Home buyers and sellers at risk

home buyers and sellers at risk
“Real Estate Miranda Rights”

I have always found it curious that area agents feel a need to be licensed in three state jurisdictions (Maryland, DC, and Virginia) as if there is never enough business in any one area.  I get the idea that it potentially helps them make more money.  But are they putting home buyers and sellers at risk?

Being a competent real estate agent requires more than just a license.  It also requires more than an understanding of the neighborhood housing market nuances.  A competent agent knows the jurisdiction and local statutory requirements where they are doing business.  They should also be knowledgeable of and use the latest contracts and disclosures.

It’s more than a full time job to be a local expert; following sales trends, knowing the latest home listings, and keeping up with specific statutory requirements. It’s very difficult (maybe almost impossible) to be a local expert in more than one county, let alone three states!  And as more state and local legal, zoning, and disclosure requirements for buyers and sellers become enacted – Home buyers and sellers at risk from incompetent agents.

For example, the statewide requirement of licensees to ensure home improvement contractor referrals are licensed is a consumer protection that many are unaware.  The requirement ensures that consumers can go to the MHIC if the work is faulty and/or there are issues with a licensed contractor.  If your agent unwittingly recommends an unlicensed contractor for home inspection repairs, (besides any potential action against the licensee), a home buyer could demand you make additional repairs and/or obtain certification from a licensed contractor that repairs were completed properly.

And effective October 1st, Maryland is altering its agency law again.  Among the requirements, agents conducting an open house must conspicuously post a notice from the Maryland Real Estate Commission.  The notice (sounding like Miranda Rights) states that any information provided to the open house agent is not considered confidential and buyers are “entitled” to representation.  What would your reaction be if your agent was unaware of this and the buyer is now seeking to void your contract because they were not given their “Real Estate Miranda Rights?”

Recent home seller requirements in Montgomery County are further example where you could be at risk if your agent is unaware of the local statutory requirements and ordinances (such as utility costs and radon test requirements).  Non-compliance and/or non-disclosure could possibly result in a fine.  And of course any future ordinances (such as a sign ban) furthers the risk.  Who knows?  Maybe the County Council will devise a local registry of agents doing business in the county to promote real estate agent competency and protect consumers.

Do yourself a favor and hire a competent real estate agent who is not only aware of sales trends and neighborhood values, but the local practices and regulations as well.

Increasing statewide and local regulation is making local real estate sales a specialized endeavor.  And as a home buyer or seller, you should bear this in mind when hiring real estate agent.  If you’re not being advised properly as a home seller, you’re at risk of non-compliance with statutes, regulations, and/or ordinances – which has potential for fines and a contract dispute.  If you’re not being advised properly as a home buyer, you’re at risk of missing specific local disclosures and notices that could affect you financially and/or physically as a home owner.

Copyright © Dan Krell

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Property Brothers option to home buying

The Property Brothers option
The Property Brothers option when buying a home – home improvement infograhic (from census.gov)

If you’re looking for the perfect turn-key home, you may find that the already limited home inventory is further limited by the many homes with deferred maintenance and those that are in need of updates.  If you’re like the many frustrated home buyers in today’s market, you may decide to take the route of buying a home that includes the Property Brothers option.

As you know, HGTV’s Property Brothers is one of the most popular real estate shows on cable.  What makes the show work is the concept of transformation; creating a model home from one that is crying out for TLC.  Of course, the magic of TV makes it seem easy; home buyers appearing on the show put their trust into the dynamic duo to find the right home and to make it perfect.

A warning, however, this process is not for everyone.  Undergoing this type of project (buying and rehabbing a home) is taking an already exasperating process and making it an emotional and financial challenge.  It is also a time consuming, as you’re totally involved – from buying to rehabbing the home.  Your experience may be similar to those on TV, nevertheless it is more likely to feel like the movie “The Money Pit” or somewhere in between.

Unlike the Property Brothers, you don’t need your real estate agent and your contractor to know each other.  Each has a distinct role; one is helping you acquire the home, and the other is remaking it.  However, it’s a good idea to make sure each is licensed and experienced in this type of process.  Ask for references; some contractors will even have a portfolio of their work.

Before you begin taking the Property Brothers option, make sure you have the funding and your real estate agent and contractors are ready for action.

Talk to a lender about a renovation loan.  Besides providing the money to buy the home, a renovation loan will provide funding for renovations.  Loan programs and mortgage limits vary, so it’s a good idea to get qualified before you write a contract to buy a home.  Make sure your contractor can provide details about the renovation, as the underwriter will review the plans.  Consider a FHA 203K program, which also offers a “streamline” version for less expensive renovations.

Working with a top notch real estate agent is key in not only finding a home, but also negotiating a price.  The ability to think outside the box is very helpful in this phase.  They should be able to find the “diamond in the rough,” that provides suitable space at the right price.  If you’re communicating well with your agent, they will understand your requirements.

Once you identify a home (and before you write the offer), meeting with the contractor will determine if your vision is possible, and its price.  Be realistic and flexible.  Be prepared for bad news and to move on to another home.  Sometimes the home needs too much work and/or the cost of the renovation could be beyond your budget.

Even if you have lots of cash to spare, it’s recommended that you start by creating a budget.  Besides the acquisition cost, consider the renovation costs and carrying costs (if the project is long term).  Also decide on your limitations.  You may decide on limiting renovations to kitchen and bathrooms; or you could broaden the project to be more ambitious.  Consider creating a short term and long term plan for the house; focusing on critical repairs immediately, and making other updates over time.

Copyright © Dan Krell

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Home prices, power lines, and cell towers

home prices
Power lines, Cell towers, and home prices (infographic from bragg.com)

Anyone who has bought or rented a home has been told about lead paint, radon, and maybe even asbestos, as well as other potential hazards in the home.  But what about potential hazards brought about by technology, how do they affect home prices?  Many shirk away from homes that are close to power lines or cell towers because of health concerns; while some are repelled by the aesthetics.   Regardless, there is some impact on your home’s value when in close proximity to power lines and cell towers.

What is considered to be necessary for modern living, power lines and cell towers are fundamental to our lives.  And although many are wary of the health effects from living nearby these devices; they will still have wi-fi, and a microwave oven in their home, and they probably also use a cell phone.  All of which emit similar types of radiation.

According to the American Cancer Society (cancer.org), the type of radiation emitted from power lines and cell towers are non-ionizing radiation, like the electronic devices mentioned above.  Non-ionizing radiation does not remove particles from atoms, nor does it directly change DNA.  Power lines emit ELF (extremely low frequency radiation), which is a lower energy radiation than visible light and infrared.

Cell towers, on the other hand, emit radiofrequency (RF) radiation that is between FM and microwaves.  Although very high levels of RF can be damaging to body tissue, the American Cancer Society website states that cell phones and towers emit RF at much lower levels (of course, one should not stand next to a cell tower).  More about power lines, cell towers, and health concerns can be obtained from the American Cancer Society website.

Findings of a 2005 study conducted by Bond & Wang (The Impact of Cell Phone Towers on House Prices in Residential Neighborhoods. The Appraisal Journal. Summer 2005.) indicated that about 40% of the control group were concerned about health effects of living in close proximity to a cell tower; which compared to 13% of respondents already living nearby a cell tower.  Nevertheless, both groups were highly concerned about future property values: 38% of the control group would lower asking price by as much as 20%; while almost two-thirds of the respondents living close to a cell tower would lower the home price by as much as 19%.

Roddewig & Brigden’s review of the research into property values surrounding power lines was enlightening (2014. Power Lines and Property Prices. Real Estate Issues, 39(2),15-33.).  They stated that the appraisal industry does not automatically reduce prices just because of a property’s proximity to a power line, even though there has been history of concern over the environmental impacts.  And caution home owners, buyers, and real estate professionals to not substitute opinion for analyses of actual home prices.

They concluded that if there is a price impact on a home’s value, it is a small reduction.  They explained that “the real estate appraisal profession has been studying those prices since the 1960s.  Some of the many published studies have found adverse impacts to property prices and values while others have found no impact or statistically insignificant impacts despite media attention given possible health effects of exposure to EMFs.”

Roddewig & Brigden also found that the long history of research suggests that negative impacts on property values from power lines can be limited by proper “land use planning and subdivision layout procedures.”

Copyright © Dan Krell

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Think resale when home buying

think resale when home buying
think resale when home buying (infographic from pureenergies.com)

A common question, especially among savvy first time home buyers, is what will the resale value be like when they sell?  Of course they are not asking for a specific price, but rather they question if the future home buyer will find the home just as desirable as they do. In other words, think resale when home buying.

That is a good question, since your home is one of the largest investments you’ll ever make; and you want to make sure you’re making a sound investment.  Some things to keep in mind when buying a home and keeping an eye to the resale includes: focusing on current desirability; keeping the home complimentary to the neighborhood; considering added value; and not going overboard with updates and upgrades.

Ask yourself what attracted you to the home you’re purchasing and you’ll have a number of items that probably will make it desirable to the future home buyer.  Most likely at the top of the list is the location.  “Location, location, location” may be cliché, but it holds true.  Items such as the home’s accessibility to metro and major commuter routes are important, along with its proximity to neighborhood and local amenities.  Other top attractors to the home possibly include the living space and back yard.

Consider the future plans for the area, as it could affect the home’s resale.  You can view the master plan for the county and specific localities on the Maryland-National Capital Park and Planning Commission’s website (montgomeryplanning.org).  You can decide if the home you’re about to buy will be impacted by some future development or zoning change.

Another resale factor is how the home compares to its neighborhood cohorts.  Is the home similar or does it obviously different?  Has the current owner modified the existing living space in any way?  Have they converted a three-bedroom home into a two-bedroom home; or similarly, added a bedroom by taking space from an existing bedroom or living area?  Such modifications can make the home feel cramped and smaller and affect future resale.

Think about how the home seller updated and upgraded the home.  Although not all updates add value, many will increase the home’s appeal to buyers.  Keep an eye on the kitchen, bathrooms, and flooring, as home buyers typically consider these as high cost upgrades and can affect resale value.  Ask the seller if they hired licensed contractors for major renovations and additions.  Also, check for appropriate permits, and ask for plans and invoices.

Additionally, do your due diligence when it comes to “green” upgrades.  Although the home seller may have considered the investment into green upgrades money saving, they are not always reliable and can be expensive to repair.  And it may be all the rage among home owners, solar panels may come with lease payments and/or replacement costs with little or no net savings; so it’s a good idea to ask for associated lease agreements and utility bills, as well as replacement and maintenance costs.

When it comes time for you to sell, don’t go overboard when with updates and upgrades.  Contrary to belief, doing too much to the home could have a minimal return on your investment, or even decrease the value.  Updates and upgrades should be comparable to similar homes in the price range to maximize return on your investment. Also, steer clear from short lived trendy designs.  Experts recommend to focus on function and substance when making upgrades.

Copyright © Dan Krell

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Radon is everywhere – testing is not

Radon is everywhere
Radon is everywhere (infographic from inhabitat.com)

Montgomery County MD is implementing two controversial bills. New county recordation tax rates. And – Radon is everywhere, but new law falls short to protect county residents.

Effective September 1st, increased recordation tax will be collected in Montgomery County.  The rate for the first $500,000 will be $8.90 per $1,000.  The rate for any amount exceeding $500,000 will be $13.50 per $1,000.  The individual primary residence exemption is also increased from $50,000 to $100,000.   Read more about the controversy here.

Recordation tax is an excise tax that is collected for the “privilege” of recording an instrument in the land records.  Of course, transfer tax is collected when a home is sold; and is also collected when a mortgage is refinanced.

Effective October 1st radon testing is compulsory for homes that are sold in Montgomery County MD (however, the law lists exemptions).  The seller must test, or allow the buyer to test radon levels in the home.  The radon test must not be older than one year from the closing date.  Both the buyer and seller must receive the radon report.  If radon levels are above the EPA recommended action level of 4 picocuries per liter, then an estimate must be obtained from a licensed contractor to reduce level to 2 picocuries per liter.  Read more about the controversy here.

Radon is a toxic, radioactive gas that is formed by the natural breakdown of radium.  Radon seeks its way to the surface as an odorless, colorless, and tasteless gas.  A 1999 National Academy of Sciences report (The Biological Effects of Ionizing Radiation, The Health Effects to Indoor Radon) indicated that radon causes up to 22,000 lung cancer deaths per year.  As there are no immediate symptoms of radon exposure, the only way to know if a building has high levels of this gas is to test for it.

Radon is everywhere, but testing is not.  Although the radon testing law is well intentioned, it misses the mark on comprehensive radon testing, education and awareness.

First, the law may unintentionally provide a false sense of security to home buyers. By requiring the test by the sale, it suggests to home buyers that the initial radon test (when the home is purchased) is the only test needed.  In fact, the EPA recommends radon testing every two years.  Homes with low radon levels may change over time to have increased levels, and vice versa.  Additionally, the self-testing conducted by home owners may not be accurate (or worse, may be intentionally erroneous). Consequentially, home buyers should hire a qualified expert to test the home regardless of home seller provided test results.

Second, it must be asked as to why only require testing for single family home sales?  Radon is everywhere.  The radon law should have been more comprehensive to also include radon testing every two years for single family rental units, schools, and public buildings.

And finally, the law should have provided for consumer education much like the EPA lead paint pamphlet (Protect Your Family From Lead In Your Home) that is required for home sales and rentals.  Likewise, why not provide to consumers the EPA pamphlet “Home Buyer’s and Seller’s Guide to Radon” (epa.gov/sites/production/files/2015-05/documents/hmbuygud.pdf)?

Copyright © Dan Krell

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.