such high regards just a mere 20 years ago.

Agents: Will you be part of the move toward professionalism? Integrity? Respect?

Consumers: Will you become better educated about what you should expect from your agent and then demand that they provide a level of service which you are comfortable with?

You’re paying for it, you deserve no less!

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Myth: Modification vs Refinance

Myth: There is a widespread myth that a modification is just a re-financing of the loan. The two options have some things in common, but they are worlds apart. Let’s get some clarity.

Fact: Modification is usually a much better option for a borrower, especially if you are behind on the mortgage and want to use this option to get a loan which you can afford.

Both a modification and a re-finance will result in the old loan being paid off and a new loan being created. However, almost everything else about the two are dramatically different.

A modification:

a. Will be handled by the lender/servicer currently holding the loan (a big plus)
b. Will NOT require a new appraisal or upfront fees to be paid (a significant financial blessing)
c. MAY be used even when a person’s credit score has already been lowered by late or unpaid payments
d. Should definitely be considered if your interest rate is scheduled to reset

Under the terms of a modification:

1. the term of the loan can be stretched out (which reduces your monthly payment)
2. the interest rate can be changed from a variable to a fixed rate
3. the interest rate may be lowered
4. the principal balance on the loan (the amount you owe) can be reduced with documentation that the actual value of the home has declined (almost a given in today’s market)

A re-finance has major differences which are not as consumer friendly.

1. You probably won’t qualify for a re-finance if your credit has been dinged.
2. You must go to an outside source (different lender) apply, and pay fees for processing a new loan
3. There will be fees associated with the process such as an appraisal and possibly a lender’s inspection
4. Closing the transaction will cost another substantial fee
5. Strong possibility of a higher, rather than a lower, payment

When it’s all said and done, the climate is right for your lender or servicer to be willing to consider a modification of your loan if you are struggling to make payments. It is definitely in their best interests to help you resume making regular payments even if those are at a reduced amount.

There will be paperwork required for either of these options. You will need to demonstrate your ability to make payments and fill out the hardship documents which are required, but it is well worth the effort to get a PERMANENT change to your loan which makes it a workable situation for you as well as the lender.

Call your lender today. Best of luck.

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: "As Is"

And the WORD for Today is:

"As Is" Condition—means that the property is being sold in its current condition, including all defects, latent and otherwise, no repairs will be made. The consumer who is purchasing may still have an inspection, but they should not expect any concessions from the seller based on the outcome of that inspection. They will typically be allowed to withdraw from the transaction (by mutual release) if the report shows significant repairs. Their earnest money would usually be returned.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Did You Know: Dual Agency

Dual Agency Dilemma

FYI: “Dual Agency” can be harmful to your health.

The things you have to be careful of continue to multiply. Even a large percentage of the things which are completely legal can come back to bite you in the proverbial “you know where”. One of those things is dual agency. Such a nice sounding phrase. Could end up hurting you about as much as a friendly rattlesnake.

You may not know the word but you have probably been involved in a dual agency relationship without being aware of it. Dual agency exists when a professional represents a person to handle an issue and then also agrees to represent the other party in that same transaction. Most folks would think you were crazy if you decided to use the attorney who is representing your spouse in a divorce against you. You would clearly see that is not likely to end up with the result that is best for you.

Yet, in the real estate world, not only is dual agency common practice; it is totally legal. Most real estate agents are unhappy if anyone (especially me) says that dual agency is seldom your best choice. When an agent represents both sides of the transaction, they get both sides of the commission. That is good for them; not necessarily so good for you. It’s called a “conflict of interest”. Suffice to say that just because the law allows it, that does not mean that regular professionals can balance the opposing needs of two different parties and get the resolution which is best for EACH party. Consequently, the professional is happy, most often the other individuals feel a tad bit taken advantage of.

Anyone who has ever bought a house using the agent who had it listed has participated in a “dual agency” situation where the agent represented both sides of the transaction—the SELLER and the BUYER. If you take a poll of the folks who have done this, most of the buyers and some of the sellers think they got a raw deal BECAUSE their agent was looking out for the other party. Some will tell you that they did not understand that the agent WAS representing the other party as well. You may be surprised when informed that you signed a document which stated you were agreeing to the “dual agency" representation. You made it legal by virtue of your signature.

Dual agency is legal; requires the signature of both parties that they understand and agree to such representation; and is likely to give you heartburn.

Solution: Don’t Do It! Select your own representation, someone who has an exclusive commitment to represent your best interests. You want your agent to recommend the toughest inspection company and then fight to have all the repairs completed which are reasonable under the law in your state. A dual agent has to look out for both parties and is much more likely to find an “easy” inspection company, go light on recommendations for repairs and try to placate everyone, thereby satisfying nobody but themselves.

Would you like to share your spouse??? Is dual agency really in your best interest?? I told you, “don’t do it.”

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Did You know — SwapALease.com

Did You Know?

Swapalease.com

Life Happens….

As a trainer I meet lots of folks who are struggling or real estate professionals whose clients are struggling. One of the challenges being faced by many consumers is what to do about your auto lease when you can’t comfortably afford the payments anymore. You have been relocated by your employer (and you were grateful to just keep a job) or your family expands and you need a new vehicle, or you lost your job or face a cutback in hours. Whatever the situation, it could be any one of a myriad collection of things which means the lease is simply not a good fit financially anymore.

How do you get out of a car lease? What about the thousands of dollars in early termination fees? Must you make the rest of the payments on the lease?

Enter Swapalease.com

The service was initially implemented to help new car dealerships sell a car when the prospective buyer already had a lease and no way to get out of it without facing stiff penalties for early termination or being forced to pay the full amount of the remaining payments. That was 10 years ago and now the service works as an independent connector for folks who want to acquire a lease and folks who have a lease they need to terminate. Out of need, a service is born.

What, exactly, is “Swapalease.com?”

It is an on-line business—a service—which matches folks who want to get out of a lease with folks who wish to acquire a short term (24 months or less) lease. A number of benefits for either side of the transaction—a person acquiring a lease in this way can:

1. a. Get a lease for less than the standard amount of time which would be required if they went directly to the dealership,
2. b. Avoid paying the substantial amount typically required up front with a traditional lease
3. c. Effectively "try out” a car for the remaining term of the lease without having to make a long term commitment.

For the current holder of a lease:

1. a. Having the opportunity to be released from the obligation without having to pay early termination fees (which can be substantial)
2. b. Avoiding the requirement to pay the remaining balance on the lease
3. c. Security of knowing that swapalease has verified the credit worthiness of the party who ‘assumes’ your lease

Other services

In addition to connecting a willing lessor with a happy lessee, other services include originating new leases, transportation and shipping of vehicles, vehicle inspection, various financing alternatives and extended service contracts and warranties (I told you this service was started by car dealers).

I need a….

They probably have it or will have it shortly. Swapalease.com features a wide selection of cars and trucks, from economy to luxury. (For instance, I am considering a sports car but I am not sure I am a “sports car person” after driving 4 door family sedans for most of my life, now the proud owner of a Jeep Liberty Renegade, but I want to switch to something “different”. I may be having a delayed mid-life crisis but I WANT a sport car. I am aggressively looking for the right one on swapalease.com. One I can try for 8-12 months so I can decide if that will be my next purchase or just to have had the experience.

Where to get started?

Visit their consumer-friendly website at www.swapalease.com. You can also contact them at (866) SWAP-NOW (That’s 866-792-7669). They provide instructions in an easy to understand format. Best of luck in shedding your lease—or picking one up—depending on what you need to do.

** I’ll let you know how my sports car search goes.

I am shooting for my birthday, November 15th.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)