Category Archives: Homebuying

Unexpected Homebuyer Expense: New Cookware for Induction Stove

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.”

Staging Lesson #3: Don’t Forget the Tuscan Landscape Prints

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.

Wouldn’t Any Homebuyer Want to Know About a Murder/Suicide on the Property?

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.

Rent vs. Buy: It’s All About Whether You Can Save

You can track the local trends, run numbers through the online calculators, and so on. But in the end, according to what Eli Beracha, co-author of ”Lessons from Over 30 Years of Buy versus Rent Decisions: Is the American Dream Always Wise?” told Amy Hoak of the Wall Street Journal, “We find that if people don’t invest the money [that they save by renting], actually about 90% of the time, you’re better off buying.”

So instead of thinking of a home as an investment, perhaps we should start referring to it as a forced savings plan. Read all about it in the full article, “Making a New Case for Home Buying.” And for more help with everything from affordability to inspections to mortgages, see the Buying a House section of Nolo’s website.

Parents Helping WIth Kids’ Home Purchases

The trendspotters are out in force, noting that the tight mortgage market is prompting kids to get financial help from Mom and Dad, in order to take advantage of low real estate prices and buy their first home.

Some wannabe buyers are asking their parents to cosign onto a bank loan, as described in Shandra Martinez’s article in the Grand Rapids Press, “More parents helping their grown kids buy first homes by co-signing mortgage loan or providing financing.” But that has some downsides for the parents’ credit rating — they’ll be viewed as, in effect, having taken on more debt, and their credit will suffer if the buyer defaults. Learn more in Nolo’s Q&A, “Should we cosign for our son’s mortgage?

Other buyers are going straight to the “Bank of Mom and Dad,” as described in Sandra Block’s article in USA TODAY, “More parents finance their kids’ mortgages.” That has the advantage of keeping all the interest income within the family, as further described in Nolo’s article, “Borrowing From Family and Friends” (which also offers tips on preparing the paperwork).

 

 

Is “As Is” Really “As Is” When Buying a Home?

At last, someone has written a cogent explanation of what the buyer should (or has a right to) expect when buying a house “as is.”

Frankly, I’ve been confused by the differing accounts I’ve read or heard — some say “as is” means that you pays your money and gets what you gets, no basis for price reductions (or later lawsuits)  if any repair needs turn up. Others say that you can still include an inspection contingency and ask for repairs — which makes one wonder, “In what sense is that sale ‘as is?’”

So, big thanks to Tara-Nicholle Nelson for her article “Buy real estate ‘as is,’ use inspection contingency,” syndicated by Inman News.  I haven’t been able to find the article online yet (I read it in the Montclarion), but it’s sure to turn up one of these days.

In the meantime, here are the most important points:

  • The meaning of “as is” varies by state.
  • In most states, it means the buyer takes the property “as disclosed.” So anything the seller revealed to the buyer ahead of time, such as a leaky roof, becomes something you cannot go back and negotiate over. Any surprises regarding the house’s condition, however, are fair game for negotiation.
  • In a few states, it doesn’t matter what the seller told you, “as is” means you accept the risk of flaws in the property.
  • Regardless of what state you’re in, insist that an inspection contingency be included in your offer.  That way, if the house’s repair needs turn out to be more than you want to take on, you can at least back out of the sale without losing your earnest money deposit. You might even be able to negotiate with the seller despite the “as is” clause, with the seller’s willingness to pay for repairs or agree to a price reduction dependent on how eager he or she is to sell. (But, as Nelson points out, it would be unethical to try negotiating over issues that were disclosed by the seller from the beginning. )

And, a final tip from me: Remember to choose an inspector with a reputation for giving houses a detailed once over. Get independent recommendations — some real estate agents, unfortunately, will recommend inspectors who soft pedal problems and therefore ensure that the deal goes through.

Short Sales Still a Long Process in California

Remember my post last year, called “Short Sales: A Trap for the Unwary?” It described how short sales weren’t always the deal they seemed to be for sellers, whose credit rating suffers more than people realize, and whose lenders, if and when they finally get around to approving the deal, might sneak in language making the homeowners agree to continued liability for the remaining mortgage debt.

Well, I wish I could report that things have improved, but according to a recent report in Realty Times, by Bob Hunt, California short sales have gotten more difficult than ever, impacting buyers as well as sellers. Fewer than 3 in 5 short sales even closed successfully last year, and the lender-approval process often took sixty days or more. Pending legislation to improve the process has gone nowhere.

Is it time to rename this a “long sale?”

Would Your Home Sell Faster With an Added Commission to Buyer’s Agent?

I always find anecdotes as interesting as studies, especially since they sometimes reveal activities that haven’t made it onto the radar screens of those doing the studies. Which is why my attention was caught by a letter to the editor in the July, 2011 edition of Money magazine, titled, “How to Nab a Buyer.”

The writer, a certain Steve from Cincinnati, says that, after three months of watching their house sit on the market with no buyer interest, they decided to offer a $1,000 cash bonus to the agent who brought in a buyer. Lo and behold, a half dozen agents appeared for showings, and they sold the house within two weeks.

It’s a sample of one, but a pretty compelling story. Of course, it then raises the question of, where were all these buyers’ agents before? Presumably they still stood to gain their usual half of the 5 1/2 to 6% commission paid by the seller, and were actively helping their clients look for a home — shouldn’t that have been incentive enough to bring them in?

But if you’re read Freakonomics, you may remember that the real estate agent’s commission isn’t what it appears to be. The 3% percent  commission that each agent walks away with usually gets split with the agent’s agency, leaving only 1.5% of the selling price for the agent. On the sale of a $300,000 home, that would put the buyer’s agent’s personal take at $4,500. Given that amount, an extra $1,000 bonus might start to look pretty intriguing — perhaps leading some agents to look back over their client lists to ask, “Would this place fit any of my clients needs better than I realized?”

Such a scenario is especially plausible given that buyers are moving slowly in this market. Instead of the once-classic scenario of buyers and agents scouring neighborhoods together, with daily phone calls about what’s hot and what’s about to come on the market, I’m hearing more stories of buyers asking agents to “keep their eyes open,” going through brief flurries of househunting, getting cold feet, wondering if now is really the time to buy, going through another flurry of looking, and so on.

Have you or any other home seller you know tried this bonus strategy? If so, please leave a comment.

Experts Almost Agree: Now’s a Good Time to Buy

Looking for information overload? Try attending the annual National Association of Real Estate Editor’s Conference in Texas, as I recently did. This event brings together real estate writers and editors to hear from economists, real estate industry insiders, and others, to get a picture of trends and interesting stories in the U.S. market.

By the end of last year’s conference, I’d heard the pundits opine that real estate sales (and therefore prices) were going to go up, down, down in a bad way forever, or just flatten out.

This year’s prognostications were a tad more consistent. In fact, there was a lot of talk about how now is a good time to buy. Here are some of the reasons:

  • Home prices are starting to go up. This from Bob Dorsey, of the FNC Residential Price Index, an alternate index to the popular Case Shiller. Dorsey explains that the FNC index leaves out foreclosure sales – which he describes as attracting a completely different sector of homebuyers – revealing that in ordinary, arms-length sales, rises in price are already happening.
  • According to Ted Jones, Chief Economist with Stewart Title, interest rates are poised to go up. And there’s no doubt that buying a home costs significantly more if you’re paying higher interest. Meanwhile, viewed over the long term, real estate remains a good investment.
  • Sue Stewart, Senior Vice President of Mortgage Match, says, “Many more people are now considering buying their first home than in 2009. These first-timers are important because they’re not adding to the housing inventory when they turn around and sell.”

Still, commentators expressed concern about the number of foreclosures still making their way through the pipeline. One noted that, “According to Case Shiller, prices could still fall 15 to 25%.”

With all of that, I’ll give the last word to Sam Mitts, Executive Managing Director of USAA Real Estate Company. Mitts says: “We’re seeing a shift in thinking. A house is again being seen as a place to live in, not an investment.”

The takeaway message might be that if now feels like the right time for you to buy a home, go for it. If not, your window of opportunity, price-wise, may not close right away – at least not within the foreclosure market, if you’re willing to take the risks associated with buying a distressed property.

Real Estate Still Beats Gold as an Investment!

At least, that’s the conclusion of Ted Jones, Chief Economist at Stewart Title, who spoke at the recent National Association of Real Estate Editors in San Antonio Texas.

Despite all the recent talk about gold being the hottest investment out there, Jones notes that, over the last 30 years, “Real estate outpeformed gold two to one.”

He adds, “If you had bought a median-priced home in January of 1980 and sold it last month [May of 2011], it would have gone up in value 207%. If you had sold gold after holding it for the last 30 years, it would have gone up only a little.”

And that doesn’t even take into account the benefits of actually owning a house, which you can enjoy living in or renting out. What can you do with a piece of gold for 30 years? “Look at it!” says Jones.

Of course, you could argue that the next 30 years aren’t likely to be as rosy for the housing market. Nevertheless, Jones observes that some increase in demand is inevitable. By the year 2050, the U.S. population is expected to increase to 400  million people, not including undocumented aliens.  (The current U.S. population is 311,623,562.) Those folks will eventually need housing!