Shopping for Your Home

Tuesday, December 31, 2013

Deferring Maintenance In Your HOA

Deferring Maintenance In Your HOA
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Deferring maintenance in a homeowner association has negative and lasting effects. While postponing maintenance may seem to be a money-saving technique, the consequences are usually a much higher cost over time.

Painting is one of the largest elements of routine common area maintenance for many HOAs. Poorly maintained paint will fail prematurely. Touchup should be done annually. Wood trim should be painted every 3-4 years. The complete painting of buildings should be done every 6-8 years.   
Drainage. Rain and sprinkler run-off can create problems for the lawn, landscaping and underground building areas. The landscape contractor can often provide for drainage corrections that will mitigate these areas.
Salt Air Corrosion. Salt air found at coastal locations can rapidly deteriorate and short-circuit light fixtures, elevator electronics, fire sprinkler system plumbing, electrical boxes and door hardware. These should be checked every year.

Concrete sidewalks and driveways need to be inspected annually for cracks and raised areas, as well as degradation of the surface. Raised areas create a trip hazard which can be corrected by grinding or removal and replacement.

Asphalt paving needs to be repaired and seal coated every 3-5 years to properly protect it so it will achieve its maximum useful life of 25-30 years.

Roofs need to be part of a Spring and Fall maintenance plan. They need to be inspected, repaired and cleaned by a qualified roofing maintenance contractor.

Roof gutters and downspouts should be cleaned at least twice a year, more often in "hotspots" where leaf debris is prevalent. Failure to do this causes backups and overflow that damages paint, siding and landscaping.

Playground equipment should be inspected and maintained to ensure child safety.
Directional signage should be in good repair and easily readable in order to assist emergency response services like police, fire and pizza delivery (joke). Directories with name and addresses also facilitate emergency response. The directory should be regularly updated for accuracy.

Reserve Study. This is a 30 year plan to manage and fund (usually) large projects. A Reserve Study will help the board to schedule, budget and properly maintain the common elements. It is highly recommended that the study be done and updated by experienced professionals like PRA (Professional Reserve Analysts) members of the Association of Professional Analysts. See for a directory PRA members.

Use these hints to help craft your own Preventive Maintenance Plan. Deferring maintenance is a sucker bet that will come back to bite. Follow Doctor Oz's advice and use an "Oz (Ounce) of Prevention".

Thursday, December 26, 2013

Assume This Is THE Article Home Buyers Can't Miss

Assume This Is THE Article Home Buyers Can't Miss
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Real estate buyers' Number One Mistake is assuming - that's guessing, hoping, ignoring, and NOT knowing.

Assumptions can be very expensive in real estate. For real estate buyers this may be an expense that only materializes after they have spent their money and moved in to their new house or condominium unit. Assumptions lie at the heart of buyer's remorse.   
With the wide range of financial, legal, and lifestyle complexities involved in real estate, buyers' assumptions are often clarified in hindsight. When buyers discover the gap between reality and their assumptions, their responses usually begin with "I thought...," "I believed...," "I hoped...," and often "I assumed." Suddenly, they realize what they did not know or understand, and what that ignorance has cost them.
"Buyers think [read assume] they can use a coastal condominium unit as a second home during parts of the year and rent it out when they are not using it to help offset the cost of ownership," explained Ralph De Martino CRS, GRI, RSPS, broker/owner of Miami-based Ocean International Realty, which specializes in coastal second homes for international buyers. "If the condo doesn't allow 30, 60, or 90 day rentals, they won't be able to rent out, and will have to foot the whole bill of ownership.... Without me asking them directly, their intended form of use would not be mentioned because they assumethat they can rent short term. In our market, most condo buildings have more stringent restrictions."

De Martino, having identified a common assumption, is quick to stress that he does not let prospective second-home buyers make this mistake. His advise for buyer is simple: "They should get an agent that knows what they are doing with condos and who asks exactly how will they be using [the unit], so the end result will be exactly what they want."

Professional expertise is the antidote to assumptions, but it is not always easy for real estate professionals to apply. The added frustration for them is the resistance they meet while exploring what prospective buyers know about real estate and what they reallywant and need. The sales processes that professionals take prospects through are designed to uncover assumptions, objections, and other limiting factors, but this aim is only achieved with cooperation from prospective buyers.

"Sometimes buyers get so upset with the process that they give up, and in some instances walk away from the deal, and end up fighting over the escrow check with the seller," said Realtor Kay Conageski, PA, of Miami-based Keyes Company, who targets first-time and international buyers. "It's truly unnecessary because knowing what to expect eases a lot of this frustration."

Conageski explained by email that she consistently found condo buyers did not understand that they must go through the condo associations approval process in order to purchase a unit.

"Educating these buyers is the key to a successful transaction," stresses Conageski. "Knowing the ins and outs of various condo buildings is the job of a good agent, and eliminating unnecessary stress for their buyers is the real estate professional's responsibility. They have to hand hold in a lot of cases, and should assist the entire way to make the process less chaotic for everyone."

This article draws on my recent research with the MIAMI Association of REALTORS® (MIAMI), which also generated my column, "Avoid Six Way Too Common Condo Buyer Mistakes," however, I must stress that assumptions are not just a problem in condominium sales. Buyers, sellers, and professionals must be wary of their assumptions and those of others whether dealing with commercial or industrial real estate, home buying and recreational purchases, leases of any type, and real estate markets in all locations.

"Many condo buyers have a belief (read assumption) that the real estate market is frozen in time," emailed Realtor Patricia Rotsztain, Director of Operation and Broker Associate at Decorus Realty and MIAMI Governor. "There has been so much press about the real estate bubble, foreclosures, etc. that buyers still expect to find an oceanfront condo in a hot area for peanuts. It doesn't happen any more...the market has changed completely and the demand keeps pushing prices up."

Buyers may not understand the full effect of international buyers on their local markets. In "hot" areas like Miami and South Florida, competition for properties takes on global scale, placing even greater emphasis on having the right information for every aspect of the purchase.

Rotszain makes no assumptions about where problems lie: "Buyers need to look at the current numbers and talk to a trusted advisor (Realtor) instead of searching in sites where the information is not updated and they can see a property that was sold 4 years ago as a 'current listing.' updates information every day, so it is a much more reliable source of information.... The best approach for buyers is to work with reputable professionals who will show buyers the right data and help prevent costly mistakes. In my case, I have a network of attorneys, CPA's, inspection companies, etc. Spending a little money on an inspection, talking about tax implications, and setting up the right structure from the beginning can save money and headaches."

Assumptions - calculated and unconscious - are common distractions and counter-productive elements in thinking and problem-solving. Assumptions involve, and can create, inconsistencies, contradictions, disparities, problems and questions. Professional expertise is essential to tease out assumptions that prospective buyers may not be aware they were using as a standard for evaluating properties and making buying choices. What assumptions are undermining your real estate efforts?

For Agents: "Anti-Oops Assumption Busting " - Take this Assumption Busting Test for Professionals to learn what's undermining your effectiveness. This exercise is excerpted from Chapter 5 of the business ebook What's Your Point? Cut The Crap, Hit The Mark & Stick! with permission of Catapult Publishing.

Note to you: Don't be shy let's share your Board's or Brokerage's special real estate knowledge. Send me a short note not just a link to your website. Email me with your point at This email address is being protected from spambots. You need JavaScript enabled to view it. .

All the joy of the season and the Happiest of New Years to you and your families.

Friday, December 20, 2013



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Tracking the housing markets healthiest cities can be challenging as things change fairly quickly and surprisingly. For instance, who would have guessed that California would be listed as having five of the 10 healthiest housing markets in the nation? In fact, for healthy markets, head west.
According to, not only does California have five healthy housing markets but it also has the number one healthiest housing market: San Jose. San Francisco, Los Angeles and San Diego are also in the top five and Sacramento is number 10 on the list.
"Rapid home value appreciation in the West, particularly California, is currently having a very positive effect on a number of other factors, including negative equity, foreclosure activity and the overall financial health of local homeowners. But that same rapid appreciation may cause affordability issues in the future in these markets, leading to potentially unhealthy conditions," said Zillow Chief Economist Stan Humphries.
Filling out the remainder of the top 10 healthiest housing markets are: Denver, Colorado (4th), Boston, Massachusetts (5th), Pittsburgh, Pennsylvania (6th), Portland, Oregon (7th), and New York, New York (9th).
So how does Zillow figure out which markets are the healthiest? The Zillow Market Heath Index is formed from 10 different metrics as detailed in a press statement by, month-over-month change in the Zillow Home Value Index (ZHVI); year-over-year change in ZHVI; percent change in 1-year ZHVI forecast; percentage of homes selling for a gain; days listings spend on Zillow, adjusted for seasonality and for deviations from historic norms; the percentage of mortgage holders with negative equity; the percentage of mortgage holders delinquent on their loans; the number of foreclosures out of 10,000 homes; the percentage of sales composed of previously foreclosed homes; and the number of foreclosures out of 10,000 still held by banks, i.e. unsold REOs.
According to Zillow, "For each of the 10 metrics used in the Market Health Index, we assign each region a score along a continuous scale from 0 to 10, where 10 corresponds to the healthiest value and 0 to the least healthy among all regions in the US with available data. We take the average of these scores and then re-scale the average to range from 0 to 10. This becomes the Market Health Index. To ensure sufficient data availability, we only score regions with data from at least 5 of the 10 metrics we measure."
Influencing a real estate market's health is not just about supply and demand from buyers and sellers. It's also about real estate investors. Two of the worst markets are also markets that once had high real estate investor activity. Phoenix, Arizona, and Las Vegas, Nevada, are among the unhealthiest markets in large part due to rapid price appreciation from investor demand. Today, in Phoenix, there is a lot of housing inventory available (up 40 percent from a year ago). However, it's not clear if it's investors selling or homeowners who have gained some equity and now are electing to move.
As you watch market trends, keep an eye on investors who are now turning their investment-purchasing power to markets such as Atlanta, Georgia, and Charlotte, North Carolina, to see how investors will impact those real estate markets.

Wednesday, December 18, 2013

Refinancing Through Family Makes Sense

Refinancing Through Family Makes Sense
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  Question: I am looking into refinancing my home from a 5/1 ARM to a fixed rate. During this process my mother stated that she would lend me the $150K to pay off my existing loan and I would pay her back at the current market rate for a 30-year fixed. This would provide her a stable investment and I can forego the closing costs, paperwork, appraisal, etc. associated with the refinance.
What are the legal implications of this transaction? If I pay off my current loan do I assume title? What paperwork do I have to sign with my mom to validate the transaction and where do we file it? She would have to claim the income; can I still write off the interest as I would do with any other home loan? Is this transaction as simple as it sounds?
Answer: Yes, it is simple and makes a lot of sense. Instead of giving the money to a stranger (your new lender) you will be keeping it in the family. However, I strongly recommend that you retain local counsel to assist you, since there are a number of legal documents and administrative steps that have to take place.
You first have to send a letter to your current mortgage lender, asking for the amount that will be necessary to completely pay off that loan. The lender will send you a pay-off letter, showing the current principal balance plus a per-diem amount. Interest is paid in arrears. That means that the payment you will send in January will cover interest for the month of December.
However, unless you pay off the balance as of the end of a month, you will have to send in a check that includes the number of additional days until the lender receives your check. To be on the safe side, I would add three extra days of interest based on the per-diem amount that you receive from your lender.
Once you have the pay-off number, you will have to sign a deed of trust and a promissory note in favor of your mother. (Some states call it a Mortgage). It would make sense to have your attorney prepare those two documents for you, and the fee should not be more than $400-500. The lawyer will also record the deed of trust on the land records where your property is located, and there will be a nominal fee that has to be paid to the Recorder of Deeds.
You asked about title. You currently own the property, but it is subject to a deed of trust (the mortgage document). This means that you have deeded the property in trust to a third party selected by the lender. If you pay off the loan, the trustee will release the trust from land records - which is what you have to do after you pay off your current lender.
On the other hand, if you are in default on your loan, the trustee has the power to sell your property at a foreclosure sale. For example, turn to the classified section of today’s paper and you will see a large number of properties being advertised for foreclosure by the trustee.
The monthly payments you make to your mother have two parts: income and interest. Your mother will have to declare as income the annual amount of interest that you pay her. And so long as the deed of trust is recorded, you can deduct that interest when you file your tax returns.
Your mother will have to send you and the IRS form 1098 at the end of each year, which will show the amount of interest that you have paid.
Your mother has presented you with an attractive offer which you should not hesitate to accept.

Tuesday, December 17, 2013

Smart Home Renovations That Pay You Back

Smart Home Renovations That Pay You Back
              Written by Jaymi Naciri

 Small renovations to your home can pack a big punch. Big renovations can also pack a big punch - but they can also be a big headache and come at a big cost. While you may be eyeing a new bonus room and guest bedroom in the attic, beware that not every renovation pays you back at the same rate. "Homeowners in many areas of the United States can still recoup 80 to 90 percent of the money spent on home improvements," said MSN Money. "The key is to know where to spend. Just because you put $20,000 into renovations, it won't necessarily add that much value. The key to adding value is to focus on the things that are important to buyers, and to not over-improve. You don't want to have the most expensive house on the block. So if the houses in your neighborhood have concrete driveways, investing in expensive brick pavers may not be in your best interest financially." It is also important to consider your lifestyle, so that you make smart changes according to your desired outcome, said CBS News. "Home remodeling is all about return on investment. When deciding which project to tackle in your house, consider your circumstances. If you're planning on staying forever, make changes to the space that makes it more livable for you. Just remember not to go so overboard that you can never sell the house if you suddenly needed to. If your current place is not your forever home, only invest time and energy into projects that will give you a decent return when you eventually sell it."

Here are some tips for making smart renovations that can bring enjoyment of your home and also make you money.

How much should you spend?

The easy answer is to determine what you're comfortable with budget-wise and then bump that amount up against home values in your area and the latest numbers defining ROI for your project. Remodeling magazine releases a cost versus value report every year. You can read the 2013 version here.

"The biggest mistake homeowners make is spending more on the remodeling project than their home value can support. Don't expect to get optimum return on a $65,000 kitchen if the home is valued at $300,000," said HGTV. Generally speaking, you can spend between 6 and 10 percent of the total home value and get fair returns. You also can be too thrifty and overlook items that buyers look for in your price range.

"Remodeling for resale means choosing materials that appeal to the masses. This means opting for stainless steel appliances that are high quality rather than professional-grade models. Spend on functional features like pantry drawers, soft close cabinet drawers and doors, waste-recycling cabinetry. But don't over-personalize the space. You may appreciate the art-deco drawer pulls that cost $50 a pop, but will buyers care? Probably not.


Before you consider an exterior renovation, take a good look at your home's exterior with fresh eyes. Is the paint peeling? Is the lawn dead? "If your house doesn't look appealing from the outside, chances are a potential buyer will never make it inside," said TLC. "According to, a good first impression can add five to 10 percent to the value of your home. If the exterior color of your house is dated or fading, painting is a good place to start your improvements. Choose colors and exterior details that match the period of your house."

If it's landscaping you need, re-seeding your lawn costs a fraction of putting down new sod, but takes longer to bear fruit. If you just need a quick fix before an Open House, head to a home improvement store for some potted flowers to place at either side of the door or along your front walkway. The splash of color brightens up a house and can turn drab to dreamy.

An important, but often overlooked, renovation is the front door. In fact, replacing a "low-quality entry door with a steel version will give you the biggest bang for your buck." According to Remodeling's Cost vs. Value report as reported by Forbes, "homeowners can expect an 85.6 percent return on investment, or $856 on a $1,000 job."

Sound boring?

No. 2 on their list will give you some enjoyment out of your space while also providing you a great return on your investment when it's time to sell: add a deck. And make sure you do it professionally.

A New Coat

Once you have taken stock of your exterior, it's time to take a look around the inside. Outside of picking up your stuff and de-cluttering the home, painting is probably the easiest change you can make for the lowest cost and biggest impact. "Painting is one of the least expensive ways to freshen and improve your home's look, and consequently its value," said TLC.

Are all your walls white? You can add a little personality without going overboard just by splashing some neutral paint on the walls. Are the colors too bold or to personal for potential buyers? Toning it down will help buyers see the home, and not get lost in the cobalt blue walls. In addition to the walls, "A coat of paint can do wonders to brighten up dingy cupboards, for example, or old paneling," said TLC.


Yes, paint can indeed provide an easy update in a kitchen. If you have old cabinetry and it's not cost-effective to change it out, a coat of paint can give you a great head start and turn around potential buyers that would have been turned off by all that outdated mid-range maple.

"For potential buyers, the kitchen is the room that can make or break the sale. An upgraded, attractive kitchen can make your home irresistible. Ideally, your kitchen renovation should earn a 70 percent return on investment when you sell your home, said HGTV. "But this depends on the features you choose, how much you spend remodeling and whether your priority is to create a dream kitchen for yourself or a kitchen that will appeal to potential buyers. The biggest mistake homeowners make is spending more on the remodeling project than their home value can support. Don't expect to get optimum return on a $65,000 kitchen if the home is valued at $300,000."

Kitchen remodels remain a top choice of homeowners - both those who are looking to sell and those who just want to improve the aesthetic or function of their home.

"Over the last five years, nearly four in ten home improvement dollars have gone into kitchens and future spending is likely to follow the same trend, according to a recent survey by Houzz," said Huffington Post. "U.S. homeowners on average spent $28,030 to remodel their kitchens over the last five years, with costs varying widely at different budget levels. Nationwide, the average cost for a high-end kitchen was $54,942, $22,390 for a mid-range kitchen, and $7,133 for a lower-budget kitchen."

For more reno dos and don'ts, see Life Hacker's guide to the renovations that raise your value - and the ones that don't.


A recent story about home renovation projects from the Chicago Tribune found that "the average small bathroom home renovation cost is a little under $16,000. However, you'd only expect to see a payback of a little over $10,200 on that project if you turned around and sold your home within a year of completing the project.

That's not to say that a well-thought-out and executed bathroom reno won't pay off for you. Kitchen and bathroom remodels continue to be two of the best investments you can make in your house," said HGTV. "They're always right up there at the top of the list. They're the big, sexy rooms that new home builders splurge on, so when buyers are shopping around that's what they want in an existing home, too."

If you're considering a bathroom renovation, Better Homes and Gardens recommends:
  • "White sinks, tubs, and toilets all cost less than those in colorsbecause manufacturers make and sell more of them." Updated vanities and tubs can fetch a near 100% ROI, said Yahoo.
  • Skimp on high-cost items like tile, buying only enough to tile "only the shower and/or bath area walls. If it's within your budget, tile halfway up the wall, add a border design, and paint the area above."
  • Update the cabinet Hardware "to provide an instant visual impact at a minimal cost"
  • Trendy Tile
If you love the look of pricey hand-painted or mosaic tile but you're on a budget, include a few... among affordable field tiles.

Friday, December 13, 2013

A Look At 2014: Repeat Buyers Expected To Boost Market And Renters Will Pay More

A Look At 2014: Repeat Buyers Expected To Boost Market And Renters Will Pay More             
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This past year has been the year of the investor but things are expected to change in 2014, according to Their chief economist, Jed Kolko, is predicting that repeat homebuyers will soon dominate the market.
"As prices rise, buying homes will become less attractive to investors as well as first-time home buyers, but repeat buyers will be able to offset the higher price of the home they buy with the higher price from the home they sell," said Kolko on

Kolko reported that prices hit bottom and began a sharp rebound in Winter 2012. Then by Spring 2013, inventory and mortgage rates started climbing and price increases slowed. Kolko is hoping to see construction and household formation start to normalize. Many young adults are still living in their parents' home.

Kolko also predicts that there will be a decline in homeownership or the market may become stagnant in 2014 due to 18-34 year olds opting to live in rentals. The plus is that many of these young adults will move out of their parents' homes and into their own rentals.

Trulia tracks five key indicators of which two remain unbalanced. Progress has been seen in existing home sales, delinquency and foreclosure rates, and prices from a bubble condition. The other two indicators, new construction starts, and young adult employment are still lagging.

While the rental market is growing (35 percent in 2012 compared to 31 percent in 2004), it's not necessarily a rosy picture for renters. According to Harvard Joint Center for Housing Studies, in recent years, rent has become significantly less affordable. The report released this month, states that 50 percent of U.S. renters are spending more than 30 percent of their gross income on rent. That statistic (from 2010) is up a record 12 percentage points compared to a decade prior when it was only 38 percent. Nearly 30 percent of renters, according to the study, spent more than half of their salary on rent. That's up from 19 percent 10 years ago.

The study reports that landlords continue to hike rents, making it difficult for renters to save for a downpayment on a home. According to, rents increased 2.7 percent in the year-period leading up to October 2013. The hikes are causing renters to have to cut other essential needs.

A still soft economy and unemployment rising are making it tough for new construction. Newly constructed homes dipped to a 50-year low. In order to reach normal levels, housing construction would need to increase 50 percent. But new homes aren't likely to be affordable when, according to Bureau of Labor Statistics, the average seasonally adjusted hourly earnings of all employees on private non-farm payrolls was $24.15 in November compared to $23.67 a year ago.

Lest this starts to depress you, know that there are still many real estate transactions occurring and, during the end of the year and early start of the new year, there are also eager sellers. So, if you're in the market to buy, in order to escape the escalating rental hikes, now might be the ideal time to start your house hunting

Wednesday, December 11, 2013

Condo Association May Violate Consumer Protections Acts

Condo Association May Violate Consumer Protections Acts
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Although they differ in form and substance, many States have enacted Consumer Protection Laws. Their purpose, in the words of the Virginia law, for example, is "to promote fair and ethical standards of dealings between suppliers and the consuming public."

When we analyze these laws, even practicing attorneys consider them as protecting the consuming public from bad acts from merchants - car dealers, grocery stores and even mortgage brokers and lenders.     
However, on April 30, 2012, the Maryland Court of Appeals ruled that even a condominium could be held to violate the Maryland Consumer Protection Act. (MRA Property Management v Armstrong).
The case is complex and goes back many years. Twenty five condominium unit purchasers sued their association and its property manager, claiming that the resale packages each plaintiff received violated the Consumer Protection Act because the budgets spelled out in those packages "had the capacity, tendency and effect of misleading" the potential purchasers."

The Plaintiffs brought the lawsuit when their association imposed a special assessment to pay for water damage to the buildings. The Plaintiffs alleged, among thirteen counts, that even though the budget in the resale package they received reflected that repair expenses were declining, the association and management knew - as far back as 1996 - the extent of that damage.

In the majority of states, if you plan to buy a condominium unit from a current owner (not the developer) your seller (and the association) is required to provide you with a package of information, called a "resale certificate". This would include, for example, the association’s legal documents, insurance information, and an updated budget which contains the income and expense of the association for the coming year, a statement of how much money in held in reserves, and in some jurisdictions, a statement of any planned expenditures and assessments.

The trial judge found for the Plaintiffs, issued a million dollar judgment against the defendants, basing the ruling that the association and management violated the Maryland Consumer Protection Act.

The Maryland High Court issued a 34 page opinion, which can be instructive to condo owners, managers as well as attorneys. The court reaffirmed an earlier decision that there "simply does not exist contractual privity between the condo association (called ‘council of unit owners in Maryland) and the buyer of a unit." The buyer has a contract to purchase a unit from a unit owner, not from the association.

However, the court went on to state that the association does have a duty - imposed by the Maryland condominium act - to provide buyers with the "resale certificate". One of the items required to be disclosed is "the current operating budget of the condominium including details concerned the reserve fund for repairs and replacement and its intended use, or a statement that there is no reserve fund."

And the Consumer Protection Act prohibits "false, ...misleading oral or written statement... which has the capacity, tendency, or effect of deceiving or misleading consumers..."

Why is the association and the manager considered a "supplier"? According to the opinion, the statutory obligation under the condo act "injects (the manager and) the association into the sales transaction as central participants because where they to have failed to provide these materials, the contract for sale would not have been enforceable." In the words of the court, both the manager and the association are "sufficiently involved" in the sale.

The Court sent the case back to the trial judge. Having determined that the consumer protection act could apply, the lower court now has to decide if the statements contained in the resale package were, in fact, deceptive. Unless the case is settled, that’s yet another round in a court of law.

The resale certificate is an important document, and unfortunately is not always taken seriously by either boards of directors or their management company. The laws in each of the three jurisdictions differ slightly as to what must be disclosed.

For example, In Maryland, the buyer must receive the package no later than 15 days before closing, and has the right to cancel within 7 days of receipt. In the District, the buyer must be provided the package 10 days after the contract is signed, and has 3 days to cancel. In Virginia, the package must be given to the buyer within 14 days after a contract is signed. If the package is hand-delivered or emailed, the contract must be cancelled within 3 days from receipt. However, if it is mailed, the rescission right is extended to 6 days.

If the resale package is not complete, and does not comply with applicable state law, a potential buyer can walk away from a sales contract, and get a full refund of the earnest money deposit. And in today’s economy, where buyers are having second thoughts about buying real estate, it’s easy to back away from a contract if the resale certificate is not complete.

But more importantly, it also has to be accurate. The laws require that the association - not the property manager - provide the certificate. Accordingly, while management should review the form at least once a year, it should be signed only by a board member.

We are a litigious society. Make sure your resale certificate complies with your state law and that it is absolutely accurate.

Tuesday, December 10, 2013

Avoid Six Way Too Common Condo Buyer Mistakes

Avoid Six Way Too Common Condo Buyer Mistakes
              Written by on Monday, 09 December 2013 10:57 am

If practice makes perfect, how can you excel at buying a condominium unit when you'll probably do it fewer than a half dozen times in your life?

What about the first time you buy? You'll be working without any condo practice at all! Since condo prices start in the tens of thousands of dollars and head into the millions, gaining practice as a buyer can involve some very expensive lessons.    
Can you name any complex, life-enhancing task you can learn to do exceptionally well in just a few tries? After all, aren't you aiming to be an above-average condo purchaser out to achieve the equivalent of a touchdown or picking a very hot stock every time you buy?
The amazing thing about Real Estate is that you can tap into a professional's years of practicebuying condo units—hi-rise suites, townhomes, houses, offices, or any type of condo you're interested in - often without cost and usually without mistakes. Watch real estate professionals excel.

When you learn how to do anything, you make the same mistakes that other "newbies" make whether it's mastering a sport, acquiring a skill, or targeting an investment. Repetition of the same first mistakes leads to frustration in sport and undermines confidence when learning a skill. In investing - which is what every real estate purchase is - repeating common mistakes is frustrating, unsettling, and costs money and future returns. None of this negativity is necessary.

Avoiding common mistakes is what separates savvy investors from the masses. Do you really want to repeat the mistakes common to other condo buyers when you take your first plunge into the market or perhaps your second or third?

How do you go from zero to expert in one condo buy?

Mistake #1: When speaking to groups of condo buyers and "wanna-bes," I am always struck by how little they understand about condos in all shapes and sizes. Ownership of condominiums involves title to the space defined by the condo unit and a share in the common element which includes amenities and the land. Owners are responsible for their unit's monthly costs and a pro-rated share of maintenance costs for every other part of the condominium complex.

I recently contacted The MIAMI Association of REALTORS® to get an insider view of condominium buyer habits from three MIAMI members: Christopher Zoller, Melissa Rubin, and Sep Niakan.

To really understand this form of real estate ownership and a specific condominium complex, Certified Residential Specialist Christopher Zoller of EWM Realty International, suggests condo buyers "seek out other owners (preferably long-time owners), board members, or the manager and ask the tough questions" so they can learn the potential weaknesses and future expenses. Carefully review financial statements, upcoming assessments, and recent Board Meeting minutes to discover significant details like pending fee increases.

Zoller, who also invests in condominiums, offers other examples of common buyer mistakes linked to misunderstanding condo complexities:
  • Not learning what percentage of the units are owner-occupied. The mortgage lender may not approve or give favorable financing to an association that has more than a certain percentage of investor-owned units. The buyer's loan could either be denied, or the interest rate or LTV ration could be much higher.
  • Not checking insurance documents for flood and windstorm coverage, and whether or not the premiums are financed or paid in full. Inadequate insurance could be costly, and not having enough reserves to pay the insurance premiums can also be very costly.
The best results come when buyers also clarify their goals, so they are receptive to opportunity and ready to act.

Mistake #4: "In this [Miami] market, the buyer needs to make fast decisions and make an offer, often at full asking price or over," emailed Broker Melissa Rubin, CIPS, CDPE, and Certified Board Mediator, of Platinum Properties International, who specializes in condominiums to serve her international clients and the national luxury market. "If they wait, they miss the opportunity and next month the same property is at a higher price."

Rubin gives this example: "A buyer sees a pre-construction property and is thinking about it. Price today is $1.0M for the 25th floor. Next month, the 25th floor is sold and the 20th floor is for sale for $1.1M. Our market is increasing so rapidly, that if a buyer can hold a unit for 15 days with the rescission period, it is a better decision to do so, and [then] change their mind [if necessary], rather than thinking about it and reacting afterwards."

Mistake #5: Buying mistakes can also be linked to short-term thinking by buyers intent on what they'll do when they move in, not on the investment value of this home purchase.

"The best approach for buyers is to recognize they are buying to enjoy the property and, over a period of time, the additional funds to secure a better property will yield them a better return," stresses Rubin. "There is huge competition among buyers now and bidding low will frustrate them and not achieve their goals."

Mistake #6: MIAMI Broker/Owner Sep Niakan, CRS, GRI, ILHM of HB Roswell Realty is very clear about the most repeated mistake buyers make: "Not buying waterfront and water view when they can afford it. Waterfront and water view units are always easier to sell and always appreciate better in the long run. Buyers' loss is in significant future equity! Buy what is rare and unique such as waterfront or water view."

Monday, December 9, 2013

Californians Facing Short Sale Will Continue To Get A Break On Taxes

Californians Facing Short Sale Will Continue To Get A Break On Taxes 
             Written by on Monday, 09 December 2013 10:56 am 

  While it is true that short sales are no longer such a dominant segment of the real estate market, they are still around and, many suspect, will continue to be for some time. It is a pleasure to report, then, that we have recently received some good news for California short sellers. In short, California short sellers of residential properties (1 - 4 units) will continue to be protected from taxation on the "phantom income" received in a short sale.
 A brief history is in order. "Phantom income" refers to the amount of debt that is forgiven when a lender is willing to accept less than the full amount owed. If you owed $200,000 on your mortgage, and the lender allowed a short sale for $180,000, you would have received $20,000 in phantom income. (Phantom, because you never got to lay your hands on it.) Normally, under both state and federal law, forgiven debt is taxable as income. (If it weren't, every CEO would arrange to be paid in the form of a loan that would later be forgiven.)
  In the face of a crumbling economy and a tsunami of short sales, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007 which provided that there would not be taxation on debt forgiveness in the short sales of qualified principal residences. California adopted legislation to conform to the Federal policy. In neither case, however, was the legislation permanent. The California version expired at the end of 2012. The Federal provision expires at the end of 2013. The respective legislatures - being busy with so many other things - have given no signs that there will be further extensions.

So, does this mean that short sellers will once again face the prospect of being taxed on phantom income? The answer is "no" in the case of most California short sales. This was made clear recently in an IRS letter to California Senator Barbara Boxer and in a letter subsequently released by the Franchise Tax Board (California's version of the IRS).

The IRS letter noted that forgiven debt is not considered taxable if the debt obligation is nonrecourse. If a debt is recourse, the lender is owed the difference - a deficiency - if the debt is not paid in full. In many states, mortgage debt is recourse debt. If a foreclosure auction does not generate enough to satisfy the outstanding debt, the lender may pursue the borrower for the difference. In California, though, some mortgages (e.g. for the purchase of a principal residence) are nonrecourse. An auction pursuant to a trust deed foreclosure will be full satisfaction of the debt, even if it garners less than the balance owed. There is no deficiency judgment; there is no recourse.

In its letter to Senator Boxer, the IRS noted the following: "In 2011, California enacted an anti-deficiency provision under section 580e of the (Code of Civil Procedure), which generally prohibits a lender who holds a deed of trust on a homeowner's principal residence from either claiming a deficiency or obtaining a deficiency judgment from the homeowner after agreeing to a short sale." Thus, "We believe that a homeowner's obligation under the anti-deficiency provision of section 580e of the CCP would be a nonrecourse obligation to the extent that, for federal income tax purposes, the homeowner will not have cancellation of indebtedness." There will be no taxation of short sale phantom income.

Responding to inquiry on the same matter, the Franchise Tax Board said, "Since California conforms to the relevant portions of the federal tax law governing the forgiveness of nonrecourse and recourse indebtedness, California would follow the federal treatment for the CCP section 580e transactions."

That's good news for most Californians who may be facing a short sale.

Bob Hunt is a director of the California Association of Realtors®. He is the author of Real Estate the Ethical Way.

Saturday, December 7, 2013



Written by 
When you buy a home, you should plan on staying in your home at least five years. Why? You'll need equity in order to sell the home without bringing cash to the closing table.
Equity means ownership. Building equity takes time, usually about five years for typical households to be able to sell at a profit, break-even, or without losing money.
This five-year rule can change depending on what state you live in, how much you put down to reduce the size of your loan, and how healthy the housing market is in your area. In some states, you could pay as much as 14% in closing costs and fees to buy and sell a home.
These include the fees to close your original loan, Realtor fees when you sell, title and/or abstract company fees, attorneys fees, surveys, home inspections, and so on.
Building equity can be challenging. With any mortgage loan, you'll find that the first five years' worth of payments go more toward paying interest to the lender than reducing your principal obligation.
That said, there are four ways you can build enough equity so you can sell at break-even or better:
1. Put more money down. If you put 20 percent down, you're covered. If you put down 3.5, 5, or 10 percent, you'll have a little equity, but not enough to sell your home anytime soon.
2. Pay your mortgage on time and in full. Some of your principal will be reduced along with interest. The longer you pay, the more principal you'll reduce.
3. Make additional payments toward reducing your principal. You can add an extra $50, $100 a month, $500 or whatever you want as extra payment.
4. Let the housing market raise the value of your home. The housing market typically rises one to two percentage points above inflation annually, but for nearly a decade, the market has been volatile. Many homes gained and lost significant value. As the market stabilized, home prices have risen again, replacing lost equity and adding more value in most markets.
Putting money into your home is the most reliable way to build equity. Equity gives you freedom to sell whenever you want. If you don't have much equity, you're better off following the five-year rule before you sell.

Monday, December 2, 2013

Everything In Real Estate Is Negotiable

Everything In Real Estate Is Negotiable
      Written by      

Everything -- absolutely everything in Real Estate -- is negotiable.

Recent economic reports indicate that real estate sales are on the increase, especially since mortage interest rates are still very low. But it still is a "buyer’s market".

Home buyers, and especially first timers, do not understand that they have the right to bargain and negotiate all aspects of their real estate purchase.    
Potential buyers should not hesitate to make low offers on a house they are considering to buy. The real estate broker/agent has a duty to submit any offer -- no matter how ridiculously low it may seem -- to the owner of the house.
A seller has three options when an offer is received. She can reject it out of hand, can accept it as presented, or she can counter-offer.

If your offer is rejected, you can always present another offer which is closer to the seller's asking price. Or, if price is a concern, you can keep looking for something else.

If the seller counter-offers (which is the usual practice) then you can slowly begin to narrow the difference between the two prices until hopefully you both reach that happy medium.

Once you have a signed contract to purchase, the negotiations should not cease. First, you have to determine what kind of mortgage loan you want. Do you want the security of a fixed 30 year loan, where your monthly payments will remain the same? Do you think you will be selling the house within the next 5-7 years, in which case you may want a 5 year adjustable rate?

Incidentally, I do not recommend a 15 year mortgage. True, the rate will be less than a fixed 30. But your monthly mortgage payments will be higher. With a fixed 30, you have the right - but not the obligation - to make larger monthly payments, as if you had a 15 year loan. And if you need that extra money - or if a better investment comes your way - you can always go back to your regular 30 year payment.

You should shop around and compare mortgage interest rates with a number of mortgage lenders in your area. Presumably the real estate agent will give you a name or two of potential lenders. Certainly you should contact them. But don't stop there. Check out at least five lenders to try to get the best rate for your purchase. Then make your decision.

After you select your lender, once again the negotiations should continue. Your contract should contain a provision that the contract is contingent on your obtaining a satisfactory inspection by a professional home inspector. Typically, there are two kinds of inspection contingencies. One gives you the absolute right to cancel the contract for any reason based on the results of the inspection. The other requires that you provide a list of problem areas to the seller, who has three days in which to agree to all (or some) of the issues. If the seller agrees to your concerns, the contract remains in full force.

I prefer the former approach. From the buyer’s point of view, if there is disatisfaction - or even buyer’s remorse - they have the right to cancel the contract immediately. (Typically, the contingency lasts for 3 or 5 days after the contract is accepted.) From the seller’s point of view, while they may lose a sale, its better to do it now rather than have an unhappy potential buyer who will give you trouble all the way to settlement - and even beyond.

Usually, the real estate agent involved in the transaction will provide you the name of an inspector. But insist that you be given at least two names. This assures you that there is no collusion between the agent and a particular inspector; it also protects the agent from claims that he was not in cahoots with the inspector.

Do not let the broker select a title or escrow company or attorney for you -- at least until you have compared prices with several such settlement providers. Keep in mind that the law is very clear: you - as purchaser - have the absolute right to select who will conduct your real estate closing.

Home owners insurance (hazard) will be required by your mortgage lenders. Once again, shop around. There are many different kinds of insurance coverage, and you should familiarize yourself with the various policies before signing up with a particular company.

No doubt the real estate agent will try to be helpful and will want to walk you quickly through the entire process. After all, the agent wants the deal to close so that the commission will be paid.

But it's your money. And a lot of it. Take your time, shop around, and then make your decision based on all the facts and a lot of negotiation of price and terms.

Friday, November 29, 2013

Low Supplies, Higher Prices, Better Homes

Low Supplies, Higher Prices, Better Homes      
Written by

Existing home sales have succumbed to the typical seasonal slowdown, but the National Association of REALTORS® says annual sales should end 10 percent higher than they were in 2012.

Housing sales are predicted to be just as high in 2014.
So what's driving housing sales?

Sales volume has remained above year-ago levels for the past 28 months.

October sales and prices are both up nearly 13 percent over October 2012. The median home price for all types of housing was $199,500, the 11th consecutive month of double-digit year-over-year increases.   
The good news there is that equity homes are selling, and that's also bringing prices up. Foreclosures and short sales were only 14 percent of homes sold, down from 25 percent a year ago.

Prices are expected to end 11 percent above last year, and then cool down to about a five percent increase in 2014.
The National Association of REALTORS® says prices are shrinking affordability which will cool home sales volume. The first sign is the decrease in the number of first-time homebuyers, down three percent from 2012.

Currently, homes are at about a five-month supply nationwide, up slightly from September. One-third of homes sold in October were on the market less than 30 days.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.19 percent in October down from 4.46 percent in September.

If rates stay lower, that should offset rising prices for some homebuyers.      

Tuesday, November 19, 2013



Written by Todd Foust and Jennifer McNamara on Friday, 15 November 2013 12:20 pm

Modern homebuyers will inevitably come across one or more properties currently classified as a short sale. A short sale is an attempt by the current owner to sell a home in lieu of the bank taking it back through foreclosure proceedings, thus partially salvaging their credit rating and lifting the burden of heavy mortgage debt. The entire short sale process hinges on the hope that the bank will take a loss now, approve the sale, and eliminate the costly process of foreclosing, clearing, and reselling a home. Obviously, this is a big hope on behalf of prospective homebuyers as well and they need to understand some things in order to lessen the chance for disappointment of unapproved short sales. This is what they should know:
1. Price is usually set by the agent & seller, not bank: The agent and seller often create a very low asking price in order to attract buyers. The bank is normally unaware of the asking price; however, the bank has the final say in what an acceptable offer will be. Since the bank has the power to ultimately accept or deny offers, their lack of price awareness often leads to the process taking longer than anticipated. The bottom line is that the buyer needs to remain positive and patient throughout the entire process, sometimes even for months.
2. Loans owned by 1 bank usually better than 2: If the seller has loans owned by two different banks it is a lot more difficult to approve the short sale. This is something the agent or the buyer cannot control; it simply depends on the willingness of the bank or banks involved. While the reasons are beyond the scope of this guide, buyers should know that when the seller only has loan(s) with one bank the short sale often becomes more buyer-friendly. A savvy Realtor can let you know this type of information.
3. Lowball offers get slow or no response: Remember that the bank is typically unaware of the pricing during a short sale. When lowball offers stream into the bank they are often scoffed at and rejected, giving the prospected buyers little or no feedback. Surprisingly, it may also take painstakingly long to hear back even on good offers due to the high volume of transactions lenders are inundated with these days.
4. Agent must check comparables before submitting offer: The agent must be sure to check recent home sales in the area to give buyers a better idea of the properties that are selling. This will give the agent and the seller appropriate grounds for an asking price that will be more likely to be approved by the bank. Checking comparables will also give the buyer a better knowledge of what price homes in the neighborhood are selling for and ultimately make them a more informed homebuyer.
5. Don’t hang your hat on the property: Short sales aren’t necessarily "short." It can sometimes be a very long process. Don’t get your hopes up for just one property, keep your options open and continue to actively look at multiple properties. Buyers must remain optimistic, the right property will come along. In most areas it is completely legal and risk-free to have multiple offers out at any given time with the proper contingencies.
6. Sellers with other properties or too strong of financials may not qualify for short sale and/or may be asked to pay the difference: Sellers that own more than a handful of properties or have an extremely large net worth will probably not be eligible for short sale. In some cases the seller will be asked to pay the difference of the sale. The seller might even need to sign a promisary note stating that they will pay back all or most of the debt. This has virtually no effect on the buyer as long as the seller cooperates.
7. "Approved" prices are quickest: It is important to remember that short sales are not always timely; however, making an offer on an "approved short sale" can be a quicker process. An "approved short sale" has a price that has already been given the green light by the bank. This could be due to the fact that another interested buyer made an offer that was approved, but didn’t end up buying the property. These types of short sales are some of the most highly desirable.
8. Some banks look want strongest buyers, some want strongest offers: The bank has all the power in approving short sales. The bank can pick the most appealing buyer, which may mean different things to different banks. Some banks may prefer the buyers with large down payments while others just want the highest price regardless of down payment. Many buyers want to know if they will get a deeper discount for an all cash offer. This is very hard to predict and one will never really know until they make an offer. As long as the buyer is surrounded by a good team we would advise them to do just that.
9. Repairs are seldom done, credit is more frequent: If there are improvements that need to be made on a home, even if they are necessary to get a loan, it is often unlikely that they will be done. Typically there is some sort of credit issued and the buyer must take the responsibility of fixing anything that is broken.
10. When you get approval, must close on time: During a short sale there is no leniency with the closing escrow date as there often is in a traditional sale. During a short sale, exceptions are rarely made and the buyer must close on time. Because of this, it is important to take care of all loan paperwork immediately after opening escrow. We’d advise buyers to be extra prepared and try to have the loan finalized a few days in advance of the closing date. If there is going to be an issue that will prevent closing on time, a request for an extension will need to be made immediately. If the request is made early enough, many banks will grant an extension but don’t just assume it will happen.
Short sales can be a great opportunity to find your new home at a competitive price. A Short sale could also be a major headache that lasts for months. It is important to have a good understanding of the factors that lead to a successful short sale to make it an enjoyable and profitable experience. We hope that these tips will help you to remain positive and optimistic throughout the process.
About the Author: Todd Foust is the chief marketing executive for the FOUST Team at C21 Discovery; one of the top-selling real estate teams in Southern California. He specializes in Orange and Los Angeles Counties and operates one of the area’s most informative real estate websites. To contact him or learn more about Anaheim real estate , please visit .
About the Auther: Jennifer McNamara works as a creative marketing contributor/manager for the FOUST Teams public relations division. She is a Southern California native and specializes in translating complicated real estate knowledge into user-friendly information for local homebuyers.