Category Archives: real estate

IN AND OUT OF THE CLOSET

08 Wednesday Aug 2012

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One thing about being a real estate agent – you become very comfortable looking into other people’s closets.  It’s just part of the job.  Closet space is IMPORTANT – we have lots of stuff these days.  The homes built in the 1960s or earlier generally have very very small closets compared to what we’re used to today.   Lots of times, owners have added on closets or expanded closets (one of my relatives even made a small bedroom into a closet).  In any event, closet space, and storage in general, is an important aspect of a home for most buyers.

Now when I go to a friend’s home to socialize I sometimes find myself automatically opening closet doors as I’m getting a tour of the house.  Not cool.  I catch myself right away, and people laugh.  But now I try to remind myself when the house I’m viewing is not on the market to NOT look in the closets unless prompted.  Looking into closets has become an automatic reflex.

When we put my now-husband’s home on the market, in one of the closets we left a piece of artwork that consisted of a stylized hanging skeleton, hoping that buyers would get a kick out of it and feel warmly towards the home.  Okay, it’s a stretch – but the more you can make buyers feel GOOD when they are in your house, the more likely they will buy it!  The house sold, but I have no clue whether or not the skeleton had anything to do with it – I am pretty certain it didn’t hurt, however.

I got the idea for this blog from one of my favorite columnists, Joel Stein, who writes “The Awesome Column” in Time Magazine.  Stein’s article is about “stuff” and “clutter” in general and was based on the book “Life at Home in the Twenty-First Century”, about an 11 year UCLA project studying the homes of 32 Southern California middle class families.  I can’t wait to read it.  If you’re as fascinated as I am about homes, home life, and what people use and keep, I also recommend Bill Bryson’s “At Home: a Short History of Private Life”.  Bryson goes room by room – including the closets – to describe how the modern home got to where it is today.  Happy reading!  Excuse me now, I’ve got to go clean out those closets…..

DO YOU WANT CONTRACTORS OR CASH? – A look at money in lieu of repairs

03 Friday Aug 2012

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During the due diligence period, the buyer does an inspection and asks for repairs.  The seller may prefer to give money, and not want to actually do the repairs because (1) they fear that the buyer will not be happy with the repairs and will ask the seller to redo them; (2) they may not have sufficient time to schedule repairs, pack, and move; (3) they simply do not want to have to take the time and effort to have them done.

The buyer may also prefer that the seller give money in lieu of repairs because (1) the buyer can oversee the repairs and be sure that they are to the buyer’s liking; (2) the buyer may want to do other modifications related to the trade at the same time and the money can simply go towards the larger bill; (3) the buyer may find it worthwhile to postpone the repair and use the money now.

In the instance where both sides agree to money in lieu of repairs, the buyer has several choices: he/she can reduce the purchase price by the agreed-upon amount, or have that amount added to seller-paid closing costs. Previously, we could have checks written at closing to third party vendors for the repairs to be performed later, but with the tightened mortgage restrictions that is generally not possible.  Which is preferable – reducing the sales price or increasing the closing costs?  Here are the pros and cons:

  • Either way, the buyer brings less cash to closing.
  • The lender typically will limit the amount of closing costs the seller can pay on behalf of the buyer.  For most loans, it’s three percent of the purchase price.  So just be sure that if you’re increasing the closing costs paid by the seller, you’re not running afoul of this limit.
  • If you decrease the purchase price, the purchase price is reflected in the tax records and future buyers will see that you paid less for the place. The plus side is that the tax commissioner also looks at the purchase price in determining taxable value, so a lower purchase price may result in a lower      property tax burden.

Either way, be sure your lender knows of the change in the contract.  Any changes – particularly those that change the purchase price of the property – must go through underwriting and you want to be sure there is plenty of time before closing to take that step.

Atlanta Metro TSPLOST SPLASH

30 Monday Jul 2012

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Tomorrow, please go to the polls and vote!  I am hopeful that you will vote FOR TSPLOST.  In a nutshell, TSPLOST would increase our sales tax to 9 cents in order to fund a laundry list of projects – some make sense, some might not – but all of which are designed to help alleviate our increasingly difficult traffic problems.  The project list is lengthy and encompasses all ten counties which are voting on the TSPLOST but particularly benefit those of us who live intown.  The AJC ran a detailed list of the projects in the paper yesterday – and the list is also available online.

TSPLOST may well NOT pass – no one likes a tax increase, and some in areas outside the immediate Atlanta area feel as if they will not be getting enough from the tax.  The Marietta Daily Journal ran a headline: “Cobb County Not Getting Much Bang for the Buck [with TSPLOST].”   But helping intown Atlanta also benefits those who live farther out, in that all of the Atlanta metro area is losing business and relocations because of our difficult traffic – anything and everything that helps alleviate traffic helps Atlanta AND the areas surrounding Atlanta.

Why vote on it NOW?  The political negotiation process in the Legislature that resulted in the list was a lengthy, involved process (no surprise).  We need solutions, and even though these solutions may be imperfect, they are before us now.  If rejected, and the process has to begin anew – who knows how long that could take, or even if the outcome would be very much – if at all – different?

Defects, Due Diligence, and the Deal Killer

02 Wednesday May 2012

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Once you are under contract to purchase a home in Georgia, you enter the due diligence period, during which you, as a buyer, does all relevant inspections and investigations and ultimately decide whether or not you would like to proceed with the sale.  This is very buyer-friendly, since during this period the seller is bound to the buyer and cannot enter into other contracts for the sale of the home (except as back ups)– but the buyer is free to terminate the contract with no penalty.

This due diligence period is relatively new inGeorgia.  We used to have “inspection periods” instead.  In the former version of our purchase and sale agreement (with the inspection period rather than the due diligence period), it was tougher for a buyer to get out of a contract once she or he had entered into one – to terminate the contract, the buyer had to find a defect in the property through the inspection, ask the seller to fix it – AND the seller would have to refuse to fix it for the buyer to get out of the contract.  If the seller agreed to fix all defects, the buyer was bound and would be liable for breach of contract if they failed to proceed.

If as a buyer during this inspection period you decided you wanted OUT of a contract, one tactic was to call in a REALLY tough inspector – like the one known as the “Deal Killer” – and come up with something you knew the seller could not or would not fix.  The Georgia Association of Realtors Forms Committee decided the inspection period created a perverse incentive in that respect.  There was too much litigation over what is or is not a “defect”.

So they changed our contracts to conform with those of a majority of other states – and now in Georgiawe no longer have the inspection period.  Instead we have the due diligence period or the “FREE LOOK” provision.  During the due diligence period, which it typically anywhere from 7 to 14 days, the buyer can terminate the contract for any reason or no reason at all.  They do not have to have found something during the inspection not to their liking, and they do not have to give the seller the opportunity to fix any defects.  They can simply notify the seller that they have decided to terminate.

Thus, it is in the seller’s best interest to keep the due diligence period as short as possible.  That way, if the buyer does terminate, the property can go back on the market quickly and hopefully with little ill effect.  There is always some ill effect when a buyer terminates, however – the next buyer will wonder WHY the first terminated.  Sometimes there is just no good reason.  But the subsequent buyer will be more suspicious, and will devalue the property accordingly.

For the buyer, of course, a longer due diligence period is preferable.   There is really no risk for the buyer.  This creates a different sort of perverse incentive – some buyers will get a property under contract before they have really decided if they want the place or, perhaps, before they have even seen it. This is a particular problem in foreclosure sales, where there are often multiple bids.  A buyer looking for a bargain may make multiple bids on several foreclosure properties, but not even visit those properties until they win a bid.

To end due diligence, typically the parties will enter into an “Amendment to Address Concerns” – in which the seller agrees to fix or give monetary compensation for repairs needed to the property.

Notes on Negotiating

26 Thursday Apr 2012

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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 inAtlanta, 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.

First, every contact with the other side conveys information – so pay attention to every contact.  Most importantly, you do not have to mean or rude to “win”.  After all, haven’t you heard that you get more flies with honey than with vinegar?  Particularly in real estate, often a more emotional negotiation, this is important.  Being professional and polite does not mean you cannot be tough and represent your client well.  In fact, make sure your agent is one who is respected and liked by other agents.  Agents want to work with other agents who “play fair”, and that will serve you well when coming to agreement.  Also, say you do not come to agreement on a given negotiation.  Timing matters – a seller may get more motivated, a buyer may find a greater source of funds – in other words, the deal may work, just not right now.  If you have kept a congenial relationship, the other side may just come back, offering more.

Another important point is that knowledge is power.  With information, your arguments actually hold weight – without the hard facts, you have no ground to stand on.  When an agent is representing a buyer, that agent should marshall the LOWEST comparables and be able to discuss them with intelligence to convince the seller, hopefully, to accept less than they would otherwise.  Similarly, an agent representing the seller shouldmarshallthe HIGHEST comparables available to help convince the buyer that they are getting a great deal (which every buyer wants and expects).

Also: be creative.  Every negotiation is not all about money.  What else can your client offer that is of value to the other side?  Perhaps a seller will take less for the home if you close quickly.  Or if they need more time, if you will close later.  Your agent needs to ask questions and pay attention to the nuances of the other side’s needs and wants; that can certainly help ease the parties to agreement.

Finally, stick to your plan and stay the course.  Do not walk away without offering your “walk away” offer.  But if you give a “take it or leave it walk away” offer, make sure that is exactly what it is.  If it is not, you lose credibility.

In this market, great negotiation skills mean more than ever.  Make sure your agent has them!

Obtaining a Mortgage: 3 Steps to Improve Your Credit Score

19 Thursday Apr 2012

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Right after the mortgage meltdown, it was very difficult to obtain a mortgage.  It is still not especially easy, and I find that some buyers have credit scores that either prohibit them from getting a mortgage or make it difficult to get a good rate.

The first step to improving your credit score is to get a current copy of your credit report. There are three nationwide consumer credit reporting companies that provide reliable credit reports. Those companies are: Equifax- www.investigate.equifax.com, Experian – www.experian.com and TransUnion – www.transunion.com.  At AnnualCreditReport.com you can get a copy of your credit report from one of these companies absolutely free. To report false information that appears on your report you may contact the nationwide consumer credit reporting company that provided the credit report. The time it will take to correct your report depends on the specific error contained in your report, but no matter the length of time, getting your credit information corrected is your best and only option because your credit is at stake.

The second step to improving your credit score is to take control of your monthly debt. Your credit score reflects what you owed at the time of your last billing cycle and the amount of credit that you have available. People with the highest credit scores only use 10% of their total available credit each month. To maintain good credit you must keep your monthly debt under 25% and not utilize more than 25% of your available credit each month.

The third step to improving your credit score is to remember that “credit” cards don’t always benefit your credit. Paying off the balance on your credit card every month will not always improve your credit score. At the end of each billing cycle the full amount that you owe on that card is posted on your credit score, even if you paid your monthly charge. Once you have paid off the full balance on a credit card, do not cancel it. Canceling a credit card will lower your credit score, even if you have paid it off. Mortgage companies suggest that if you plan to purchase a home, you should not make any purchases with your credit card 3 to 6 months before you plan to secure financing for your new home. Instead, use cash or debit to pay for purchases during those months so you can enhance your credit worthiness.

Overall, your credit score is only a small part of your complete financial standing, but it is one of the most important because it proves your responsibility for paying off your debt. Don’t miss out on the historically low mortgage interest rates that are being offered. There’s no requirement for you to have outstanding income and a high down payment if you have good credit. Improving your credit score will give you an opportunity to take advantage of a low interest rate. Follow these 3 easy steps to improving your credit score and be on your way to owning a new home!

GREAT EATS IN ATLANTA

23 Friday Mar 2012

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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

09 Friday Mar 2012

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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. 

A short sale can take MONTHS and MONTHS (although I HAVE had one approved in two weeks – that is very unusual).  The lender generally doesn’t WANT to take less than is owed, as you might imagine.  Therefore it’s somewhat of a fight, and if/when there are multiple lenders and lienholders (as there often are) it is often next to impossible to get them all to agree.  We agents sometimes say that it’s the THIRD short sale buyer who actually gets the house, meaning that most buyers who make an offer on a short sale get tired of waiting for the approval and just go on and buy something else.  Of course, the short sale may or may not EVER happen.  The seller may just stay and pay – or it may end up as a foreclosure.

Even when the short sale lender or lenders approve the short sale, they will sometimes reserve the right to disapprove the short sale at any time before closing – which poses another problem; it could fall through at the last minute.  In fact, you can be sitting at the closing table when the word comes that the lender has decided to withdraw approval and foreclose instead.

Other potential snafus are that the seller usually wants a release from any and all liability with respect to the loan, while the short sale lender(s) will often require that the seller sign a personal note back to the lender for the remainder owed.  Another problem I have seen is when the seller does not realize that they may be TAXED on the forgiveness of debt (why the seller’s agent did not bring up this issue to the seller prior to getting a contract is beyond me, but it happens).  The IRS considers forgiveness of debt taxable income, and the seller will be responsible for paying that tax.  A side note – if you are the seller, please consult your accountant on this one – because if it is your personal residence you are selling, the forgiveness may be excludable, much as GAIN from the sale is excludable if you have lived in the house as your main residence for two of the past five years.

In other words, short sales are a PAIN, but you CAN get a great deal.  It’s best to look for PREAPPROVED short sales where only one lender is involved.  Pre-approved means the lender has already agreed to accept a short pay-off, and these deals are much more likely to go through.  In any event, I usually counsel buyers to go ahead and make an offer on a short sale if that is the property that they really like, but the to KEEP LOOKING.  You can always terminate your short sale offer if you find something better in the interim. 

We agents are all ready for the day when regular sales again outnumber foreclosures and short sales, but I am also glad to see those sales moving through the system.  The quicker we turn over the troubled properties to buyers who can handle the payments, the faster the housing market will recover.

FORECLOSURES – as I see them

01 Thursday Mar 2012

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Lots of buyers want to look at FORECLOSURES, and there are a lot of them!  You can certainly get a great deal on foreclosed properties, and these days many Banks are even cleaning them up, painting them, putting in new carpeting – in other words, they aren’t all in “terrible” shape.

Here’s how most foreclosures work these days (it’s changed a LOT since 2008).  Lenders give notice of foreclosure to the homeowner – and often wait months and months to foreclose, even though legally they can foreclose sooner (in Georgia, they just have to give four weeks notice, published in the legal newspaper for the appropriate county).  Banks have so many foreclosures on their books they often just do not WANT anymore, and once they foreclose then the Lender, as owner, is responsible for any code violations (such as grass growing too high, etc.).  In other words, once they foreclose it’s not only a liability on their books, they have potential further liability due to the condition of the property. 

When they DO decide to foreclose, it’s “sold” on the courthouse steps for the county the property is in, on the first Tuesday of the month.  Used to be you could GO to the courthouse steps on the first Tuesday of any month and buy property.  They still offer properties for sale then, but it’s much less common for anyone to purchase there.  For several reasons: (1) the reason that has always existed – you must have CASH or a CASHIERS CHECK (same as cash) to purchase on the courthouse steps, no exceptions; (2) it’s so much easier, and you can actually get it for LESS, by waiting for the foreclosure LISTING to come up.  Because at the courthouse steps you must pay AT LEAST what is owed on the property.  Almost by definition, the property can’t be worth what is owed on it, or it wouldn’t have ended up there to begin with.

Banks then list the property with foreclosure agents – like Rick Hale of Keller Williams, the Peargin Team at Remax, etc. etc.  YOU CANNOT CALL THE BANKS – THEY WILL NOT TALK WITH YOU.  If you DO pull off a miracle and someone will actually talk to you, they will tell you that they do not sell properties; they hand them over to the assigned agent.  Most of the time they can’t even tell you who that agent is because they use so many.  Believe me, take from someone who has had plenty of clients try despite this explanation.  The Banks know that the best way to get the best buck for the property is to PUT IT ON THE OPEN MARKET.  They do not WANT to sell to you before then.  Because foreclosures often end up in BIDDING WARS and the Bank gets much more than they thought that they would.

MY HOUSE IS UNDER CONTRACT – WHAT HAPPENS NOW?

22 Wednesday Feb 2012

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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?

Unless the buyer is purchasing “as is” (usually not the case) the buyer has a “DUE DILIGENCE PERIOD” – typically somewhere between 7 and 14 days.  During that time the buyer can terminate the contract for any reason or no reason at all.  The buyer can simply send a notice of termination and the deal is over – you are left with an unsold house and a search for the next buyer.

But do not worry – it does not often happen like that.  Instead, the buyer will have an INSPECTION – by a certified home inspector.  The inspector’s job is to find anything and everything that is wrong with the place, so don’t be surprised or offended.  Also, the standard inspection report is about 30 pages long – so don’t panic about that either.  It contains a lot of OTHER information in addition to any “problems” the inspector has found with your home.

After the inspection, the buyer will provide the inspection report to you and ask you to fix items that the inspector says need to be fixed.  They might ask for EVERYTHING, so be prepared for that – but more often the buyer will pick what is most important to THEM.  You can either agree to fix these items, or you can negotiate a dollar amount to compensate for the things you don’t want to fix.  You don’t have to agree to do ANYTHING, but it’s best to be as reasonable as you can – because again, during this period, the buyer is able to TERMINATE the contract for any reason or no reason at all. 

Once the due diligence period ends, the buyer cannot back out of the contract (except under a different, applicable contingency – financing or appraisal, for instance).  If they back out prior to closing and no other contingency gets them out of the contract, they lose their earnest money.  You, the Seller, can then claim that earnest money OR you can sue for damages.  But rest assured – a vast majority of the time buyers do NOT back out once the due diligence expires.

There may also be the aforementioned FINANCING and/or APPRAISAL contingency associated with the contract.  The financing contingency gives the buyer an OUT from the contract if they are unable to obtain financing.  The period can be anywhere from 7 days to 30 days.  As a seller, you have likely insisted on a prequalification letter from a lender – so you know the buyer at least HAS talked to a lender – and have negotiated as short a period as possible. 

The appraisal contingency is sometimes a longer contingency.  Sellers attempt to negotiate as short a period as possible, of course, but the problem is that many lenders are ordering multiple appraisals – sometimes even the day prior to closing.  So imagine the buyer’s dilemma.  They think that the property has appraised and there’s no problem – and then the lender orders ANOTHER appraisal and it comes in low.  As a seller, all we can do is keep in contact with the buyer’s agent and make sure that at least the first appraisal is ordered in a timely manner.  There’s no way to know in advance if the lender is going to order multiple appraisals.  It is not the norm, but it can and does happen.

Say the property does NOT appraise for the contract price – it appraises for less.  In that instance, if we are still within the appraisal contingency period, the buyer can (and will) ask the seller to sell the property for the lower price.  If the seller refuses, the buyer can walk from the contract.  But if the seller AGREES to sell for the lower price, the buyer is bound (unless another contingency applies).  One sticky issue here can be when the seller has agreed to pay for some of the buyer’s closing costs.  Say the contract is for $100,000, seller paying $5,000 of the buyer’s closing costs, and the appraisal comes in at $95,000.  Well, that’s what the buyer is REALLY paying, right?  Because they are effectively getting $5,000 back.  STILL, the buyer has the right to insist that the seller lower the purchase price AND keep the closing costs in.

What happens NOW?!?!  All contingency periods are up.  We are waiting for closing.  Time to have all your utilities disconnected as of the day of closing, except for water.  It is common to leave water on for three days after closing.  The reason for this is that the buyer must present a closing statement to get water service – and, of course, they won’t have the statement until the day of closing.   In addition to scheduling the disconnection of utilities, do not forget to put in a change of address with the postal service – www.usps.gov – and notify your credit card companies, magazine subscriptions, and the like of your new address.

What can you leave in the place?  Best to leave nothing except what was agreed to in the contract (with the exception of any manuals for left appliances or the neighborhood directory).  If you want to leave anything else, or think the buyer might want you to, get your agent to get the okay from the buyer.  A typical issue here is that you cannot leave old paint cans unless the buyer says it is okay, for instance.  (Paint is not always easy to dispose of).  Then, hire someone to do one last, final, deep cleaning.  All that is required under the contract (unless there is a special stipulation) is that the home be left “broom clean” – floors and carpets swept, horizontal surfaces wiped down, ovens and fireplaces cleaned, etc.  But you don’t want to have an issue the day of closing over dirt; simpler to pay someone to do one last sweep.

Then, to closing it is!  Your job at that point is to bring all keys and remotes to the closing table.  Most of the documents will be signed by the buyer – you will have only a few.  You can give the buyer a forwarding address and/or email if you so choose – but that is by no means required.  You can always ask them to contact your agent if mail arrives for you after closing.  If you have gain from the transaction, you will be given a check at the closing table or you can have it wired directly to an account (this can be arranged ahead of time).

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