Dear Pat,
What’s the deal around here, giving a full day after closing for the seller to move out? Where we come from, the seller has to be out of the house by the time he signs the closing papers. We’re asking because the sellers made us give them a day extra possession after closing, even though we’ll be responsible that day for mortgage, insurance and taxes. Is this normal “Minnesota Nice” (with us being the nice), or were we
---Hoodwinked
Dear Hoodwinkies,
By “made us give them” I assume you mean that the sellers accepted your offer, with the condition that possession be given one day after closing. This is indeed common in Minnesota, although our standard purchase agreement allows for any date or specific time to be agreed upon, from immediate possession to weeks, or even months, after the closing. So you weren’t hoodwinked, you simply didn’t get everything you wanted in the negotiation. Dot’s juste bissiness, da vay vee do it here in Mi-nne-so-ta. But while we’re on the subject, it’s worth pointing out to all prospective buyers and sellers that there are good reasons to be careful when negotiating time of possession.
Let’s look at a few of the timing considerations regarding possession. Sellers may want to ensure that the house they’re buying will be available for occupancy before they move out of the house they’re selling, so it’s to their advantage to ask for the extra day. Often for first time buyers it’s little hardship to accommodate them; unless, of course, their rental agreement requires them to leave on the same day picked for closing. In all cases it’s best to specify an hour for possession, such as “2PM day after closing” so everyone is clear.
When sellers need more than a day or two, they are typically required to sign a rent back agreement, and to pay a daily rental equal to the buyer’s mortgage costs. Sometimes they’re asked to give a damage deposit (although sellers can be insulted by this, after they’ve worked hard to maintain a house and to sell it). It’s important to note that a longer-term arrangement such as this should be negotiated at the time of sale—last minute surprises could easily result in sellers hunting for storage lockers and extended-stay hotels.
Obviously there needs to be trust between the parties and their agents when matters of possession present last-minute challenges. If the moving van is delayed, or the up-line closing didn’t happen on time, everybody has to scramble and compromise. This is when sellers and buyers fare much better if they go to closing as cooperative parties rather than adversaries. So my advice to you, Hoodwinkies, is to put on your best smile and make Minnesota Nice!
Saturday, November 7, 2009
Sunday, October 4, 2009
Full Spooky Disclosure: Dematerializing Casper
Dear Pat,
You’re going to think we’re crazy, but my husband and I believe we share our house with a ghost. We’ve heard unexplained noises, objects have been moved when we’re sure we haven’t moved them, and there’s just a certain “feel” to the atmosphere sometimes that makes us sure we’re not alone. We’ve never been afraid of this presence, but it makes some of our guests uncomfortable if we mention it. We bought the house without any disclosure about a ghost, and the sellers say they never had the kind of experience we’re having. It’s really not a problem for us, but do we mention it when we list the house for sale? I say we should, but my husband says…
Don’t Say Boo
Dear Boo,
I don’t believe in ghosts, but I don’t think you’re crazy. Over the years I have been in three different homes where the seemingly rational owners claimed they had felt, or had seen evidence of, a spirit in their house. Happily, all the ghosts were reported to be of the non-malevolent “Casper” variety. Whether they had been spooked by a real ghost, or had simply spooked themselves by overactive imaginations, the spirits were very real to these owners.
The law is clear that you don’t need to disclose that your house is the site of “perceived” paranormal activity. Nor do you need to mention on-site occurrences of suicide, accidental death, or natural death. Murder, however, must be disclosed. For a short time a few years back, the law did require that sellers and agents disclose any perceived paranormal activity as material fact. During this period one spooked seller and I struggled to come up with honest language that disclosed everything required but that didn’t make us look like “nut cases.”
Even though the law gives you a pass on this, Boo, you still may want to disclose anything that you think might make a new owner uncomfortable about your house. If you choose to mention a ghost, do yourself a favor and avoid putting it in writing. Of course, it’s much easier to disclose actual facts. I’ve listed several houses where a suicide had occurred and in every instance we decided to mention it, believing that it would be better to disclose up front than to have the new owners hear it from neighbors. All the houses sold in normal market time; a minister who bought one said he would say an extra blessing for the house on moving day!
Sign of the times perhaps, that two of the current disclosure questions pertain to meth production and buried human remains. Now, that’s what I call material facts. But even though Casper has been legally dematerialized, a prospective buyer might appreciate that you took care to say Boo. Good luck!
You’re going to think we’re crazy, but my husband and I believe we share our house with a ghost. We’ve heard unexplained noises, objects have been moved when we’re sure we haven’t moved them, and there’s just a certain “feel” to the atmosphere sometimes that makes us sure we’re not alone. We’ve never been afraid of this presence, but it makes some of our guests uncomfortable if we mention it. We bought the house without any disclosure about a ghost, and the sellers say they never had the kind of experience we’re having. It’s really not a problem for us, but do we mention it when we list the house for sale? I say we should, but my husband says…
Don’t Say Boo
Dear Boo,
I don’t believe in ghosts, but I don’t think you’re crazy. Over the years I have been in three different homes where the seemingly rational owners claimed they had felt, or had seen evidence of, a spirit in their house. Happily, all the ghosts were reported to be of the non-malevolent “Casper” variety. Whether they had been spooked by a real ghost, or had simply spooked themselves by overactive imaginations, the spirits were very real to these owners.
The law is clear that you don’t need to disclose that your house is the site of “perceived” paranormal activity. Nor do you need to mention on-site occurrences of suicide, accidental death, or natural death. Murder, however, must be disclosed. For a short time a few years back, the law did require that sellers and agents disclose any perceived paranormal activity as material fact. During this period one spooked seller and I struggled to come up with honest language that disclosed everything required but that didn’t make us look like “nut cases.”
Even though the law gives you a pass on this, Boo, you still may want to disclose anything that you think might make a new owner uncomfortable about your house. If you choose to mention a ghost, do yourself a favor and avoid putting it in writing. Of course, it’s much easier to disclose actual facts. I’ve listed several houses where a suicide had occurred and in every instance we decided to mention it, believing that it would be better to disclose up front than to have the new owners hear it from neighbors. All the houses sold in normal market time; a minister who bought one said he would say an extra blessing for the house on moving day!
Sign of the times perhaps, that two of the current disclosure questions pertain to meth production and buried human remains. Now, that’s what I call material facts. But even though Casper has been legally dematerialized, a prospective buyer might appreciate that you took care to say Boo. Good luck!
Monday, June 1, 2009
Not So Lovely by the Water's Edge
Dear Pat,
We had a foreclosure on our block last year, and it took many months for the bank to take over the house and finally sell it. While it stood vacant several of us neighbors pitched in to shovel snow and mow the grass until new owners finally came. Now we hear that another neighbor is probably going to lose his home. I suppose we'll have to start mowing again. We're struggling to keep our payments up to date, and we wonder what these foreclosures are doing to our property value. What if we can't sell because we owe more than our house is worth? We don't want to be
---Stuck Here
We had a foreclosure on our block last year, and it took many months for the bank to take over the house and finally sell it. While it stood vacant several of us neighbors pitched in to shovel snow and mow the grass until new owners finally came. Now we hear that another neighbor is probably going to lose his home. I suppose we'll have to start mowing again. We're struggling to keep our payments up to date, and we wonder what these foreclosures are doing to our property value. What if we can't sell because we owe more than our house is worth? We don't want to be
---Stuck Here
Dear
Stuck,
It's sad to see how foreclosures can really affect homeowners
who live nearby, and how they have affected all of us by dragging down
values across the entire marketplace. Obviously the solution to the
problem is to dramatically reduce the number of foreclosures. I've heard
that 50% of the people who lose their homes to foreclosure never called
anyone to get help, unaware of valuable resources to help at-risk
homeowners with refinancing or loan modification. One such resource is
the Homeownership Center (HOC), a statewide non-profit organization that
oversees a network of mortgage support and foreclosure counselors.
Their easily navigable website is www.hocmn.org. Our local resource in
south Minneapolis is PRG, a non-profit that provides homebuyer education
and foreclosure prevention. The website is www.prginc.org. Counselors
can be reached at 612-721-7556. Ask for Stacey Bostwick at ext 21 or
Jennifer Lancour at ext 19. I urge anyone who is experiencing difficulty
with mortgage payments to contact these good people.
But if the foreclosure problem went away tomorrow, Stuck, you might still be experiencing the difficulty of owing more than your house is currently worth. Many millions of Americans are living "underwater," and it may take years for property values to recover sufficiently to allow them to sell their homes without loss. Longfellow homeowners sit on higher ground than owners in many other areas, but I sometimes have to bring the lifejackets to prospective sellers who bought at fair market prices as far back as five years ago. Indeed, many of us who bought or refinanced a home this decade are living uncomfortably close to the water's edge. So, assuming you are underwater. what is the lifejacket for you, Stuck? It may well be a complicated process called a "short sale," where the bank that holds your mortgage agrees (reluctantly) to settle for a less-than-full payoff on the loan at time of sale. This option can be much less costly for them than foreclosure, it spares the neighborhood the blight of an unattended house, and it has far less impact than foreclosure on the seller's credit rating. Details vary by situation and are too extensive to cover here, but a Realtor experienced in short sales can advise you on the necessary steps. Good luck!
But if the foreclosure problem went away tomorrow, Stuck, you might still be experiencing the difficulty of owing more than your house is currently worth. Many millions of Americans are living "underwater," and it may take years for property values to recover sufficiently to allow them to sell their homes without loss. Longfellow homeowners sit on higher ground than owners in many other areas, but I sometimes have to bring the lifejackets to prospective sellers who bought at fair market prices as far back as five years ago. Indeed, many of us who bought or refinanced a home this decade are living uncomfortably close to the water's edge. So, assuming you are underwater. what is the lifejacket for you, Stuck? It may well be a complicated process called a "short sale," where the bank that holds your mortgage agrees (reluctantly) to settle for a less-than-full payoff on the loan at time of sale. This option can be much less costly for them than foreclosure, it spares the neighborhood the blight of an unattended house, and it has far less impact than foreclosure on the seller's credit rating. Details vary by situation and are too extensive to cover here, but a Realtor experienced in short sales can advise you on the necessary steps. Good luck!
Friday, May 1, 2009
Thinking on the Discordant Door
Dear Pat,
We're planning to sell our tidy craftsman-style bungalow this summer. It's a bit of an untouched classic, with lovely oak built-ins and archways, maple floor in the kitchen, a claw foot bathtub sitting on white octagonal floor tiles...you get the idea. Nearly everything is ready for sale, but my husband and I are at loggerheads over what to do about our ugly front door: it's a flat metal monstrosity, with a little peephole for a window and a double deadbolt lock. We talked about replacing it with a decent replica during the whole five years we've been here, and I believe we need to for selling, but my husband doesn't think we'll get the $1000 back in the sale price if we do it now. What do you think?
---I'm thinking wood is right
We're planning to sell our tidy craftsman-style bungalow this summer. It's a bit of an untouched classic, with lovely oak built-ins and archways, maple floor in the kitchen, a claw foot bathtub sitting on white octagonal floor tiles...you get the idea. Nearly everything is ready for sale, but my husband and I are at loggerheads over what to do about our ugly front door: it's a flat metal monstrosity, with a little peephole for a window and a double deadbolt lock. We talked about replacing it with a decent replica during the whole five years we've been here, and I believe we need to for selling, but my husband doesn't think we'll get the $1000 back in the sale price if we do it now. What do you think?
---I'm thinking wood is right
Dear Thinking,
I
think you're thinking right, Thinking. (And I think you should call me
in to do a market analysis right away, before some other lucky agent
lists your house!) From your description, you are the proud owners of a
nearly pristine "grandma's house," a real estate commodity that makes
buyers tremble with excitement, even in these cautious times. But to
maximize your potential on the market, you must finish the job. Find a
craftsman style door in keeping with your other wood features: whether
you have 9-light doors in the buffet, or 4-light, or any other
configuration, you want to bring the front door into harmony with the
rest of the house.
Remember, Thinking, in this case you're selling much more than a roof and four walls. This is your chance to return the home to its rightful craftsman aesthetic--you'll feel good for doing so, a buyer will reward you for doing so, and grateful architectural gods (to whom harmony still matters) will smile down upon you. Let's think real estate and art at the same time: a complete work is always more valuable than an unfinished work.
Remember, Thinking, in this case you're selling much more than a roof and four walls. This is your chance to return the home to its rightful craftsman aesthetic--you'll feel good for doing so, a buyer will reward you for doing so, and grateful architectural gods (to whom harmony still matters) will smile down upon you. Let's think real estate and art at the same time: a complete work is always more valuable than an unfinished work.
I've answered your
specific question, Thinking, but while we're on the subject of craftsman
style I want to take this opportunity to refer readers to my old August
2002 article about replacement windows at www.riverrealty.net. With a
$1500 tax credit available to buyers of energy-efficient windows and
doors from now until the end of 2010, I expect to see lots more
replacement sash in the coming years. I just hope homeowners understand
that they may be de-valuing their properties by choosing cheap white
vinyl sash. Wood replacement windows are energy efficient, stainable,
and come in simulated divided light configurations that suit our older
homes. They're well worth the extra money when it's time to sell.
Wednesday, April 1, 2009
Buyers, Start Your Engines!
Dear Pat,
We've been watching prices go down for the past year, and it finally looks like we can afford a home of our own. My husband says he wants to watch the Indy 500 in his own den by Memorial Day. If that means I can put his giant TV in the basement, I'm all for it. Now we just need the basement! But I've heard that mortgage financing is really hard to get these days, since the banks are afraid to lemnd. Is that why the real estate market is so slow? If we start looking, what are the odds for us?
---Want the Green Flag
Dear Flaggers,
Why do you think the real estate market is "so slow?" Have you been watching the news again on that big flatscreen, tuned in to all those reports about frozen lending at 'fraidy-cat' banks, foreclosures dragging California into the sea, Washington political posturing and government ineptitude only making things worse? Geez, no wonder it seems as if the cars are crashing the sidewalls, with no chance for you. I've heard versions of your first question many times in the past few months, and I think this is a good time to address it here. Fact is, the lender-mediated (bank-owned, short-sales) market is extremely active as would-be homeowners and investors scramble to get the "deals." Meanwhile, the traditional market (seller-owned) is heating up as inventory shrinks and prices (impacted by the competing bank-owned sales) settle at affordable levels. Nothing crazy here: this isn't a land-rush but it's obvious to everyone in my business that things are beginning to return to normal.
And that includes normal lending. Not the wacky lending of the past 10 years that has brought daily floggings via CNN into our living rooms, but a return to the safer lending standards that served us in the past: higher credit scores, conservative income ratios, even down payments (what a concept!). Big commercial banks may be afraid to lend to each other, if the pundits are to be believed, but there's plenty of mortgage money available to homebuyers, and banks aren't the least bit afraid to lend it if you meet their guidelines. Let's continue to torture the racing analogy: if you were really going to enter the race, first your car would have to qualify, right? Then you'd learn what pole position you'd have at the outset. In much the same way, you need to talk to a mortgage loan officer to see how you qualify before you go looking for houses. In fact, you need to get pre-approved, so you can snap up that perfect basement, er...house immediately when you find it.
Now here's something to get revved up about, Flaggers: your US Treasury is going to GIVE you $8000 to buy a house this year. This is not a deduction from taxable income; it's a tax credit for first-time buyers--that means that if your wages are fully withheld the Treasury is going to send you a check for $8000; or the difference, if you owe anything after withholding. There are a number of qualifying details, but it's very inclusive--and no strings attached. While I'm touting the government here, let's not leave out the recently announced $75 billion foreclosure prevention program, which helps protect home values for everyone. Or the latest trillion-dollar Fed monetary injection, designed to keep banks lending and mortgage rates low. Or the stalwart FHA, possibly the most successful government program in history, ready to help another generation of Americans with a down payment requirement of only 3.5%.
So I'd say the odds look good for your own checkered flag, Flaggers, and for us all. Good luck!
We've been watching prices go down for the past year, and it finally looks like we can afford a home of our own. My husband says he wants to watch the Indy 500 in his own den by Memorial Day. If that means I can put his giant TV in the basement, I'm all for it. Now we just need the basement! But I've heard that mortgage financing is really hard to get these days, since the banks are afraid to lemnd. Is that why the real estate market is so slow? If we start looking, what are the odds for us?
---Want the Green Flag
Dear Flaggers,
Why do you think the real estate market is "so slow?" Have you been watching the news again on that big flatscreen, tuned in to all those reports about frozen lending at 'fraidy-cat' banks, foreclosures dragging California into the sea, Washington political posturing and government ineptitude only making things worse? Geez, no wonder it seems as if the cars are crashing the sidewalls, with no chance for you. I've heard versions of your first question many times in the past few months, and I think this is a good time to address it here. Fact is, the lender-mediated (bank-owned, short-sales) market is extremely active as would-be homeowners and investors scramble to get the "deals." Meanwhile, the traditional market (seller-owned) is heating up as inventory shrinks and prices (impacted by the competing bank-owned sales) settle at affordable levels. Nothing crazy here: this isn't a land-rush but it's obvious to everyone in my business that things are beginning to return to normal.
And that includes normal lending. Not the wacky lending of the past 10 years that has brought daily floggings via CNN into our living rooms, but a return to the safer lending standards that served us in the past: higher credit scores, conservative income ratios, even down payments (what a concept!). Big commercial banks may be afraid to lend to each other, if the pundits are to be believed, but there's plenty of mortgage money available to homebuyers, and banks aren't the least bit afraid to lend it if you meet their guidelines. Let's continue to torture the racing analogy: if you were really going to enter the race, first your car would have to qualify, right? Then you'd learn what pole position you'd have at the outset. In much the same way, you need to talk to a mortgage loan officer to see how you qualify before you go looking for houses. In fact, you need to get pre-approved, so you can snap up that perfect basement, er...house immediately when you find it.
Now here's something to get revved up about, Flaggers: your US Treasury is going to GIVE you $8000 to buy a house this year. This is not a deduction from taxable income; it's a tax credit for first-time buyers--that means that if your wages are fully withheld the Treasury is going to send you a check for $8000; or the difference, if you owe anything after withholding. There are a number of qualifying details, but it's very inclusive--and no strings attached. While I'm touting the government here, let's not leave out the recently announced $75 billion foreclosure prevention program, which helps protect home values for everyone. Or the latest trillion-dollar Fed monetary injection, designed to keep banks lending and mortgage rates low. Or the stalwart FHA, possibly the most successful government program in history, ready to help another generation of Americans with a down payment requirement of only 3.5%.
So I'd say the odds look good for your own checkered flag, Flaggers, and for us all. Good luck!
Friday, March 6, 2009
Going Natural: Back Room Stripping
Dear Pat,
I've loved my Longfellow bungalow for many years, but I've always wished the bedrooms and bath hallway had the same lovely natural oak woodwork that graces the living and dining rooms. Alas, the woodwork in those back rooms has all been painted white. Is there a reason why someone would want to paint the woodwork? I had the hardwood floors sanded and refinished recently, and now I have the itch to finish the renovation by doing something about the painted woodwork. From a real estate point of view, is it practical to strip it and refinish?
---Want to go Natural
Dear Natural,
Most of the bungalows I see have painted trim in the back hall and bedrooms. This was a builder's choice, using less-expensive softer woods such as pine or fir to be painted. Usually primer was applied directly to the raw wood, making it nearly impossible for later generations to strip successfully. Oak in the bedrooms is very rare, although the maple or birch commonly used in kitchens was sometimes carried through the back rooms. Occasionally I've run across beautifully preserved old fir in bedrooms and hallways. The key here is whether the raw wood was varnished or painted originally. One way to find out is to use a carbide scraper to remove some paint from the trim inside a closet. If the paint comes off fairly easily, leaving a trace of brown varnish dust, you have a strippable finish. But if it scrapes hard, leaving a "chatter" of paint clinging to the wood, you'll probably never be happy with the results from stripping.
Let's explore the options: if the paint is strippable, you can undertake the arduous task yourself (stripping info is available on websites), or try to find a contractor to do it for you. I'd guess that the cost of 3 rooms, including doors, could run into several thousand dollars, if you can find a quality contractor willing to strip on-site. Or the trim and doors could be removed and dipped commercially, then re-installed. Or it might be easier to find a carpenter to install new replica woodwork and doors. The woodwork consists simply of boards and backband, which are readily available; the single-panel doors can be ordered from local lumberyards. Materials cost for this option could run $3000-$4000, plus a big $X for labor. Get bids, of course, but we know quality carpenters don't come cheap.
Much as you want to go natural, Natural, there are practical considerations of dollars and effort that have stopped many before you. You can comfort yourself, if you choose the path of least resistance, in the knowledge that the standard bungalow has painted trim in the back rooms. So, from a real estate point of view, the dollars and effort are probably better spent on bringing any lagging area of your house up to standard, or on getting creative in the kitchen or bath. Just don't get creative if you decide to repaint the back room trim: stick with off whites or creams, colors that can really show off rich historical wall colors. That will make buyers happy---and make you glad you stayed out of the strip club!
I've loved my Longfellow bungalow for many years, but I've always wished the bedrooms and bath hallway had the same lovely natural oak woodwork that graces the living and dining rooms. Alas, the woodwork in those back rooms has all been painted white. Is there a reason why someone would want to paint the woodwork? I had the hardwood floors sanded and refinished recently, and now I have the itch to finish the renovation by doing something about the painted woodwork. From a real estate point of view, is it practical to strip it and refinish?
---Want to go Natural
Dear Natural,
Most of the bungalows I see have painted trim in the back hall and bedrooms. This was a builder's choice, using less-expensive softer woods such as pine or fir to be painted. Usually primer was applied directly to the raw wood, making it nearly impossible for later generations to strip successfully. Oak in the bedrooms is very rare, although the maple or birch commonly used in kitchens was sometimes carried through the back rooms. Occasionally I've run across beautifully preserved old fir in bedrooms and hallways. The key here is whether the raw wood was varnished or painted originally. One way to find out is to use a carbide scraper to remove some paint from the trim inside a closet. If the paint comes off fairly easily, leaving a trace of brown varnish dust, you have a strippable finish. But if it scrapes hard, leaving a "chatter" of paint clinging to the wood, you'll probably never be happy with the results from stripping.
Let's explore the options: if the paint is strippable, you can undertake the arduous task yourself (stripping info is available on websites), or try to find a contractor to do it for you. I'd guess that the cost of 3 rooms, including doors, could run into several thousand dollars, if you can find a quality contractor willing to strip on-site. Or the trim and doors could be removed and dipped commercially, then re-installed. Or it might be easier to find a carpenter to install new replica woodwork and doors. The woodwork consists simply of boards and backband, which are readily available; the single-panel doors can be ordered from local lumberyards. Materials cost for this option could run $3000-$4000, plus a big $X for labor. Get bids, of course, but we know quality carpenters don't come cheap.
Much as you want to go natural, Natural, there are practical considerations of dollars and effort that have stopped many before you. You can comfort yourself, if you choose the path of least resistance, in the knowledge that the standard bungalow has painted trim in the back rooms. So, from a real estate point of view, the dollars and effort are probably better spent on bringing any lagging area of your house up to standard, or on getting creative in the kitchen or bath. Just don't get creative if you decide to repaint the back room trim: stick with off whites or creams, colors that can really show off rich historical wall colors. That will make buyers happy---and make you glad you stayed out of the strip club!
Monday, February 2, 2009
Best Zen Advice: Live in the Now
Dear Pat,
We recently saw an open house in Longfellow that suits us perfectly. The problem is is the price. The seller is asking $205,000 but we checked the old sales records and discovered that he only paid $105,000 in 1999. That seems like too much profit, when we consider what has happened to prices in the past few years. We also checked the tax statement, and the city has the house valued at only $185,000. We don't want to offend the seller, because we love the house, but we don't want to get stuck, either. Is there an appraisal formula to account the rise and fall of prices in the last 10 years?
---Don't want to be Hornswoggled
Dear Horns,
I've heard variations of this question for over 30 years, through all different kinds of markets and circumstances. Now, if you were present in my inner thoughts, you'd observe that I mindfully fold my hands, arrange my spine in the position of the Lotus, and quietly answer, "Live in the Now, my children." However, in the hurly-burly of the outer world my advice might sound a little more like, "Why the [bleep] do you care what the seller paid for it, the important thing is what it's worth NOW!!"
If this sounds harsh, Horns, please bear with me. You'll soon see how the pros determine value. First, let's take a quick look at reasons why your need to know the past is a waste of time. A few: the seller may have gotten a great bargain when he bought, or he may have made big improvements you're not aware of, or he may have located on a block that has since benefited from commercial or civic development.
Tax values won't help you, either. Anyone who owns a house rightly believes that the city is nearly always wrong. City estimates are either too high or too low because they rely upon area sales statistics to determine value changes, much as you are attempting to do. The city has little choice in this. There simply isn't the budget available to do an actual appraisal of every home.
But Realtors and appraisers can accurately determine value by using the "market approach." They compare the subject property with comparable recently sold properties in a given area. Using information available from the Multiple Listing Service they add to or subtract from the subject property a given value for differences in features and amenities. If, for instance, the subject property has no fireplace, but in all other respects is equal to a comparable sold property, then the appraiser would subtract, say, $4000 from the estimate of the subject property's value. In addition to the market analysis, a conscientious Realtor may also tour other properties currently on the market to see if her proposed listing price is competitive.
So do what the pros do, Horns. Work with a Realtor who can do a competitive market analysis of the house you're interested in. Get a thorough tour of similar homes currently on the market in the area. You can become pricing experts in two days. Just remember, it doesn't matter what the seller paid, or if he's a greedy dog for trying to make a bundle. The market will tell you what it knows, and what the market knows is NOW. Good luck!
We recently saw an open house in Longfellow that suits us perfectly. The problem is is the price. The seller is asking $205,000 but we checked the old sales records and discovered that he only paid $105,000 in 1999. That seems like too much profit, when we consider what has happened to prices in the past few years. We also checked the tax statement, and the city has the house valued at only $185,000. We don't want to offend the seller, because we love the house, but we don't want to get stuck, either. Is there an appraisal formula to account the rise and fall of prices in the last 10 years?
---Don't want to be Hornswoggled
Dear Horns,
I've heard variations of this question for over 30 years, through all different kinds of markets and circumstances. Now, if you were present in my inner thoughts, you'd observe that I mindfully fold my hands, arrange my spine in the position of the Lotus, and quietly answer, "Live in the Now, my children." However, in the hurly-burly of the outer world my advice might sound a little more like, "Why the [bleep] do you care what the seller paid for it, the important thing is what it's worth NOW!!"
If this sounds harsh, Horns, please bear with me. You'll soon see how the pros determine value. First, let's take a quick look at reasons why your need to know the past is a waste of time. A few: the seller may have gotten a great bargain when he bought, or he may have made big improvements you're not aware of, or he may have located on a block that has since benefited from commercial or civic development.
Tax values won't help you, either. Anyone who owns a house rightly believes that the city is nearly always wrong. City estimates are either too high or too low because they rely upon area sales statistics to determine value changes, much as you are attempting to do. The city has little choice in this. There simply isn't the budget available to do an actual appraisal of every home.
But Realtors and appraisers can accurately determine value by using the "market approach." They compare the subject property with comparable recently sold properties in a given area. Using information available from the Multiple Listing Service they add to or subtract from the subject property a given value for differences in features and amenities. If, for instance, the subject property has no fireplace, but in all other respects is equal to a comparable sold property, then the appraiser would subtract, say, $4000 from the estimate of the subject property's value. In addition to the market analysis, a conscientious Realtor may also tour other properties currently on the market to see if her proposed listing price is competitive.
So do what the pros do, Horns. Work with a Realtor who can do a competitive market analysis of the house you're interested in. Get a thorough tour of similar homes currently on the market in the area. You can become pricing experts in two days. Just remember, it doesn't matter what the seller paid, or if he's a greedy dog for trying to make a bundle. The market will tell you what it knows, and what the market knows is NOW. Good luck!
Friday, January 2, 2009
Sell Now, or Rent?
Dear Pat,
My husband just got an East Coast job offer we can't refuse. We need to be situated in Boston by March 1, and we'd like to have our considerable home equity available to buy our next house. But with the real estate market so poor, we're considering renting our house out for now and trying to sell later, perhaps in June or July. We have friends who say we should sell now at the market price, and other friends advising us to rent it out now and sell later when prices rise again. You have no stake in our decision; what do you say?
---Beantown Bound
Dear Beanies,
Do you want me to tell you whether I think the local market will go up, or down, by next summer? Sorry, I took the pledge and swore off all prognostications for at least a year, although I expect sales data coming later this month to confirm my cautious optimism about local prices in the "traditional" market vìs-a-vìs the "distressed" (short-sale and bank-owned) market. I hope to talk more about this new two-market reality in the months ahead.
For now, let's assume that prices will stay approximately the same over the next year (that way, we can be only half-wrong). If you rent out your home now, you can:
* probably leave town with less distraction
* presumably collect enough rent to cover your mortgage payment
* temporarily avoid facing the fact that your home is worth less than it was 3 years ago
But you will:
* not have your equity available to buy your next house
* need to hire a property manager, or impose upon the time of your friends and family to maintain the property and address the problems of renters
* eventually, in order to sell, need to spend time and money putting the house back in the condition it was when you lived there.
Of course, there are more pros and cons than we can discuss here. It may appear that I'm stacking the deck to favor selling over renting, and perhaps I am---in some cases, renting out one's home is the only practical alternative---but I have seen too many instances where sellers or buyers let market conditions keep them from moving forward with their life plans. Your resources and fortitude in a long-distance rental situation may be adequate to the task, Beanies, but if renting out your home is only a delaying strategy to outsmart the market, you need to ask: is it worth the effort, and the risk?
My husband just got an East Coast job offer we can't refuse. We need to be situated in Boston by March 1, and we'd like to have our considerable home equity available to buy our next house. But with the real estate market so poor, we're considering renting our house out for now and trying to sell later, perhaps in June or July. We have friends who say we should sell now at the market price, and other friends advising us to rent it out now and sell later when prices rise again. You have no stake in our decision; what do you say?
---Beantown Bound
Dear Beanies,
Do you want me to tell you whether I think the local market will go up, or down, by next summer? Sorry, I took the pledge and swore off all prognostications for at least a year, although I expect sales data coming later this month to confirm my cautious optimism about local prices in the "traditional" market vìs-a-vìs the "distressed" (short-sale and bank-owned) market. I hope to talk more about this new two-market reality in the months ahead.
For now, let's assume that prices will stay approximately the same over the next year (that way, we can be only half-wrong). If you rent out your home now, you can:
* probably leave town with less distraction
* presumably collect enough rent to cover your mortgage payment
* temporarily avoid facing the fact that your home is worth less than it was 3 years ago
But you will:
* not have your equity available to buy your next house
* need to hire a property manager, or impose upon the time of your friends and family to maintain the property and address the problems of renters
* eventually, in order to sell, need to spend time and money putting the house back in the condition it was when you lived there.
Of course, there are more pros and cons than we can discuss here. It may appear that I'm stacking the deck to favor selling over renting, and perhaps I am---in some cases, renting out one's home is the only practical alternative---but I have seen too many instances where sellers or buyers let market conditions keep them from moving forward with their life plans. Your resources and fortitude in a long-distance rental situation may be adequate to the task, Beanies, but if renting out your home is only a delaying strategy to outsmart the market, you need to ask: is it worth the effort, and the risk?
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