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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.

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 April 16, 2007. Copyright © 2007 Dan Krell.

June 6, 2007November 23, 2021

Sorting Through the Paperwork

by Dan Krell
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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.

April 6, 2007November 23, 2021

The Art of Pricing Your Home

by Dan Krell © 2007
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As February gives way to March home buyers make their way out of hibernation, while many home owners are preparing their homes for sale. Some home sellers will list their home with a Realtor, while others will attempt to sell by owner. As the home sellers are making their preparations, one item is still undecided-the list price.

Pricing your home correctly is the key to having a successful sale and will make the difference in going to settlement in a reasonable time or having your home languish on the market for weeks and months.

Although it is true that selling a home is not rocket science; however, home pricing is a science to some and an art form to others. There is a certain knowledge and technique in home pricing as well as requiring a lot of work in the form of research.

If you are presently selling your home, (if you haven’t realized it yet) market conditions are no where near the market conditions of several years ago. Don’t expect your home to sell fast at a higher price and/or in poor condition than other homes in your neighborhood-those days are over.

The first step in pricing your home is to see what is happening in the local market and neighborhood. You can see this by getting a comparative market analysis (CMA) from a Realtor. I would ask several Realtors for a CMA as there may be differences in approach and presentation. A CMA is not an appraisal; however it is a comparison of your home to similar homes. It is important to compare your home to homes of similar style and size. Dissecting the analysis in six, three, and one month segments will show you any market trends.

When looking at the analysis, compare recent sales to currently active homes. Are the current listing prices consistent to recent sale prices and days on market? Is your competition is over priced for present market conditions, or is the market slowing down?

Look at the expired and withdrawn listings too. Try to find out why these homes did not sell and avoid doing the same mistakes. Also, look any pending sales for price reductions and seller concession as these may give you a hint to where you need to be in pricing your home.

Now that you have the analysis, it is important to know your competition first hand. Go visit your competition when they hold an open house. Compare active listings’ condition and amenities to your own home. Does your home compare; is the price reasonable; would you consider buying this home?

Be honest with yourself about your home’s condition and features. Are there amenities that will attract home buyers? Are there any problems or shortcomings that will turnoff home buyers? You will need to adjust for these items accordingly.

Home buyers in today’s market are looking for homes that show well and are reasonably priced. Additionally, many home buyers are in need of closing cost assistance. Don’t expect home buyers to make an offer just because the home is on the market-they won’t. Be realistic, as there are lots of other homes on the market that show well and are competitively priced.

April 6, 2007November 23, 2021

Does a Vacant Home Sell Faster?

by Dan Krell © 2007
Google+

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.

October 14, 2006April 25, 2019

Home Selling Tips

Because not all listed homes sell, you should be strategizing how to make the most of your sale. What to do? Here are some home selling tips .

Think about the basics that go into a successful home sale. 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.

Home selling tips

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. That means besides pricing according to the homes that are comparable, your Realtor should expect results within the parameters based on those sales also. Regardless of what you hear, the seller sets the selling price. Your Realtor is only an advisor providing you the data and opinion.

Sale price

Comparing your home to similar homes that sold is critical in deciding a sale price. 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. Typically, comparables are restricted within a subdivision or within about 0.5 mile to 1 mile. And sales not older than six months (unless there is a lack of home sales).

Home condition

Why is your home’s condition important when deciding a sale price? If your home has deferred maintenance or hasn’t been updated for twenty years, it’s not going to get the same price as the renovated similar home across the street. Be honest with yourself about the home’s condition. If your home is not in move-in condition, think about the cost of renovating in the price along with market conditions. If it’s a buyer’s market, you may have to consider a lower price or the home will languish waiting for a buyer. If it’s a seller’s market, there are more home buyers willing to buy a home with the intention of renovating it.

Marketing plan

You need a roadmap to success. 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 entering the information in the MLS is not typically enough sell a home. Market conditions frequently change, and your Realtor should have a concrete plan to sell your home. The plan should include not only how the home will be marketed, but how the agent will take you from contract to closing.

Your listing agent

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 being honest (for good and bad). It’s not a good sign if your Realtor is often defensive when you express concerns and needs. Your Realtor, on the other hand, should also be honest, as well as timely with information concerning your home. Besides communicating the activity of the potential home buyers, they should also keep you up to date with the neighborhood market keeping an eye on the other homes on the market.

How will you market your home and what will you do if the market changes? When you are interviewing Realtors to sell your home ask about their marketing plan. Ask about a home pricing strategy. Ask how your home’s condition affects the price. Ask how the agent communicates and what you should expect from them.