Tag Archives: home

LET’S GO TO COURT – OR NOT…

19 Monday Nov 2012

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , , , , , , , , , , , ,

Most new construction contracts contain an ARBITRATION PROVISION.  If you’re buying new construction, you’ll notice it because typically it requires a specific initialling at that particular paragraph.  Our resale contracts in Georgia do not contain such a provision.  So the question is raised – is a good idea or NOT to agree to arbitration in advance?  Here are some thoughts from a recent briefing with the law firm of Epstein Becker Green I attended –

First, what IS arbitration?  Often confused with mediation, which is less formal and not binding, arbitration CAN be legally binding.  This means if you choose binding arbitration you may be stuck with the outcome with no avenue of appeal.  There are only very limited bases for appeal of an arbitration provision; as they stated at the briefing, you would need something akin to having a picture of the other party handing a monetary bribe to the arbitrator in order to have a judicial appeal.

One party cannot force another to go to arbitration unless it is agreed upon in advance in writing – hence the provision in many new construction contracts.  So, say you’ve entered into an agreement with an enforceable arbitration provision and there is a dispute.  If you file a claim in court, the other party can legitimately ask the court to force you to arbitrate instead.  When you arbitrate, a private company is chosen to provide the arbitrator or arbitrators (typically there is one arbitrator or three – for obvious reasons, an even number of arbitrators would not make sense).  As a party to the arbitration, you will have the opportunity to strike arbitrators for cause.  You then proceed to a hearing.

WHY arbitrate?  Might you WANT an arbitration provision in your contract?  There are several advantages: typically it is less expensive than litigation, because it is faster.  It is also more certain, since there are only limited grounds for appeal.  On the con side, third parties aren’t bound by the arbitration agreement and cannot be forced to appear.  There are no rules of law or evidence in an arbitration proceeding other than those set by the parties or the arbitration company –thus, what often happens is that “if you can get it through the door, you can get it into evidence.”

As a practical matter, the arbitration provision in many new construction contracts is probably favorable for all concerned.  Filing a lawsuit is expensive.  But most do not add an arbitration provision to the standard Georgia Association of Realtor resale contracts.  Our standard practice in Georgia is to adhere to the form contracts without extensive rewriting of them; rewriting by an agent who is not a lawyer might be considered unauthorized practice of law.  Even if your Realtor IS a lawyer (there are a few of us out there) you will want to carefully consider whether or not adding such a provision makes sense.    Talk to your Realtor about it when you are entering into your agreement – it may or may not make sense for you.  And as always, never hesitate to call the Mary Anne Walser team if we can help in any way!

SURVEYS – WHAT YOU SEE MAY NOT BE WHAT YOU GET

17 Wednesday Oct 2012

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , ,

(Image: Residential Lot- 908 Peachtree Battle Circle, Atlanta, GA 30327 – Listed at $125,000)

What’s your line? When a buyer goes to look at a home, sometimes it seems very obvious where the property lines (boundaries) are. But what you see may not be what you get. Property boundaries don’t always coincide with fences nor are they always where you think that they are. In fact, we’ve seen cases where even a large pool was half on a neighbor’s property; no one was aware until a survey was performed.

When we make an offer on a property, we usually ask the Seller for a survey. If the Seller does not have a survey, the usual course to order a survey at closing – but this is not the prudent course. The best thing to do is order a survey long before, so if there are any issues they can be resolved prior to closing or so that the Buyer can terminate if the issues are of great concern and not fixable.

Typically you will want to have an inspection *first* and then if there are no big issues with the inspection, order the survey. Since we often have only a 7 to 10 day inspection period, that may not be long enough for both to conclude.  So insert a stipulation in the contract that says something to this effect: “Seller must provide a survey, if Seller has ever had one done, within 48 hours of binding agreement date. Buyer has the right to order his/her own survey, whether or not Seller provides one. If Buyer’s survey reveals any title, permitting, easement, or encroachment issues Buyer shall provide said survey to Seller within 3 days of receipt and Seller shall have a 5 day opportunity to cure any deficiency. If Seller cannot cure, Buyer shall have the option of terminating this Agreement at no penalty to Buyer.”

Why the mention of “permitting” issues above?  Well, if a structure or improvement encroaches on a neighbor’s property, it likely means that the structure or improvement was not permitted with applicable governmental authorities, which is another, potentially even bigger issue.  While encroachment issues have a two year statute of limitations, permitting issues do not.  This comes up most often with garages and other structures on the edges of the property.

As with everything you purchase, be sure you know what you are buying!  One important aspect of this is knowing the boundaries of your property through a survey.  And as always, call the Mary Anne Walser team when you or someone you know wants to buy or sell a home!

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

03 Friday Aug 2012

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , , , , , , ,

Image

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.

Defects, Due Diligence, and the Deal Killer

02 Wednesday May 2012

Posted by in real estate

≈ 2 Comments

Tags

, , , , , , , , , ,

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

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

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!

FORECLOSURES – as I see them

01 Thursday Mar 2012

Posted by in real estate

≈ 1 Comment

Tags

, , , , , , , , , , , , , , , , , , , , , , ,

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.

MAKING THE OFFER – when should I ask to close?

13 Monday Feb 2012

Posted by in real estate

≈ 2 Comments

Tags

, , , , , , , , , , , ,

Typically buyers placing an offer do so 1-2 months before they want to actually move.  So the “normal” time for a closing would be one to two months from the date the offer is placed.  In terms of WHEN during a month you should ask to close, if you close at the END of the month, you bring less money to closing – so most buyers want to close at the END of the month.  How it works is like this: unlike RENT, your mortgage payment is paid IN ARREARS.  If you close at the end of March, your first payment isn’t due until the first of MAY – you pay the first of May for the month of April (for rent, as you know, you pay at the first of the month for the month following – for example, rent is due April 1 for all of April).

Another consideration is this: when you own and occupy your home, you qualify for what is called “homestead exemption”.  It’s a partial exemption from property tax for your principal residence.  But in every metro county, you must own and occupy the home as of January 1st in order to qualify for the homestead exemption.  Therefore, if you are looking for a home in the fall or winter, you want to be sure to close prior the end of the year in order to qualify for the exemption.  My husband and I closed on our home at the end of December for this very reason.

Other than that, there really is no “right” time to close.  It’s entirely up to you.  Most sellers are not going to want to accept a contract to close for too long after the contract date, though, because it ties up the property and makes it unavailable to other potential buyers.  You can always try, but know that the seller is probably going to counter with a closing date closer in time.  Their thinking is – what if the property is tied up for those months, and then you, Buyer, fail to close?  During the time they were under contract, they might have found another buyer for the property.

Be aware, also, that if you are making an offer on a short sale OR on a foreclosure, all bets are off, time-wise.  Short sales can take months and months to be approved (if they are approved at all), so even if you ask for a fast close date, it’s not likely to happen.  You will make an offer and then, usually, wait – and wait- and wait.  Foreclosures can sometimes close quickly, but at other times also take some time.  The seller must be sure that the foreclosure deed is recorded and in the chain of title and that other liens have been cleared before they can sell the property to you. (While many liens are extinguished by the foreclosure, some liens, such as tax liens, survive foreclosure and must be dealt with by the seller before they can give you clear title).

A REALTOR BUYS A HOUSE

12 Thursday Jan 2012

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , , , , , , , , , ,

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 – WHAT NOW?

15 Thursday Dec 2011

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , , , , ,

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.

CONGRATULATIONS ON YOUR NEW HOME!!!

WE ARE UNDER CONTRACT!

12 Monday Dec 2011

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , , , , , , , , , , , , , , , , ,

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.

My favorite inspector is Bryan Dilworth of Cornerstone Inspection Group.  Their website is http://www.atlantahomeinspector.com/ or you can call 770.436.2667 to schedule.  Chuck LeCraw, also an inspector, owns the company and he is great also.  They don’t charge you until the inspection is DONE, so you can schedule without worry (if you are calling before the contract is finalized, something happens and you do NOT get under contract, you won’t have to pay).

Your inspection company will ask if you want a RADON TEST. Radon is an odorless substance which emanates from natural stone in the ground.  It has been shown to cause lung cancer.   The main place we worry about radon is in a BASEMENT – and even if you do have a basement, if it is unfinished and you are not planning to finish it, it is not as crucial.  In fact, the radon testing protocol is that the radon is placed on the lowest FINISHED level, so they would put your radon test on the main floor if your basement it unfinished, where it is highly unlikely that there is any radon.  But if you have a FINISHED basement, I would absolutely order a radon test.

The only areas of town I’ve personally seen radon tests come back POSITIVE are near Chastain (just North of Chastain Park) and Tucker.  Both tests were done in finished basements.  I hear the closer you get toStone Mountain, the more likely they’ll find radon (it’s released from the granite).    What happens if they FIND radon?!?!  Well, you REMEDIATE it, which consists of plugging up any cracks and bare ground and in some cases, putting in a ventilation system.  It can cost 2,000 or so.  Not cheap.  If you discover radon during the inspection period, it is the seller’s job to pay for it.

Once you have your inspection, your inspector will issue a written report detailing everything he has found that is wrong with the property.  The average inspection report is 26 to 30 pages long, so don’t panic if yours is lengthy.  A lot of it will consist of general information and pictures. With me, your agent, you will decide what to ask the seller to fix, replace or repair – and thus the second big negotiation begins.  You must finish these negotiations within the due diligence period or EXTEND the due diligence period.

The seller can either agree to fix, replace or repair the inspection items themselves prior to closing, or can give you a monetary concession in lieu of repairs.  That monetary concession will have to pass muster with your lender.  Oftentimes a lender will NOT allow a check made out to a third party vendor at closing – instead you’ll have to negotiate more seller-paid closing costs or a reduction in the purchase price.

If the seller agrees to make repair, specify that receipts for those repairs will be provided at least three days prior to closing so that you can be sure that they are done and check to make sure that they are done correctly.