Homebuying tips for First Time Homebuyers

By Dan Krell

Every homebuyer needs information and support to help them maneuver through the sometimes confusing and often overwhelming home buying process. Even for veteran home owners, who are moving up to a larger home, the process can be perplexing and overwhelming. If you are a first time homebuyer, however, you will definitely need specific information to help you through the wonderful experience that is home buying.

When buying your first home, you should look to the professionals who assist you through the process. Choosing the right lender, realtor, home inspector and title company can make the difference between having a great first time home buying experience and a regretful experience.

The very first thing that you should do is consult with a lender to get pre-qualified so as to know how much home you can purchase. In order to do that, you need to find a lender. From the outside, choosing a lender might seem as simple as looking at the rates in the paper to see who will give you the best interest rate. However, it is not that simple. The rates and ads that appear in the paper are usually teasers to get you to call. I have found that many buyers that I have worked with either have used their local banks or have developed a relationship with a loan officer from a local mortgage company. Using your local bank or credit union can be good because they know you and want to make you happy to keep your business. Who ever you chose, make sure they can deliver what they promise.

I have found that many homebuyers do not put much thought into the Realtor that helps them purchase their home. Some of the ways that homebuyers have found their realtor include referral, internet, and open houses. Many Realtors have a strong referral base of past clients and friends where many homebuyer referrals originate. The referral is a wonderful way to find a Realtor because the person that referred you obviously trusts the Realtor to help you with your major purchase. Make certain the Realtor you chose can give you the time you need, as a first time homebuyer, to help you understand the process and make the right decisions.

Two of the lesser considered professionals that play a role in your home buying experience are the home inspector and the title company (or attorney). Choosing competent home inspector is important to the quality of your home inspection. In choosing a home inspector, you should interview them to understand their philosophy in conducting the home inspection and what kinds of defects are important to address. In searching for a home inspector, one good place to start is the American Society of Home Inspectors (www.ashi.org).

Choosing a title company or title attorney can be a bit more confusing because title work and title insurance seems very straight forward. You should interview a few title companies or attorneys before you choose so you can get an idea how they will conduct your settlement. Again, the title company or attorney should give you enough time so as you can understand the legal issues that surround your home purchase.

If you are uncertain where to begin in choosing the right professionals to help you in your purchase, you might consider attending first time home buyer classes. One place to start is the Housing & Communities Initiatives, Inc. (www.hcii.org), a local non-profit organization.

As a first time homebuyer, you will require additional time and support from the professionals who will help you buy your first home. Referrals and interviewing is the good way to start to develop the necessary relationship to build your trust.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This column was originally published 8/15/2005 in the Montgomery County Sentinel. Copyright Dan Krell 2005.

Landlord tips for the investor

Landlord Tips
by Dan Krell

The real estate market in the Metro DC area has broken sales records for the last few years. Each year sales numbers and average home prices surpass the previous year by a wide margin. Besides the many homebuyers who are buying homes for their own families to inhabit, there are the devout few who are always on the lookout for a bargain home to turn into a rental property. With home sale prices rising seemingly as fast as a jet taking off the runway at Reagan National Airport, it may be a wonder how, or more appropriately why, investors buying homes for rental properties.

Serious investors are a remarkable breed. They come from all walks of life and socioeconomic backgrounds. Although they have a diverse background, their one commonality is accumulating wealth. The goal for the average investor is to accumulate real estate and sit on it as the value appreciates. The payoff for the investor is when they sell off their assets and retire.

This over simplified and brief article is an overview of some difficulties that most real estate investors encounter. Some of the difficulties that many real estate investors encounter are tenants, maintenance of the property, and cash flow.

Finding good tenants to rent your properties is essential for success. A good tenant is described as one who pays in a timely manner and who will treat your home as if it was theirs. To find tenants, you can advertise in the local papers for tenants, subscribe to placement companies, or hire a professional management company to do all the work for you. The best tenants usually come by referral.

Making sure the prospective tenants have good references is essential. One way to do that is to ask them for a recent copy of their credit report, which would report any past delinquencies. Rental companies usually report delinquencies and non-payments to credit reporting companies like Equifax, Trans Union, and Experion. If they do not have a credit report, some investors accept references from past landlords.

Once your rental property is leased, it is important to keep it maintained. Good tenants will usually do the basic maintenance for you. If things go wrong, however, it will be up to you fix the problem. It never fails, the emergency calls will come in the middle of the night or while you’re on vacation. You will need to respond to the emergencies fairly quickly as you build your relationship with your tenants.

The most important issue with a rental property is cash flow. Cash flow is the perpetual incoming of cash so the mortgages and other real estate related expenses can be paid. Cash flow can be positive or negative. The goal with cash flow is to at least come out even, as most investors bank on the appreciation of the property itself for wealth building.

To help overcome the pitfalls of owning investment properties, some investors hire professional management companies. These companies can help find quality tenants, collect rents, and maintain the property. As the art of being a landlord is becoming legally complex, the management company and a good attorney can help you through the difficulties.

Anyone that is serious about beginning a career as a real estate investor should attend classes and find out more about the field to make an informed decision. As a real estate investor, you will find that there are many complex issues that require experience and support. However, once mastered, it can be very rewarding.

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 8/8/2005. Copyright Dan Krell 2005.

Remodel instead of Move?

By Dan Krell

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 re-think 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 or enlarging the spaces they already inhabit.

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 and not moving as: 1) you like remodeling; 2) you like your home floor plan; 3) you like your neighbors; 4) you like your yard; 5) you have a great location; 6) you will get exactly what you want; and 7) you feel that it can enhance the value of your home. As you are trying to decide whether or not you remodel or move, you may find these reasons in line with your decision. This web site has lots of resources and information to help you make your decision.

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 have to weigh 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, the return on your investment should not be as much of a factor as 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, which can be found at Remodeling Online (http://www.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 nationwide data they collect for their annual reports from Home-Tech Information Systems, a remodeling estimating software company in Bethesda, Md. HomeTech collects current cost information quarterly from a nationwide network of remodeling contractors, and its cost figures include a 40% margin. Costs are adjusted to account for city-to-city pricing variations.

The following are the top improvements listed in the Remodeling Magazine’s 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 and regret. There are many resources at the library and the internet to help make your decision. Additionally, you should consult a local contractor and a Realtor to assist with costs of improvements and neighborhood home values.

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 8/2/2005. Copyright Dan Krell 2005.

Home Selling Tips

by Dan Krell © 2005

It is not unheard of that homes in this market do not sell. Of course your home should be priced according to the comparables in the neighborhood, and progress should be gauged with the other homes on the market in the neighborhood. Before your home goes on the market, you might ask how to make the most of your sale. That means besides pricing according to the homes that are comparable, your Realtor should expect results within the parameters based on those sales also.

There are several aspects that go into a successful home sale. Of course, the first is to price the home according to the comparables in the neighborhood. The second is to consider the condition of the home. The third is to have a marketing plan. And lastly, you should have a close working relationship with your Realtor.

As I have said here before, you, the seller, should set the selling price. Your Realtor should advise you based the comparables in the community. Comparables are homes that match your home in style and size. If you have a three bedroom rambler, you should compare your home to other three bedroom ramblers in then neighborhood.

What does your home look like? Be honest. Although the other three bedroom ramblers sold for $400,000, their condition was in move in condition. Your home on the other hand, needs a lot of cosmetic work. The home needs to be painted, the roof has a leak, and the carpet is thread bare. How do you think this will affect the sale of your home? If you are trying to achieve a new high sale price, I would think again. A homebuyer looks at these deficiencies and thinks how much it will cost them to repair.

If your Realtor has not yet presented you with a marketing plan, ask for one. Your Realtor should have a plan of action to sell your home. Putting a sign in front of your home and crossing their fingers is not enough sell a home. As the market changes and homes are on the market longer, your Realtor should have a concrete plan to follow to sell your home. The plan should include new technologies, such as the virtual tour.

The final aspect that is important in selling your home is the relationship between you and your Realtor. Besides having confidence in your Realtor, you should feel comfortable expressing your needs and concerns. It is not a good sign if your Realtor becomes defensive when you express concerns and needs. Your Realtor, on the other hand, should be honest and timely with information concerning your home. Besides communicating the activity of the potential homebuyers, they should also keep you up to date with the neighborhood market keeping an eye on the other homes on the market.

As the local real estate market changes, fewer homebuyers will be beating a path to your door to pay you ten thousand dollars more than the last home. When you are interviewing Realtors to sell your home, you should consider asking them about pricing your home, the condition of your home, their marketing plan, and their idea of a working relationship. These steps won’t guarantee a sale, but it leads you down the right path.

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 7/25/2005. Copyright Dan Krell 2005.

Disclose, disclose disclose

by Dan Krell © 2005

It is not unreasonable for homebuyers to seek assurances about the homes they purchase. One method for obtaining a sense of confidence about the home is having a home inspection. Sometimes it is not as much as wanting to know what needs to be fixed as much as wanting to know what they were getting into, as one of my clients casually stated. However, home inspectors are not perfect and there are numerous conditions in the home that could go undetected.

In the past, it used to be buyer beware. As you could imagine there were many complaints and lawsuits that were filed with state officials which prompted them to enact a property disclosure law. Property disclosure laws have been enacted in about thirty states. Here in Maryland, the disclosure just changed this last Saturday (October 1). The previous law was around since 1994.

Before Saturday, homesellers, had the choice of either disclosing facts about their home or they could offer a disclaimer that the home was being purchase “as-is.” Among some of the items that would be included in the homeseller’s disclosure include, but is not limited to, plumbing, heating, electrical, and home structure. If there was any knowledge about any past or potential problems, the homeseller would disclose that information.

If the homeseller chose to not disclose any information, the seller chose to offer the homebuyer a disclaimer. The disclaimer stated that the homeseller did not warrant the condition of the property and the home was being purchased “as-is.”

It had been incorrectly thought by homesellers and some Realtors alike, that if the homeseller provided a disclaimer, the homeowner did not have to provide any information at all about the home-including relevant material facts about the condition of the home. In fact, some homesellers would offer a disclosure statement and still withhold some important material fact about the home which was not apparent.

Many law suits have been filed by homebuyers who, after years of living in a home, have discovered latent defects. The lawsuits typically claim the home seller and the listing agent knew about these defects. Latent defects, as presently defined by section 10-702 of the Real Property Article of the Annotated Code of Maryland, are 1) defects which could not be reasonably expected to ascertain or observe by a careful visual inspection of the real property and 2) would pose a direct threat to the health and safety of the purchaser or an occupant of the real property.
Like the previous law, the new disclosure law requires the homeowner to provide either the disclosure statement or disclaimer, except with a little twist. Since October 1, if the homeseller chooses to provide a disclaimer (sold “as-is”), the homeowner must still provide a statement that lists all latent defects in the home.

If you are selling your home or thinking of selling your home in the future, you should discuss the disclosure/disclaimer statement and the new law with your Realtor. If you have any doubt about your obligations as a homeseller or do not understand the disclosure law, you should consider consulting with your attorney.

I was taught the golden rule of disclosure to be: disclose, disclose, disclose. A problem that is disclosed to a homebuyer before they enter into a contract with you is a piece of information that the homebuyer will keep in mind as they purchase the home. However, a problem that is not disclosed remains a problem and has potential to become a law suit.

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 10/3/2005.
Copyright Dan Krell 2005.