Covenants and Conditions and Restrictions, Oh My!

Covenants, conditions and restrictions, or CC&Rs, are almost always put in place when a subdivision is created. They cover a large range of property rights and uses, determining issues as broad as the height of your fence to whether you can park an RV in your driveway. Some CC&Rs can be quite restrictive; governing details like what color you can paint your house or whether your floor plan has enough square footage. When the value of a property is tied to a view, CC&Rs will sometimes restrict whether certain lots can build a house with a second (or third) story.

CC&Rs vary widely. Some are long and detailed; others list just a few basic restrictions. According to, some of the most common things CC&Rs regulate include landscaping, including types of trees or bushes and grass height; house color, including trim; size and type of outbuildings, like sheds and garages; pets, including type and size (for example, no farm animals or any animals heavier than 20lbs); outdoor decorations, both year-round and holiday; parking, like how many vehicles and what type of vehicles; and junk, including items as obvious as cars on blocks and less obvious things like gardening tools or unattractive but functional benches.

CC&Rs are usually created in hopes of maintaining property values for the long term. Conformity to size and style—and maintaining views—prevents wild individualism from lowering the value of surrounding homes.

The CC&Rs are something all buyers should be aware of before making a final decision on whether to purchase a property. I recommend reviewing them carefully (you can find them in the preliminary title report). While they may feel restrictive, consider whether your freedom is more valuable than having no rules for anyone in the subdivision. While you might like a few more colors to choose from for exterior paint, your quirky neighbor may think it would be fun to paint her house in pink and purple stripes.

In reviewing the CC&Rs, you may want to make sure they are restrictive enough. If you are paying a premium for a home because of a view, you’ll want to confirm that the CC&Rs protect that view. If they don’t, you may want to renegotiate that price or request that new restrictions be put in place.

CC&Rs are typically enforced by neighbors, which can cause hard feelings. When people on your street band together to complain about the paint on your house, it makes the neighborhood potluck a little tense.

Neighbors can go to court to enforce CC&Rs, but it’s usually a difficult, time consuming, costly, and unfriendly action. So if you and your neighbors have a difference of opinion on this, please talk about it before making a formal complaint. It makes future potlucks so much more palatable.

If there’s a homeowners’ association, that body should be the CC&R enforcement arm. It feels less personal (and awkward) when the association deals with CC&Rs because the association represents all homeowners, not just the guy you’ll see over the fence for the next 20 years.

A close cousin to the CC&Rs is the road maintenance agreement and the same rules pretty much apply.

I’ve said it before, but I’ll say it again: the large print giveth and the small print taketh away. Read the CC&Rs. Be sure you understand them. Consider whether they work for you in the type of neighborhood you’re moving into. If you need help, ask your realtor. It’s always best get information before you purchase a home. Once it’s yours, it’s yours, CC&Rs and all.

If you have questions about real estate or property management, feel free to contact me at or visit our website at 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 Dick Selzer is a real estate broker who has been in the business for more than 35 years.

Real Estate Investing – Part IV: Commercial Property

This summer I’ve written three “Real Estate Investing” columns covering single family residential properties; duplexes, four-plexes and apartment complexes with fewer than five units; and larger apartment complexes (with up to sixteen units). I recently received a request to write a column on investing in commercial real estate, so here you go.

Commercial property is not for the faint of heart. It’s not too different from the other types of real estate investing, but because of the longer depreciable life there are lower tax benefits and the bigger investment makes it a bigger risk (if you’ve heard of the risk/return trade off, that’s what I’m talking about: bigger risks can lead to bigger returns or profit. Of course, bigger risks can also lead to bigger losses, so it’s best to do your homework to minimize risk where possible.)

When investing in commercial real estate, you’ll want to run a thorough background check of any potential tenant(s), including a credit check and rental history. Don’t give the keys to anyone until the history and credit check come back clean. I’d also screen potential tenant(s) for business experience for the type of lease you’re offering. For example, if the whole reason a potential tenant is opening a restaurant is because his sister-in-law says he’s a great cook, the business plan may not be sound.

Although you may feel uncomfortable asking specific questions about the person’s business plan (especially if you haven’t done this type of lease agreement before), you’d be negligent not to inquire. When turning over an asset worth hundreds of thousands, or even millions of dollars, you want to be certain that the prospective tenant can and will perform the full agreement.

In commercial real estate, you’ll deal primarily with two types of leases: gross leases and triple-net leases. With a gross lease, the landlord is responsible for most expenses, including taxes, insurance, and routine maintenance (the tenant fixes things he breaks). With a triple-net lease, the tenant takes care of virtually all expenses, including taxes, insurance, and all maintenance.

There are pros and cons with both. As a landlord, a primary benefit of the triple-net lease is not having to deal with much property management. You’ll get no calls about a broken window or clogged sewer on a Saturday afternoon. However, if your tenant doesn’t keep up with routine maintenance over the course of several years, the long-term damage can be substantial. And, if the tenant’s business struggles, routine building maintenance is likely to be one of the first expenses to go. Sometimes the ill effects of poor maintenance are not immediately obvious, so trying to recoup expenses years after a lease begins is difficult (bordering on impossible).

As a rule, finding a tenant for a commercial building can take more time than for a residential property, so vacancies can last longer, but because commercial leases are typically multi-year contracts, vacancies are less frequent. As you consider negotiating a commercial lease, it will likely be quite different from the experience you may have had with a residential lease. Commercial tenants may be more along the lines of, “Have attorney; will travel.” If you’re lucky enough to have a major credit tenant (e.g., major grocery store, federal agency, national chain store), you’ll benefit from additional foot traffic and more stable rent. If your building allows for multiple tenants, a major credit tenant will attract other tenants. Because they know they bring these benefits, major credit tenants often play hardball when it comes to lease negotiations. They expect their rents to be lower  than other tenants, and even than operating costs for that space. Depending on how much lower, you’d be smart to play ball.

If you have questions about real estate or property management, feel free to contact me at or visit our website at 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 Dick Selzer is a real estate broker who has been in the business for more than 35 years.

Don’t accidently give away some of your property rights: Easements

A couple weeks ago, I talked about title insurance and how it can help you guard against unexpected liens on your property (someone having legal rights to your property that trump yours). I made a reference to an easement and promised to define it, so here you go. According to, an easement is “ the right to use the real property of another for a specific purpose.” The easement itself is a real property interest, but legal title to the underlying land is retained by the original owner for all other purposes.

If you choose to provide an easement, the common way to do so is to allow permission to use some of your land in exchange for payment, trade, or for free because it’s totally reasonable (e.g., you allow a neighbor to use a road along the edge of your property that provides the only access to their property). Common easements include access to roads, utilities, waterlines, wells or springs. More esoteric easements include buying access to a view or sunlight. For example, if you have solar panels that provide the bulk of your household energy, you may need a sunlight easement that prevents neighbors from planting tall trees that block the sun, making your solar panels useless.

A prescriptive easement is a way people can gain legal access to your property without your consent. A prescriptive easement occurs when a property has been used uninterrupted for five or more years in a way that is “open and notorious” (that’s the legal description) and against the will of the owner. On the coast, a common example is abalone divers making a footpath across someone’s property to gain access to the ocean. If that property is sold, those divers may have a prescriptive easement to continue to use that footpath forever.

Here’s the weird thing. If you give the trespassers permission to use the path, then they are not trespassing, when the property changes hands, the divers have to get permission from the new owners to legally continue to use the path. They don’t have a prescriptive easement because they weren’t using the property against the owner’s wishes. So, if you have a property being used in a way you don’t approve of, take care of the problem (post signs, build a fence, bust out your video camera and press charges, etc.). If you don’t have a problem, give permission to limited people to use the property. If you don’t like confrontation, get your lawyer involved. They do confrontation for a living.

If you don’t address the issue, you may give away rights that you (and future property owners) shouldn’t give away.

Speaking of giving away rights, if you don’t register to vote, you give away the right to have your say. Have you moved recently? Don’t forget to re-register to vote. Those elected to federal, state and local office make decisions that affect you every day, from the taxes you pay to the quality of your schools. Many races are decided by just a handful of votes (remember Florida? Al Gore does.) It’s essential that all those eligible to vote do so. The next election is November 4, 2014 and the deadline to register to vote is October 13.  You can register to vote at:

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 or visit our website at 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 Dick Selzer is a real estate broker who has been in the business for more than 35 years.






Making the Most Out of Open Houses

When you’re trying to sell your home, you want to engage in all the activities that encourage buyers and none of the activities that don’t. Common sense, right? Then why do I see so many sellers sabotaging the sale of their property when it comes to open houses?

Realtors have many marketing techniques to get your property in front of potential buyers. One of those is open houses. Like anything, there’s a right way and a wrong way to do open houses. The right way involves the following:

  • Remove a third of your furniture
  • Clean your house until it sparkles
  • Take Fido to your sister’s house (best not to have pets on the property)
  • Make the beds
  • Open the window treatments (curtains, blinds, etc.)
  • Make sure your valuables are in a safe place (Realtors will safeguard your home, but cannot be in all rooms at all times. Don’t leave out jewelry or electronics that someone could easily slip into their pocket.)
  • Mow your lawn and make sure your landscaping looks great
  • Clean the fireplace (If it’s winter, have a fire in the hearth. Otherwise, put a fern in the fireplace for decoration.)
  • Bake cookies before the open house (your house will smell amazing). If you don’t have time to bake cookies, put a drop of vanilla on light bulbs around your house. It will have much the same effect.

Now that you know what you should do, here’s what you shouldn’t do: as the owner, you should NOT be present when people tour your house (either during an open house or a showing). Be anywhere but home. Go to the movies. Go play with Fido at your sister’s house. Go to someone else’s open house. Go ANYWHERE but home.

Clear enough? If you’re wondering why it is so essential not to be present, here are a few reasons:

Your realtor can negotiate for you. Part of negotiation is the art of timing in asking and answering questions. If a potential buyer asks about whether a feature is included in the price (say, a hot tub), the realtor can ask, “Is that important to you?”  If you’re standing right there, the potential buyer will ask you directly and you’ll need to answer. Your realtor can legitimately say, “I don’t know, let me find out,” while probing about what the buyers really want.

Potential buyers feel more comfortable when the owner isn’t around. Many people feel weird rummaging through a closet or poking around someone else’s house when they’re right there.

Realtors are trained in how to respond to criticism, and are not emotionally tied to the property. This is probably the biggest reason owners should not be present during their own open houses. Prospective buyers should feel comfortable objecting to things about the home that they don’t like: a closet is too small or a room is too dark. When realtors hear these objections, they can often turn negatives to positives. If they don’t hear the objections because the property owner is hovering, the issues cannot be aired, and your realtor can’t address them. The last thing you want is a defensive homeowner defending a property’s shortcomings. That’s not a helpful negotiation tactic.

So, go somewhere fun for a few hours and let your realtor do his or her job. You’ll be glad you did.

As you can tell, there is no way for a seller to overcome these issues if they are selling the house themselves. I know this is biased in favor of working with a realtor, but it is also true.

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 or visit our website at 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 Dick Selzer is a real estate broker who has been in the business for more than 35 years.

How to Hire a REALTOR: 4 Simple Questions

A few months back, I wrote about why you should consider hiring a realtor if you plan to buy or sell a home. What I neglected to mention was how to hire a realtor. Like anything, if you’ve never done it before, it’s hard to be an expert out of the gate.

Briefly, here’s a reminder on why to hire a realtor.

  1. Licensed real estate agents have a fiduciary responsibility to deal honestly and in the best interest of the principal (you) — this is not just an ethical responsibility, it’s a legal one.
  2. Win-Win. It’s in your realtor’s best interest to help you meet your goal, because realtors only get paid if you get what you want – a completed transaction.
  3. realtors know their stuff and can save you time and money. Just ask people in the industry, because they hire realtors.  Even lenders and people in related industries with the knowledge to do the work themselves feel it’s worthwhile to hire realtors. To the extreme, when I want to list or buy property I use a realtor other than myself.

So, how can you pick a good realtor? First, talk to your friends and neighbors to find out whom they’ve used and would recommend—and maybe more importantly whether there is anyone they would not recommend. Ask your insurance agent, your accountant, your attorney and your local banker, too. These professionals understand the economics of real estate and are likely to have a valuable opinion on the subject.

The realtor you ultimately choose to engage in a business relationship needs to be someone with whom you can have a personal relationship. It’s critically important that your search not be a popularity contest, because we’re talking about dealing with hundreds of thousands of dollars.

Before you pick up the phone to talk to any of the potential realtors on your list, make sure they have integrity, a good reputation, and are well connected to all kinds of information. By the end of the interview, you should be really comfortable (hopefully even impressed) with answers to these questions.

  1. Does their communication style work for you? Do they use all the communication tools you like (e.g., cell phone, text, email, even that old fashioned standby face-to-face)? Are they available on weekends or during evenings? How long do they usually take to respond to questions?
  2. Do they have the expertise to meet your needs? When measuring expertise, pay attention to years and type of experience, as well as professional designations as realtor (instead of simply real estate agent). Some realtors even have additional education like GRI (Graduate, Realtor Institute) or CRS (Certified Residential Specialist).
  3. Do they have the capacity to take you on as a client? Although the agent may have wonderful credentials, it is important to find out about their current workload. Can they give you the time and attention you need to buy or sell a property on your timeline?
  4. Do they have the technical tools to do the job right? In this world of constant communication and electronic marketplaces, can your realtor excel? Do they or their company have a mobile app? Website? Blog? Access to the Multiple Listing Service (MLS)? Franchise affiliation with impressive online networks?

In addition to answering all these questions to your satisfaction, was the realtor organized? If you plan to list your house for sale, did the realtor come with a marketing plan, a market value analysis of your property, and information about themselves and their company? If you want to buy a home, did the realtor review prospective contracts and walk you through what to expect at each point in the buying process?

If you responded positively to all these questions, you’re probably in great shape. When it’s all said and done, the realtor you choose should be someone you trust and get along with, and someone who has the expertise, capacity, and company support to accomplish your objectives.

Next time I’ll write about how to hire a lender. 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 or visit our website at Dick Selzer is a real estate broker who has been in the business for more than 35 years.

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Appraisals 101

It’s a seller’s market, but whether you’re talking about a sales transaction or a lease situation, it’s important to know the value of your property, and which home improvements will pay off. Here are some of the factors that affect a property’s value the most.

  1. Size. Square footage is the single biggest factor in determining a property’s value. Be sure you know the square footage of the home. Measuring it is not always easy and even professionals make mistakes, so estimate it yourself to check the numbers.
  2. Land. How much property does the structure sit on? A big back yard can add a lot of value. However, sometimes the difference between 10 acres and 20 acres isn’t as big when it comes to overall impact.
  3. Condition. The condition of the property (both visible and invisible) is a major factor. Obvious signs of wear and tear are unappealing, but sometimes it’s the structural issues that have a bigger impact on a property’s value.
  4. Location.  Location used to be more important than it is now. While it’s still a major component of value, our telecommuting world allows people more freedom in where to live.
  5. Décor. The style should not only be attractive, but appropriate to the home and the era. It helps to be internally consistent as well as consistent with the neighborhood.
  6. Room Count. In addition to how many bedrooms and bathrooms, the total room count matters. These days, “outdoor kitchens” almost count as another room.
  7. Other Amenities. Pools, hot tubs, and other amenities, while nice, do not increase the value by the amount it costs to install them. And, they can detract if they are poorly placed or in disrepair.
  8. View. To let you know the value of a view, I once knew an apartment building owner who said, rent was $1000 and the view was an extra $200. Yep, people paid it.
  9. Community Amenities. If a property is close to good schools, parks, shopping, and other amenities, the value increases. Now, of course, these are subjective. For a retired couple without children, clearly the schools won’t be much of a draw.
  10. Financing. If the seller is willing to carry the loan, the value of a property may go up. No fuss, no muss (simpler loan application, no fees, etc.).

When it comes to things you can change about your house, the absolute best return on your time and money is to clean and de-clutter. Haul stuff away and deep clean your house—top to bottom. Once that’s done, you can decide  on additional improvements.

People often ask, should I update the kitchen or the bathroom(s)? Well, as with most things, that depends. If you have a four-bedroom/one-bath home, add a bathroom (preferably a master bath). If your kitchen fixtures were done in a nice shade of 1970s avocado, consider renovating your kitchen.

When updating, go neutral. If you want a snazzy color, paint a wall. Paint is inexpensive to replace. Appliances and flooring are not. And, think long and hard before you convert a garage into a family room, because what you gain with one, you lose with the other. It’s almost a fair trade in overall value, so you’re getting little or no return on the money you spent to make the change.

Once your property is in tiptop shape, it’s time for an appraisal. While there are three methods appraisers use to estimate the value of the property; theoretically, they should all come up with comparable values. It costs about $400 to get a single family residence appraised, and this is another one of those times when it’s really important to have a reputable, local professional do the job. Call your local REALTOR for a referral.

In case you’re interested, the three methods of appraisal are as follows.

  1. The Market Approach – compare physical data, get data on several comparable properties, and make adjustments for size, condition, etc.
  2. The Income Approach – figure out the fair market value for renting the property, get income/rental information for comparable properties, and multiply by a ratio to get the appraised value.
  3. The Replacement Cost Approach – figure out the top value (what it would cost to replace it), assess the cost of doing so (including permits, hookup fees, insurance, taxes, etc.) and adjust for the aging of the property (physical, functional, and economic).

Lenders require appraisals, and they can be handy if you’re a For Sale By Owner type of person. If you work with a REALTOR, they can provide a market evaluation as part of their service which will help you estimate the value of your home.

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Being a Good Renter

The real estate market continues to evolve into a seller’s market. Prices are up, inventory is down, and buyers outnumber sellers. However, if you would rather rent than buy right now, here are some tips on how to be a savvy renter.

  1. Find a property that fits your needs. You can find places for rent listed in your local newspaper, via an online search, or call a professional property management company.
  2. Make sure you’re dealing with a reputable landlord, and that the person you’re dealing with is, in fact, the owner or legitimate property manager. A recent scam involves “landlords” advertising properties for rent. They accept your application and your deposit, but get “called away” and cannot meet with you. They abscond with your money and personal information and never send you the keys. If possible, it’s best to deal with people you can meet with face to face.
  3. Pay attention to the condition of the property. This is the honeymoon phase. If the place doesn’t look nice now when the landlord is trying to rent it, it’s unlikely the landlord will put in more time and money to fix things once you’ve moved in.
  4. Tell the truth. Complete the rental application thoroughly and in good faith. You should assume the landlord will verify the information.
  5. Read your lease agreement, and pay attention to your obligations. You don’t have much negotiating power after you’ve signed your name. If you have questions, ask them.
  6. Use a move-in checklist and take pictures. If the landlord doesn’t offer a move-in checklist, make one for yourself. Take inventory of what’s broken or missing, as well as the condition of appliances and other features. Pictures are a great way to catalog the property.
  7. Confirm that the locks have been re-keyed.
  8. Prepare for an emergency. Find out where the breaker box is, along with the emergency shut off for water and gas. Also inspect the property for a smoke and carbon monoxide alarms. Landlords are legally required to provide them.
  9. Communicate with your landlord. Renters sometimes fear that sharing bad news with landlords about needed repairs will result in a bigger rent payment. However, a good landlord will appreciate being informed about problems when they’re small and easy to take care of. A little leak is usually cheap to fix; massive dry rot is not. Replacing an electrical outlet is relatively easy; losing your property to fire is not.
  10. Move out well. When you leave a property, give appropriate notice (check your lease agreement) and really clean the place. Use your move-in checklist as you move out. Ask the landlord for a pre-move out inspection, so they can tell you what they believe requires attention. This gives you an opportunity to fix things yourself rather than to be charged for them later.

If you’re wondering how much to pay for rent, look at what similar homes in the area are renting for. If the one you’re interested in is really high or really low, pay attention. Be aware that the security deposit cannot legally be more than twice the monthly rent for an unfurnished property. Be informed.

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Being a Good Landlord

Owning a home isn’t right for everyone, which is why many people invest in rental properties. This week I’m sharing my thoughts on how to prepare a home to be rented, and what it means to be a good landlord.

To prepare a home for rent, consider these six suggestions:

  1. Really clean your house. As mentioned in a previous column, we all know that other people’s dirt is dirtier than our dirt, so make sure your place is CLEAN. We’re talking about a “mother-in-law visit” clean, not the old “dust and vacuum” clean. Have carpets and window treatments professionally cleaned.
  2. Make sure the home is in good repair. Fix leaks. Replace broken parts. Deferring maintenance can actually cost you money. The additional problems from an unfixed leak can get very expensive.
  3. Put in attractive, hardy, low maintenance landscaping that’s appropriate for the property. A dirt patch is hardy and low maintenance, but hardly attractive or appropriate for most properties. A field of delicate flowers is beautiful, but not hardy or low maintenance.
  4. Make sure all door and window locks are in good repair, and re-key locks between tenants. Paying $50 to re-key locks is a small price to pay for the peace of mind that you’ve protected your new tenants from someone who might have an old key to the property. Hope for the best, but plan for the worst.
  5. Take pictures of your property. Good pictures make for good marketing. They also serve as a record of the condition of your property before it was rented to the current resident. Some memories are faulty. It’s always nice to have proof.
  6. Consider who would be happy living in the property in its current condition. If the house is in good shape, then responsible renters will likely be interested in renting from you. If the house isn’t in good shape, consider maintenance that would make a nice difference and attract the type of applicants you’re looking for.

So, the house is ready to rent. If you’re a new landlord (even if you’re not), how can you be a good one? Being a good landlord includes following these six rules:

  1. Start with a thorough application. Ask about income, credit, rental history, and other relevant details. Once the applicant provides this information, VERIFY it. As a long time property manager, I have seen some interesting attempts at deception.
    On rental history, for example, if a tenant isn’t paying in a timely manner or is a complainer or isn’t taking care of the property, the current landlord might be motivated to give that tenant a sparkling recommendation. Why? Because if someone else will rent to the tenant, that tenant will vacate their current property. That’s the reason you should talk to the last two landlords.
    On employment verification, even if you call and get “ABC Company” and a stellar recommendation, consider further research if you’re unfamiliar with the company. Call back in a few days and see if “ABC Company” answers or if “Joe” (the brother-in-law) answers.
    Run a credit check and then read it. If you don’t know how to interpret it, ask someone who does.
  2. Use a well-written rental agreement. Make sure you leave no doubt about who is responsible for what. Include more than just the financial details (security deposit, monthly rent, length of the lease). Be clear about who pays for utilities. Are you pruning the roses or is the tenant expected to do so? How many people can live in the home? Are pets okay? Do you have a pool or hot tub? Is it mentioned in the agreement? If you Google “residential rental agreement,” you’ll find lots of sample rental agreements. Review them to find an agreement that’s right for you.
    On the utilities issue, you should require the tenant to show proof that they’ve put the utilities in their name as soon as they occupy the property. Trying to get back payments is a hassle that can and should be avoided.
  3. Rely on a Move-in Checklist. A checklist protects you and the new tenant. The tenant has the opportunity to note any deficiencies (e.g., whether a window was cracked when they moved in to avoid being charged for it later), while a landlord can later refer to a signed checklist that indicates the tenant didn’t see anything amiss when they took occupancy.
  4. Install carbon monoxide and smoke alarms, and brace the water heater before you rent the property. Protect your investment and your tenant with these inexpensive and legally required safety precautions.
  5. Maintain the property. Be sure to keep on top of regular maintenance. Don’t wait for a change in tenants to keep everything in good working order.
  6. Be responsive. Being responsive doesn’t mean giving in on every issue or being at a tenant’s beck and call. It means responding appropriately when your tenant requests information or repairs.

This blog wouldn’t be complete if I didn’t mention how much to charge, and yet, there’s no easy formula. I will say that I charge a security deposit and first month’s rent. Why don’t I charge first and last month’s rent? Because, the rent can only be used for rent and no other reason. Be aware that the security deposit cannot be more than twice the monthly rent for an unfurnished property. If you’re not sure what to charge, do a little market research; find out what are other properties in the area renting for.

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What to Expect from a Real Estate Agent

For those of you who may not have noticed, the real estate market has changed recently. Prices are up, inventory is down, and buyers outnumber sellers. This makes it a seller’s market. Buyers are in the market because rates are still at historic lows (and have only one way to go in the future). Prices are still affordable, and the economy is looking stronger. If you are thinking of selling in the near future, you should consider starting right now.

Whether you’re thinking of buying or selling, the question is whether to employ a real estate agent to help you. Are they expensive? What do they do for you, exactly?

To answer those questions, I thought I’d define a real estate agent’s legal obligations, as well as the difference between a real estate agent and a realtor®. All realtors are real estate agents, but not all agents are realtors.

Licensed real estate agents have a fiduciary responsibility to deal honestly and in the best interest of the principal (you) — this is not just an ethical responsibility, but a legal one. Real estate agents must follow your instructions unless they are “patently frivolous.” But, as long as you are reasonable, your agent must represent you according to your wishes.

A realtor is a real estate agent who is a member of their local realtor association (which also affiliates them with their state and national associations). So, in addition to being well trained, realtors adhere to a strict code of ethics and standards of practice, higher than those mandated by law. Membership in the associations also makes it easier for realtors to stay up to date with the latest legal issues. The question remains, should I hire a realtor to help me buy or sell a house? I’d say yes, and here’s why.

First, it is in a realtor’s best interest to help you meet your goal. realtors only get paid if you get what you want – if you complete a buying or selling transaction.

Second, people in the real estate industry hire realtors – brokers and lenders with the knowledge to do the work themselves. They know the value of a good realtor. It’s kind of like when you find out your doctor goes to a specialist when he needs one. Don’t you want to do the same?

On the selling side, a realtor will assess your property to determine its market value and bring to light any issues that make it unusual (e.g., is it in a flood plain? Does it have historic value?). realtors advertise your property locally, online, and via the Multiple Listing Service (MLS), reaching thousands of potential buyers. realtors are also connected to other real estate professionals and can share information about your home via those relationships. And, the realtor doesn’t make a dime unless your house sells. As a mater of fact, they spend time and money marketing your property on the prospect of collecting a fee when it sells.

On the buying side, realtors can act as a buffer between you and a homeowner, so you don’t tip your hand. In negotiations, he who speaks first loses. However, if realtors communicate, they may act as independent parties, providing you with information without giving away your position. (This is true whether you’re a buyer or seller.)

If you’re a buyer, realtors can save you a ton of time. As long as you are clear and specific about your needs, a realtor can filter through all the properties for sale so you only see ones of interest to you. Also, realtors are likely to hear of properties coming on the market before the general public, putting you in a position to know sooner.

The idea of saving money with a For Sale By Owner (FSBO) isn’t really accurate. From a seller’s perspective, unless you’re a marketing genius, your property just won’t get the same exposure it would with a realtor. And, advertising can get expensive. If you are not well versed in real estate law, mistakes can also be very costly. Not surprisingly, most FSBO homes end up being listed with a realtor.

On the buyer’s side, you do all the work and receive none of the benefits of an agent. Without a realtor, you may not know what’s for sale or what legal rights you have, what sellers should provide and/or pay for, or other legal issues. And, real estate contracts have a lot of details. If you aren’t familiar with them, you may agree to things you shouldn’t.

Whether you are buying or selling a home, if you have a smart phone you can download a free app that will give you a lot of information about what’s for sale. Text “Selzer” to 87778 and you’ll be sent a link to an app that uses your location to identify all properties in the MLS (not just Realty World listings). It also offers recent sales so you can compare your property to others.

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How to Buy a House

I’ve talked about why renters should consider becoming homeowners. The market is still a buyer’s market, for the most part, so this week I’ll share some information on how to buy a house.

The most important way to prepare is to get your finances in order. This means getting a credit report, collecting financial documents like your tax returns and W2 forms to demonstrate your reportable income, printing bank statements to show your cash reserves, and making an itemized list of your monthly obligations (rent, car payment, insurance payment, utilities, etc.). Gathering this data will allow you to figure out how much house you can afford.

The next step is to figure out how much house you want to afford. Do you want to have a little money left over at the end of each month, or are you investing all you can in your new home? Is there growth potential in your job? Does your spouse plan to go to work and increase your household income next year? Or, are you a young couple planning to start a family and have one of you quit your job to stay home with the baby? Be honest with yourself about what kind of payment will allow you to live the way you want to.

Remember, owning your own home means a mortgage payment, tax and insurance payments, and maintenance expenses. On the bright side, it also means building equity in your own property instead of paying rent to someone else so they can build equity in theirs.

So, you’ve got your finances together and have decided on your price range. Now, you need a real estate agent—one you like and trust. Tell your agent how much you want to spend, what your new home must have and what you’d like it to have. Share your preferences about location, property size, home size, number of bedroom and bathrooms, and any special considerations (e.g., Americans with Disabilities Act-compliant, one-story, specific school district). Be as picky as you can up front so your agent doesn’t waste your time showing you homes you’re not interested in.

Be prepared to look at lots of homes, and do yourself and your agent a favor: be completely honest. Tell your agent what you like and don’t about each. You won’t hurt your agent’s feelings if you share negative impressions. It’ll just speed up the process of finding homes that fit your needs. You should also be open with your agent about any contingencies. For example, you can only afford a home at this price after you receive the court settlement you’re expecting or as soon as you sign the contract for your new job that you’ve been promised verbally.

Once you’ve found the home you want, it’s important to be a savvy buyer. First, make sure all of the folks involved in buying the home are involved up front. If grandma is helping with the down payment and wants to approve the purchase, be sure to plan ahead. Sometimes buyers have to compete, and if you cannot make a timely decision, you could lose your dream home to a more organized buyer.

Then, work closely with your agent to make an offer that spells out exactly who is paying for what, and exactly what is included in the sale. Who’s paying for inspections? Repairs? Loan fees? Closing costs? What stays with the house? Hot tub? Window treatments? Pool equipment? Being a good negotiator means paying attention to the details. Your agent can help with this. They are familiar with real estate contracts and connected with local inspectors and service people (e.g., plumbers, contractors, electricians, pest and fungus companies) who can provide quality work.

I was recently asked, “When does an agent’s relationship with a buyer or seller end?” I said, “When one of you dies.” Smart real estate agents know that people typically stay in their homes for about seven years. After that, they’ll need a good agent to help them buy and/or sell their next home, and if that agent has been helpful during those years, they’ll be the first person that the buyer or seller calls. So don’t hesitate to ask for help from you agent even after the sale, they will be happy to be of service, it means you will remember them.

If you’re short on cash, see whether the seller is willing to work with you by paying for some of the closing costs or loan fees. This allows you to use the cash you have towards the down payment or for repairs. If you are pre-approved for a loan, sellers are more likely to help you out because they know you are a serious buyer able to complete the purchase.

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