Nolo Mourns the Loss of Real Estate Writer Broderick Perkins

BJBPerkinsA man of immense talents and creativity, Broderick Perkins was perhaps best known professionally for his real estate writing with the San Jose Mercury News and on his website, DeadlineNews.com.

Here at Nolo, however, we felt lucky that he lent his talents to various projects, including writing online articles (tackling tough topics such as “Seller Financing: How It Works in Home Sales” and “Mortgage Rate Locks: How They Work“) and acting as an adviser/reviewer for the writing of Nolo’s Essential Guide to Buying Your First Home (which turned into a company bestseller).

Broderick Perkins passed away on September 29 of this year. It’s both a professional and personal loss for all who knew him. We will miss his warmth, humor, and insight.

Let’s conclude with an excerpt from Nolo’s homebuying book, in which Broderick explained what he liked best about his work: “Aside from the fact that I don’t have to go into an office every day, I appreciate the learning aspect of it. Every story is education for me. I used to get kidded a lot at the San Jose Mercury News when I didn’t own a home and was working on a real estate story–people from the realty industry would say, ‘How can you write about home ownership when you don’t even own a home?’ I’d say, ‘Do I have to rob a bank to write about crime?’ Now that I’ve been writing about real estate for years, I realize there’s no end to learning the details of mortgages, appraisals, the physical structure of homes, unique homebuying and selling experiences, and much more.”

Floodwaters May Not Be Rising Yet, But Flood Insurance Rates Are!

floodNo one can say FEMA didn’t warn us. Its website offers pages of information about how flood insurance rates might go up in 2013 due to the Biggert-Waters Flood Insurance Reform Act of 2012. Every homeowner’s case is different, but in extreme cases, FEMA projected that individual premiums could go up to $20,000.

(By the way, could you get a more perfectly ironic name for a flood-related law? It’s named after its Congressional co-sponsors, Rep. Judy Biggert, a Republican from Illinois who is no longer in Congress, and Rep. Maxine Waters, a Democrat from California.)

Until recently, this law attracted little public attention. But October 1, 2013 marked its first actual effective date.

The results aren’t pretty. Nor are they surprising, given that the purpose of the law was to put the National Flood Insurance Program (NFIP) on a firmer financial footing by, among other things, raising insurance rates to reflect true flood risk levels. For example, homes whose lowest floor elevation is below the Base Flood Elevation (BFE) will no longer receive subsidized rates, and homeowners who were grandfathered in under old flood maps will no longer be able to take advantage of this.

Now we’re hearing that even Congresspeople who voted for the law are worried about how it will impact some homeowners. Homeowners themselves are complaining; The New York Times reports “rallies, petitions and concern among state governors.” And real estate agents report home deals falling through when the new owners get a look at the new price tag for insurance.

Some members of Congress are, in fact, looking into ameliorative or delay measures. (If there’s anything Congress is capable of doing effectively, it’s delay!)

In the meantime, if you’re buying a home, you might want to add an insurance contingency to your contract, specifying that closing be made conditional on obtaining acceptable insurance coverage. See Nolo’s Essential Guide to Buying Your First Home for details on contract clauses,  insurance and other aspects of home buying.

Yes, It’s THAT Shiller Who Just Won a Nobel in Economics

Macro of sparkling champagne against black backgroundAnyone who follows the real estate market has probably heard of the “Case-Shiller Index,” known for “tracking changes in the value of residential real estate both nationally as well as in 20 metropolitan regions.” Its findings are widely reported on, as are the thoughts and conclusions of Robert Shiller himself, who warned the U.S. of the pre-2008 housing bubble many times over. (Well, at least he was wrong about that. Oh.)

So yes, this is the very same Robert Shiller who was recently named as one of three co-winners of the 2013 Nobel Prize in Economics. When you hear blurbs about his study of when “assets are overvalued,” real estate is one of the assets being referred to.

Now that his credibility just got gold-plating, what does Dr. Shiller have to say about where the housing market is going next? Actually, he’s worried that prices in some markets have risen unrealistically high — creating a “bubbly” situation, according to a Reuters report. Let’s hope that’s just the celebratory champagne talking.

Or, You Could Paint Your Kitchen in Downton Abbey Colors

engravDon’t say I never brought you any useful information here. True, it’s not exactly in line with Nolo’s mission of putting the law into plain English, but how about painting your walls in plain English? Specifically, Amber Grey or Empire Grey, the colors created by the British company Mylands specifically for Downton Abbey based on century-plus-old recipes — and available to the public for online orders.

The Brits themselves will make fun of such obsessive adherence to tradition, of course, but they’ve got so much history all around them, they can take it for granted. Oh, but if you’re a devoted fan of the series, avoid reading about it in the British press — it’s already well into the next season, so spoilers abound.

 

Getting a Mortgage During the Shutdown? Expect Delays

This isn’t speculation anymore. I talked to an excited new homebuyer just yesterday, whose offer had been accepted from among multiple bids on a home in Berkeley, but whose mortgage broker had warned him that the closing could be delayed.

IRS wall_0Why? Because the lender will need to get his tax transcript from the IRS, and as part of the federal government shutdown, the IRS tax-transcript department has been furloughed. Even if the entire IRS were to reopen tomorrow, chances are their inboxes are already overflowing with backed-up requests.

So now, our new homebuyer waits. And he’s not even applying for a loan that specifically involves approval by the federal government, such as a FHA loan, USDA loan, or VA loan.

Fortunately, most every standard home purchase contract in California is written with a contract contingency stating that if the buyer can’t get a mortgage, he doesn’t have to go through with the sale. Unfortunately, the homebuyer is expected to take care of this and remove the financing contingency by a date even earlier than the closing, or face the possibility of the deal falling through.

In unusual circumstances such as these, however, it’s worth remembering that contracts are nothing more than an expression of the mutual interests of the parties involved. In this case, I would think both seller and buyer would be amenable to negotiating a delay of the contingency and closing dates so that the sale can go through as planned, and everyone can get back to watching CNN to find out when the folks in Washington, DC are going to end this nonsensensical shutdown.

Your Home’s Value: Who Wants to Know?

Paper house attached to yellow blank price tag on blue backgroundI normally don’t push syndicated content produced by nameless writers at marketing companies, but this article, “What’s your home’s price tag now?” makes some good points. (Despite an inappropriate title.) ((Could I be any more grudging in my praise?))

The idea is that, accustomed though we might be to thinking of a home’s worth as its likely sale price, there are actually three ways of looking at a home’s value. It depends on who’s doing the looking. These include:

  1. Market value (the likely sale price).
  2. Replacement value (costs of reconstruction, for insurance purposes, after a total loss).
  3. Property tax value (how much the government says it’s worth before sending you a property tax bill for several thousand dollars).

Understanding what each of these figures means, and how each is arrived at, will help you to both avoid confusion and know whether you’re paying an appropriate amount in taxes, covered adequately by insurance, and can sell your house for your hoped-for amount. The article itself explains these details well.

About that inappropriate title, however. Did you notice that none of these three figures would necessarily be the “price tag” that you’d place on your house if you were to put it up for sale?

Savvy home sellers do enough research (and get a Comparable Market Analysis or CMA from their real estate agent) to help them understand their property’s likely market value, but they then set a list price based on what will most likely reel buyers in.

Many sellers adjust the list price downward from the apparent market value, hoping to incite a bidding war that will ultimately take the price higher than they could have dreamed of listing it for. Then again, a seller may not want to set the list price too low, for fear that people won’t view the house as high-quality, or will wonder what’s wrong with it. See “Listing Your House: What List Price Should You Set?” for more on this topic.

There’s also one more measure of value that could have been added to this list: What amount the home appraises for. Before closing on a sale, the lender will doubtless require that a professional appraiser visit and attach a value to the property, as a way of reassuring the lender that it can foreclose for the amount it’s lending out. That appraised amount is supposed to be the “true” market value — but it’s sometimes less than buyers are actually willing to pay for the house, which can be a problem in some transactions. See “Low Home Appraisal: What to Do” for more on this.

Condo Association Takes on Doggie Doo-Doo Dilemma

pup snowTradeoffs are inevitable when buying a home within a development that’s overseen by a homeowner’s association (HOA) or condo association. Your life is made easier by knowing that the association will take care of maintenance of the common areas and landscaping, and potentially even of parts of your own property, such as your roof.

But you give up some control — such as, according to recent reports, Fido’s genetic privacy, and your right to sneak off and hope that no one notices that your dog just left a deposit on their lawn.

Fox News tells us that The Grand at Riverdale, in New Jersey, has announced to its residents that they must have their dogs’ mouths swabbed for DNA analysis. Thenceforth, any stray droppings will be tested for a match. Owners will be fined $250 for the first offense, with subsequent fines ranging up to $1,000.

It’s a colorful (or smelly) news item, but probably not surprising to anyone who’s lived within a condo association. Their community rules can cover all sorts of issues: in the dog realm alone, whether you can own dogs, how many, how big they can be (by weight), and so on. (Oh, and by the way, Fido doesn’t really have any right to genetic privacy, in legal terms. Though while you’re at it, maybe you can check his ancestry!)

See Nolo’s articles, “Homeowners’ Associations (HOAs) and CC&Rs: Know What You’re Getting Into.”

Should Seller Allow Buyer to Do Pre-Offer Inspection?

OLYMPUS DIGITAL CAMERAThere’s a lot of buzz lately (at least in areas where multiple offers are making a comeback) about buyers getting the sellers of homes in which they’re interested to open their doors for a professional home inspection before, not after the buyer submits a purchase offer.

Buyers are being told that it will ultimately make their offer more attractive, given that they can, armed with extensive knowledge about the house’s condition, submit an offer with no inspection contingency. (The post-offer inspection, based on a contingency or condition written into the contract, is a time when negotiations often get contentious. Enough defects are usually found for the buyer to ask for repairs or a reduction in purchase price, and haggling over the details can consume — or derail — the entire process.)

Some sellers remain leery, however, of allowing pre-offer inspections. Let’s look at why, and whether these are reasonable concerns.

1) Sellers fear that the buyers will turn up defects in the property that even the seller hadn’t known about. True, this could happen. A seller who has lived in the home for years may have little idea of what’s been going on “under the hood,” so to speak. And once the seller knows of the issues, he or she will, in most states, be obligated to disclose them (or any of them that are “material”) to all other potential buyers. (See Nolo’s articles on “Preparing, Showing, and Making Disclosures About Your Home” for more on this.) As daunting as this might sound, however, it’s worth remembering that the truth about the house will likely come out eventually. Unless the market is super-hot and you’ve got buyers willing to waive the inspection contingency blindly, some other buyer will eventually conduct an inspection that turns up the defect, and you’ll be no better off than you would have otherwise been — or possibly worse off, if the buyers’ shock causes them to ask for a major price reduction.

2) Sellers feel they shouldn’t have to put up with an inspector in their home for a buyer who may not even ultimately bid on the place. True, if the inspection report comes back with a long list of defects, the buyer may get scared off completely. But there’s no reason to fear that buyers are running around casually hiring inspectors to write up reports on every home in which they’re remotely interested. These inspection reports cost a few hundred dollars a pop! Only a buyer with a serious interest in your home is likely to request a pre-offer inspection.

3) Waiting for the buyer to conduct an inspection might delay the process. Actually, this is more a concern for the buyer than the seller — as the seller, you don’t have to wait around for any one offer, but can put a deadline on considering them, and review other offers while you wait for the folks doing the preinspection to get everything scheduled and sorted. More and more home inspectors are, in light of this recent trend, making themselves available for inspections within a few days of being contacted by the prospective buyer.

Ultimately, the choice is yours, as the seller, as to whether to let a buyer conduct an inspection of your home before making an offer. But more and more successful home sales are now taking place this way.

Buyers Demand Tech-Friendly Homes

smart homeOne of the most striking results from a recent Better Homes and Gardens real estate survey was that a whopping 87% of luxury homebuyers would not even consider living in a home that isn’t tech-friendly, or “smart.” This wasn’t the only must-have on the mind of these affluent homebuyers — they would also find it hard to live without a garden oasis (53%), an outdoor fireplace or fire pit (50%), and a separate guest house, not attached to the main house (47%).

But look at the numbers differential! Eighty-seven percent is so close to an across-the-board vote that it’s hard not to imagine that the few remaining affluent homebuyers are either from a generation that never had to learn to use personal tech devices, or will simply be spending too much time on round-the-world travel to care how what their house is wired for.

Even if you’re selling a home that doesn’t qualify as “luxury,” these results are worth noting. Buyers of luxury homes tend to set the trends for other buyers. And although clever staging can hide, say, a lack of electrical outlets, more and more buyers may start looking closely at whether your house can actually support their tech needs. And on the other side of the coin, you’ll get an advertising boost if you can describe your home’s technological features and capacities. Automated appliances! Climate control! Intelligent lighting!

What exactly does creating a tech-friendly or smart home involve? Asking tech-savvy friends how they’ve adapted and upgraded their homes is probably a good start for finding practical guidance. Also check out online sources like Globitor’s “Tech-Friendly Tips for Upgrading Your Home,” Lifehacker’s “How Can I Bring My Tech-Unfriendly Home into the 21st Century?,” and CNET’s “Automate this: Smart devices for every corner of your home.”

“Dear Prudence” Is Giving Real Estate Advice?!

spookyYou just never know what people will decide to write to an advice columnist about. Only yesterday, a couple asked “Prudence” (Emily Yoffe, of Slate) whether they should buy a house that was the site of a horrific and widely publicized murder, in which the husband dismembered his wife. The couple work as a mortician and a pastor, respectively, so they aren’t personally freaked out by death, but they’re worried about what the kids and others will say.

Prudie’s advice is fine as far as it goes. She says if you’re comfortable with living there and want to buy the place, just be sure to tell the kids soon, and perhaps hold a prayer ceremony to . . . well, she didn’t say it, but I’m assuming to rid the house of ghosts and negative energy.

But there’s a lot more this couple should consider, namely:

  1. Their statement that, “Thanks to the Internet, we know all the horrific details of the case” is disturbing. It suggests they might not have learned about the murder from the sellers. A seller is, under most states’ laws, supposed to tell buyers, in writing, about anything that might materially affect the value of the house. If the seller did not, in fact, tell them about this, what else are they not telling? See my earlier blog post about a lawsuit by a buyer against a seller who neglected to disclose a murder/suicide that had taken place in the house for sale.
  2. Is the couple getting a bargain for the house? They’d better be. The place is, in real estate jargon, a “stigmatized” property. The fact that they may be willing to live there doesn’t change the widespread public perception that it’s tainted. Some properties of this nature remain on the market for years, or ultimately have to be bulldozed out of existence.
  3. Have they considered resale value? Once stigmatized, always stigmatized, if the event was horrific enough. And it sounds like this one may have been.

In the end, this couple may actually be the perfect one to buy the house and make it into a cozy, ghost-free place to live. (In fact, buying a stigmatized property is one of Nolo’s “Top Tips” for getting an affordable house.) But to the extent that a home is also an investment, let’s hope they proceed with their eyes wide open, and press the matter hard in negotiations.