Friday Real Estate Fun: “If You Lived Here”

HousesFor anyone who loves real estate, it’s good to stop and reflect once in a while on how the concept, shape, and style of what we call a “house” varies across cultures and time periods. And the book, “If You Lived Here: Houses of the World” contains artful images of just that variety. (Yes, it’s a children’s book, but one that adults can enjoy, too.)

By artist Giles Laroche, the book contains cut-paper collages showing everything from cave dwellings to yurts to Dutch floating houses to Venetian palaces. It’s accompanied by concise text explaining what the house is made of, where such houses are found, and what it’s like to live in one.

My favorite text comes with the cave-dwelling entry, noting that if you lived in one, “you would be among the 45 million troglodytes (cave dwellers) living in the world today.” (Gotta remember to use the word “troglodyte” more often.)

Perfect gift for a real estate agent who’s got kids, perhaps? Or a way to keep your little ones busy in the car while you visit your 25th open house? Then again, Laroche’s inviting picture of the Airstream trailer might make you forget your house-hunting plans altogether.

Athletes Who Over-Customize Their Homes May Have Trouble Selling

foosballIt’s not a problem that most of us will ever have — but it’s a good reminder of the general principle that homes fixed up with special features to suit the owner might eventually drive away would-be buyers. “Over-customization,” you might call it. Athletes with multi-million dollar contracts seem particularly prone to this syndrome.

Take a look at Tiger Woods’s $6 million digs for example: It’s not easy to dwarf a house with its own amenities, but this place comes close, with a tennis court, diving pool, lap pool, running track, boat slip, and golf green.

According to “Broke,” the 30 for 30 film by Billy Corben, one of the first things an athlete often does after hitting the big time is to buy a house for Mom. And another one for himself — a big one, with lots of rooms, perhaps a bowling alley or two. And then he goes on to buy a few more houses for friends and relatives. The title of the movie should tell you where all this often winds up, with the houses on the market or in foreclosure within a few years.

Alex Rodriguez is getting credit, however (in Darren Rovell’s article in ESPN), for having had the foresight to add nothing more than an indoor batting cage to his Miami Beach mansion, even while he poured in over $7 million worth of  improvements. (He added white oak flooring. a zen garden, a rooftop deck, and so on.) A-Rod bought the place for $7.4 million and recently sold it for $30 million.

The buyer was not an athlete, but a businessman. And that’s “an important distinction,” says Rovell,  “since so many athletes customize their homes so much that they find trouble selling them to anyone outside the sports world.”

So, there you have it. Best stick to a foosball table, that you can take with you when you move.

Disclosures, Schmosures: First, Make Sure Would-Be Buyers Don’t Get Hurt!

MINOLTA DIGITAL CAMERAA recent California case is being hailed as an expansion of the listing real estate broker’s duty to warn buyers of dangerous conditions within the house. The case is called Hall v. Aurora Loan Services, LLC, 2013 DJDAR 5460 (April 26, 2013). In many ways, however, it’s a reminder of how common sense, rather than reliance on the letter of the law, can save home sellers a whole lot of hassles — such as broken legs and lawsuits.

Here’s what happened. The home seller, prior to putting the house on the market, commissioned a home inspection. This is a common practice among sellers in order to get a heads-up on home defects and potentially fix some of them before buyers have a chance to use them as negotiating points. The inspector’s report mentioned that the pull-down stairs leading to the attic needed “repair and replacement.” (Not, obviously, the stairs shown in this artsy image.)

Wouldn’t you think common sense would be screaming in your ear at this point, “Fix it!”? Or at least put up a warning sign? Or at least ask more questions if you weren’t entirely clear on what the report was saying?

But neither the seller nor the selling broker did any of that. Instead, in keeping with California disclosure obligations, they provided copies of the inspection report to everyone who visited the house. One of those visitors was a real estate agent with her clients. The clients ascended the stairs, the real estate agent followed, the stairs collapsed, and the agent fell and broke her leg. Lawsuit time!

Not terribly surprisingly, the court said, in essence (yes, I’m paraphrasing hugely here),  “Don’t just hand people the darn report, tell them the stairs are dangerous!”

But really, the most pithy commentary on this whole sad sequence of events was offered by the bloggers at the Law Offices of James J. Falcone, who said: “The [court] opinion doesn’t say how the clients, now stranded in the attic with the agent writhing in pain on the floor below, got out of the attic.” Indeed, court opinions often leave out the most interesting facts!

That Drone May Shoot Your House — In a Good Way

earthI was feeling like all real estate news had turned into an endless loop of the same material (c’mon, how many times have we seen that St. Joseph statue story already?) when I came across this item from Paul Hagey and Inman News: “Drones are ready for real estate.”

That’s right, tiny unmanned, remote-controlled helicopters are becoming affordable, and photographers are figuring out how to stabilize them for high-quality pictures and even video,  allowing prospective buyers to see views of your property that you’ve never experienced yourself.

You’ve got to admit, this is cool stuff. Even cooler when you read the part about how not even a normal plane or helicopter can get low enough — in the 300-feet-over-your-house range  –  to take photos with of similarly impressive detail and depth of field.

Of course, not every property will look good from the air. Last time I looked at my house on Google maps, it looked like a square of gray (that being the roof) set against a lot of other gray (those being the neighbors’ roofs and the cement of nearby roads) plus the occasional dot of green (uh oh, I really should prune back that jasmine vine). But the nearby high school swimming pool looks really great.

So if you’ve got a house with a pool, you may want to be an early adopter of this drone method of real estate advertising. The same goes if you’ve got a luxury property that looks more shapely from the air than my little square of gray. Or if you’ve just got a really stunning roof.

Charles Ramsey and Amanda Berry Story Illustrates Importance of Good Neighbors

htbh4_2When buying a home, you want to live near neighbors like Charles Ramsey, who will rescue you in a tough situation, right? By the look of it, Ramsey wasn’t living in a fancy house or in a luxury neighborhood. But sometimes other community qualities are just as important when homebuying — a truth that buyers sometimes forget in the midst of admiring the kitchen or reviewing the inspection report concerning the home’s physical condition.

There are limits on how much you can find out about your potential new neighbors, of course. Ramsey himself illustrates this, noting that he could have saved Amanda Berry and the other kidnapping victims a year before, if he’d only known what his neighbor Ariel Castro was up to. He says, “That’s why now I’m having trouble sleeping.” But he didn’t have any idea that the women were there; despite the fact that, “I barbequed with this dude. I ate ribs and listened to salsa music [with him].”

Such limitations shouldn’t stop you from trying to find out what a home’s neighbors are like. A good way to start your research is simply to knock on doors to houses surrounding the one you’re thinking of buying. You probably don’t want to ask whether they’re up to anything that the police would like to know about! Simply explain that you’re interested in purchasing, and ask about how they like the neighborhood, what they’d change, whether they know of any neighbor disputes or recent crime or problems on and around the house for sale, and so on.

If the neighbors are forthcoming, you may learn a surprising amount about both the condition of the house and neighbor relations. If they’re unpleasant or hostile, that tells you something, too. They may be difficult to deal with, or be carrying a grudge against the home’s current owners.

You can also ask the home’s seller for information, through your and their agent. Good questions might include:

  • Have disputes arisen with the neighbors? If so, how were these resolved?
  • Do you and your neighbors share the same idea of where your property boundaries lie?
  • Do the neighbors smoke, make noise, have difficult pets, or do anything else that impacts your use and enjoyment of the property? (This type of information may appear on the disclosure form, but most likely not.)
  • How do you and the neighbors handle fence repairs and trimming of trees on the boundary line? (Most of this should probably be shared, but if you find out that the sellers have been dealing with such things alone or shirking their duties, you’ll need to plan ahead for some delicate neighbor negotiations.)

Add your own questions as relevant to the area and property. And for more information on how to research a home before buying, see the recently released new edition of Nolo’s Essential Guide to Buying Your First Home,

Really? Sellers Can Paint the Walls in Actual Colors?

For a while there, “neutrals, neutrals, neutrals,” seemed to be running a close second behind “location, location, location,” for favorite real estate tag line. Home sellers were advised to paint as much of their house as possible before putting it on the market — and to paint only in inoffensive yet alluring shades of what you and I might call tan, grey, and white. (The paint vendors, of course, call them “bisque,” “barley,” and other similarly tasty terms.)

SONY DSCBut hold everything: The word on the street now is that “bold colors” work very well if you’re trying to sell your home to “millennials,” or buyers currently in their 20s and 30s. This according to experts quoted by Richard Eisenberg in his article “How Boomer Home Sellers Can Hook Millennials.”

If you believe the paint companies, “Emerald,” “Aloe,” and “Lemon Sorbet” are what’s trending now. In fact, florals, patterns, and wallpaper are said to be making a comeback, too.

Pity all the home stagers whose websites include “Before” and “After” pictures in which they painted over perfectly respectable colors with shades of blah!

Wedding or Down Payment on House: Which Comes First?

wedding cakeA wedding is often referred to as the happiest day of someone’s life. But young couples are increasingly willing to put that day off until they’ve bought a home together, according to a Coldwell Banker survey reported on by Haya el Nasser in USA TODAY. In 2012, nearly one fourth of homeowners between the ages of 18 and 34 purchased a house together before they were married, along with smaller percentages in the upper age brackets.

The article explains this trend in terms of timing and financial savvy. Home prices are low, as are interest rates — and both might rise in the very near future. For committed couples, taking time and money out to plan a wedding might risk delaying or derailing their homebuying plans. One commentator even posited, “It’s almost like buying a home is the new engagement ring.”

What the article doesn’t mention is the starkness of the choice. The average opposite-sex wedding in the U.S. cost $28,427 in 2012, with same-sex couples spending even more. The median price of a home in the U.S. is $184,300. In order to make the standard 20% down payment on that median-priced U.S. house, a couple would have to come up with $36,860. And there are plenty of areas in the U.S. where that median price won’t buy you a garage. One good wedding could easily munch up most or all of your intended down payment.

But here’s an idea for bringing your homebuying and wedding plans together: The biggest cost when holding a wedding is the venue, whose average cost in 2012 was nearly $13,000. If you take that money and spend it on a house with a larger yard, you could hold your wedding right there. And you’d get to enjoy the space for longer than the few hours before the hotel tells you to grab your stuff, wake up Uncle Fred, and go home, please.

Home Sellers: Don’t Spill Precious Beans to Prospective Listing Agents

flageolet_bigIf you’re doing your due diligence when preparing to sell your home, you’ll talk to two or three real estate agents or brokers about the possibility of representing you in that sale.

Brokers are typically generous with their time at this stage — they’re experts in the field, they love touring houses and talking about real estate, and they (of course) are hoping you’ll sign up with them and ultimately pay a chunky commission on the sale.

But I’m getting ahead of myself here. Things can get very chummy during these initial conversations, and you may even feel with each broker that, “This is the one.”

Better keep at least some cards close to your chest, however, as described by columnist Ken Harney in his intriguing and disturbing article, “Agents not obligated to keep secrets when they don’t get the listing.” If it weren’t for an April Fool’s joke played by a real estate broker — who pretended to have set up a website, “LostListings,” in which the unchosen masses of prospective brokers could sell information gleaned from those initial conversations — this topic might not have made it to anyone’s radar screen. The joke website suggested, for example, that brokers might reveal things like the seller’s desperation to unload the house quickly to avoid foreclosure, or defects the seller was hoping not to have to disclose.

Not everyone caught on to the joke, however. (That always happens!) And a conversation ensued along the lines of, “Okay, so how much can a broker who no longer has a direct relationship to the seller ethically reveal?”

For the brokers who ARE in contract to sell someone’s house, the answer is clear. They must maintain confidentiality, subject to any exceptions set out by state law. (In some states, for example, listing brokers must tell buyers about material defects within their knowledge that would not have been readily apparent to the buyer or an inspector.)

If I’d had to guess, I would have said that prospective brokers would also have a professional obligation to keep confidential any information they learn from home sellers. That’s what lawyers have to do — in fact, Section 1.8 of the American Bar Association’s Model Rules for Professional Conduct specifically addresses the nature of lawyers’ relationships with prospective clients, saying, “Even when no client-lawyer relationship ensues, a lawyer who has learned information from a prospective client shall not use or reveal that information, except [some narrow exceptions].”

Well, guess what? Apparently no such rule has been written for real estate agents and brokers. Harney interviewed the National Association of Realtors’ (NAR’s) top legal official, Laurie Janik, who said, “The Realtor Code of Ethics does not impose any duty of confidentiality with respect to information provided by a prospective seller client who does not engage the Realtor.”

Harney also spoke with the ethics columnist for Realtor Magazine (also senior vice president and general counsel of Prudential Alliance Realtors in St. Louis), Bruce Aydt, who agreed that the Code of Ethics says nothing about information divulged during listing presentations. Aydt noted, however, that sellers in these conversations likely “have an expectation of privacy ….” Yup, that’s just what the lawyer for the disgruntled home seller would write in the 100-page legal brief to support a lawsuit against a loose-lipped broker.

To be fair, no one is claiming that there’s been a rash of — if any — instances where selling brokers revealed confidential information about a prospective client. I’ll bet most of them have enough business savvy to keep mum. But if you’re thinking of selling, you might not want to put this theory to the test. Unless you want the word on the street to be, “We just won the zillion-dollar lottery and are moving to the Bahamas, you can sell this dump for $1 and we’ll still be rich!!,” keep it to yourself.

Don’t Let an Investor Buy the Home You Wanted!

IMG_5064They’re back! Those steely eyed buyers with pockets full of cash, attracted by the combination of low but rising prices in many parts of the United States.

In some geographic areas, the investors — professionals who plan to rent out or flip the house rather than live there — are actually the CAUSE of the price increases; in others, they’re just one of the active players in a local area with a rebounding economy. (See CNNMoney‘s Real Estate Guide 2013.)

That’s bad news for ordinary mortals, however, who are just trying to buy a family home. Inventory is at its lowest in decades, as a result of builders having folded up their tents and stopped building and banks having made their way through most of their pending foreclosures.

An investor who comes in to buy a house is likely to literally offer all cash; which, even if it’s not the highest offer, can look very attractive to a seller who knows full well that buyers are still having trouble getting final approvals on mortgages.

How do you compete with these investors? First, know that they’re out there, and plan accordingly. (Double check by asking your real estate agent how active investor-buyers are in the area where you plan to buy.) Other potential strategies include:

  1. Bid higher. True, that may take the home out of your price range. But now’s a good time to come to terms with the fact that a house’s list price is just a suggested amount with which to open negotiations. Many houses go for more than the list price, and if you’re bidding against other possible buyers, such a result is all but guaranteed. At a certain price level, investors lose interest — they’re only out to make a buck, and have no interest in whether this is the perfect house in the perfect location for their own lifestyle and dreams.
  2. Pay all cash. Don’t laugh — doing so on a very short-term basis may actually be possible, with the help of your family and friends. Even people who aren’t wealthy may have a nest egg they’d be willing to park in your house temporarily — just until you close the deal and turn around and take out a traditional bank loan. Even if everything goes wrong and you can’t pay it back, they can always foreclose on you and recoup their investment. See Nolo’s article on “Borrowing From Family and Friends to Buy a House” for more information.
  3. If you can’t pay all cash, do the next-best thing(s). That’s making a large down payment, for starters — higher than the usual 20%.  Why does the seller care? Because he or she knows that the less you’ll be borrowing from the bank, the more likely the bank will be to approve the loan, confident that it can sell the house for enough to recoup the amount at stake. And if you can’t manage a large down payment, at least come in with a letter of preapproval from a lender and other forms of proof that your financial situation is strong enough to likely close the deal.
  4. Strengthen your offer in other ways. Remember, when competing against other bidders, you won’t get a second chance at working out the details. You’ll want to concede everything that can reasonably be conceded in order to woo the seller. That may mean offering the shortest closing period you can manage; accommodating the seller if you know that he or she still needs to find a house to buy (for example by offering a rent-back or home purchase contingency); and even waiving the contingency allowing you to make the sale conditional on your satisfaction with the results of a home inspection (though this is risky; you’d want to at least get a friend in there with contracting skills to tell you what you might be getting into).

Bidding wars aren’t fun, and many buyers react with, “I’m just not going to get into any transaction where I’ve got to play that game.” But as long as you don’t lose your head, a bidding war is in some ways no different than buying a house where you’re the only offeror — your job is to calmly, and with an eye on what comparable houses are selling for, choose a price and terms that balance out both your own needs and market realities.

Buyers who wait until the investors lose interest may still be looking for a house a few years from now, when prices really have gone up.

The Seller Has No Place to Move to Yet: Will Your Purchase Close?

IMG_4405Found a house to buy? You’re probably feeling lucky, while many other home buyers remain frustrated at the present dearth of “For Sale” signs (not to mention properties). Low housing inventory breeds low housing inventory, with sellers thinking, “How can I put my house on the market when I don’t know if I’ll be able to find another house to buy?” along with “How can I afford to buy another house until I’ve sold this one?!”

Would-be home sellers are all but stuck — unless a buyer is willing to sign onto a so-called “seller purchase contingency.”  This portion of (or addendum to) the home purchase contract says that the deal will not close unless the seller finds another home.

If you’re the buyer, and you love the house in question enough to risk either waiting extra time for it or losing it altogether, you might want to sign onto such a contingency. But read its terms carefully first, and sound out your seller. In particular, you want to find out how far down the road toward a new house the seller will contractually need to be before your sale will close, and what steps the seller has already taken toward finding a new home.

As pointed out by Bob Hunt in the RealtyTimes article “Seller Purchase Contingencies Require Care,” the California Association of Realtors (CAR) has issued a new (as of November, 2012) addendum for just this purpose, called the “Contingency for Sale or Purchase of Other Property.” (Note: It’s not that this contingency is a new concept — real estate agents could, in the past, add language to this effect in California as well as in other states — but the contingency has become more commonly used, which apparently led CAR to issue the new form.)

The language in the new addendum is favorable to California buyers, requiring only that sellers have “enter[ed] into a contract to acquire replacement property” within a certain number of days (17 is suggested in the contract) in order to remove the contingency and allow the original deal to close. In other words, buyers who sign this addendum don’t have to wait around to make sure that the sellers’ deal actually closes on time or at all — they just need to hope that the sellers get as far as a signed agreement with another home buyer (and actually removes the contingency).

Seventeen days isn’t a very long time in which to not only find a house but enter into a purchase contract. You may want to give the sellers more time to begin with. But to make sure you’re not going to be strung along for nothing, it’s also worth making sure the sellers have been taking the appropriate steps toward finding a house.

California Realtor George Devine (co-author of Nolo’s How to Buy a House in California) says, “The seller is motivated to act in good faith here — otherwise he or she risks losing you, the willing buyer. Nevertheless, in a situation like this, you (most likely through your agent) should be asking pointed questions of the seller, like, ‘Why are you selling? How many houses have you already looked at? Have you made an offer on any? If so, at what stage are the negotiations?’ If, for example, the seller hasn’t really looked around at all, but wanted to test the market and see what price his or her house would command before taking the next steps — or is already in escrow, but with a 180-day closing period — you might want to think twice. “