About Dan Krell

May 8, 2009August 5, 2019

Alternatives to a Traditional Home Sale

Home Selling Alternatives

Frustrated home sellers are searching for creative solutions to selling their homes in the face of one of the most difficult housing markets in recent memory. While some home sellers reluctantly take their homes off the market, others look to the creative methods that real estate investors have used for many years.

Two creative options that some sellers are considering are “seller financing” and the “lease with the option to purchase.” Seller financing is when the buyer signs a mortgage note that is held by the seller (rather than a bank). The buyer receives deed and title like a typical home purchase, but makes their payments directly to the seller. Seller financing is not for all home sellers as all mortgages and liens on the home must be paid off prior to closing.

Lease with the option to purchase (also known as a lease-purchase) is when the buyer rents the home and agrees to close on the sale at a future predetermined time (usually one or two years when they can qualify for a mortgage from a traditional lender). Besides forking over a large deposit (usually non-refundable), the buyer pays a monthly rent that includes an additional amount that is applied to the purchase.

Some benefits when offering seller financing and a lease-purchase include attracting a greater number of home buyers, selling in a shorter time and the potential to make more money on your sale. Qualifying for a mortgage these days is much more difficult (even for some buyers who have good income and credit); however by offering an alternative to bank qualifying, you’ll attract a larger number of home buyers! Logic follows that the greater number of serious home buyers interested in your home, the quicker your sale.

You can potentially make more money on your sale by selling for a higher amount. If there is seller financing, you don’t have to worry if the lender’s underwriter will limit the sale to the appraised value- because you are the lender. However with a lease purchase, your buyer will most likely be limited to a lender’s appraisal when they are ready to settle on the home.

Seller financing and lease-options are very risky. Besides the downside of being a landlord, your buyer could default on their payments to you. It is important that your mortgage note or lease-purchase should specify your rights in eviction and foreclosure. Eviction and foreclosure can sometimes be drawn-out and expensive. Additionally, you may have to spend money to fix up the home again after your home is vacated; you can potentially lose money while your home is vacant while you look for new buyers.

It is highly recommended to hire an attorney to assist you in these transactions because of the many legal and financial ramifications. The concepts of these transactions may be easy to understand, however writing contract clauses to ensure you’re covered in all circumstances is another thing entirely; there are many variables to consider. Many home sellers have been burned from improperly prepared contracts.

Some have used creative techniques in selling their homes with great results; but before you decide to sell using seller financing or a lease-purchase, consult an attorney. The seller financing and lease-option transactions are very risky and should not be undertaken without legal counsel.

By Dan Krell
© 2009

This article is not intended to provide nor should it be relied upon for legal and financial advice.

April 29, 2009October 5, 2019

Foundation problems don’t have to be a nightmare

Conducting a home inspection by a competent and experienced home inspector can spot signs of foundation problems. However, many foundation problems develop over time and may not have been noticeable when you purchased your home. Regular maintenance can identify foundation problems; early intervention can prevent more serious and costly issues. Don’t let your home’s foundation become your source of sleepless nights

Warning signs of foundation problems include hairline cracks in walls, windows and doors that stick or do not open and close smoothly, uneven floors, bowing walls, and stair-step cracks in brick mortar. Additional signs of a failing foundation that may be attributed to other problems include damp floors, puddles of water, and flooding basements. Foundation repair experts recommend that you have a repair specialist and structural engineer inspect your home as soon as you suspect there is a foundation problem; the longer you wait the worse the problem becomes, and the more expensive the repair.

Common causes of a faltering foundation are due to soil conditions around and under your home. Some foundation problems are due to soil settlement, however some problems are due to improper soil compaction during construction; the soil may shift and compact over time due to the weight of your home and other conditions. Some foundation problems can also be due to changes to the soil’s moisture content that is caused by poor drainage, undetected plumbing leaks, an extreme weather changes. Soil properties can change due to over saturation and/or drought, which can make the soil supporting your home’s foundation settle and shift.

Regular home maintenance can prevent most foundation problems caused by excessive moisture and extreme weather conditions. Much of the maintenance is to ensure proper drainage in and around your home. Besides checking and repairing any plumbing leaks, experts recommend the inspection and maintenance of gutters, downspouts and grading to ensure that excess water is taken away from your home. If the soil around your home is determined to be excessively dry, a foundation expert can instruct you on proper hydration techniques.

If your home has a failing foundation, don’t despair! Many foundation problems can be repaired; some say that an expertly repaired foundation can be more structurally stabile than the original foundation. The cost of repairing your home’s foundation will depend on the type of repair that’s required.

Besides leveling your home to its original position, foundation repair may include a piering and/or an anchoring system. Piering systems drive long steel shafts into the ground to stabilize the home’s foundation. Anchoring systems stabilize walls (usually basement) by attaching steel rods to walls by anchors.

A common misconception is that a new home is covered by a builder’s warranty or builder’s insurance policy for ten years. Many home builders offer warranties, however Montgomery County requires a new home builder to offer a minimum structural warranty of five years (and there may be limitations and exclusions). If you have structural and foundation problems on a new home, you should consult an attorney as warranties and coverage vary.

As many foundation problems worsen with time, early detection and repair is recommended. More information on warning signs and repairs can be obtained from a local licensed contractor or the National Association of Waterproofing and Structural Repair Contractors (NAWSRC.org).

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of March 30, 2009. Copyright © 2009 Dan Krell.

April 29, 2009October 5, 2019

Take care of your trees and they’ll take care of you

Maintain and inspect your trees regularly

Trees are an essential part of our ecosystem. Among the many benefits trees offer us include filtering our air and water, providing shade from the sun, and positively affecting our moods. Properly maintained and placed trees can even possibly add value to your home. However, if trees are not maintained properly and inspected regularly, they can become neglected and a potential hazard to you and your neighbor.

When you moved into your home you probably didn’t think much about the trees on your lot, other than their beauty and shade. Trees require maintenance and regular inspection to ensure their health and to remove any potentially hazardous limbs. For proper tree maintenance you should hire a professional tree care expert. Professional tree care experts (arborists) are licensed in Maryland by the Maryland Department of Natural Resources. If you need a Maryland Licensed Tree Expert, you can find one on their website (www.dnr.state.md.us/forests).

The Montgomery County Department of Environmental Protection recommends regular tree maintenance to include mulching and watering. Mulch layers protect tree roots from nutrient robbing weeds, provide insulation from extreme weather, and maintain the moisture provided from rain and watering. Mulching during the spring and fall will ensure your trees have the proper mulch coverage (recommended to be two to three inches deep).

Proper watering is essential for tree health. As you can imagine, summer months are hard on trees (especially for newly planted trees) so regular watering is beneficial. Newly planted trees require watering in the absence of rain. Because the water needs to reach the tree roots, deep watering methods are recommended by experts (use of soaker hoses, gator bags or, drip buckets).

If your lot is 40,000sf or greater or have a champion tree on your land, you may have to comply with the Maryland Forest Conservation Program. The Montgomery County Forest Conservation Program ensures Forest Conservation Law is enforced to save, maintain, and plant forests in the county. The Montgomery County Planning Department (MontgomeryCountyPlanning.org) can assist you in determining if your property falls in this category.

So, what happens if your tree falls and damages property? If your property is damaged, then you should consult with your insurance agent to determine if your insurance policy covers the damage.

However, if your neighbor’s property is damaged, they may have formed their own opinion about who is responsible; the outcome can be resolved in several ways. Sometimes neighbors can work out a solution on their own. Many such neighbor and tree cases are determined through mediation. Mediation is a form of alternative dispute resolution that is private and can be less expensive than going to trial. More information can be obtained from Community Mediation Maryland (www.mdmediation.org).

However, it is a good idea to consult an attorney if your fallen tree damages your neighbor’s property; these cases are not always clearly defined. If you do end up in court you may find that the court often decides such cases from case law and considers a variety of contributing factors to the resulting damage before making any decision.

I am no Lorax, but it’s clear that if you take care of your trees they will provide you with many years of shade and enjoyment; not to mention possibly avoiding “situations” with your neighbors.

March 18, 2009October 5, 2019

Market outlook: Banking on Bernanke

Confused about where the real estate market is headed? So are the pros. Realistically, the outlook for the housing market depends upon your perspective.

If you are a home owner, the almost 30% reduction in home inventory since last spring is certainly welcome news; the idea of less competition makes home sellers more optimistic about their homes actually selling. However, because they would be upside down (owe more than the sale price) if they were to sell today, many homeowners continue to wait for a more favorable market. Believe it or not, some home buyers have been turned off by bidding wars sparked by the reduced inventories of many low priced distressed homes for sale.

If you are a home buyer, reports of reduced home prices as reported by the increasing Home Affordability Index (HAI) is also good news. The HAI was 166.8 in January- an all time high (the higher the index, the greater the affordability)! Lower home prices combined with low mortgage interest rates make the current housing market the most affordable since the National Association of Realtors began tracking housing affordability in 1970 (Realtor.org).

Although optimists look forward to increased sales in the third and fourth quarter of 2009 due to pent up demand, the future may depend on other mitigating factors as well. Concerns of further sliding home prices and the state of the overall economy have had many potential home buyers keep their wait and see attitude. This sentiment was expressed during the January meeting of the Federal Open Market Committee (FederalReserve.gov), where reports of further concerns of devaluation in the housing market were discussed.

Additionally, many real estate industry insiders are concerned with the new Administration’s budget reducing mortgage interest tax deductions and increased home sale capital gains taxes (which some call an attack on homeownership). Even the ever optimistic Lawrence Yun, NAR Chief Economist, expressed concerns about the Obama’s administration’s move to restrict and lower some of the tax benefits of homeownership

Peter Hong of the Los Angeles Times (March 14, 2009: Plan to cut mortgage interest deduction stirs opposition) reported Yun to say that although the reduced mortgage interest deduction is aimed at two percent of all households, all home owners will be affected. Critics of the Administration’s new tax policies point to lower home prices in the “upper tier” sector, which will affect surrounding market areas and subsequently drive down home prices further in all sectors of the housing market.

Some are concerned about increasing mortgage interest rates due to impending inflation as a consequence of increased government spending. However, some economists point out that inflation fears are overstated because low consumer demand will keep inflation at bay.

Finally, it must be stated that Federal Reserve Chairman Ben Bernanke discussed optimism for the American economy during a recent interview with “60 Minutes” (as reported by Fox News on March 15th). He stated that a recovery could begin as early as next year if banks are stabilized. If what Dr. Bernanke stated comes to fruition, and if the HAI and interest rates remain low, then it is possible that we could see home sales modestly increase by the fourth quarter of this year and rise significantly by spring of 2010.

March 17, 2009September 16, 2018

Verify all contractor licenses

If your real estate agent says, “I have a guy to do the work…,” you might want to check if those contractors or handymen are licensed by the Maryland Home Improvement Commission (MHIC). The Maryland Real Estate Commission warns consumers that it is illegal for unlicensed contractors and handymen to do home improvements for a fee.

The Montgomery County Office of Consumer Protection website states that anyone who repairs, maintains, restores, or improves real property (homes) is required to be licensed by the MHIC. The MHIC regulates home improvement contractors, subcontractors and salespersons. If a handyman is altering, remodeling, or making repairs to your home- then the handyman is required to have a license too.

The MHIC issues licenses to contractors who have least two years trade experience; provide proof of financial solvency; and pass a test on the home improvement law and general business competency. Additionally, licensed contractors are also screened for serious criminal convictions and are required to make regular contributions to the Maryland Home Improvement guarantee fund.

If you selling your home, make sure that any completed repairs are performed by a contractor or handyman that is licensed by the MHIC. The Maryland Real Estate Commission and the Montgomery County Office of Consumer Protection (OCP) recommend that you ask contractors and handymen for their MHIC license number to verify their license status and complaint history before they begin working on your home. You can verify MHIC licenses by either calling the MHIC or through their website (www.dllr.state.md.us/license/occprof/homeim.html). Additionally, it is recommended that you check with the OCP (240-777-3636) and the Better Business Bureau (202-393-8000) for any filed complaints against the contractors.

Additionally, verifying that your contractor or handyman is actively licensed prior to any home improvement will ensure that the contractor can obtain the proper permits (if required) as well as protect you from shoddy or incomplete work. The Maryland Department of Labor, Licensing & Regulation (DLLR) has made an effort to have permitting offices require all contractors present their licenses when applying for permits. Additionally, the MHIC investigates all consumer complaints (some complaints result in an award for monetary damages from their guarantee fund); the MHIC will also pursue and aid in the prosecution of violators of the Maryland home improvement law.

Two specific MHIC investigations of consumer complaints last year resulted in a revoked license, a fine and jail time. The first investigation (as reported by WBAL TV in Baltimore on October 21, 2008; wbaltv.com) resulted in a revoked license from a contractor who had numerous consumer complaints of shoddy work (one home owner complained that after he paid the contractor for an addition, the addition was ordered to be torn down for being unsafe). The second investigation (as reported by the DLLR on December 16, 2008) was of the deeds of an unlicensed contractor, which resulted in a $65,000 fine and thirty days in jail.

Even though you trust your real estate agent, the fact that a real estate broker was fined by the Maryland Real Estate Commission last year for allowing the use of an unlicensed contractor (to perform repairs that were listed in a contract addendum) should be motivation enough to check out any contractor before they begin to work on your home.

Original published at https://dankrell.com/blog/2009/03/17/verify-all-contractor-licenses-its-the-law/

By Dan Krell