home seller tips Archives - Page 9 of 11 - Real Estate News and Commentary

October 19, 2007November 23, 2021

Considerations in choosing a real estate agent

by Dan Krell
Google+

So you’re thinking of moving. If you are going to buy and/or sell a home you may be thinking of hiring a real estate agent to assist you. If you have bought or sold a home in the past, you know that there are thousands of real estate agents to choose from.

Choosing a real estate agent should be an objective as well as subjective process. You want an agent with experience and expertise, but you also want to make sure they listen to your needs and are patient with you. Additionally, you want to feel comfortable enough to trust them.

Choosing the right real estate agent is important because the agent that is chosen to represent you will have a fiduciary responsibility to you. As many home buyers and sellers don’t know, a fiduciary is someone who acts as a custodian for your rights and/or assets. The fiduciary has a responsibility to act with honesty and integrity, as well as act in your best interest and not exert influence on you or pressure you for their own or others interests. So, if the agent seems impatient, pushy or desperate you may need to look elsewhere.

Some people advise that your first step in choosing a quality real estate agent is to choose a broker or real estate firm first. However, the quality if an agent is not dependant on the firm. The quality of real estate agents varies from agent to agent; real estate firms have very good agents as well as agents that are less than perfect.

Whether you are interviewing an agent that was recommended or one you found in the paper, you should ask many questions about their knowledge, experience and expertise. You should also ask them if and how long they have been licensed.

Ask where the agent is licensed; not all agents are licensed in all jurisdictions. If your intention is to look at homes in Maryland, Virginia, and DC, make sure the agent is licensed in all three jurisdictions. If you are only looking in Maryland then they only need to be licensed in Maryland.

Once you have determined where the real estate agent is licensed, you can get an idea of their experience by asking how long they have been licensed. Someone who just received their license may not be as experienced in negotiating as someone who has been licensed five or ten years. If you are considering a novice agent, make sure they have some type of mentor that is training them. If the agent does have mentor, meet and interview them as well.

Additionally, you may want to consider working with a real estate agent who is a Realtor®. A Realtor® is a member of the National Association of Realtors® (NAR) and follows the NAR code of ethics. It has been said that the NAR code of ethics exceeds the ethics requirements of many state laws.

Finding the right agent is a process much like home buying. Through interviewing real estate agents you can find out the agent’s professionalism, training, and knowledge base. Additionally, you can find out if the agent’s personality clicks with yours, as you will spend time together selling or buying your home.

This column 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 June 18, 2007. Copyright © 2007 Dan Krell.

August 21, 2007October 5, 2019

Real Estate Tax traps You Need to Know About

by Dan Krell

It is unfortunate that many home buyers and home sellers neglect to consult with experts and sometimes enter into situations that may not be in their best interest. There are several common situations that are associated to real estate transactions that seem beneficial, but may actually incur a tax liability to those involved. The situations are the “short sale,” rebate programs, and the use of a down payment assistance programs.

The short sale has gained popularity recently as a sluggish market has forced some desperate home sellers to reduce the price of their home below what is actually owed. A short sale is when the lender agrees to accept an amount that is less than the payoff amount in order to sell a home. The concept is simple although the process is sometimes problematic. Although there is no net profit from a short sale, the financially challenged home seller can find some relief when they engage in such a process.

Although the short sale can help you out of a mortgage crisis, the IRS looks at the difference between the actual mortgage payoff and the negotiated payoff as a financial gain to you. You will most likely be issued a 1099 at the end of the year by your lender.

Another popular practice that seems beneficial but may have some liability is the rebate program. Rebates are offered to Home buyers and home sellers as a business incentive from organizations, brokers, and Realtors to use their services. Some organizations and credit unions offer buyer rebates as a value added service to its members if an affiliated broker or Realtor is used. For example, Costco offers rebates to its members of up to 0.75% of the price of the home when affiliated service providers are used. USAA offers its members up to $3,100 when the MoversAdvantage® program is used. If you participate in such a program, you may receive a 1099 as you may have incurred a tax liability.

Although they have been scrutinized by HUD and the IRS, down payment assistance programs have been used by millions nationwide to assist in the purchase of a home. Down payment assistance programs are non-profit organizations that assist home buyers with limited funds to purchase a home by providing the money needed for their down payment. The funds provided to the home buyer are typically received by the program as a gift from the home seller. These programs have been criticized as being a circle scheme funneling extra money from the home seller to the home buyer to assist in the purchase of the home, circumventing the underwriting guidelines.

Last year, the IRS revoked the non profit status of some of these programs citing that that the amount given to the program from the seller is directly related to the amount provided to the buyer. Additionally, the amounts in question are only provided to the program if the sale closes. If you use such a program, you should consult the IRS on the tax exempt status of the program as well as any tax liability you may incur.

As any real estate transaction may have tax ramifications, you should always consult a tax expert for advice.

June 6, 2007October 5, 2019

Fair Housing Month 2007

by Dan Krell

April is finally here, which means spring is around the corner and we celebrate another Fair Housing Month. When you think of Fair Housing Month, thoughts of celebrating equality among the diverse come to mind. This year, however, people are talking about the recent sub-prime mortgage meltdown as an indicator of how we are doing in promoting equality and fairness in real estate.

At first you might find it difficult to fathom how lending practices and fair housing go hand in hand. After all, isn’t mortgage lending a highly regulated industry? Aren’t lenders using exacting rules to qualify home buyers for mortgages?

The mortgage industry is vigilant in maintaining strict quality control standards as well as cracking down on abuses such as fraud. However, the saying “where there is a will, there is a way” holds true. There are unscrupulous people who continually scheme to make their fortune through blatant mortgage fraud and other dishonest practices.

Although there are new schemes that pop up every year, most schemes involve the use of straw buyers (fraudulent using another person’s information to obtain a mortgage), giving false information, and/or providing manufactured financial documents to obtain mortgage funding. Fortunately these folks get caught and end up in jail.

Another problem that contributes to issues in the mortgage industry is the forcing of clients to use a specific lender for a kickback (violating federal law). When this happens, it is common for the consumer to pay excessive fees, points, as well as having a higher than average interest rate.

Mortgage schemes like these are just a sample of lending abuses that occur. In addition to other predatory lending practices, all lending abuse preys on an uninformed consumer. Perusing the Mortgage Fraud Blog (mortgagefraudblog.com) you overwhelmingly get an idea of the extent of the problem.

Why talk about mortgage lending practices, predatory lending, and mortgage fraud during Fair Housing Month? The reason is that many of the abuses that occur in the lending industry are due to the targeting of certain classes or sub-classes of home buyers.

The problem does not lie with the mortgage industry per se. The problem extends from the lending industry to other professionals involved in the real estate transaction. If the settlement agent or Realtor is not already aware of the abuse, they may turn a blind eye when they become aware at settlement when they review the closing documents. If the home buyer catches on to the high fees and interest rate, they are sometimes guaranteed a refinance in a couple months by their Realtor or settlement agent (which is a common predatory lending practice).

Like many things in life, it’s not the tool; however, it is the tool’s abuse by the ill intentioned or uncaring that produces disrepute. It needs to be said that Sub-prime and interest only mortgages are needed and can be useful tools in the purchase of real estate. However these tools need to be used responsibly. A guide to mortgages and other consumer information can be found on the National Association of Realtors website (www.realtor.org/housopp.nsf).

This Fair Housing Month, let’s just not commit to practice fair housing, rather let’s assist others to practice fair housing by not turning a blind eye to their lapses.

June 6, 2007November 23, 2021

Sorting Through the Paperwork

by Dan Krell
Google+

Have you read your purchase contract or listing agreement? Many people won’t read the documents thoroughly, if they read them at all, and rely on their Realtor’s explanation to help them understand the legal and binding contract to which they are entering. Unfortunately, there is a chance that your Realtor may not understand the documents either and may have given you misleading information.

What was once a simple two page purchase contract is now an often confusing and seemingly endless forty to fifty pages of clauses and addendums. The contract of yesteryear may have been easier to read, however it was not very specific and was written in favor of the home seller. Today’s real estate contract is very specific to many aspects of the transaction, discussing the terms of the agreement as well as contingencies, notices and disclosures.

To make matters more confusing, there are two contracts in use in our area. The MAR contract is provided by the Maryland Association of Realtors and the Regional Contract is offered by the Greater Capital Association of realtors. Up until recently, there were major differences between the two contracts. Attempts for parity have been helpful, however differences continue. You should consult with your Realtor to determine which contract would benefit your situation.

As hard as it may be to read through the contract and understand its terminology, can you depend on your Realtor to explain it to you correctly? Both contracts along with addendums undergo constant change requiring Realtors to re-familiarize themselves with the documents. Because of this, it is common for even a seasoned Realtor to get tripped up.

When presented with a listing agreement and/or a purchase contract, your Realtor should explicitly explain the meaning of each clause so as you understand it. It is a good idea to even consult an attorney.

Today’s real estate contract specifies the rights and responsibilities of each party. Additionally, the contract defines default, discusses recourse and hiring an attorney. The MAR contract requires you to attempt meditation prior to going to court.

Additionally, you may find that there are many additional disclosures that are part of the contract. Contrary to belief, these addenda are not filler paper; many of these disclosures ensure you understand your rights as a home buyer or home seller.

For example, many home buyers don’t know that they have the right to review condo and HOA docs. You have seven days to review condo docs and five days to review HOA docs. If you find that there is anything in the docs that is not acceptable, you can declare the contract null and void.

Why should you understand the contract? Believe it or not the real estate contract survives even after settlement. This is an important concept as it is mistakenly thought that once settlement occurs there is no recourse. Disputes can arise after settlement if the home seller decides to take items they were supposed to leave in the home, or if there were misrepresentations in property condition.

A real estate contract is not to be taken lightly as there are consequences to any breach of this contract. Make sure you understand your rights and any responsibilities, and if in doubt-consult an attorney.

October 14, 2006April 26, 2019

Remodel instead of Move?

Moving up has been a right of passage for families for years. Families have been moving up for one reason or another, usually because of the need for space or just to move to a new neighborhood. However, spiraling home prices made many to rethink the usual move up, and instead make improvements on their homes. Rather than buying the four bedroom colonial they need due to a growing family, homeowners are adding rooms and enlarging the spaces they already inhabit. They’re thinking remodel instead of moving.

If you are unsure of making improvements or selling your home, there are some factors to consider. RemodelorMove.com (www.remodelormove.com) lists the top reasons for remodeling instead of moving includes: you like remodeling; you like your home floor plan; you like your neighbors; you like your yard; you have a great location; you will get exactly what you want; and you feel that it can enhance the value of your home. If you’re trying to decide whether remodel or move, you may find some of the reasons to remodel resonate.

If you decide to remodel rather than move, there are some considerations. According to RemodelorMove.com you should consider how long you are going to be in your home, the costs involved, and the timing of the remodeling before you move.

If you are planning to stay in your home less than a year, you should consider the actual cost of the improvements against the return you may get on your upcoming sale. However, if you plan to be in your home for a few more years or longer consider the factors of personal pleasure and comfort.

If you are concerned with cost vs. value, a great resource that every turns to for their annual report is Remodeling Magazine (remodeling.hw.net). According to Remodeling Magazine, return on investment depends on the value of the house itself, the value of similar homes in the immediate area, and the rate property values are changing in the surrounding neighborhoods. Some projects will recoup more than 100% of the original investment, however overall in 2004 the return of investment was 80.3%.

The following are the top improvements listed listed in this year’s Remodeling Magazine annual report in order of return on investment: minor kitchen remodeling -92.9%; siding replacement-92.8%; midrange bathroom remodeling- 90.1%; deck addition- 86.7%; upscale bathroom remodeling- 85.6%; and window replacement- 84.5%. You can view the rest of the 2004 report on the website.

Both selling and remodeling can be large propositions that can bring a lot of joy. There are many resources available to help make your decision. But you should verify the information you get, especially from the internet. Additionally, you should consult a local contractor and a Realtor to assist with costs of improvements and neighborhood home values.