Category Archives: Shopping for a Home

Miami Real Estate Industry Willfully Blind to Sea Level Rise

fla hurricaneIt takes a writer from a British newspaper to point up the absurdity of human behavior in Miami, where despite obviously rising sea levels, “The local population is steadily increasing; land prices continue to surge; and building is progressing at a generous pace.” (See “Miami, the great world city, is drowning while the powers that be look away,” by Robin McKie, Friday 11 July 2014.)

Many Miami residents are apparently  living in a state of denial. And not just climate change denial, by the look of it. To deny climate change is, after all, primarily to deny that humans are the cause of changes in the environment.

No, in the case, we seem to be witnessing literal denial of what’s in front of people’s eyes: walls of seawater, increasingly regular flooding, shopkeepers who “keep plastic bags and rubber bands handy to wrap around their feet when they have to get to their cars through rising waters,” and homeowners who “have found that ground-floor spaces in garages are no longer safe to keep their cars.”

Yes, they’re building sea walls and other measures to hold back the waters, but scientists believe these measures will offer only short-term relief. And it’s not just a problem of occasional high waves. As McKie describes, Miami is “is built on a dome of porous limestone which is soaking up the rising seawater, slowly filling up the city’s foundations and then bubbling up through drains and pipes. Sewage is being forced upwards and fresh water polluted.”  Meanwhile, the cost of the stopgap measures is in the billions.

Just for fun, I took a look at some ads for Miami real estate, wondering whether the homes on higher ground would at least mention that fact — as would seem doubly important, given that the local architectural style seems to be one story, even if it’s a one-story sprawling mansion.

Nope, the real estate agents who write these ads have chosen to not breathe a word about threats from the elements. You might think the beach in Miami didn’t even exist. Most ads talk about local shopping, schools, and golf courses. Oh, but there was one that advertised, “All windows and doors hurricane proof. ”  So, at least one home seller in Miami is getting real! And getting out of town, I’ll bet.

Why Non-Parent Homebuyers Should Care About School Quality

Who’s thinking about school in the middle of summer, right? Well, I went to a neighborhood party yesterday, which was heavily attended by parents of toddlers, and the primary topic of conversation was where they were going to send the little ones when they grew up.

Our local schools, for the most part, are lousy. In fact, I probably wouldn’t live here if they weren’t. Low school quality is the very factor that allowed us, along with various other childless buyers, to afford a place here. So part of me was inclined to yawn and turn away at this topic of conversation.

Yet I was also watching the laws of supply and demand in action. If school quality doesn’t improve around here, or the parents don’t feel able to shell out for private school, many of these friendly neighbors whom I’m just getting to know will be moving in a few years.

If and when they do move, local “for-sale” inventory will rise – and other buyers will have to go through the “will we have kids, can we deal with the local schools, and if not, is it worth buying now only to have to move in a few years?” analysis.

For many, the answer will be no. For me, that will mean less neighborhood stability, and less home appreciation for my own abode.

If you’re a homebuyer currently scouting out the market, it really is worth having a look at how your local schools are rated, whether or not you have, or plan to have children. Fortunately, there are lots of great research sources for that, such as City-Data and GreatSchools.org.

Luxury Homes Will Soon Be Less of a Bargain

House cornerOne of the fun things for buyers during the depressed real estate market was seeing almost unbelievably low prices on luxury homes.  (Who wanted to buy a castle with everyone in fear of a job loss or investment tumble next week?) Even if we couldn’t actually afford a mansion in the hills, we could peruse the listings without feeling like such a fantasy was completely and utterly crazy.

Unfortunately, buying a luxury home is swiftly returning to the realm of never-never land for the average buyer. According to the April, 2014 edition of Money magazine (“The sunny outlook for housing in upscale neighborhoods“), sales volume for expensive houses is on the upswing, the time it takes to sell is on the downswing in many parts of the U.S., and these factors will soon add up to price increases for high-end homes.

Sigh. You might console yourself by remembering that, even if you could afford the purchase price on a luxury home, other costs such as insurance, repairs, and of course home security might completely break your bank. See Nolo’s article, “How Much Does Owning a Home Really Cost?” for more on that.

San Fran Home Sells for $1.405 Million Over Asking?!

Paper house attached to yellow blank price tag on blue backgroundSeriously. You read that right. That bid brought the total price of the recently sold two-bedroom, 2.5 bathroom home on Gough Street to $3.4 million

I wonder whether there’s some other bidder out there who offered a mere $1.309 million over asking, and is now kicking himself for not having gone just a little higher? (Though what’s “little” in this context is relative, with every .1 million signifying a cool $100 thousand.)

While the article discussing this house on Curbed didn’t mention it, a price hike like this is a sure sign that a bidding war took place. (Either that, or some seriously misguided buyer thought a bidding war was inevitable or had money to burn.)

How, you might ask, did the buyer decide to go quite that high? Real estate bids are traditionally confidential. This isn’t like an auction, where everyone gets to hear the other offers and then raise their own bid by a bit.

But the buyers’ agents are allowed to, and traditionally do, ask the seller’s agent how many people have indicated that they plan to submit a bid. If it’s only one or two, the savvy buyer will probably bid something over asking, but not go crazy.

In the Bay Area, however, with a tech boom and a housing shortage, it’s not uncommon to hear of ten or more prospective buyers bidding on the same house. When up against that sort of competition, with only one chance to make your offer stand out, your best bet is to put an eye-popping dollar figure on it.

If you’re new to the real estate world, let this serve as an introduction to the fact that home list prices mean almost nothing until you understand what’s happening in the market where the house is located. Wouldn’t you think that a two-bedroom home listed for over $2 million wouldn’t require anyone to bid a penny more? But that’s the Bay Area market. Yours may differ! See Nolo’s article, “Home List Price: What Is a House Worth?” for a deeper discussion of this issue.

Should Your First Home Be an Old One, or Newly Built?

Brick entryIf you’re thinking of buying your first  home. chances are you’re a member of Generation Y (born between 1977 and 1994), had a median income of around $73,600 in 2012, and are looking to buy an 1,800-square-foot home that will cost you about $180,000.

How’s the crystal ball doing so far? (Actually, those figures are based on a recent “Home Buyer and Seller Generational Trends” study by the National Association of Realtors.)

If those demographic descriptors describe you, you’ve probably already noticed that they are not, for the most part, within your control. The amount you’ll spend on a home, for example, probably depends largely on what you can afford and what’s available in your area.

But now we come to an important matter that IS within your control: Will you buy an older, previously lived-in home, or a brand-spanking new one, most likely in a development?

The differences may be larger than you realize: Older homes tend to be more solidly built, more affordable (though not always), and in established neighborhoods with grown trees and neighborhood character. Newer ones, however, offer the advantages of customizable finishes and features, adaptations to modern building codes and energy efficiency standards, and, because they’re often in communities run by a homeowners’ association, reduced maintenance responsibilities for the homeowner.

So, would you like to know what the other Gen Y homebuyers are choosing? (The drum roll, please.) The answer is: OLDER HOMES! Apparently for all the reasons just described. So if you have confidence that your fellow Gen-Yers know what they’re about, the decision has just been made for you.

But should it give you pause that the Boomers, just two generations up the line from you — who have already owned a home or two — are now mostly choosing to buy newly built homes? Apparently they got tired of all the maintenance as an older home starts to fall apart.

The real test would be, however, to ask these Boomer-buyers how they feel about their new home in a year or so. By then, they may be kvetching about how newer homes have thinner walls (“I can hear the neighbors’ TV!”), they can’t get a dog of the size they’d wish (because of homeowners’ association restrictions) and the hot tub leaks (hasty building with unqualified labor is epidemic in the new home world).

There’s just no perfect, obvious selection. To help you make that choice intelligently, see the articles on the “Choosing a House” page of Nolo’s website.

Joining the Crowd of Newly Built Home Buyers? Do Your Homework

valentines houseA couple of years ago, finding a newly built home to buy was as hard as finding an open seat in a nice restaurant on Valentine’s Day. The builders weren’t building, knowing that the buyers weren’t looking.

But last month saw a sharp spike in sales of new homes, according to estimates by the Mortgage Bankers Association (MBA).

A whole new crop of homebuyers may, for the first time, be considering the possibility of investing in a home that, at the moment, exists only in the form of a drawing on a map. It’s an exciting process — new-home buyers can often customize the place to their own wishes, from the layout to the counter tops to various amenities.

It’s also a time for caution. First, there’s the matter of construction quality. The model house in the development, if there is one, probably looks shiny, new, and perfect. But not every builder is attentive to quality, and some are more attentive to speed and appearance than anything else — leading to horrible customer surprises down the line, as described in Nolo’s article, “Newly Built Houses: Pros and Cons of Buying.”

Then there’s the fact that many homes in development — particularly, but not always, if they’re condos or townhouses — require all owners to join a homeowners’ association (HOA). That offers many advantages, such as someone to maintain common areas and watch over community quality and uniformity.

But it also means ongoing monthly dues, the possibility of expensive special assessments, and a level of control over your life that not even a landlord could exert. (“Sorry, your dog’s too big, you can’t fly that flag, and you can’t hang your laundry outside.”) For more on that, see “Homeowners’ Associations (HOAs) and CC&Rs: Know What You’re Getting Into.”

And when you’re done with all that reading, don’t forget to make those Valentine’s Day reservations!

Reasons to Spend Longer at an Open House

IMG_4113If you’re a recreational open house visitor (as I am) or a serious buyer who can tell at first glance that you don’t like the place, walking through an open house can take as few as five minutes.

If, however, you’re seriously interested in a house that you’re touring while it’s open to the public, there are ample reasons to stay for a good long time — longer even than your instincts might tell you.

You may, for example:

  • Overhear what other visitors are saying. A second, third, and additional set of eyes is always useful in forming your own judgments. Other visitors may notice flaws that you hadn’t, or open a door that leads to space you wouldn’t have otherwise noticed.
  • Overhear the real estate agent answering visitors’ questions. Information that isn’t on the listing or advertising materials may be relevant and important — perhaps regarding an upcoming change in the neighborhood, indications of how many offers have come in so far, or the history and scope of remodeling work. Some agents will even unwittingly reveal aspects of the sellers’ personalities.
  • Pick up on the “buzz.” You don’t even have to hover too near other lookers to get a sense of whether they’re excited by the place or not. Are they looking bored, plugging their noses, and leaving quickly? Or pulling out tape measures and cell phones? Such information is highly relevant in setting your own offer price, if any — too much excitement, and you’d better be planning to bid over the list price.
  • Notice things that won’t necessarily appear within five minutes. For example, if a neighborhood fire station discharges regular vehicles with blaring sirens, or a train passes by every 15 minutes, it will help to know exactly how loud they are.

By the end of all this, you yourself may have some good questions to put to the listing agent! Just make sure to be clear on whether you’re already represented by an agent of your own. Otherwise you could find yourself facing a hard sell, as the agent makes a pitch to represent you as well as the buyer (a dual agency arrangement that we don’t recommend).

Unpermitted Construction by Former Homeowner May Affect Current Owner

outhouseRemember last week’s blog post, “Of Mice and Moss: Tales of Unexpected Homeowner Expenses“? A significant number of people contributed tales of — to quote one of them — “stupid repairs and improvements of previous owners.”

This of course raises the question, why weren’t the issues revealed during the home buying process? My guess is that they’re precisely the types of issue sellers are least likely mention on the disclosure form mandated in most states. After all, the sellers think of disclosures as where they list and describe problems with the property,  such as an aging roof or a crack in the basement floor slab.

But that beautiful new tile that they installed in the kitchen? That’s not a problem, it’s a handmade masterpiece! (Never mind that it ripples in a few places.) And the new bathroom that Cousin Ed created where the back porch used to be? Perfection itself! So perfect that they didn’t bother taking out a permit for it! (The inspector might not have understood Cousin Ed’s avant garde pipe installation style.)

If the former owner could live with some slapdash construction, the current owner sometimes can, too. However, complications arise when it comes time to sell the place yourself. What do you tell the buyers? Do you have to fix the problems? To shed some legal light on these issues, we’ve posted a new article to the Nolo website, “Discovering Unpermitted Construction When Selling Your Home,” by attorney Allison Nash.

Knowing Your Home Inspector’s Background May Change Everything

roofAs a reader of Nolo’s books and articles on real estate, you probably know that we recommend that home buyers ALWAYS include an inspection contingency in their purchase contract. That allows you to hire one or more licensed home inspectors to do a full report on the house, and to close the deal only if satisfied with (or able to negotiate around) whatever problems the report turns up.

But Patricia Wangsness, a broker with Coldwell Banker in Washington State, adds some important cautions to this advice: “Realize that inspectors are not all alike! Even if you hire an inspector who is fully licensed, you might find that one who is a former electrician will tell you a great deal about faulty wiring and sockets and deemphasize some other issues, while one who’s a former plumber will look hardest at drains and pipes.”

What’s going on here? Aren’t you hiring the person to conduct a “general” inspection of your home?

“Yes,” explains Patricia, “but inspectors arrive at this career in different ways. Some came from the building industry during the downturn, when they lost their jobs. Others simply decided that inspection was easier than what they were doing before. I’ve even heard media ads for inspector training courses, with taglines like, ‘Make your own hours! Work only three days a week!’”

This can be a serious issue, given the breadth of a standard home inspection. The inspector needs sufficient knowledge to evaluate most of the home’s features and systems. He or she should walk through the entire house, examining or testing for defects or malfunctions in its structure, systems, and physical components, such as the roof, plumbing, foundation, fireplace, doors and windows, electrical and heating/cooling systems, and so forth. The inspector will also check the exterior of the house for grading and drainage issues, problems with retaining walls, and more. (See the “Home Disclosures, Inspections, and Appraisals” section of  Nolo’s website for more information.)

As a buyer, you can understand why this makes it especially important that you do your research before choosing an inspector. Even if you find one whom you’re confident is highly trained and regarded, finding out details concerning his or her background might help you understand various related issues in the transaction – such why the inspector is focusing more on some problems than others, or perhaps why the seller responds to a request for repairs with, “But we did a pre-sale inspection and that never came up as an issue!”

If you’re a home seller, this insight might even weigh against getting a pre-inspection with the hopes of fixing up problems before putting the house on the market. As Patricia explains, “You might repair all the problems the inspector tells you about, only to have the buyer’s inspector come up with a list of new defects!”

Millennials Are Hip to All the Bidding-War Tactics

firewkIf you’re shopping for a home in a hot market — of which there are many, such as Riverside,  Sacramento, Las Vegas, and Oakland — chances are you won’t be the only one making an offer on any given home. And that spells a bidding war.

It’s a war with an invisible enemy, given that you aren’t likely to know who you’re bidding against. And there’s little back and forth — you have to make your best offer and wait to see whether it’s the chosen one.

Typically, the savvy listing agent will schedule a day for presentation of offers, during which a line of buyers’ agents will troop in to deliver the written documents and make a case for why your offer should be the one the seller favors above the rest.

Chances are pretty good, however, that the other bidders will include some “Millennials” — that is, young-ish people born between 1977 and 1992.  And according to a Trulia study cited in Forbes magazine, the Millennials are the group most likely to pull out all the stops and use “aggressive” bidding tactics.

I got a little worried upon first reading the word “aggressive” in the headline, picturing fresh-faced young ‘uns stalking other prospective buyers and slashing their tires, or resorting to underhanded negotiating tactics. No, it turns out they’re just ready and willing to unleash the full volley of tried-and-true ways to make their bids stand out, such as writing a personal (and mildly pleading) letter to the seller, bidding an amount over the asking price (duh), asking friends and family for a loan to help fund the purchase, and removing contingencies from the offer (such as inspection or financing).

Still, the fact that the other age groups surveyed were LESS likely to adopt any and all of these tactics suggest a bit of heel-digging-in. Wannabe buyers who make conservative, “not a penny over asking” offers rarely win bidding wars, and may end up spending more than they would have as home prices eventually outpace them. See “How do I make sure my home purchase offer is the strongest?” for more information.