Last year my father bought a foreclosure in Stockton. It wasn't an easy process. The bank was slow to capitulate, the realtor was pushing a lower offer that she was double ending etc.
With many other homes for sale on his street, my father is now attempting to purchase another foreclosed home for his mother (my grandma) so she can be nearby, but still feel independent. After much wrangling with my grandmother, he still had the bank to contend with. When he went to sign the papers on this modest home, he was in for a nasty surprise. The bank (BofA)included an addendum, which was over 15 pages, and was downright atrocious about it (giving a 2 hour window to sign etc.). As much as this home made for the ideal situation for my grandmother, I was pleased to hear that he walked away. In my mind, no home is worth signing away all rights and releasing all liability (and then some), the way they require in their addendum (especially on a home priced less than 100k).
We were in a very similiar situation and eventually walked as well. Our take away from the process, when bidding on a foreclosure, ask for the addendum up front.
Showing posts with label RE Services. Show all posts
Showing posts with label RE Services. Show all posts
Wednesday, June 24, 2009
Monday, March 2, 2009
Fool Me Once Shame on You, Fool Me Twice, Shame on Me
When we bought our first home in the D.C. area, we muddled through the process, with many misgivings. We were highly reliant on the recommendations and advise of others. Internet searches for things like "closing costs" were incredibly generic, or specific to certain loans or regions. Hell, I didn't even know that realtor commissions were negotiable.
In any case, we learned many lessons from that experience, and hope some of the first-timers will not repeat our mistakes. Many of these items have been discussed on this blog over the last two years, but I wanted to put together a compilation (for easy reference on the side bar), now that we have officially purchased a home for the second time.
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Consider all costs. Don't just look at the sale price of the home, but consider all the money you will spend to make the house what you want (remodeling/repairs etc.). I know this may seem basic to some, but it wasn't something that really occurred to us when we bought our first home. It's also a big reason we bought a new home here in CA, as opposed to a foreclosure. Buying a home that needs tons of repairs or remodeling requires a big chunk of cash or credit. With tighter lending standards and credit, it's more important than ever to make sure you properly account for these costs ahead of time. Having owned a home before, we were able to walk through homes and estimate these costs more accurately. The first time, we relied heavily on an inspector who was recommended by our realtor. It was a huge waste of $400. For example, a couple months after closing we found an exterior wall in our home was rotted due to moist soil against it.
When considering all costs, don't forget to account for taxes, and any homeowner dues. One of the reasons some developments seem so much cheaper than others, the extra fees and taxes. And of course, there are big variations in monthly costs, such as utility bills.
Shop around for homeowners insurance. Some of the quotes we received this time around were 2x higher than the policy we chose. We checked the CA insurance commissioners survey to get a feel for who had lower rates, then went to J.D. Powers to make sure the company was well rated.
The second time round, we were also much more cautious about the people we worked with. The first time, we went with a realtor based on a recommendation, and then used all the services he recommended (appraisers, loan officers, inspectors etc.). While this can be very helpful in some situations, there are also major pitfalls, say if kickback are paid.
Find out what items are negotiable, and what are usual and customary for your area. This applies to both the closing costs and items in the home. It seems in California homes rarely come with a fridge or washer/dryer. Whereas back East, they stay with the home. Window furnishings, hot tubs, etc. all tend to be negotiable.....If you are expecting something to be there when you move in (or not to be there, in one case for us...debris in the yard), make sure it's in the contract (a good realtor should be able to help with this). Closing costs add up quickly, so negotiating those away is always a plus. But in some cases it may be to your advantage to go the other way....for instance we offered to pay for more closing costs, in exchange for price concessions from the bank (which lowers our taxes).
In the hustle and bustle of offer and counteroffer on a home, don't ignore the financing aspects. Pay attention to interest rates, and educate yourself. We didn't fully understand the whole points/origination fee etc., or how brokers made their money. The Mortgage Professor has many good resources on this topic.
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Please feel free to make other suggestions.....this is in no way an exhaustive list. Just what I can think of off the top of my head today.
In any case, we learned many lessons from that experience, and hope some of the first-timers will not repeat our mistakes. Many of these items have been discussed on this blog over the last two years, but I wanted to put together a compilation (for easy reference on the side bar), now that we have officially purchased a home for the second time.
_________________________________________
Consider all costs. Don't just look at the sale price of the home, but consider all the money you will spend to make the house what you want (remodeling/repairs etc.). I know this may seem basic to some, but it wasn't something that really occurred to us when we bought our first home. It's also a big reason we bought a new home here in CA, as opposed to a foreclosure. Buying a home that needs tons of repairs or remodeling requires a big chunk of cash or credit. With tighter lending standards and credit, it's more important than ever to make sure you properly account for these costs ahead of time. Having owned a home before, we were able to walk through homes and estimate these costs more accurately. The first time, we relied heavily on an inspector who was recommended by our realtor. It was a huge waste of $400. For example, a couple months after closing we found an exterior wall in our home was rotted due to moist soil against it.
When considering all costs, don't forget to account for taxes, and any homeowner dues. One of the reasons some developments seem so much cheaper than others, the extra fees and taxes. And of course, there are big variations in monthly costs, such as utility bills.
Shop around for homeowners insurance. Some of the quotes we received this time around were 2x higher than the policy we chose. We checked the CA insurance commissioners survey to get a feel for who had lower rates, then went to J.D. Powers to make sure the company was well rated.
The second time round, we were also much more cautious about the people we worked with. The first time, we went with a realtor based on a recommendation, and then used all the services he recommended (appraisers, loan officers, inspectors etc.). While this can be very helpful in some situations, there are also major pitfalls, say if kickback are paid.
Find out what items are negotiable, and what are usual and customary for your area. This applies to both the closing costs and items in the home. It seems in California homes rarely come with a fridge or washer/dryer. Whereas back East, they stay with the home. Window furnishings, hot tubs, etc. all tend to be negotiable.....If you are expecting something to be there when you move in (or not to be there, in one case for us...debris in the yard), make sure it's in the contract (a good realtor should be able to help with this). Closing costs add up quickly, so negotiating those away is always a plus. But in some cases it may be to your advantage to go the other way....for instance we offered to pay for more closing costs, in exchange for price concessions from the bank (which lowers our taxes).
In the hustle and bustle of offer and counteroffer on a home, don't ignore the financing aspects. Pay attention to interest rates, and educate yourself. We didn't fully understand the whole points/origination fee etc., or how brokers made their money. The Mortgage Professor has many good resources on this topic.
___________________________________________
Please feel free to make other suggestions.....this is in no way an exhaustive list. Just what I can think of off the top of my head today.
Tuesday, January 13, 2009
Trade Offs: Distressed vs. New
While investigating the perverted California property tax system for our new home, I happened upon a very handy tool. You put in the home APN, and it spits out all the additional taxes and fees associated with a property (Mello Roos, library, ambulance fees etc.). It only works for APNs in El Dorado County, but there is likely something similar for other counties.
http://www.co.el-dorado.ca.us/auditor-controller/PropTax/pt_direct_apn.html
Of course we would have preferred a home without a Mello Roos, but so far the trade offs seem worth it. Compared to our short sale and REO experiences, this purchase process is an absolute dream.
So far, the way I see it, buying new, as opposed to dealing with the banks on distressed inventory, has the following benefits:
1) The purchase contract seems much more evenhanded (less skewed toward the bank).
2) There is tons of disclosure.
3) Construction defect accountability etc. (California Civil Code).
4) The supervisor at the development has been very responsive about questions we have had (regarding an abandoned easement, and arborist reports).
5) The builders offer special financing incentives. I recently heard a story of how the bank’s title companies (primarily in SoCal) are charging exorbitant fees, which they are requiring the buyer to pay.
6) Putting in a backyard is pricey (for a new home) but you get exactly what you want, and can control the cost. The distressed homes we put offers on needed complete overhauls on the yard (dead plants and grass). It isn't as expensive, but still requires a lot of work.
Of course, many question the construction quality of new homes. However, I always tell people that homes made in earlier decades had their problems too. It’s just that time makes those defects apparent so they can be priced into the sale or fixed at the owners expense (our home in D.C. was very poorly made, and settled so much that doors wouldn’t close). My hope is that the home we are purchasing now was constructed with more care (since builders are no longer throwing up homes as fast as they can). I guess only time will tell.
http://www.co.el-dorado.ca.us/auditor-controller/PropTax/pt_direct_apn.html
Of course we would have preferred a home without a Mello Roos, but so far the trade offs seem worth it. Compared to our short sale and REO experiences, this purchase process is an absolute dream.
So far, the way I see it, buying new, as opposed to dealing with the banks on distressed inventory, has the following benefits:
1) The purchase contract seems much more evenhanded (less skewed toward the bank).
2) There is tons of disclosure.
3) Construction defect accountability etc. (California Civil Code).
4) The supervisor at the development has been very responsive about questions we have had (regarding an abandoned easement, and arborist reports).
5) The builders offer special financing incentives. I recently heard a story of how the bank’s title companies (primarily in SoCal) are charging exorbitant fees, which they are requiring the buyer to pay.
6) Putting in a backyard is pricey (for a new home) but you get exactly what you want, and can control the cost. The distressed homes we put offers on needed complete overhauls on the yard (dead plants and grass). It isn't as expensive, but still requires a lot of work.
Of course, many question the construction quality of new homes. However, I always tell people that homes made in earlier decades had their problems too. It’s just that time makes those defects apparent so they can be priced into the sale or fixed at the owners expense (our home in D.C. was very poorly made, and settled so much that doors wouldn’t close). My hope is that the home we are purchasing now was constructed with more care (since builders are no longer throwing up homes as fast as they can). I guess only time will tell.
Thursday, October 30, 2008
Local Builders Behaving Badly?
From the Mountain Democrat:
"West County home-building company known for constructing multi-million dollar homes in Serrano has been accused by one of its clients of fraud and forgery.
Ultimate Development Inc., an El Dorado Hills-based company that reported $13.5 million in construction activity in 2007, is not only being sued by Serrano homeowners Robert Keszler and Jennifer Cutts Keszler, but is also being investigated by the State Contractors License Board.
..........
The state licensing board is investigating what it calls a probable violation for a willful or fraudulent act that leads to substantial harm, theft and forgery. The investigation stemmed from a complaint being filed by an unknown party. "
"West County home-building company known for constructing multi-million dollar homes in Serrano has been accused by one of its clients of fraud and forgery.
Ultimate Development Inc., an El Dorado Hills-based company that reported $13.5 million in construction activity in 2007, is not only being sued by Serrano homeowners Robert Keszler and Jennifer Cutts Keszler, but is also being investigated by the State Contractors License Board.
..........
The state licensing board is investigating what it calls a probable violation for a willful or fraudulent act that leads to substantial harm, theft and forgery. The investigation stemmed from a complaint being filed by an unknown party. "
Sunday, October 5, 2008
Surprisingly Savvy
For the last year and a half we have attended open homes when we don't have something scheduled on a Sunday afternoon.
Up till recently, I haven't been all that impressed with the Realtors we have met (yes I know, usually the junior folks looking to bring in business). Normally we get the typical "it's a great time to buy" routine. Sadly I often feel I know more about the local market forces than some of these professionals.
However at two recently open homes, bank owned homes in Serrano, we met very savvy and knowledgeable Realtors. It was so very refreshing to hear their take on the market.
In the past, maybe I was just looking for Realtor's that validated my world view......but these two guys, seemed to know the details of the broader market, and had some facts and data to back up their opinions. I am happily swayed by opinions that are backed with sound theories and data. Up till now, many of the Realtors I met rarely had much to back up their claims.
Perhaps its a sign of the times, maybe all the soccer mom Realtors have left the market, leaving only the seasoned veterans and business savvy. In any case, I was really pleased to have a real and honest conversation (up till now I only smiled and nodded, not wanting to argue why now is not really a good time to buy, especially at the price they were asking ).
Up till recently, I haven't been all that impressed with the Realtors we have met (yes I know, usually the junior folks looking to bring in business). Normally we get the typical "it's a great time to buy" routine. Sadly I often feel I know more about the local market forces than some of these professionals.
However at two recently open homes, bank owned homes in Serrano, we met very savvy and knowledgeable Realtors. It was so very refreshing to hear their take on the market.
In the past, maybe I was just looking for Realtor's that validated my world view......but these two guys, seemed to know the details of the broader market, and had some facts and data to back up their opinions. I am happily swayed by opinions that are backed with sound theories and data. Up till now, many of the Realtors I met rarely had much to back up their claims.
Perhaps its a sign of the times, maybe all the soccer mom Realtors have left the market, leaving only the seasoned veterans and business savvy. In any case, I was really pleased to have a real and honest conversation (up till now I only smiled and nodded, not wanting to argue why now is not really a good time to buy, especially at the price they were asking ).
Tuesday, September 16, 2008
Wednesday, August 20, 2008
Riddle Me This?
How can a home, which has been sitting on the MLS for almost a year, and at the current price for 4 months, without ANY offers, recently appraise at 97% of the value?
I obviously don't understand real estate......
We agreed to pay for an appraisal for the short sale we put an offer on, in order to convince the bank that it wasn't worth what they wanted. The appraisal came in much higher than our offer (which was about 10% off list....our previous offer was 95% off list when interest rates were lower).
Supposedly, the home is now going to go into foreclosure. It will be interesting to see if we are able to purchase it then....
In the mean time, many homes in my favorite neighborhood have come on the market. Two at prices we can afford, and the rest way above our means.
I obviously don't understand real estate......
We agreed to pay for an appraisal for the short sale we put an offer on, in order to convince the bank that it wasn't worth what they wanted. The appraisal came in much higher than our offer (which was about 10% off list....our previous offer was 95% off list when interest rates were lower).
Supposedly, the home is now going to go into foreclosure. It will be interesting to see if we are able to purchase it then....
In the mean time, many homes in my favorite neighborhood have come on the market. Two at prices we can afford, and the rest way above our means.
Monday, August 18, 2008
It's Negotiable
Was delighted to see that one of my favorite publications, Consumer Reports (who would have guessed ;) did a recent survey on real estate.
Below is a very interesting conclusion from their study, which is good news for both buyers and sellers (hat tip to the WSJ Developments blog):
"Many real-estate brokers are willing to cut a deal on their commissions, and readers who successfully negotiated for a lower commission, often cutting the traditional 6 percent to 3 or 4 percent, tended to be just as satisfied with the result as those who paid the full fare."
If I had my way, I would completely redesign the compensation system. Here are my thoughts on how commissions should be structured.
Below is a very interesting conclusion from their study, which is good news for both buyers and sellers (hat tip to the WSJ Developments blog):
"Many real-estate brokers are willing to cut a deal on their commissions, and readers who successfully negotiated for a lower commission, often cutting the traditional 6 percent to 3 or 4 percent, tended to be just as satisfied with the result as those who paid the full fare."
If I had my way, I would completely redesign the compensation system. Here are my thoughts on how commissions should be structured.
Sunday, July 20, 2008
Mistaken Identity
I wake up Saturday morning and check my e-mail. A great home in one of our favorite neighborhoods had dropped it's price 75k! Boy was I excited. It was in our price range, even with current interest rates.
I was very hopeful (an actual owner occupied home), but wanted to move quickly since homes in the lower price range are selling much more briskly around here. We even took my MIL by the house, since she was in town for the night.
To make a long story short.....turns out, the agent put the price on the wrong house (even though the wrong price equated to the average price per square foot for EDH last month).
Needless to say, I was crushed.
I was very hopeful (an actual owner occupied home), but wanted to move quickly since homes in the lower price range are selling much more briskly around here. We even took my MIL by the house, since she was in town for the night.
To make a long story short.....turns out, the agent put the price on the wrong house (even though the wrong price equated to the average price per square foot for EDH last month).
Needless to say, I was crushed.
Monday, June 30, 2008
For the Record
Some of you may recall earlier posts by me regarding my opinion about agents I have spoken with and our very different interpretation of the facts. Recently I have been threatened with legal action for my opinion as to someone's conduct. Rather than lose sleep over something (or someone) this inconsequential, I have removed the post and set forth below is the full text of one agent's recent email to me.
Update: So I replied to the e-mail saying it wasn't me who was cyberstalking him (leaving links to my blog comments at all the online forums where he is active) and that I had removed the post as requested. I got a really wierd automated reply back. This does bring into question whether the e-mail was really from him, although the references to our personal encounter do lead me to believe it was. In any case, whoever is baiting him....please leave me out of it.
___________________________________________________________
I want to advise you of the following:
1) If you continue any further attempts to damage me or my business you will be met with swift legal action.
2) Your latest attempts are just the evidence my attorney’s need to prove it is malicious and meant to damage me and/or my business.
3) Your writings about me and/or the events do not support any of the facts.
4) As you hide faceless behind a blog do not think your bogus disclaimer will protect you.
5) I know who and where you are and I will personally expose you from your phony blog mask.
You are nothing more than a disgruntled Buyer that thinks every real estate professional is out to get you. That was evident from the first time I met you. It is even further evident by your goofy blog. I also have information about your past that would make a great blog… your past fits well with your current views.
You are now formally put on notice to cease your writings about me or claimed events. You are further notified to remove the blog you wrote on or around 11-07 within 24 hours or expect swift legal action.
Any questions you know how to find me… I do not have a reason to hide or remain faceless behind bogus writings about events or others.
Jaret L. Ghent
Update: So I replied to the e-mail saying it wasn't me who was cyberstalking him (leaving links to my blog comments at all the online forums where he is active) and that I had removed the post as requested. I got a really wierd automated reply back. This does bring into question whether the e-mail was really from him, although the references to our personal encounter do lead me to believe it was. In any case, whoever is baiting him....please leave me out of it.
___________________________________________________________
I want to advise you of the following:
1) If you continue any further attempts to damage me or my business you will be met with swift legal action.
2) Your latest attempts are just the evidence my attorney’s need to prove it is malicious and meant to damage me and/or my business.
3) Your writings about me and/or the events do not support any of the facts.
4) As you hide faceless behind a blog do not think your bogus disclaimer will protect you.
5) I know who and where you are and I will personally expose you from your phony blog mask.
You are nothing more than a disgruntled Buyer that thinks every real estate professional is out to get you. That was evident from the first time I met you. It is even further evident by your goofy blog. I also have information about your past that would make a great blog… your past fits well with your current views.
You are now formally put on notice to cease your writings about me or claimed events. You are further notified to remove the blog you wrote on or around 11-07 within 24 hours or expect swift legal action.
Any questions you know how to find me… I do not have a reason to hide or remain faceless behind bogus writings about events or others.
Jaret L. Ghent
Saturday, May 17, 2008
Get a CLUE
One of the main drawbacks to purchasing an REO, is the lack of disclosure about the home. For Mr. BT and I, this is nothing new. In Virginia, where we purchased our first home, sellers are not required to disclose anything about the home (and in fact are discouraged from doing so by their Realtors).
One thing you can do to put your mind at ease if there is limited disclosure, is get a C.L.U.E. report. From what I understand, its a report that details any insurance claims on a home in the last 5 years. Unfortunately a buyer cannot order it, it must be done by your agent or seller.
To emphasize the need for these types of precautions, one of my favorite site lurkers told me a story about a family they knew who lived in Folsom. This family had built their dream home on Tarbolton Circle (very high end, around 800k), but eventually realized the home had a mold problem that was making them sick. They were foreclosed on and I believe the home was recently sold by the bank (in the last month or so). I believe they plan to warn the new owners about the problem.
Sidenote: Mold has really killed the values of several developments around here, such as the development South of 50 called Stonbriar. Those homes were way out of our league when we first moved here, but recently some have dropped below the 500k mark. Anyone know how to check for mold? Or who migh provide this service?
One thing you can do to put your mind at ease if there is limited disclosure, is get a C.L.U.E. report. From what I understand, its a report that details any insurance claims on a home in the last 5 years. Unfortunately a buyer cannot order it, it must be done by your agent or seller.
To emphasize the need for these types of precautions, one of my favorite site lurkers told me a story about a family they knew who lived in Folsom. This family had built their dream home on Tarbolton Circle (very high end, around 800k), but eventually realized the home had a mold problem that was making them sick. They were foreclosed on and I believe the home was recently sold by the bank (in the last month or so). I believe they plan to warn the new owners about the problem.
Sidenote: Mold has really killed the values of several developments around here, such as the development South of 50 called Stonbriar. Those homes were way out of our league when we first moved here, but recently some have dropped below the 500k mark. Anyone know how to check for mold? Or who migh provide this service?
Sunday, May 4, 2008
Buyers Behaving Badly
Many of us have discussed how the current business model for real estate agents is poorly suited to a buyers needs (for suggestions on how to change it). However it can be a double edged, and doesn't always work out for the RE agent either.
I was rather saddened to hear of a situation from a mom I know, who has been showing a particular client many homes. She typically did this on weekends, even though she would rather spend time with her daughter. She had even written an offer on a short sale and was still waiting to hear from the bank. However at our last play date, she mentioned that they had been using several agents, and ended up having an offer accepted with a different agent.
While I can understand taking an agent for a test drive or two (one or two showings), but stringing along several agents, without any compensation for their time is very naughty (can you tell I have two young kids =).
I was rather saddened to hear of a situation from a mom I know, who has been showing a particular client many homes. She typically did this on weekends, even though she would rather spend time with her daughter. She had even written an offer on a short sale and was still waiting to hear from the bank. However at our last play date, she mentioned that they had been using several agents, and ended up having an offer accepted with a different agent.
While I can understand taking an agent for a test drive or two (one or two showings), but stringing along several agents, without any compensation for their time is very naughty (can you tell I have two young kids =).
Saturday, April 26, 2008
Lack of Common Courtesy?
Well, I am going to assume that our offer to the bank (which hasn't responded yet), was not good enough. They are holding the house open again this weekend (and had it open last weekend).
My question....do they just lack the common courtesy to respond to us (after all, their agent never returned any calls), or are they holding it open one last time to shop the offer?
I guess we will find out on Monday (when my agent suggested we would get an answer).
Update: We stopped by both Saturday and Sunday when it was supposed to be open, according to www.Metrolistmls.com to give it another look and see what the agent had to say (she was not the listing agent). Both times the house was not open. Of course this leaves me wondering if they might be seriously considering our offer. At the gym today I was daydreaming about how I would decorate....sigh.
My question....do they just lack the common courtesy to respond to us (after all, their agent never returned any calls), or are they holding it open one last time to shop the offer?
I guess we will find out on Monday (when my agent suggested we would get an answer).
Update: We stopped by both Saturday and Sunday when it was supposed to be open, according to www.Metrolistmls.com to give it another look and see what the agent had to say (she was not the listing agent). Both times the house was not open. Of course this leaves me wondering if they might be seriously considering our offer. At the gym today I was daydreaming about how I would decorate....sigh.
Tuesday, April 1, 2008
Update on Your Average Buyer
Things have been rather hectic for me lately. I have been playing single mom because Mr. BT has been traveling the great state of California with his new work assignment. As some of you may have noticed, Paul has stepped in to take up the slack.
As for the status of our short sale offer......it sounds like the 1st may be willing to at least consider it, they had an appraisal done recently. So its all about getting the second to sign on. Any suggestions are welcome.
I know many wouldn't consider putting in an offer on a short sale. However I don't really see it as that big of a hassle. Its not like we have to purchase a house in the next month, so waiting a little longer for an answer isn't really an issue for us. This home fits almost all of our criteria (except its a two story instead of a one story), otherwise we wouldn't be bothering to make an offer right now.
The "as is" sale would be the same if we bought from the bank, so that doesn't make a short sale any less desirable than an REO. We are rather handy so it doesn't intimidate us as much. (This home needs some serious TLC. )
The one true downside I have heard, is that sometimes banks cut the commission for the Realtors. So for some, it might be a challenge finding an agent willing to go the distance on a short sale.
If the short sale doesn't work out for us...I may start a scorecard to track all our failed offers and see at what price they finally sold.
As for the status of our short sale offer......it sounds like the 1st may be willing to at least consider it, they had an appraisal done recently. So its all about getting the second to sign on. Any suggestions are welcome.
I know many wouldn't consider putting in an offer on a short sale. However I don't really see it as that big of a hassle. Its not like we have to purchase a house in the next month, so waiting a little longer for an answer isn't really an issue for us. This home fits almost all of our criteria (except its a two story instead of a one story), otherwise we wouldn't be bothering to make an offer right now.
The "as is" sale would be the same if we bought from the bank, so that doesn't make a short sale any less desirable than an REO. We are rather handy so it doesn't intimidate us as much. (This home needs some serious TLC. )
The one true downside I have heard, is that sometimes banks cut the commission for the Realtors. So for some, it might be a challenge finding an agent willing to go the distance on a short sale.
If the short sale doesn't work out for us...I may start a scorecard to track all our failed offers and see at what price they finally sold.
Monday, March 3, 2008
Agent Inquiries Only
Hard to believe it in this market, but us buyers still get treated shabbily when inquiring on a home. Below is my most recent run-in with an agent who obviously hasn't gotten the message that some RE buyers are sophisticated enough to make decisions for themselves.
There is home in my favorite neighborhood that is now listed for rent (the same neighborhood where we made an offer two weeks ago). I kinda recognized the place as having been sold in the last 4 years (my agent sent me all the recent sales so I could do my homework on this neighborhood).
Well I called the number to find out how much it would rent for. The guy was nice enough. But the rent was way out of line, even for EDH. So I ventured to ask, if they would be willing to sell. He thought they might be, but refused to discuss it with me any further, insisting my agent needed to call him. Apparently it makes us 'serious buyers' if our agent calls. Surprisingly, he even held his ground after I mentioned we recently put in an offer right around the corner.
Of course, I was a bit insulted. But once again, I won't let a snobby RE agent get in the way of my dream home. So after doing some more homework on the place, it looks like they are speculators with almost 100% LTV.
There is home in my favorite neighborhood that is now listed for rent (the same neighborhood where we made an offer two weeks ago). I kinda recognized the place as having been sold in the last 4 years (my agent sent me all the recent sales so I could do my homework on this neighborhood).
Well I called the number to find out how much it would rent for. The guy was nice enough. But the rent was way out of line, even for EDH. So I ventured to ask, if they would be willing to sell. He thought they might be, but refused to discuss it with me any further, insisting my agent needed to call him. Apparently it makes us 'serious buyers' if our agent calls. Surprisingly, he even held his ground after I mentioned we recently put in an offer right around the corner.
Of course, I was a bit insulted. But once again, I won't let a snobby RE agent get in the way of my dream home. So after doing some more homework on the place, it looks like they are speculators with almost 100% LTV.
Tuesday, February 26, 2008
Getting Personal
There is a reason people involve agents in a transaction. One is for the expertise they provide, and another is to have an “arms-length” transaction between buyer and seller.
During escrow on our first home, we were on rather nice terms with the seller. It was great because she introduced us to some of the neighbors, and gave us a little insight into the home and neighborhood.
In the past, my husband has suggested skirting a seller’s agent and contacting the seller directly to make negotiating easier in some circumstances (this was also before we had an agent).
Last night it came to light that a mom I know, and called to get her thoughts on transaction, actually knows the owner of the home we made an offer on.
So my question is this, what are the pros and cons of talking directly to the seller of a home (in the different stages of the negotiations)?
In some situations I can see how it would actually help with negotiations (the agent representing the buyer of our D.C. home was a first class jerk and we came very close to killing the deal during the inspection process as a result). But in others I would imagine its best to go though an agent.
During escrow on our first home, we were on rather nice terms with the seller. It was great because she introduced us to some of the neighbors, and gave us a little insight into the home and neighborhood.
In the past, my husband has suggested skirting a seller’s agent and contacting the seller directly to make negotiating easier in some circumstances (this was also before we had an agent).
Last night it came to light that a mom I know, and called to get her thoughts on transaction, actually knows the owner of the home we made an offer on.
So my question is this, what are the pros and cons of talking directly to the seller of a home (in the different stages of the negotiations)?
In some situations I can see how it would actually help with negotiations (the agent representing the buyer of our D.C. home was a first class jerk and we came very close to killing the deal during the inspection process as a result). But in others I would imagine its best to go though an agent.
Friday, February 22, 2008
Do I Still Need the Approval of Others?
We put in our first bona fide offer last night, offering 20% down.
The agent is now asking for a preapproval letter.
I can see how preapproval was a “must have” during the boom, when multiple offers were rolling in, because it hedged sellers from wasting their time accepting offers that were not realistic.
But now that the RE heyday is over……and offers are few and far between (this home has been on the market well over 100 days), can a pre-approval really make a difference?
Our offer, which was about 15% below asking, if accepted, would mean a short sale. Now if they really don’t have any intention of accepting our offer, why the heck does the agent need a preapproval letter?
Personally I don’t like the idea of getting pre-approved with each offer because it means my credit will be checked (my old letter is from June of 2007). Each time my credit is checked, it means my score will take a hit. Given that this is likely to be a long process (finding a home someone is willing to sell at a price I am willing to offer), I don’t want to hit my credit each time I make an offer because it could bring down my credit score and eventually affect my rate when I really do go to apply for a loan. I don't want to provide a blanket amount either, cause then the seller will know how much wiggle room we have (our not so current letter is for 8% more than our offer).
The RE industry seems to be dominated by dogma, so much so, that no one really stops to question why its being done that way in the first place. Pre approval letters benefited sellers when they had the upper hand. But now that buyers have the upper hand, I think they should be able to dictate the terms.
The agent is now asking for a preapproval letter.
I can see how preapproval was a “must have” during the boom, when multiple offers were rolling in, because it hedged sellers from wasting their time accepting offers that were not realistic.
But now that the RE heyday is over……and offers are few and far between (this home has been on the market well over 100 days), can a pre-approval really make a difference?
Our offer, which was about 15% below asking, if accepted, would mean a short sale. Now if they really don’t have any intention of accepting our offer, why the heck does the agent need a preapproval letter?
Personally I don’t like the idea of getting pre-approved with each offer because it means my credit will be checked (my old letter is from June of 2007). Each time my credit is checked, it means my score will take a hit. Given that this is likely to be a long process (finding a home someone is willing to sell at a price I am willing to offer), I don’t want to hit my credit each time I make an offer because it could bring down my credit score and eventually affect my rate when I really do go to apply for a loan. I don't want to provide a blanket amount either, cause then the seller will know how much wiggle room we have (our not so current letter is for 8% more than our offer).
The RE industry seems to be dominated by dogma, so much so, that no one really stops to question why its being done that way in the first place. Pre approval letters benefited sellers when they had the upper hand. But now that buyers have the upper hand, I think they should be able to dictate the terms.
Wednesday, January 23, 2008
And Now Comes the Lawsuits!
Since I didn't see much mention of this story on the other blogs, thought I would post the link and some commmentary.
The New York Times ran a story yesterday on a couple in Carlsbad CA that is suing their Realtor.
Sounded like a bit of a shady deal to me, as the Realtor was also the mortgage broker and wouldn't show the couple the appraisal. The Realtor seems to be arguing that the couple should have done more research and due diligence.
I'm a bit confused by the Realtor's argument, isn't it the Realtor's job to help the couple determine if a house is a good buy, and provide them with information to support that claim? I mean, if a Realtor can't do that.....what purpose do they serve?
Of course, I am not saying the couple is faultless, they probably should have used a different broker....and they are squabbling over $100,000 on a $1.2 million home (approximately 8%).
The New York Times ran a story yesterday on a couple in Carlsbad CA that is suing their Realtor.
Sounded like a bit of a shady deal to me, as the Realtor was also the mortgage broker and wouldn't show the couple the appraisal. The Realtor seems to be arguing that the couple should have done more research and due diligence.
I'm a bit confused by the Realtor's argument, isn't it the Realtor's job to help the couple determine if a house is a good buy, and provide them with information to support that claim? I mean, if a Realtor can't do that.....what purpose do they serve?
Of course, I am not saying the couple is faultless, they probably should have used a different broker....and they are squabbling over $100,000 on a $1.2 million home (approximately 8%).
Wednesday, January 16, 2008
Unconventional Thinking: Finding Help
As many observed in an earlier post, a good realtor is worth every penny (or close to it depending on the price of your house). So if you are new to an area, like we essentially were…..how do you go about finding a great realtor?
It’s not easy. Apparently our approach was highly unconventional (and unfortunately it didn’t yield any results).
By January of last year we had three Realtors in mind that we meet by various means: one via a mom’s group I had just joined, one via a recommendation from a recommendation, and another from an open house.
Because our buying experience in D.C. was so bad, we were determined not to make the same mistakes twice (we used a Realtor a friend had used to sell their house). So we decided to interview the agents, instead of wasting their time and ours going to several homes….only to figure out we didn’t really see eye to eye on things. We found out at the interviews that this was incredibly uncommon, and they hadn’t ever really been on an interview to be a buyer’s agent (only sellers). As a side note, we interviewed almost five agents till we found one we liked to sell our house in D.C.
I told all three of them (some brought in their partners) I like numbers and data. Show me samples of the data you can provide. I don’t remember any of them bringing analysis of the local market. They mostly provided local demographic info, most of which is easily found on the internet.
The Interviews:
I mentioned some neighborhoods to try and see how much local information they knew (like about the inadequate wind standards in Stonebriar etc).
We more or less asked the same questions in all three interviews…below are some samples:
---Will they double end a deal? (Mr. BT takes it as a sign that they don’t have the buyers interest truly at heart if they will double end a deal)
---What is their market outlook? (As if in harmony…..they replied, great time to buy …do it now before the market takes off again)
---What did they know of building, construction and architecture? (To find out if they could provide insight on a homes construction or potential problems down the road)
---Given our interests, what neighborhoods would be worth checking out? (To find out if they really listening to us and what we are looking for?)
All three had some local knowledge which was a plus in my book. But in the end, none of them really seemed to offer any insight or factual analysis would lead me to believe their market predictions, let alone want to pay them thousands of dollars to open doors of 10 or so homes. I highly doubt any of them read anything other than what the NAR fed them.
By the time it was all done, I was feeling increasingly uneasy about jumping into the Sacramento market, despite what all the pundits and RE professionals were saying (the rent/buy spread was just too big for comfort). I prayed about what to do. I searched the internet, and lucky for me, I stumbled across Lander and Max’s blogs (which made much more sense, in terms of fundamental economics, than what the “professionals” were saying).
Mr. BT wasn't excited about any of the agents, but he was interested in purchasing sooner than later. Thus we struck the deal that I would closely monitor the market (the weekly screen scrape) to determine if the market really was on its way up again. Eventually I decided to start sharing all the data I was collecting, and thus another bubble blogger was born.
Friday, January 4, 2008
Hiring Help
The pros and cons of different Realtor types, as I see it:
Specialist:
Knows the area well, and has seen the inside of many local homes, so has a better idea what to expect in terms of local comps. Knows or has network to find out any special circumstances about a home (such as Paul mentioned in yesterday’s comments….eeeewwww). May be too narrowly focused to realize there are other neighborhoods that fit a buyer’s needs which are less pricey. Likely biased toward particular developments.
Generalist:
If you aren’t tied to a particular area (i.e with kids in a school district) a generalist might be able to give you a broader view of the market. Generalists tend to have a better idea of overall market trends, and can likely spot signs of good vs. troubled neighborhoods more easily. Because they know what money can buy in various parts of the region, they know a good deal when they see one.
Side note: I’ve never really understood why a specialist couldn’t help someone looking in a different area. When we first moved here a friend had referred us to their family friend who specializes in East and Midtown Sac. What exactly is so specialized about the process that they can’t unlock doors in a different neighborhood?
Discount:
For folks who are tech savvy go-getters and have a strong sense of what they are looking for (probably not first time buyers), this option is great.
Go it Alone:
Not sure there is any incentive to do this. A buyer’s agent’s commission is written into the seller’s contract. In this case, hiring a discount broker would be better, since they would return some of the commission to you.
Only time this might be a good strategy, is if the seller is not working with an agent. Then both parties can save money by cutting out the middle man (i.e. if we were to purchase our rental from my landlord, we know the home and the area well so an agent would be of minimal assistance….but an RE lawyer would still be a good idea).
Specialist:
Knows the area well, and has seen the inside of many local homes, so has a better idea what to expect in terms of local comps. Knows or has network to find out any special circumstances about a home (such as Paul mentioned in yesterday’s comments….eeeewwww). May be too narrowly focused to realize there are other neighborhoods that fit a buyer’s needs which are less pricey. Likely biased toward particular developments.
Generalist:
If you aren’t tied to a particular area (i.e with kids in a school district) a generalist might be able to give you a broader view of the market. Generalists tend to have a better idea of overall market trends, and can likely spot signs of good vs. troubled neighborhoods more easily. Because they know what money can buy in various parts of the region, they know a good deal when they see one.
Side note: I’ve never really understood why a specialist couldn’t help someone looking in a different area. When we first moved here a friend had referred us to their family friend who specializes in East and Midtown Sac. What exactly is so specialized about the process that they can’t unlock doors in a different neighborhood?
Discount:
For folks who are tech savvy go-getters and have a strong sense of what they are looking for (probably not first time buyers), this option is great.
Go it Alone:
Not sure there is any incentive to do this. A buyer’s agent’s commission is written into the seller’s contract. In this case, hiring a discount broker would be better, since they would return some of the commission to you.
Only time this might be a good strategy, is if the seller is not working with an agent. Then both parties can save money by cutting out the middle man (i.e. if we were to purchase our rental from my landlord, we know the home and the area well so an agent would be of minimal assistance….but an RE lawyer would still be a good idea).
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