Does a Vacant Home Sell Faster?

by Dan Krell © 2007
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When I list a home I invariably get the question, “Don’t vacant homes sell faster than occupied homes?”

It is an interesting debate in the real estate industry. Well, not so much a debate as it is a difference of professional opinion and culture. The rationale for vacating the home prior to listing it includes ease and convenience, for both the home seller and the prospective home buyer. After all, the home seller will not have to be bothered with keeping the home clean on a daily basis anticipating home buyers coming to see the home. Additionally, strangers won’t be traipsing through the home at odd times or while the home seller is taking a shower (which does happen).

For the prospective home buyer, viewing a vacant home can’t get any easier. There are no restrictions on showings; there aren’t any worries on going too late in the evening or too early in the morning. Also, there aren’t any worries on letting out pets because there are none in the home.

When the real estate market was on a run away pace, the advice of vacating a home may have been harmless as well as making some sense. The thought was, “Why not move out before listing? Some one will be moving in the home in several weeks.”

Now that the real estate market has become (or becoming) more realistic, the reality selling a vacant home is setting in. An empirical study conducted by Chien-Chih Peng and published in the June 22nd 2004 issue of the Appraisal Journal concluded that vacant homes take longer to sell as well as selling for less than occupied homes.

While viewing a vacant home, you notice traffic patterns as well as furniture footprints. If you have ever moved furniture out of a room, you probably noticed that the room looked a bit shabbier empty than with furniture because of the marks left behind from furniture and traffic through the room. You tend to notice more imperfections than if the home was furnished. Additionally, if the home is on the market for an extended period, dust buildup and an overgrown lawn becomes unsightly. Sometimes an unused toilet gets a ring that will become a home buying deterrent. If the home is not maintained on a regular basis, the vacant home looks as if it is an abandoned home that has no appeal.

Why do home builders fully furnish their models? It’s not because they want to advertise someone’s furniture, it is because they want to give you an idea of how the space can be used. Home builders know that selling a home is much more than a financial investment, it’s an emotional investment. Vacant homes are bleak and sterile, whereas a furnished home can show its warmth and connect emotionally with the potential home buyer.

Finally, savvy home buyers may look at a vacant home as a sign of a desperate home buyer in need of a quick sale. A vacant home may be an invitation to lower offers because it is thought to be a financial waste or strain on the home seller.

The message is clear. Whether or not you plan to live in your home during the sale, keep your home furnished modestly, clutter free, and clean.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This column was originally published in the Montgomery County Sentinel the week of 2/5/2007. Dan Krell © 2007.

Do You Know What a Home Inspection Should Cover?

by Dan Krell
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Now that the market has turned away from the record seller’s market we recently experienced, homebuyers are asking home sellers for such things as closing cost assistance and home warranties. It is also common to ask for contract contingencies such as financing approval and a home inspection.

During the height of the sellers market it was common for home buyers to forgo the home inspection so as to have their purchase offer look better than others. These home buyers took the chance that the home did not have any latent defects and was in acceptable condition.

If you are a home buyer, it is highly recommended to have a home inspection. The goal of a home inspection is to ascertain the general condition of the home including the structural condition, revealing items that need immediate attention, and determining the remaining lifespan of the home’s systems by visually inspecting the home and its components. Because the inspection is visual, it has limitations. Hiring the right home inspector can make the difference.

Before you hire a home inspector, consider that not all home inspectors are equal. It is recommended that you interview your home inspector and ask basic questions such as what are their qualifications and experience, what certifications/licenses they have, do they carry errors and omissions insurance (ask for a copy), can you contact a past client for a recommendation, what will the inspection cover, how long will the inspection be, and is the inspection guaranteed.

The Maryland legislature passed a home inspector licensure law that has been deferred due to funding constraints. So although your home inspector may not licensed, they could be certified by and/or have memberships in the National Association of Certified Home Inspectors and the American Society of Home Inspectors. Both associations require the home inspector to follow an education requirement as well as an ethical code and standards of practice.

What should your inspector be looking for? The American Society of Home Inspectors standard for a home inspection is to examine the condition of the home’s heating system and/ or central air conditioning system (temperature permitting), interior plumbing system, electrical system, roof, attic and visible insulation, walls, ceilings, floors, windows, doors, foundation, basement and structural components. The findings will be recorded in a report that will be given to you at the end of your inspection.

Like everything else in life, a home is not a perfect structure. Finding problems in the home is not a definite indicator to not purchase the home, however it is more of a guide to determine if you can afford to take on repairs immediately or in the future. Depending on market conditions, it is common to ask the seller to make the necessary repairs.

Home inspections are not just for older homes. It is becoming more common to have a home inspection of a new built home as well. Although home builders have their own quality assurance measures, no one is perfect and mistakes are overlooked.

For more information about home inspection scope and limitations as well as finding a qualified home inspector, you can search the websites of the National Association of Certified Home Inspectors (NACHI.org) and the American Society of Home Inspectors (ASHI.org).

This column is not intended to provide nor should it be relied upon for legal and financial advice. This column was originally publoshed in the Montgomery County Sentinel the week of 1/22/2007. Dan Krell © 2007.

Know Your Rights as a Home Buyer and Make a Budget

by Dan Krell
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Buying your first home is one of the most exciting things you can do; it also happens to be one of the most stressful things in your life as well. To help cope with this wonderful rite of passage, we try to prepare ourselves by doing research and getting advice from family and friends.

In theory, all residential real estate transactions are similar. However, the reality is that every transaction is subtly different with its own problems and issues. To help prepare you for your first purchase, here are some common tips to assist you in your purchase.

Make a budget. Making a housing budget and sticking to it is one of the most important steps in the process. Your housing budget is determined by your income, your debts, and your life style. Consulting with a lender can be helpful determine your housing budget. In creating your housing budget, don’t forget to include other housing related costs such as taxes, home owner’s insurance, utilities, and regular maintenance.

Know your rights. Knowing your home buyer rights can help you make the right choices during the process. If you follow this column, you have read how some real estate professionals are ignorant or unconcerned with real estate laws and ethics. Protect yourself by becoming aware of your rights protected by the Real Estate Settlement Procedures Act (RESPA), Fair Housing laws, and predatory lending laws. You can find more about these laws at HUD.gov.

Among your home buyer rights, you have the right to choose the Realtor, lender, insurance company, and title company you want to work with. Choosing a Realtor is subjective; after all, you are putting your trust in them to assist you in one of the largest purchases of your life. Don’t feel compelled to use a particular lender or title company because your Realtor recommends them or makes promises of discounts. Shop around, get quotes and compare services.

Do your homework. Thinking through such questions as where to live, what type of home to buy, how much to spend, what type of neighborhood amenities are important, will help you in your decisions. You should conduct some research on the communities and homes you are considering to purchase.

If you are uncertain about what is important to you in a home, viewing as many homes as possible can help you determine and narrow your preferences. As you shape your preferences, you will find that it is easier to shop for a home.

Know your expectations. Are your expectations realistic with regard to the home buying process, and how much home you can buy? When interviewing Realtors, discuss your expectations of them as well as what is expected from you in return. You should also discuss your expectations of what you can buy. It is common for first time home buyers to amend their expectations during the process. If you are relocating from outside the metro area, it is common to have sticker shock and change your expectation of the size of home you can buy.

As a home buyer, using a Realtor and lender can help you through the process. In the end, however, it is your choice and your home. Do your home work and be prepared.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This column was originally published in the Montgomery County Sentinel the week of 1/22/207. © Dan Krell 2007.

A Look Ahead to Affordable Housing

by Dan Krell

As the local real estate market has cooled over the last few months, many home buyers continue to wait for additional cooling. The Maryland Association of Realtors (mdrealtor.org) reported that home sales in Montgomery County for total units sold decreased over the last six months as compared to the same time in 2005. Although sales decreased, the average home price increased about 1.5% during the same time period; that is until December. December 2006 recorded a decrease in the average home price in Montgomery County of about 5.3% as compared to the same time in 2005.

Whether December’s statistic is an aberration or the start of a trend, the fact is that many home buyers continue to be squeezed due to the lack of affordable housing. Additionally, many home owners are being squeezed as well as home maintenance costs continue to rise.

The Maryland Association of Realtors has been keeping a record of affordability in the form of the Maryland First Time Homebuyer Affordability Index (MDHAI) since 2000. The index is a monthly indicator of the affordability of a starter home for prospective Maryland first time home buyers. The index and affordability have a positive correlation. The highest level the index reached was 80.1 in 2001, which meant that the average home buyer had 80.1% of the income needed to purchase a home. Since then, the index has decreased to 66.8, 61.9, and 53.2 in 2003, 2004, and 2005 respectively. The October 2006 index was 44.9, which was an improvement of the last six months.

Although the regional economic outlook for next decade is strong, other factors threaten housing affordability. A study conducted by the by the Maryland Association of Realtors entitled “the Future of Housing” cites rising interest rates, population growth, housing appreciation, moderate income growth, rising real estate taxes, and rising energy costs as obstacles to affordable housing.

It is clear that affordable housing is and will continue to be a regional issue. Although, federal, state and local government resources exist for home buyers and home owners in need of financial assistance, non governmental resources are being created to assist those in need as well as to assist with policy and research.

The Maryland Association of Realtors has created several initiatives to educate consumers about affordable housing resources. The Maryland Association of Realtors Housing Affordability in Maryland website (marhousingaffordability.org) provides research, statistics, and resources. The MD Home Programs website (mdhomeprograms.com) provides home buyers the appropriate resources and education to assist in the purchasing process. The League of Maryland Home Owners (leagueofmarylandhomeowners.com) is a coalition of home owners and prospective home buyers advocating for solutions to the affordable housing dilemma.

Although affordable housing is not one of the top legislative topics for the new Maryland legislature, it continues to be one of the top areas of concern. The Maryland League of Homeowners has an open letter to Governor Elect O’Malley and other state representatives that outlines recommendations for housing affordability which include several business and personal tax incentives, statewide coordination of resources, and additional funding for workforce housing.
If you are concerned with the future of affordable and workforce housing, you are encouraged to go the Maryland League of Homeowners website (above) and sign the open letter to our elected state representatives.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally pubished in the Montgomery County Sentinel the week of 1/15/2007. Copyright © 2007 Dan Krell

Keep an Eye on Your Pipes

by Dan Krell
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Whether you own an old home or a new home, maintenance is the key to keep your home in top condition. Obviously older homes require a different level of maintenance compared to a new home. However, no matter how old your home may be, you want to keep an eye on your pipes.

If your home was built in the early part of last century, your pipes could be lead or galvanized steel. Lead pipes have the tendency to leach lead in your drinking water. Since lead has been identified as a hazardous material, it is not an ideal for indoor water delivery. Because of the inherent dangers, most lead pipes have already been replaced; however if you still have lead pipes in your home, you should consider having the pipes replaced. You can access a wealth of information about lead at the EPA website: www.EPA.gov/lead.

Another type of pipe used in older homes is galvanized steel pipes. Steel pipes that were used at the time had a tendency to rust, so the thought was that by galvanizing the steel pipes rust on the outside of the pipes would be inhibited. The problem that developed was that galvanized steel pipes rust from the inside out. The rust builds up on the inside and consequently reduces water pressure. Additionally, these pipes have had a history of leaking and bursting. As a result, some insurance companies will not underwrite a home with galvanized plumbing.

Many homes built in the 1980’s and early 1990’s had plumbing with polybutylene pipes. Polybutylene was supposed to be the pipe of the future, as it was inexpensive and easy to install. Polybutylene pipes have had a checkered past as they have a history of leaking and bursting. The problem stemmed a class action suite against Shell, the manufacturer of the polybutylene resin used in these pipes. Although polybutylene pipes are no longer being installed, many homes continue to use these pipes as the internal water delivery system. If you have polybutylene pipes, you can get more information about the class action suite, replacing the pipes and other information at www.pbpipe.com.

Presently, the most common source of water delivery in the home is through copper and PVC pipes. Although considered reliable and safe, copper and PVC pipes have had their problems as well. Copper pipes can develop pinhole leaks; locally, WSSC has been researching this problem for a solution (www.wssc.dst.md.us/copperpipe/pinholescroll.cfm). Additionally, lead solder used to connect the pipes can leach lead into the water; new lead free solder is now being used to eliminate this problem. Alternatively, PVC pipe is cheap, easy to install, and durable; however, there is some controversy that surrounds PVC as it is associated with a carcinogen, dioxin, which is released when PVC is produced and if it is incinerated.

No matter what type of pipe is in your home, general maintenance can minimize potential problems. You should know the location of the main water shut-off valves; periodically inspect pipes for leakage; make sure all plumbing fixtures are firmly secured; outdoor faucets should be shut off from the interior and drained; and be sure pipes in areas such as crawl spaces are protected from freezing. For more specific safety and maintenance information regarding your pipes, you can contact the Plumbing-Heating-Cooling Contractors Association (www.phccweb.org).

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally pubished in the Montgomery County Sentinel the week of 1/8/2007. Copyright © 2007 Dan Krell.