Defects, Due Diligence, and the Deal Killer

Notes on Negotiating

What does your Realtor do for you? Well, many things, but a lot of what we do is negotiate contracts – either on behalf of the buyer or of the seller in the purchase or sale of a home. I have taught classes on negotiation skills. Because I am also an attorney (a former litigator) I have a lot of experience negotiating deals. 

But recently I took a class from a professional mediator about negotiating. Jennifer Keaton owns One Mediation, a mediation firm based here in Atlanta, and she made some great points about negotiation that are well taken, a great reminder, and applicable to any type of negotiations, including real estate. 

Obtaining a Mortgage: 3 Steps to Improve Your Credit Score

GREAT EATS IN ATLANTA

Well, I started to write a blog post about great out of the way places to eat inAtlanta. I love the hole in the wall places; after all, everyone knows about the big & trendy places already, don’t they?

But I had lunch with my good friend Amy Wallas Fox yesterday. She’s my go-to friend for information about anywhere and everywhere cool to eat inAtlanta, no matter what the size or location. And the best that I can do for you is to direct you to her blog – it’s the absolute best place I know of to find inside information on food inAtlanta. She’s introduced me to so many places! (My favorite thing to do is to pick her up for lunch – she works on Lenox near Buford Highway– and let HER pick the place). Yesterday we ate at C’om, the Vietnamese grill. Tremendous! We tried an avocado shake next door at Lee’s Bakery – also tremendous!

Do yourself a favor and subscribe to her blog – but HURRY! I’ve sold her home and she’s moving to Charlotte in a few months. Read up on her Atlanta blog entries and you will be on top of the cool, great places to eat in Atlanta!

You can find her here:

http://amyonfood.blogspot.com/ - tell her I sent you!!!

Buying a Short Sale can be a Tall Order

A short sale is usually anything but short.  Sort of like the attorney’s “legal brief” which is never brief, a short sale is very rarely “short”.  The term refers to the situation when the seller OWES more on the property than the property is worth, and is attempting to persuade the lender to take less than is owed on the property in full satisfaction of the loan.  You have probably heard the term “underwater” – a short sale seller is underwater on the house (has borrowed more against it than is supported by its current market value) and is trying to sell the home without having to cough up the difference at closing. 

FORECLOSURES - as I see them

MY HOUSE IS UNDER CONTRACT â€" WHAT HAPPENS NOW?

CONGRATULATIONS! You have a contract on your home. You have a willing and able buyer and you have come to terms on the sale of the home. What happens between now and closing?

And you are done!! CONGRATULATIONS!!! You have sold your home in a difficult market!

MAKING THE OFFER â€" when should I ask to close?

WHAT I LEARNED FROM BUYING A HOME â€" STUFF

WHAT I LEARNED FROM BUYING A HOME â€" GETTING A MORTGAGE LOAN

I vaguely recall getting a loan when I purchased my first home.  And what I remember is that it did not seem all that difficult, but that the closing was a nightmare.  The loan officer did not show up for closing, there were charges on the closing statement that hadn’t been revealed to me previously, and the loan officer was nowhere to be found.  As a result, the closing was much more arduous and took a lot longer than it should have. 

A REALTOR BUYS A HOUSE

I have been a real estate agent for almost a decade. But until recent, I lived in the home I owned I purchased PRIOR to becoming an agent, back when the process was more mysterious to me than it is now. In the past few years, it is no secret that home prices in Atlanta have tanked, crashed, bottomed out. SO, I decided to take the advice I give my clients – buy a home NOW! Interest rates are incredibly low, so are home prices – buying a home has never been more affordable and has never made more sense.

First I had to convince my husband that this was a good idea. We love our home in a charming little neighborhood called ChanningValley, where the neighbors know one another, kids play in the quaint neighborhood park, and there are active garden and book clubs. Our home is a ‘50s ranch that I renovated into a cute little cottage that is the perfect size for two people. So why would we move? Well, I told my husband, we can rent out our home in Channing Valley, make money every month from it – and use that money to leverage ourselves into a home that is even better for us.

Once I showed him what we could purchase in today’s market, and once we found an architect’s dream home – he was convinced. And it has been the best process in the world for me. I have a much clearer idea of EXACTLY what my clients go through in the home buying process.

First, there is the difficulty in deciding which neighborhood to live in. I have a better idea of all the “neighborhoods” in Atlanta and their individual characteristics than my clients do, of course – unless you are a Realtor, you do not intimately know a large number of neighborhoods. Part of my job is to help a client decide which neighborhood is best for them. My husband and I knew this much: that we did not want to move more than five miles from his work. (He works right across from the High Museum of Art). Since as a Realtor my work is all over the metro area (as far North as Forsyth County, as far South as Peachtree City, as far East as Stone Mountain, and as far West as Douglasville), location was not as key to me. My office is my car and it goes everywhere.

But even with that focus on my husband’s place of business, it was much more difficult to decide on a neighborhood than I imagined – there are so many that we love (Virginia Highland, Morningside, Ansley Park, Garden Hills… the list goes on, but all closer in). And the number of available properties is staggering. While with clients, I can generally know in very short order which home would be perfect for them by listening to their needs, wants, likes, dislikes, when it is a personal decision it is a lot more difficult.

This definitely helped me become more aware of my value in guiding clients in choosing a neighborhood. A third party unbiased view is very helpful. Ultimately, of course, it can be and must be the client’s choice, but a good Realtor familiar with the neighborhoods can be an invaluable asset.

What I learned from my own experience with this also, however, is that the “right” home might not be in your favorite neighborhood. The home my husband and I ended up buying is farther out than we thought we’d be willing to move, and not in the “historical” intown neighborhoods that we so love. We initially thought we had to live inAnsleyPark. But when we got down to considering practicalities and our budget, a larger home a little farther out on a larger lot made a lot more sense for our lifestyle.

So, keep your mind open! But also keep in mind that you cannot look “everywhere”. It’s very important to be limited in geographic scope. Consider traffic patterns – if you work downtown, you probably don’t want to spend an hour and a half every day in traffic. Look for something closer in. But if your Realtor suggests a neighborhood you did not think of, consider it! If the home you love is in a neighborhood you were not considering, consider it! It may be the perfect neighborhood for you.

AFTER THE INSPECTION â€" WHAT NOW?

NOW that we are through the inspection period, what happens now? Here’s what you need to do:

• Keep in contact with your lender – make sure that they have ALL documents they need from you. Remember that they may come BACK and ask for more, different documents, depending what the underwriting department asks for. Don’t worry – that’s normal. Just get them any documents they ask for as soon as you can. Email the lender to tell them you are THROUGH the inspection period and want to make sure they have all the documents that they need.
• Let your agent know what TIME of day you’d like to close so that they (I) can get you on the closing attorney’s calendar and make sure that the time is all right with the seller.
• Your agent will get you UTILITY INFORMATION. But it’s probably best to wait until the week before closing to make the calls and arrange the transfer. Sometimes companies won’t take your call until AFTER the seller has called to have the utilities taken OUT of their name (in other words, the seller must first call to have electricity turned OFF as of the day of closing – then you call to have it turned ON. In truth, the utility company never actually disconnects – they just change the name on the account.
• WATER is a special deal. The City will require a copy of the signed SETTLEMENT STATEMENT before they will switch water to your name. Go ahead and print out the application from online, fill it out and bring it with you to closing. The closing attorney will fax it along with the settlement statement to the water department FOR you from the closing table.
• PACK if you haven’t already. Arrange a moving company. Your agent can get you names/numbers if you want/need them.
• If the seller has agreed to make repairs as a result of your inspection, you will want to check to make sure those repairs are done. Hopefully you have requested that the seller provide receipts for any and all repairs either at closing, or preferably prior to closing. If they are major repairs and you feel more comfortable doing so, you can pay your inspector to come back and inspect the repairs.
• FINAL WALKTHROUGH – you will want to do one last walkthrough prior to closing. This can be done on your way to closing, or the day/evening before. You will be checking to be sure there has been no damage to the property and that all is in order. IF there is something amiss, the seller is given the opportunity to correct it. Obviously, if you do not discover it until right before closing, there’s not time for that. You can either delay closing or ask the seller to put some amount of money aside as surety until the problem is fixed.

WE ARE UNDER CONTRACT!

So, you’ve made an offer, the seller has countered, you’ve countered the counter… and after one exchange or many, you have agreed upon the terms of the contract. What happens now? First, you need to schedule an INSPECTION. 

An inspection will cost between $350 and $600, depending upon the size and complexity of the home.   You want an inspector who is ASHI (American Society of Home Inspectors) certified.

 

MAKING THE OFFER

Okay, so you’ve looked and looked – and you’ve found the place that you want to buy! What happens next? First, have your agents pull COMPS. COMPS are comparable properties that have sold in the area recently that will help you determine the value of the home that you want to buy. Typically we start with homes that have sold in the last three months that are within a half mile radius that are “comparable”. If there aren’t at least three comparable properties within those parameters, we expand the search – going out to a mile and back six months…. And so on. Your agent can be an invaluable help in determining a fair price for the home and what you should offer.

• Purchase price you’re offering;
• Amount of earnest money you’re putting up – standard in Georgia is to put up at least one percent of the purchase price, so for a $500,000 property you’d put up $5,000 in earnest money);
• Amount of closing costs you’re asking the seller to pay:
  • This must be a SPECIFIC amount. You can’t just ask the seller to pay “all” closing costs, or 50% of closing costs – you have to ask for a specific amount
  • Make sure the amount you are asking the seller to pay is not MORE than your actual closing costs. Your lender can help you determine this
• What DATE you want to close. Typically you’ll need at least three weeks from making the offer if you are getting a loan (not paying cash) for the lender to underwrite your loan;
• Due diligence period – this should be seven to ten days, unless there is a good reason to ask for more (say there’s evidence of structural problems, that sort of thing). During the due diligence period you can terminate for any reason or no reason at all, and still get your earnest money refunded;
• The closing attorneys you’d like to use; your Realtor can make recommendations for this – it needs to be an attorney who regularly does closings and who in on your Lender’s approved list;

• Seller to provide a one year termite bond for Buyer
• Seller to provide a one year home warranty for Buyer
• Seller to provide a survey of the property for Buyer
• Seller to have the property professionally cleaned prior to closing
• There may be certain items in the property that aren’t listed on the Seller’s Disclosure as staying with the property, but which you want to remain with the property, such as:
  • A porch swing
  • A gas grill
  • A piece of furniture that is custom fit to a certain spot
  • Chandeliers, if not already being left; etc.

• Financing contingency – if you are paying for the property with a LOAN, you want to be sure that you can obtain financing
• Appraisal contingency – this assures that the property must appraise for the amount you are paying, or you are able to get out of the contract
• Lead Based Paint exhibit – if the property was built prior to 1978, you need an exhibit explaining that there may be lead based paint in the property
• Plumbing disclosure – in some counties, like Dekalb, the county requires that you have LOW FLOW fixtures in order to obtain water service. In those counties, there should be a plumbing disclosure attached to the contract
• Seller’s Property Disclosure – this is attached to and becomes a part of the contract
• Condominium Disclosure Exhibit – sets forth the monthly fees for the condo, etc.

 

The Home Search

A previous blog post was on how much money you’ll need before you search for a home – basically going through the down payment you’ll need, the money for an inspection or inspections, earnest money, closing costs and the like.  So, you’ve saved the money you need.  What happens now?

First, if you aren’t prequalified already, meet with a Lender and get prequalified.  This will let you know how much you can afford to pay for a home.  Even IF you don’t want to spend the entire amount you can qualify for, you’ll know how high you can go.  The other calculation, then, is at what price point you’ll be comfortable.  Consult mortgage payment tables, which calculate principal and interest at given interest rates, then remember to add in a sum for taxes and insurance.  The four elements of your monthly mortgage payment will be that: PITI, or principal, interest, taxes and insurance.

It’s definitely a good idea to figure this out BEFORE you start looking for homes.  There’s nothing more frustrating than looking at homes way above your price range and then discovering you have to settle for something much less.  Plus, when you do get ready to make an offer you’ll need a prequalification letter.  If you’ve already spoken to a lender, you’ll be able to get one of those quickly when the time comes.

Price often dictates neighborhood – and property type.  If you are in a lower price range, but set on living in Buckhead, for instance, you’ll need to look for a condo or townhome.  Your agent can help you identify, in your range, where it is possible for you to live.  We can then set up a property search accordingly.

We have lots of cool tools these days for that – I can set my buyers up on automatic notification, so that when a new home meeting their criteria comes on the market, they know immediately.  But of course, I also look at the new listings every day, and quiz other buyers about unlisted properties, to determine whether there’s something “new” out there for one of my buyers.

So, you search – and if you have targeted correctly, you might be able to find your dream home relatively quickly.  At that point, it is time to MAKE AN OFFER – which will be the subject of a future blog post… so STAY TUNED!!!

WELCOME TO MY BLOG!!!

Currently you can find my blog on www.maryannewalser.wordpress.com - please check it out and sign up there for updates!  Soon I will start posting on epropertysites' blog as well...