Category Archives: Homebuying Trends

Remember the days of stretching to buy as much house as you could possibly afford? Once upon a time, it made sense, given that you’d be sitting an a rapidly appreciating asset. But now that real estate appreciation is looking like a thing of the bubbly past, it may be time to shift focus to the advantages of buying less house than you can afford.

That’s exactly what Money magazine did in its April, 2012 issue, under the article, “Buy Less House Than You Can Afford.” (Note: The online version is much shorter than the print one.)  Money compared the long-term financial implications of two different home purchase possibilities:

• a 2,000 square-foot house, with a purchase price of $239,000, and
• a 3,000 square-foot house, with a purchase prices of $389,000.

They assumed a 20% down payment, a 30-year fixed-rate loan at 4% interest, and other costs, such as insurance, taxes, maintenance, increasing at 3% per year.

Meanwhile, they calculated how much you would earn if you took the money saved on the sale and upkeep of the house and invested it at 6% per year. (That rate of return may be a little optimistic, but hey, we’re talking about a 30-year window.)

The drum roll please: By buying the smaller house, Money found that you would, after 30 years, have socked away an extra $1,016,800. Of course, that assumes that you actually save the money. Spending it bit by bit will destroy the advantages of earning interest or dividends, not to mention ofcompounding those earnings.

Trying to draw visitors to a holiday weekend open house can be a challenge. But the owners of at least one home in Montclair, California (at 6100 Valley View R0ad) decided to turn this challenge to their advantage by announcing an Easter Egg Hunt during the Sunday open house. What better way for parents to get in a little house-hunting while keeping the kids entertained?

Not to mention that including an egg hunt offers visitors a great opportunity to not just look at the house passively, but interact with it, and imagine more fun family activities ahead — once they’ve bought the place and moved in, of course. (Just make sure to have enough eggs on hand, if you don’t want parents noticing instead how their child’s tantrums echo through the grand entry hall.)

In keeping with the holiday spirit, Realtor.com also offered a view of “Five Homes Perfect for an Easter Egg Hunt.” Actually, with all the color splashed around these homes, Easter might be the best time of year for them to sell!

The folks at the Motley Fool recently interviewed Yale professor Dr. Robert Shiller (co-creator of the S&P/Case-Shiller Home Price Indices and author of the new Finance and the Good Society) on the topic of the housing market’s current direction. As the Motley Fool’s Brian Richards pointed out in “Where To for Home Prices,” the signs appear confusing — home prices are on the decline, while homebuilder stocks are at 52-week highs.

Shiller quickly discounted the significance of confidence among homebuilders (they can, after all, choose where to build), then focused on what appears to be a nagging theme among reporters interviewing him: the idea that “there’s going to be a day soon and then it’s going to zoom up again.”

Hmm, time for a little self reflection here. The boom wasn’t so long ago, and we watched home prices rise with such inexorability that house appreciation came to look like a law of nature. No wonder it can be hard to imagine that the bust wasn’t just a long winter’s cold, after which we’ll all start feeling better again.

But, points out Shiller, “this recent boom and bust is unique. It hasn’t happened at such magnitude on a national scale before.” And, as he further details, comparable busts on a regional level did not turn around for decades.

The lesson seems to be that we need to think of the bubble as the temporary illness. In fact, Shiller states, “Bubbles are social epidemics, and are we primed for another one now? I don’t see it . . . .”

If you’re among the many would-be homebuyers looking for an affordable place among the vast stock of foreclosures, here’s an important tip: Factor into your research whether the foreclosure home in which you’re interested is owner or tenant occupied.

If the house is a rental, federal law gives the people living there certain rights, which may affect when you can actually move in. Specifically, the 2009 Protecting Tenants at Foreclosure Act (PFTA) says that:

• month-to-month tenants must be given 90 days’ notice if a buyer at the foreclosure sale intends to terminate their tenancy, and that
• tenants with leases can remain until the lease ends (but can be terminated with 90 days’ notice if an individual buyer intends to live in the property).

You’re looking at a minimum 90 days from the house purchase to its being empty and ready for you to start moving those boxes in the front door.

If you’re buying in California, there’s even more you should know: As explained by Nolo landlord/tenant expert Janet Portman, a March 2012 court decision from the Los Angeles Superior Court held that during the time that your newly acquired tenant lives in the house under the preforeclosure lease, the only way you’ll be allowed to deal with a failure to pay the rent is to use a 90-day termination notice — instead of the normal 3-day notice to pay rent or quit. The bizarre result of that is that the tenant would be able to live in your house for 90 days rent-free. For more on this issue, see “Termination for Rent Nonpayment after Foreclosure: 90 Days’ Notice?” and PNMAC Mortgage v. Stanko, Los Angeles County Superior Court Limited Jurisdiction, Case No. 11U04495, March 7, 2012.

With many bargain-hunting buyers out there hoping to buy a foreclosure home, you might think that the home’s bank-owned status would be highlighted in the Multiple Listing Service (MLS) and other marketing materials for a property. You might be wrong, according to the article, “Agents advised to keep ‘bank-owned’ quiet,” by Alexandra Clough of the Palm Beach Post.

Clough explains that, in the Palm Beach region of Florida at least, the MLS service does not require that listings specify whether a property is bank-owned — and that some banks, such as Wells Fargo, specifically prefer to hide that fact.

To avoid the “negative connotation” of a foreclosure home, they ask that the former owner be listed as the owner of record. Agents point out that banks are probably also motivated by a desire to make sure that home visitors don’t walk in already assuming they can knock a chunk off the listed purchase price.

Indeed, the public has become increasingly aware of the risks that come with buying a home that’s been through foreclosure — potential poor condition due to lack of maintenance or vengeful vandalism by the departing owners, stolen light fixtures, copper piping, and so on after the house has sat empty for a time, and in some states with “judicial foreclosure,” a “right of redemption” allowing the former owners to buy the house back from the new owners within a statutorily set period of time.

Me, I’d want to know as soon as possible whether a house was the subject of a recent foreclosure. And presumably the seller’s agent would advise you of this soon after you expressed any serious interest in the house, as a matter of basic disclosure obligations.

But in the meantime, it would be worth asking your own agent (which we recommend that every buyer have) whether your regional or state MLS requires banks and lenders to make clear that they have assumed ownership of the property. (This practice is completely up to the local MLS services.) If not, that’s one more question to get answered when visiting a home that has caught your interest — especially if it smells funny or seems to be missing some of its parts!

See the article, “Buying a Foreclosed Home: Your Way Into the Real Estate Market?” for more information on the benefits and risks to this strategy.

As all the news media scramble to find Valentine’s Day hooks for their stories today (I’ve seen a lot of headlines on “heart health”), kudos to Trulia for putting together a whole survey on how the singletons of the world rate the importance of homeownership in making their hearts throb.

Be sure not to stall on the first line, puzzling over who those 5% of unmarried adults who actually WANT to date someone who lives with their parents are.

More revealingly, 36% of women and 19% of men would prefer dating a homeowner to a renter. It’s not a majority, but a healthy proportion of the population — perhaps looking for financial stability and ability to commit? (Little do they know, the true fireworks will start shooting when they get a load of the mortgage interest deduction.)

While women prefer to date someone who lives in a suburban home, men have their eyes on dates with an apartment in the city. Uh oh, here we go with the Venus and Mars stuff again. But wait: The survey also found that when it comes time to actually choose a home to “fall in love” with, men and women agree that the master bathroom, followed by a walk-in closet, are the most potentially enticing features. (Sellers, take note.) ((Architects, too, but please leave some space for the other rooms.))

A recent article in the Marin Independent Journal (of California) tells a story we’re hearing a lot of these days: A young couple is actively house-hunting, knowing that the market is unlikely to go any lower, yet unable to find what they want among the limited choices out there. (See “Marin Home Prices Are Down, But for Buyers, Choices Are Scarce,” by Will Jason.) The husband says they’re being patient, but the wife amends that to “Semi-patient.”

They’re a perfect representation of the statistics recently cited by Amy Hoak in The Wall Street Journal‘s MarketWatch: Seventy-one percent of 1,000 people surveyed by Fannie Mae last December said they think now is a good time to buy a house, while only 11% think it’s a good time to sell one. (See “It may be a good time to buy, but not to sell.”) The Marin couple is, unfortunately, also a good example of how buyers who wait too long to see the house they want at a bargain price may ultimately lose out.

The advice for sellers in Hoak’s article is that waiting is a good idea — just one more year, and sales are likely to become faster and more profitable. As soon as prices start to tick up, more sellers will willingly put their houses on the market. Good news for buyers’ choice, but maybe not such good news for buyers when it comes to prices . . . .

I thought I knew a thing or two about cooking, but when a friend told me that she’d recently bought a house with an “induction” stove, I had to ask, “What’s that?”

Turns out it’s touted as the hot new thing (or old thing, among cooking professionals); a method of cooking that’s not gas, not electric (or not exactly), but . . . electromagnetic. Instead of the traditional heat transfer from burner to pot of food, the burner/stovetop elements generate a field that causes the cooking pot to become hot on its own. Or something like that.

It’s fast, it’s precise, and no heat is wasted. Your kitchen doesn’t get as hot, and your cat can walk across the stove without suffering burnt paws.

But here’s the part of it that seems a bit iffy from a home-sales perspective. The seller didn’t tell the buyers about it in the disclosure forms, nor advertise it in the sales literature. My friend didn’t find out until the final walk-through, just before closing.

Which might not be a problem, except that guess what: You can’t necessarily use your normal pots and pans on an induction stove. You have to buy iron or steel ones that will do the right magnetic thing. Bye-bye aluminum, copper, or glass cookware.

“It was frustrating, because we’d just gotten married and had all this beautiful new non-stick cookware,” she says. “Our favorite pots and pans all gave us error messages when we tried them on our new stove. So did the new stuff that my husband laid out money for online, even though it had been advertised as induction-stove friendly. We’ve been eating a lot of microwaved dinners lately.”

How’s that for an unplanned budget item? (Or items, if you count all the prepared-food costs for nights of microwaving.) Sellers, I think buyers might want to know about this one — both because of the pros and the cons. While technically speaking, it might not fall within your disclosure obligations — which mainly include defects (and a high-tech stove can be seen as a property enhancement) — the old maxim about “When in doubt, disclose” seems apt here, if only for the sake of good buyer relations. For more information on what sellers must disclose, see Nolo’s article, “Required Disclosures When Selling Real Estate.”

To judge by the open houses I’ve seen lately, framed prints of Tuscan landscapes — with shapely cedar trees, winding rivers, and perhaps a splash of red poppies — are basically de rigueur. Can’t sell a house without ‘em.

Home stagers must have bought up warehouses of these prints.

In fact, once you start noticing their ubiquity, you’ll see the same syndrome in dental offices, hotels, and so on.

It makes me wonder: Who’s the artist, and is he or she getting rich? Or gnashing his or her teeth at having sold away the rights to some printmaking company?

Here’s another photo, from the staging on the house I now live in. I’ve tried to figure out which artist it is, but no luck. For one thing, on places like art.com, it appears that several artists have cottoned on to this trend, and are supplying infinite (if slight) variations on the Tuscan landscape theme.

Do I think a little art originality might be nice? Yes. Is it a little weird that home sales in the U.S. apparently require images of landscapes in a country that the buyer may have never visited? Also yes. But if you’re trying to sell your home and you want to go with what’s safe and apparently working right now, you’ve got some decisions ahead of you: Should the river be on the left or the right? Poppies or no poppies? Happy shopping.

The big news in real estate law these days is a decision by the Pennsylvania Supreme Court holding that a home buyer has the right to sue the seller and the real estate agent for neglecting to disclose a murder/suicide that had taken place in the house for sale. (See Milliken v. Jacono, 2011 PA Super. 254). The crime took place in 2006, when Konstantinos Doumboulis, who owned the home prior to the Jaconos, allegedly shot his wife and himself, leaving his children to call 911.

It was a crime that made the news, such that two professional real estate appraisers stated (on behalf of the buyers) that the property was worth 10-15% less as a result. The buyers themselves stated that they wouldn’t have bought the place had they known.

The Milliken case is based on a Pennsylvania law requiring sellers to disclose “material defects” in a property during the sales process. Nearly every U.S. state has a similar law, or common law concept, mandating that sellers tell prospective buyers what they know about the property — instead of withholding key facts that might affect how much the property is worth, under the bad old rule of “caveat emptor” or buyer beware.

The Pennsylvania supreme court’s decision doesn’t seem too surprising, although it was hardly inevitable, given that the trial court had ruled in favor of the sellers. Court decisions across the U.S. have emphasized home sellers’ responsibilities to be upfront about the condition of the property — not just regarding physical defects, but other matters that may affect what an ordinary consumer would be willing to pay. A classic example is the 1991 Stambovsky v. Ackley case, from New York, holding that the sellers of a Victorian mansion that had become the site of local haunted house tours should have told the buyers about its supposed ghostly inhabitants. (For details, see “Buying a Haunted House: How Will You Know Beforehand?“)

One thing that does stand out about the Milliken case, however, is the home sellers’ assertion that they asked their real estate agents something along the lines of, “Should we tell the buyers that they’ll be living on the site of a recent murder/suicide?” and the agents said, “No need.” That’s a rather large “oops” on the agent’s part, and a reminder that agents are not lawyers, and should not be looked to as the last word on such matters. Not that all home buyers need a lawyer in order to fill out their disclosure forms, but given the general real estate wisdom that sellers should err on the side of disclosure, specifically to head off the possibility of lawsuits, I would have thought the agents themselves would have had the wits to advise the buyers to consult a lawyer.

For more information on disclosure requirements and best practices, see Nolo’s article on “Required Disclosures When Selling Real Estate.” And if you’re a home buyer, do your research before relying entirely on the sellers’ disclosures! A little Googling about the previous sellers might have turned this news story up.