Category Archives: Shopping for a Home

What Do Condo Fee Amounts Really Tell You?

As anyone thinking of buying a condo should know, the list price is not the only dollar figure to take into account: You’ll want to look at how much you’ll be paying in monthly homeowners’ association fees, which go toward upkeep and repairs to the commonly owned areas (such as landscaping, walkways, and roofs) and any amenities (such as a pool or community room).

In fact, it appears that buyers are well aware of this issue, as evidenced by a recent Orange County Register story about a condo in Laguna Woods, California that’s listed for $1 — but not selling, due in part to the monthly $1,718 maintenance fee. (And the fact that it’s tiny, and located in a retirement community.)

Lenders are similarly attuned to the burden that monthly fees add to a homebuyer’s debt, and reject many loan applications for reasons that have more to do with the condo association’s finances than the individual borrower, according to a report by Annamaria Andriotis of SmartMoney.

A common mistake among buyers, however, is to believe that the fee amount alone tells the story — as in, lower amount = good, higher amount = bad. It’s not that simple.

For instance, Jim Adair of RealtyTimes describes a situation where the board of a condo association in Toronto went to court to get new maintenance charges imposed on the residents, who’d been refusing to raise them for years, while ignoring needed maintenance and repairs in their aging building. With the court’s help,  fees were raised to a backbreaking $900 a month. Owners who then tried to sell discovered that unloading units that were saddled with both high fees and neglected physical conditions was nigh on impossible. Slightly higher fees for the years leading up to this would have been a much healthier approach.

Then there was a recent Washington Post report out of Virginia, where a condo complex called “Shadowood” so overused its power to tack on extra fees — for everything from calling the management office to having the wrong color blinds — that a Fairfax County judge permanently enjoined it from imposing fees not already listed in the development’s original master deed (which decision was upheld by the Virginia Supreme Court). The basic fees, however, were between $287 and $324 a month; which an unwitting buyer might have concluded were reasonable, without doing any deeper digging.

Of course, high fees can spell trouble, too. As industry expert Paul Grucza noted in the recent new edition of Nolo’s Essential Guide to Buying Your First Home, “Shrinking hourly wages have seriously impacted people’s ability to pay their dues and assessments. A delinquency rate of between 5% and 7% is average and realistic, but I’ve heard of associations where up to 70% of the homeowners can’t pay what they owe. That puts a huge burden on the other homeowners — they’ll likely either have to pay more themselves or watch the property decline.”

The bottom line: You’ve got to dig. Find out not only what the monthly fees are in whatever condo unit you’re thinking of buying, but look into related issues like:

  • how many owners are actually paying those fees (more than 15% in arrears is a serious problem)
  • how much the association has in its reserve account (close to nothing is all too common, and means there’s nothing to rely on if a sudden repair or emergency need comes up)
  • when the condo association can impose special assessments or other fees, and any recent history of its doing so, and
  • whether any financial disputes or lawsuits are brewing.

Reviewing the master deed or “Covenants, Conditions, and Restrictions” (CC&Rs) will be a good start, but you will also want to talk to other owners, review minutes from recent board meetings, and follow up on any disturbing information you uncover.

“For Sale” Signs Still Important Home-Search Tool

A recent Washington Post article, “Conn. real estate agent accused of stealing competitor’s for sale signs from in front of homes,” got me wondering: Are yard signs still that important? Or was this overly competitive agent skulking around in vain, in a world that’s become Internet-driven? (Allegedly skulking, that is.)

Here’s what the National Association of Realtors (NAR) tells us about how home buyers locate the place they want to buy:

Information sources used in home search:

  •     Internet: 88%
  •     Real estate agent: 87%
  •     Yard sign: 55%
  •     Open house: 45%
  •     Newspaper ad: 30%
  •     Home book or magazine: 19%

Yes, the Internet tops the list, but over half of home buyers still rely on a yard sign — and why not? Seeing a “For Sale” sign on a neighboring house is sure to get some buzz going. Not to mention the fact that if you see a house ad, and then drive by to take a quick look, the yard sign helps spot the place.

So, if you’re selling a house, make sure to use a yard sign. (Most everyone does, but some sellers have been known to refuse, for privacy reasons or because they’re embarrassed at having to sell when the reasons are financial.) And then make sure that sign doesn’t walk off during the night!

For more marketing tips, see Nolo’s articles on “Preparing and Showing Your Home.”

The House That Got Away; Or, When Are You Safely in Contract?

A real estate market that’s heating up in various regions of the U.S. doesn’t only mean higher prices: It also means some buyers need to pick up the pace and deal with competition for the houses they want. That competition can lead to “ouch” scenarios like the one faced by clients of Spokane real estate broker Michael Crowley.

While still negotiating the final contract, says Crowley, the buyers “decided to counter on a minor detail, moving the seller’s requested closing date by three days to accommodate a birthday party. That counter kept the offer open just enough for another buyer to show up with a better offer. The buyers were not happy, but I had clearly warned them of the risks.”

Such eleventh-hour switches in seller loyalty can be confusing to buyers. By now, they’ve already been told that the seller likes their offer and wants to work out a deal. Some buyers even believe (mistakenly) that because they got there first, they’ve established some right to the house, such that other wannabe buyers will just have to wait and see what happens.

The reality comes down to a basic matter of real estate contract law. As New York attorney Richard Leshnower explains: “Until you, as the buyer, have your hands on a contract of sale with both the seller’s and your signatures, don’t get overly excited—you’re not yet in contract.”

The concept of being “in contract” is vitally important. It means not only that the escrow process leading to the closing has been launched, but that the buyer and seller are mutually bound to go forward with the deal. (Exceptions are made when the contract terms and contingencies allow an out, as many do, for example if the home inspection turns up defects that the buyer can’t accept.) Once in contract, backing out without an agreed-upon reason comes with consequences, such as a potential lawsuit, or the buyer forfeiting the earnest money deposit.

The steps toward this safety zone of being “in contract” depend on state or local real estate practices. These vary to a surprising degree. In some states, such as New York, the buyer’s starting offer is a short document, and it’s up to the seller to draft a full sales contract for the buyer to review and suggest changes to, until both buyer and seller are ready to sign.

In other states, such as California, the buyer presents an offer that’s in the form of a full contract. All the seller would have to do is sign and return it to the buyer, and they’d be in contract. More often, however, the seller will make some adjustments and return a very similar document as a “counteroffer,” which the buyer can either sign (thus creating a contract) or respond to with another counteroffer, and so on.

No matter where you’re buying a house, however, the procedures and the possibility of counteroffers tend to leave plenty of wiggle room for a seller who sees a better offer come along at the last minute. Leshnower says, “I know of situations where sellers have accepted a better offer that came along while their contract with the first would-be buyer was being mailed to them for signature.”

The bottom line: If you love a house, and are worried that other buyers are circling, do everything in your power to get into contract. Postpone the birthday party, hand-deliver your signed contract to the seller instead of waiting for the mail to get it there, or do whatever it takes. Having an experienced real estate agent at your side, who has established good working relationships with other local agents, can also help here. Michael Crowley says, “There are a few homes in our market that will sell overnight, and I can often call the selling Realtor to see whether other offers are expected and to get some assurances that I’ll be notified if one comes in.” But in the end, notes Leshnower, “A lot depends on the seller’s good faith.”

News of Climate Change Hasn’t Reached the Real Estate Media

Anyone else notice something off-kilter about Curbed’s recent analysis, in its article about an architecturally “ho-hum” house on the Pacific Coast Highway in Malibu, that the $15,800,000 price tag is justified by its “location, location, location?”

Yes, the view toward the ocean is beautiful. Yes, it’s got a private set of stairs to the beach.

But the article made no mention of the fact that, as The New York Times stated in March of this year, “severe coastal flooding could occur regularly in the United States by the middle of the century and [] California would be among the states most affected.” (See “Both Coasts Watch Closely as San Francisco Faces Erosion.”) Nor does it mention the California report (cited in the same article) that predicts sea level rises of seven inches by 2030 (that’s 18 years away, folks) and 14 inches by 2050. How convenient, those private stairs may someday lead straight into the water!

Wouldn’t you think the prospect of watching extreme weather through a lovely set of plate glass windows would reduce the value of the location just a tad? Even the climate change deniers will have trouble denying the public’s reduced interest in property that looks to be at risk. Someday, I would expect, climate change will be part of the discussion of any piece of waterfront property. In the meantime, let’s all just focus on the ho-hum architecture.

There’s a Reason You Can’t Find a House to Buy

Deciding that you’re really ready to buy a house and finding an actual house to buy are two different things — especially in the current market. If you’ve been scanning the home listings or visiting open houses and thinking, “Why don’t I see anything that looks good?” it’s probably not your imagination. It’s not even your innate fussiness.

A shortage of housing inventory is affecting many parts of the United States. This issue, and the multiple reasons for it, were major topics at the recent conference of the National Association of Real Estate Editors (NAREE) in Denver.

Curt Beardsley with Realtor.com observed, “Total for-sale inventory is 20% down. That means we’re down to about 1.8 million single family homes for sale, from 3.1 million in 2007.”

The most massive decreases in inventory, says Beardsley, are along the West Coast, in Seattle, Oakland, San Francisco, and San Jose. On the other side of the country, Tampa and Atlanta have the most limited offerings of homes for sale.

Here are some of the reasons the experts offered for the shortage:

  • Potential sellers feel trapped. According to Scott Ryles, CEO of Home Value Protection, Inc., “One quarter of homeowners are underwater today” (owe more on their mortgage than the home is worth, in cases where they have a mortgage) or they simply “can’t afford to move.” Even if these owners want to sell, the numbers just don’t add up for them — and won’t, until home prices rise.
  • Builders aren’t building. Before the crash, builders of new homes were adding to the nation’s inventory at three times the rate they are today, according to David Crowe, Chief Economist at the National Association of Home Builders (NAHB). Across the U.S., there are only about 50,000 newly built homes where the carpets are in and you can move in tomorrow, says Crowe. What’s more, it’s not easy for builders to reverse course and start building again. Crowe explains, “We’ve lost a lot of capacity; contractors, materials supply . . . No one has come back strong. Plants have been mothballed.”
  • Investors are turning single-family homes into rentals. As a potential buyer, you’ve got competition from investors savvy enough to realize that the rental market is stronger than ever. Margaret Kelly, CEO of RE/MAX notes, “Twenty five percent of home buyers now are investors. These are good investors, not flippers. They’re going to drive the recovery. Families who’ve been foreclosed on can’t qualify for a home. If you have kids, dogs, and so forth, you want a yard; you’re not going to move into an apartment.” Of course, if you want to buy a home, get ready to watch some of the bargains being snapped up.

This doesn’t mean that you should give up. Stan Humphries, chief economist with Zillow.com, believes that every time prices spike upward, it will “free some owners from negative equity, and you’ll see some surplus in supply for a while.” But hoping for low prices as well as lots of choices may be too much to hope for.

Staging Includes New Furniture AND New People?!

Whilst indulging in my favorite real estate fantasy reading — back issues of Country Life magazine, from England — I came across an article on home staging. (It was specially adapted for those selling multi-building country estates, of course.) The article credits the U.S. with having begun and “matured” the idea of dressing up one’s home for sale, which I thought was awfully sporting for a country that thinks we all live in McDonald’s parking lots.

The article goes on to say that U.S. stagers “now offer to move people as well as furniture into empty homes to give them the life they need to find a buyer.” Really? I have never, ever been through a staged home that actually had people in it. Would they be fashionably attired and draped across the sofa holding a cocktail, perhaps?

Determined to show the writer up for her anti-American snickering, I turned to Google — and whaddya know, us Americans live up to our stereotype. The Great Zillow has spoken, with an article entitled “New Staging Concept: Live-In Stagers.”

From what this article describes, however, the purpose of the live-in stagers isn’t so much to make their presence felt during showings, but to act as security and maintenance detail during the off hours. An excellent idea, in cases where the sellers have already moved and the home would otherwise be vacant. Back when I was selling my first home, I’d stop by every morning to turn on the fountain, and would almost always find something needing attention — an orange in the stager’s fruit bowl that had gone fuzzy-green with mold, a branch blown into the middle of the yard by the wind, flyers on the front doorstep, and so on.

Then again, live-human staging must have its disadvantages. They’ve got to put their toothbrushes somewhere, and keep the towels looking perfectly plush and fresh every day. Plus, I can imagine some odd interactions as visiting buyers, assuming they’re the owners, ask questions about the house, only to be told, “Don’t mind me, I’m part of the furniture.”

When Will Buyers Find Out the House Was Just Foreclosed On?

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.

 

State of the Real Estate Market: Willing Buyers, Reluctant Sellers

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 . . . .

 

Did Your City Make the Top Ten List for 2011 Home Price Increases?

Thanks to Inman News for creating a list, complete with pretty pictures and exact percentages, of all the metro areas that saw, according to data from the National Association of Realtors, the greatest hikes in home prices over the last year.

This top-ten list contains good news for sellers and owners in those areas. On its face, it contains bad news for buyers wanting to get into the market . . .  except that, with sellers feeling more assured of receiving a decent price, some of them might decide it’s time to sell after all. That will increase the range of choice for buyers, who have been complaining that they’d happily buy now if they could only find a house they liked.

Just to be a spoiler, I’ll reveal the whole list to you up front. But with no pretty pictures. Here they are, starting with number one:

  • Fort Myers-Cape Coral, Florida
  • Shreveport-Bossier City, Louisiana
  • Metro: Washington, DC (Virginia)
  • Fort Wayne, Indiana
  • San Antonio, Texas
  • Washington, DC
  • Peoria-Pekin, Illinois
  • Fort Lauderdale, Florida
  • Omaha, Nebraska
  • El Paso, Texas

Gee, not even one city in Nolo’s home state of California made the list!

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.”