Category: Home Buyer

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Surfing for Homes

Before you were surfing for homes on computers, brokers kept track of their listings by card catalogues. As a matter of fact, these old cards were displayed at the old Rockville office of Metropolitan Regional Information Systems, Inc. (MRIS), (the old multiple list service).

During that time before the MLS, brokers were not required to share information and listings with other brokers. This proprietary system allowed the broker to maintain the buyers that came to seek information on homes for sale.

Looking back, home buying was not complicated. Home buyers would go to the local real estate office and see what homes were available. Homes for sale and other information were limited to what your Realtor knew. Most likely, the only homes your Realtor showed you were homes that were listed by that real estate firm. Needless to say, the real estate industry has come a long way since then.

Since the advent of the multiple list service, technology has made a huge impact on the real estate industry. Presently, surfing for homes has never been easier. Home buyers can look for homes on the internet and get listings via email and cell phones. As a matter of fact, if you go onto the internet, you will have hundreds of Realtors (including myself) as well as Real Estate Companies offer to send you home listings.

With all of this information flying around, what’s the most reliable and accurate information available?

The most reliable and accurate information available for Realtor listed homes is through MRIS. Unfortunately, if you are not a real estate professional, you can not have a membership to peruse the database. The good news is, however, that all the other databases and online searches of Realtor listed homes are fed by the MRIS. The quality of the information depends on the website’s ability to update their information from MRIS and how it disseminated.

There are a few popular internet searches that offer free searching without offering information. If you choose additional information or services from these sites, you must fill out an information page giving at least a name and email address. Although you get to search on your own, the sites do promote realtors and other real estate professionals.

Older style internet home search services forward your information to a local Realtor who will send you the information you seek. All these sites are useful and you can get the information you desire as long as your search criteria is specific enough. Unfortunately, if your search criteria are too specific, you will miss seeing homes that you may actually consider buying.

There are many alternative sites tthat allow surfing for homes too (such as craigslist.org). These sites allow specifc posts by brokers and FSBO’s.

Having all the technology and information available online is useful, however there are drawbacks. The main drawback is that most of the information is limited and you must contact someone for additional information. No matter what manner of internet home searching you choose, you will be more informed than not having done the search at all.

By Dan Krell
Copyright © 2016

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A Final Walk Through Is Not Always A Walk in the Park

So your home inspection went well. The pest inspection came out all right. Everything is a go with your financing, and the title is clear. Settlement is two weeks away, are you excited about your home purchase? You should be-congratulations! Although everything looks perfect, don’t take your final walk through lightly.

As a home buyer, you have the right to inspect your purchase prior to settlement. As a matter of fact, both the Maryland Association of Realtors (MAR) contract and the Greater Capital Association of Realtors (GCAAR) regional contract have clauses that state your right as a homebuyer to receive the home in the same condition as the day you contracted to purchase the home.

Each clause, although worded slightly differently, states that the home will be delivered to the home buyer free of debris and that all mechanicals, cooling, heating, plumbing, electrical systems, and smoke detectors to be in operating order at time of possession (usually settlement). The MAR contract states that the home buyer can inspect the property up to five days prior to settlement. Both contracts’ make allowances for additional provisions which include home and environmental inspections.

Ok, so there are provisions for the final walk through in my contract, but what is the purpose of having a final walk through and what should I be looking for? The general reasons for having a final walking through is to ensure (among other things) that the home has not been damaged between contract ratification and settlement, that all the seller’s possessions and all trash are removed, items to remain are actually in the home, all mechanical systems and appliances are operational, and that all repairs listed from your home inspection were completed.

Your Realtor should provide you with a checklist of items to be checked by both of you during the final walk through. Generally, you should be looking for cosmetic and structural changes to the home which include damage to walls, staircases, and doors that occurred during the seller’s move prior to settlement; any items that should have been removed by the seller but left behind; and any item that was removed by the seller but should have remained in the home. Additionally, you should check the operation of appliances, air conditioning or heating (depending on the time of year), and any electrical devices including smoke detectors. Finally, you should check that the seller has completed all repairs as agreed in the home inspection addendum.

A Final Walk Through Is Not Always A Walk in the Park

Having a final walk through is just as important when you are purchasing a new home as when purchasing an older home. The builder will schedule a final walk through with you and your Realtor. When having your final walk through on a new home, the builder will check that all the mechanicals, heating, cooling, appliances are operational. Additionally, they will check that any customization that you ordered is correct. You should point out any cosmetic defects, such as dings in the wall, unevenness in paint colors, or any thing else that is not satisfactory. The builder is usually happy to repair or replace items until satisfactory.

If while conducting your final walk through you notice a problem with the dishwasher, what can you do about it? Occasionally, when conducting a final walk through, there are some problems. For example, it is not uncommon for the air conditioning to fail in the summer, or one item from the home inspection addendum was not repaired. If that happens, you have a couple of options. Your first option is to ask the seller for a monetary credit at settlement so you can make the repairs after settlement. Your other option is to delay settlement until the seller makes the necessary repairs.

by Dan Krell
© 2006
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Finding a real estate bargain

Many first-time home buyers and investors whom I encounter typically ask about foreclosures and handyman-specials. Essentially they are looking to buy a real estate bargain. When is the best time to by a real estate bargain?

A foreclosure is a home that has been repossessed by the holder of the mortgage note, usually a bank. The process of foreclosure varies depending in which state the foreclosed home exists and what type of mortgage document exists on the home. To make a long story short, the home is either auctioned to the highest bidder, or the home is taken over by the bank to be sold on the market. The foreclosed homes that are put on the market are also called REO, which stands for real estate owned by bank.

Foreclosed homes can also be bought at auction. Auctions are usually conducted at the courthouse by a local auctioneer. These types of auctions are also known as a trustee’s sale or substitute trustee’s sale. If you are interested in attending an auction, you can find the advertisements for the auctions in the local papers’ classified section. To bid on the home, you must have the minimum deposit in the form of certified funds. The minimum deposit is usually posted in the advertisement. If you are buying a foreclosed home at auction, you are essentially buying it “as-is” without the ability to do a home inspection prior to close.

When the bank has taken title to a foreclosed home, a Realtor is usually hired to list the home on the Multiple List Service (MLS). In this scenario, you have an opportunity to view the home before you decide to submit your offer. The home is generally sold “as-is.” Hopefully, you will have a Realtor of your own to advise you of the value and general condition of the home.

Generally, the process of buying a foreclosed property can be bumpy due to foreclosure process. Sometimes the previous owner will damage the home (sometimes on purpose), or take valuable materials out of the home such as copper or other fixtures. Additionally, the home is locked up for months, often without utilities. Mold growth is typical due to water penetration, and/or other structural and environmental concerns.

A handyman special is a term that is often used when a home is sold by the owner. The home can have deferred maintenance or other damage.  The home could be a rental property in need of “TLC.” Many times, a handyman special will require mostly a great deal of cosmetic work, such as painting, carpet, etc. Sometimes, there are some structural concerns, such as (but not limited to) replacing a roof, or fixing walls.

Overall, when considering a real estate bargain whether you will have to determine if the home is worth the price you want to pay. In addition to the acquisition cost, you will have to consider the total cost to repair the home, as well as the costs to make updates. It is also important to look at the recent neighborhood comparables to see if the price or adjusted price (price plus costs for repairs) is in line.

If the market is depressed or a buyers’ market, there may be some choices in a real estate bargain.  However,  if the market favors the seller, there are fewer bargains. In a sellers’ market, distressed properties can sell for close to market value.

by Dan Krell © 2005

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How your interest rate effects you

Last week, I was in Starbucks talking about interest rates and the current real estate market. It was not unusual that I was in Starbucks nor conducting business there, as it seems that Starbucks, these days, maybe second to the golf course in the culmination of business. This day, I happened to be talking with Ken Cusick. Ken and I were discussing the vulnerability of those homeowners who purchased their home with adjustable mortgages, primarily interest only mortgages and their mortgage rates. Ken had a lot to say about this topic. Ken is the principal of Cusick Financial, LLC, a financial consulting firm located in Olney, MD specializing in residential and commercial financing.

Ken and I agreed that many homeowners have a great mortgage rate because of the historically low interest rates we have had recently. I expressed my concern about the many homeowners who have bought their home with an interest only or variable rate mortgage to either allow them to buy more home than they normally could afford, or to keep payments down. After all, the interest rates for these mortgages usually started between three to four percent. This cut the mortgage payment by at least a few hundred dollars a month, if not more.

Ken had a few things to say in response, as well as a few words of advice. First, Ken asserted that because the interest only and variable rate mortgages are tied to short term indices, they usually tend to be a better deal than 30-year mortgages (which are tied to long term bonds and indices). Depending on the type of index the mortgage is tied to, the interest rate can change annually or even as frequently as monthly. He stated that the unusually low interest rate environment we have had in the past five years has made housing more affordable, which paradoxically led to the significant increase in home prices we have experienced.

Second, Ken stated that those homeowners who have a fixed rate mortgage would always be able to afford their home as long as their income never decreases and they never need to sell their home. Even if there is a correction in the real estate market to lower home prices, these homeowners are in good shape.

Third, homeowners who have interest only or variable rate mortgages are subject to the volatility of the market as rates rise and fall, and are at significant risk. As interest rates rise, their monthly mortgage payments rise. Additionally, as interest rates rise, the cost of housing rises and housing demand decreases. This creates difficulty for those who were betting on interest rates to stay low because the affordability of the mortgage becomes an increasing burden on those who may not be able to afford higher payments. Add that to the possibility of their home being devalued increases the burden of loss.

Ken’s advice was simple. If the homeowner could not afford the mortgage payment with an increase of of interest by two to three percentage points, then they should refinance into a fixed rate mortgage. He admits the payment will be higher, but the comfort that the payment will not change should be peace of mind in an uncertain future.

If, however, the mortgage rate does not adjust in three to five years and the homeowner intends to sell in within that time period, Ken says to hang in there. The logic is that the only risk the homeowner takes is the possibility of the home depreciating in value. If the mortgage balance is 70% to 80% of the current home value, then the risk is much less.

To many, Ken’s advice would seem a bit too conservative. I, however, believe that this advice to be the consensus of good financial planning.

by Dan Krell © 2005

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

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