Home Selling Myths – DeBunked Part I

 

Most of us don’t buy and sell homes very often, so when we hear a myth that sounds plausible, we believe it. Last week I shared home buying myths and debunked them. This week, I thought I’d jump to the seller’s side and debunk common myths people have about how best to sell their property.

Myth #1: I don’t need a Realtor. Yes, you do. I am a real estate broker and I’ve hired Realtors to represent me when I buy or sell property. A typical, run-of-the-mill real estate contract requires a 10-page purchase agreement, 6-8 disclosures of one to twelve pages each, and 3-5 inspections, all of which need to be reviewed and understood. Real estate law and practices are updated frequently, so knowing the latest information requires constant education.

Myth #2: I looked online and I know what my house is worth. No, you don’t. If you read the disclaimers on those websites, they admit that the prices they list are only estimates and that you should talk to a real estate professional to determine your property’s value.

Myth #3: I can negotiate my home’s purchase price better than a Realtor. This simply isn’t true. One of the biggest benefits to having a Realtor is his or her ability to serve as a third party negotiator. When a prospect has looked at your house and not made an offer, how can you find out if an offer is coming? If you call for a status report, you are breaking the first rule of negotiating by making first move. It is seen as weakness and it communicates a sense of urgency you may or may not care to admit. When a Realtor calls, he or she is just following up in the process of looking for a commission—not putting you at a disadvantage.

Myth #4: I don’t need inspections; the buyer will get them. My recommendation to every home seller is to get as many inspections up front as you can, from wells and septic systems to sewer laterals, roof, pest and fungus, home inspections, preliminary title reports and more. These inspections provide value for lots of reasons. First and foremost, inspections tell you what’s wrong with your house, giving you the opportunity to take care of minor issues before they come to a buyer’s attention. Fixing little issues will also make your house show better. Finally, it will make your sales transaction go more smoothly, because you’ll have no last minute surprises for the lender or buyer to resolve prior to the close of escrow. Having inspections up front takes all the wind out of a buyer’s sails in the event that he or she wanted to renegotiate price because of some newly discovered issue.

Next week, I’ll debunk four more myths about selling your house.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

 

 

Why Getting Permits Up Front Saves Time, Money, and Headaches

If you plan to undertake major repairs or structural improvements to your home, you will undoubtedly need a permit to do so legally. Whether you live within the Ukiah city limits or in the unincorporated part of Mendocino County, there’s a planning and building department for you!

When do you need a permit? Any time you mess with a utility like gas or electricity, any time you do structural work, any time you build a retaining wall taller than three feet, and any time you build a deck, for starters. If you simply plan to paint your bedroom a lovely shade of lavender, you need not alert the authorities, but if you build a walk-in closet, it’s permit time.

Depending on where you live, you’ll either choose the city or county building department. You’ll likely need to submit drawings of your intended repair or improvement, as well as structural calculations. The building department folks will then assess a fee and issue a permit (provided your plans adhere to building and zoning codes). Once the work is done, a city or county inspector will confirm that the work is complete and to code, and issue a final permit.

I cannot tell you how many unpermitted repairs and improvements have been discovered during the sale of a property. And even without a sale, if you started the permit process but never obtained final approval, you not only have no permit, you have notified the authorities of this fact.

Because many people (or their contractors) are competent to do repairs or improvements, they think they don’t need a permit, but they do. If they ever want to sell the property, they’re now obligated by law to disclose to prospective buyers that unpermitted work was done. So in addition to paying a hefty penalty, the work that was done must meet current code (not the code that was in effect when the repair or improvement was completed). If the repair or improvement cannot be brought up to code, or if it does not comply with current zoning requirements, the building department may require that the repair or improvement be removed. No, I am not kidding.

Bear in mind that not all repairs or improvements are brick and mortar. Grading a driveway, for example, requires a permit depending on how much earth is moved and the driveway’s proximity to nearby bodies of water. I am aware of a situation where a driveway was constructed without a permit and not to code, and the county required that the property be restored to its original condition. The restoration cost exceeded the value of the property. So a word to the wise: get a permit.

In addition to building and zoning codes, some houses must comply with covenants, conditions and restrictions (CC&Rs)—go to http://richardselzer.com/2014/09/08/covenants-and-conditions-and-restrictions-oh-my for more about those. Long story short, if you live in a subdivision, there are likely limitations about the height of fences, whether you can build a second story, or even what color you can paint your house.

Just save yourself the time, money, and headache of trying to get a permit after the fact, and get it up front. Do the work, get the inspection, then put the final permit somewhere you can put your hands on it, should you ever need to. Remember, if you sell your home, improvements can be deducted from the sales price in determining if and how much capital gains tax you pay. Generally, the first $500,000 is deductible for a married couple who has lived in the house for at least two of the last five years.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

 

Home Inspections – Getting Up Close and Personal

Last week I talked about pest and fungus reports. This week, I’m sharing information about home inspections—what they cover and why they’re important.

To find a home inspector you’ll be happy with, check references, read contracts, look at sample reports, and most of all ask your realtor for a recommendation.

Once you’ve found a good inspector, please understand that you’re hiring him to do a thorough inspection of all visible areas. Like the pest and fungus inspector, your home inspector is not Superman: he cannot see through walls or floor coverings to find potential problems. However, he can and will find plenty to fix.

He’ll inspect the electrical system, including wall outlets to make sure they 1. work, 2. are grounded, 3. have correct polarity, and 4. are connected to the breaker switch of appropriate size. (I once purchased a house where an appliance was connected to a 90-amp breaker via a 45-amp wire—a massive house fire waiting to happen!). He’ll also make sure the electrical panel is wired properly and in good condition.

The home inspector will examine the house’s foundation for cracks and how the house is connected to its foundation. In earthquake country, this is particularly important. He’ll also check to see whether the foundation is adequate to support the structure above it. If a do-it-yourselfer owned the home years ago and added a bedroom over the garage, he may have added more weight than the foundation could safely hold.

While the inspector is under the house, he’ll also inspect the cripple wall (the structure between the foundation and the subfloor). He’ll comment on whether you’d benefit from more access to the crawl space and whether you need more or better insulation. He’ll assess the ventilation, and if he sees evidence of standing water (either because it’s wet or there’s a white, chalky substance on the foundation walls), he’ll mention it. While he is not legally allowed to go into the realm of pest and fungus (don’t get me started with ridiculous laws), he can certainly identify conditions that encourage dry rot or bug infestations.

He’ll take a look at the roof to assess its serviceable life and provide valuable information about the materials and how they were applied. This is critical information when it comes to warranty claims and the ease of repairs. For example, the inspector will let you know if you have one, two, or three layers of roofing: this is one time when more is not necessarily better. I once had a roof added over an existing roof (approved by a contractor, of course). Sadly, the weight of the roof with the additional layer compromised the supporting trusses and cost a fortune to repair. He’ll also examine at the gutter system to make sure it’s installed correctly and in good condition.

Right under the roof, in the attic, the inspector will look for many of the same issues as in the crawl space under the house: is there adequate insulation? Is it in good condition? Is there enough ventilation? (By the way, you can enhance ventilation dramatically with an attic fan—cutting your cooling bill nicely.)

Throughout the house, he’ll look for code violations and any safety concerns. The inspector doesn’t make judgment calls; he provides information for you to make decisions.

Speaking of decisions, there are three things to do with a home inspection report: first and foremost, decide if you want to buy the home and at what price. Second, assuming you buy the home, use the report to make a list of weekend home-improvement projects. Third, give a copy of the report to your pest and fungus inspector. Allowing inspectors to share information only benefits you.

If you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

 

Pest & Fungus Inspections – More Than Just Termites

After reading last week’s article, if you’re brave enough to buy in winter let me tell you about one of the most vitally important inspections you’ll need to get: a pest and fungus inspection. This is sometimes referred to as the Termite Report, but it is so much more. Of course, a good inspector will check for termites, but he will also check for powder post beetles, carpenter ants, carpenter bees, dry rot, and more.

He’ll take a screwdriver and poke, punch and prod the eaves of your house. He’ll check to see whether the rain gutters are doing their job and if the kitchen ice maker is dripping. He’ll notice whether the wax seal on the commode is broken and if the wooden fence around your yard is attached directly to your siding. He’ll crawl under your house and walk around the perimeter, making note of anywhere he finds earth-to-wood contact. If, for example, a post in your basement (or under your house) is not on a concrete block or your siding goes all the way to the ground, you’ve created a bridge for critters to travel from the ground into your home, where they can feast on all manner of wood.

By the way, now that we’ve had enough rain to knock the leaves off the trees, it’s a good idea to go back and double check the gutters you cleaned a few weeks ago. I just noticed a clogged downspout outside my bedroom window and had to go out in the rain to clear it. It’s much easier to clear leaves when water isn’t pouring from the sky and from the downspout!

Back to the inspection, once the inspector is done, he’ll provide a report with findings in two areas: Section 1 includes active infestations: problems you have right now with bugs or dry rot. Section 2 includes issues that could lead to critters chewing on your home like any earth-to-wood contact or leaking plumbing.

What the report won’t include is anything the inspector cannot see during a visual inspection. Inspectors are not paid to move furniture or clean your basement. The house’s occupant needs to do that before the inspector arrives. Inspectors also can’t see through new plywood or drywall, put in place by a do-it-yourself handyman in an attempt to fix or hide problems. Be aware that a seller is required to disclose “anything he knows or should reasonably have known.” So, just because an inspector cannot see dry rot, for example, doesn’t mean the seller isn’t required to disclose its existence.

A little advice to sellers: before you sign a contract to sell your property is the best time to make any and all disclosures you can think of. Buyers are far more forgiving when they know about defects before making a purchase than judges are afterwards.

And a friendly reminder, if you’re interested to winning $750.00, consider submitting your ideas on how to make Ukiah a safer place to live and work. I’m open to all kinds of suggestions, and I have three expert judges choosing the winner: Ukiah Daily Journal Editor KC Meadows, City Councilman Doug Crane, and Police Chief Chris Dewey. You don’t have to be an expert writer. Use bullet points, if you want to. My goal in sponsoring this contest is to find workable solutions to the challenges we face as a community. Learn more at www.richardselzer.com/2014/09/29/making-ukiah-safer-in-2014. The deadline for submissions is December 1, 2014.

If you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

 

You Can’t Disclose Too Much. Really.

When you sell a house, you are legally obligated to disclose anything that would negatively affect the value of the property or a buyer’s interest in owning it. So, if you’re selling your home, you probably have quite a list to compile.

In Mendocino County, real estate agents typically use an 11-page document that covers a wide variety of issues. In addition, sellers must also complete a Transfer Disclosure Statement (TDS) that includes anything he or she knows (or should have known) about the property.

Typically, disclosures fall into three main categories. Property-specific disclosures include things like a leaky roof, a well that runs out of water each September, a septic system that has a swamp over it, or an addition for which there is no building permit. Proximity-specific issues can include things like whether a property is at the bottom of a hill with erosion problems, near a Superfund contamination site, or within earshot of a popular shooting range. And finally, regulatory disclosures include zoning and other issues. For example, is the property zoned for its current use or within 300 feet of land zoned for agriculture? These issues can affect how the property can be used and the owner’s quiet enjoyment of it.

If your head is already spinning, hold on because we’re not done yet. Some local sellers (especially in Willits) must also complete the Alquist-Priolo disclosure that warns buyers that the property is close to an active earthquake fault. And, your realtor must do a diligent visual inspection of all visually accessible areas (so, not necessarily the attic or under the house, but everywhere you can easily see).

After the visual inspection, the realtor has to describe the property in detail. The report doesn’t have to include explanations regarding the cause of the problems, just that they exist. For example, the realtor’s report may state, “There is a stain on the ceiling,” but not, “Looks like a leaky roof.” Or it may state, “The lawn over the septic system is green and soggy and smells like a sewer,” but not “The septic system clearly needs attention.”

If the sellers don’t hire a realtor, they must complete the disclosures on their own, so be sure to get all the appropriate forms. On the upside, this process is an excellent way to make sure you haven’t overlooked common issues. On the downside, it is time-consuming and a legal liability probably better handled by one accustomed to completing it.

There are a few exemptions, folks who do not have to complete some of the disclosures, most notably people who acquired property by foreclosure are exempt for the TDS requirement. If the owners did not have problems disclosed to them, they may have no way of knowing a problem exists. However, to the extent that the post-foreclosure owners knew or should have known about problems, they are on the hook. For example, if a neighbor repeatedly sends letters concerning a property line discrepancy and those letters are tossed in the trash, a judge will likely rule that the owner should have been aware of the problem.

If you’re trying to decide whether to disclosure something, your decision should basically come down to three rules:

  1. If you wonder, “Gee, should I disclose this?” The answer is almost certainly YES.
  2. If you would want to know about the problems, you should disclose it to the buyer.
  3. If you picture yourself in front of a judge explaining why you didn’t disclose something, is the judge likely to rule in your favor? If not, disclose.

Here’s the thing. When a potential buyer is walking around the empty living room picturing her couch next to the fireplace and her kids squealing with delight as they run around the backyard, that’s the time to disclose issues. Be up front. If you mention a minor issue that isn’t really material, no harm is done because the buyer will recognize it as minor. If an issue is material, then you are legally obligated to disclose it. So, just err on the side of caution. After all if the disclosure is going to kill the sale, wouldn’t you rather have it die before escrow closes than six months later when you hear from the buyer’s attorney?

I hope you are enjoying the holiday season. I wish you and your loved ones a happy and prosperous new year.

Next time I’ll write about some of the highlights from 2013 as we plunge into 2014. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

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Getting Through Escrow

With so little inventory available, the market is shifting to a seller’s market, even with rates at record lows. So, if you’re a buyer fortunate enough to have signed a purchase contract and gone into escrow, here’s what you need to know to complete the process.

First, let’s define “escrow.” Escrow is a neutral place where money and property are both safe. An escrow officer is like an impartial judge who makes sure everyone keeps his or her word. The escrow officer has a fiduciary responsibility to all parties (buyer, seller, and lender). When all the conditions for the transfer of property are met, the escrow officer oversees the exchange of the deed for the payment.

As a buyer, you may have already worked with a lender to become pre-approved for a loan. If not, you’ll need to find a lender and get all your financial information in order (see last week’s column for details on what you’ll need).

Hopefully, you’ve been working with a real estate agent who walked you through the process of carefully outlining contingencies you need, exactly what is included in the purchase and who will pay for inspections, any repairs, closing costs, etc.

Inspections are a big part of an escrow. My advice to buyers is to take advantage of as many inspections as you can. Yes, you will probably have to pay for them, but better to know what you’re buying, than to end up with nasty surprises after the property is yours. Unless you are buying a property and planning to tear it down and build from the ground up, order inspections!

Here’s a list to consider:

○     Home Inspection

○      Electrical

○      Plumbing

○      Roof

○      Heating & Air conditioning

○      Foundation

○      Structural

  • Well – both quantity and quality of water
  • Septic – physical condition of the tank and function of leach field
  • Pest and Fungus – check for dry rot and bugs, both of which are abundant in Mendocino County
  • Hazardous Materials – e.g., asbestos and lead paint. Although both were outlawed in 1978, contractors still had supplies on hand and sometimes used those supplies illegally for some time.
  • Soil/Geology – if you are unsure of the history of the property and plan to plant vineyards, for example, you will want to know what you’ve got. Are you on the side of a cliff that may be about to give way? Check it out.
  • Energy Audit – are you going to need new windows and insulation as soon as you purchase the house? Best to know ahead of time.
  • Structural Engineering – two-story house with cracks in the walls, any house with cracks in the foundation? In addition to inspections, making sure you are aware of any liens, easements, or tenant rights connected to the property can save you from big headaches later. Many easements aren’t a big deal; they assure that your neighbor can access their driveway or that a utility company can pass behind your property to access communication or electricity lines.

However, some legal restrictions could prevent you from inhabiting your home for several years or require you to pay bills that weren’t yours in the first place. An easement through the only building site could reduce the value of the property dramatically. If the property has renters, be sure to get written verification of the rental terms (called an estoppel agreement). Because, verbal agreements are only worth the paper they’re written on.

The escrow process is based on everyone acting in good faith. If inspections or the preliminary title report indicate problems, the buyer can withdraw from the contract if the seller is unwilling to remedy the problems. However, the contract is a legally binding document, so there must be a compelling reason to dissolve the contract. Most escrows go through, and the property changes hands in 30-45 days.

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