‘Stigmatized’ Properties Can Offer Big Bargains

Daily Real Estate News | Monday, August 06, 2012

Home buyers who can stomach some misfortune in a home’s past may be able to find big discounts. For example, buyers can expect to pay 10 percent to 25 percent off the regular market home price for a stigmatized home, according to real estate consultant Randall Bell of Bell Anderson & Saunders. And depending on how bad the crime was that occurred at the home, the more a home buyer can expect in discount to the price.

“In large, it all comes down to finding the right discount to entice a buyer to accept the property along with its tainted history,” Bell told AOL Real Estate.

But for some, the crime that happened may be too much to stomach, regardless of the big discount. Some buyers worry about the resale value and what others will think too. Also, homes where crimes took place tend to linger on the market from two to seven years longer than they would without a tainted past, according to Bell.

Creepy House

For example, a Southern California mansion that was the place where 39 cult members from Heaven’s Gate killed themselves sold for $668,000 two years following the suicides, which was less than half of the $1.6 million list price before the suicides occurred. Also, the home where O.J. Simpson’s ex-wife Nicole Brown Simpson and her friend Ronald Goldman was killed lingered on the market for two years before selling for $590,000—$200,000 less than the initial asking price.

However, some buyers say they are willing to overlook a home’s shady past. “It may have a terrible history,” says Chris Butler, who purchased a split-level ranch nestled in a forest in Akron, Ohio, that once belonged to serial killer Jeffrey Dahmer and was the site of Dahmer’s first murder. “But the house didn’t kill anybody.”

Source: “Jeffrey Dahmer, Andrea Yates, the Lemp Family: Life Inside Homes Where Grisly Deaths Took Place,” AOL Real Estate (Aug. 2, 2012)

 

Advertisements

Do pre-emptive purchase offers work?

   image via Shutterstock
Do pre-emptive purchase offers work?     | Inman News          http://www.inman.com

The home-sale market has come to life this spring for the first time in years. Inventories of homes have dropped, interest rates are near all-time lows, and buyers feel the market has hit bottom and they’d be wise to buy now before prices rise.

There are low-inventory niche housing markets around the country, which is good for sellers and tough on buyers. Reminiscent of the bubble of 2005 and 2006, buyers often have to make offers on more than one listing before they have an offer accepted.

Sellers in a low-inventory market may list their home on the low side of market value hoping to stimulate multiple offers and a higher price. In this case, a date is often set for offers to be heard. The date is usually after the house has received market exposure; giving the sellers more of a chance that more than one buyer will make an offer.

Some sellers don’t feel their property has received enough exposure until it has had two public open houses. They might decide to hear offers a few days after the second open house.

HOUSE HUNTING TIP: Buyers competing in a market that’s short of inventory have the option of trying a pre-emptive offer. A pre-emptive offer is one that is made before the seller’s predetermined offer date.

Let’s say that you, like the sellers, feel that a home you want to buy will receive more than one offer. You want the house badly enough that you’re willing to make an offer before even knowing if there will be multiple offers or not.

Even though the sellers have told their real estate agent that they don’t want to hear an offer before a certain date, some do. There is no guarantee that your early offer will be accepted or even reviewed by the seller. Some sellers will stick to their word and wait until the official offer date.

There’s also no guarantee that you will successfully avoid competition by making an offer before the due date. Recently, sellers who said they would wait until after the second Sunday open house to entertain offers changed their mind when they were told that an offer had been written before the first open house.

This buyer made a full-price offer and gave the seller until 2 p.m. the next day to respond. That night the listing agent received a call from another buyer’s agent who wanted to know when offers would be presented. Upon hearing that an offer had already been made, the second buyer made an over-asking-price offer that was accepted.

If you’re going to make a pre-emptive offer on a property that you think is well priced, you might want to offer over the asking price to make a positive impression on the sellers. Your offer should be good enough that the seller will be encouraged to carefully consider it even if there isn’t another offer.

Your financing should be in order, and include a strong preapproval letter from a lender. To maximize your chances of acceptance, make sure that your offer isn’t littered with contingencies.

THE CLOSING: Keep it simple and back it up with confirmation of your sincerity and ability to perform.

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

CONDOMINIUMS: Things you should know about buying a condo.

A group of townhouses in Bristol, Tennessee.

Simmie Annandale-Realtor, BPOR -Northeast Cincinnati

You’ve found your dream condo, and you’re ready to relax among the mango trees and swaying palms. Hold everything. To keep from getting stuck with a lemon, you’ve got some homework to do. Here are the seven most important questions you need to ask before buying a condo.

1. “What’s the Beef?”
Take a look at the minutes of the condo association board meetings to see what the owners have been griping about. If everyone was complaining about the faulty plumbing or the gardener’s absence, you know that the complex is having management difficulties. Even if there aren’t any complaints, reading the minutes will reveal the sorts of projects that are under way at the complex — projects the seller may have neglected to mention.

2. “Who’s Been Naughty and Who’s Been Nice?”
Find out the delinquency rates of present owners. If people aren’t paying their association dues on time, that is either a sign of discontent or an indication that the association might be underfunded.

3. “How Much Is In the Repair Fund?” [aka “Reserves”-SA]
Ask if the community has done a reserve-fund review in the past five years. Lester Giese, the author of The 99 Best Residential & Recreational Communities in America, recommends the following formula: If the complex is one to 10 years old, the reserve fund should have 10% of the cost of replaceable items (roofs, roads, tennis courts, etc.). Between 10 and 20 years old, the repair fund should be at 25% to 30%. At 20 years, that amount should be 50% or above. Residents who brag that they don’t pay much in maintenance may be in a complex that either is not being kept up well or is living beyond its means.

4. “Can You Cover Me?”
If you look at nothing else, get a copy of the certificate of insurance, which is a summary of the association’s policy. First see if the replacement costs covered by the policy are an accurate estimate of the cost of rebuilding. Then make sure that the policy has a building-ordinance clause, which means that the insurance will cover the cost of bringing the building up to code if there is any rebuilding to be done. On older buildings, there may have been many code upgrades since the time of construction. Finally, make sure that you understand exactly what the association policy covers and what you are responsible for. The smart condo owner will insure his or her personal belongings, along with any other items within the unit that are not covered by the association’s policy. If you have trouble understanding the insurance lingo, take the insurance certificate to an agent whom you trust and who understands the state laws.

5. “Does the Association Present Any Legal Problems?”
Buying a single-family home without a lawyer is no big deal for many people. But with a condo, there’s so much more involved. Contact a local real estate lawyer and have him or her go over the bylaws of the association. Do they make sense? Are they consistent with the state laws? Giese, the author, once found that the association bylaws of a large garden-style condo complex had been lifted from the books of a high-rise condo, leaving confused tenants with rules about shared hallway space and the correct use of garbage chutes. Benny Kass, a Washington real estate attorney, recommends that you also have your lawyer screen the association at the local courthouse, to see if any owners have filed suit against it. [Some counties provide access to court documents online. -SA]

6. “Is the Complex Renter-Friendly?”
If the renter population is over 10%, there should be clear rental policies, either listed in the bylaws or tacked on as an amendment. Does the management company find renters for you? If so, do they get enough good renters? Ask other tenants about their experience. In addition, ask to see the association’s rental lease, and have a real estate lawyer look it over. Keep one thing in mind, though: An association can change its bylaws to prohibit or restrict renting at any time. The more owners who rent, the less chance that will happen.

The amount of the Downpayment is Important.

What exactly is the down payment? It’s the amount of money that you, the buyer, kick in out of your own pocket, right at the start, toward the purchase of the house. But exactly how much do you need to put down?

Here’s my feeling about this: always try to put 20 percent down. Period. I’ve been recommending 20 percent forever—since long before the market had its recent huge downward swing. But as so many people fell prey to the idea of putting less than 20 percent down in recent times, we have to talk about this because it’s a big deal and something I feel very strongly about.

Seven Reasons to Put 20 Percent Down

  1. Improved chance that you will get the mortgage—The first and biggest reason to come up with 20 percent down is that in today’s new market, many banks won’t give you a mortgage unless you come up with at least that much. The loan programs that once existed for 10, 5, and 0 percent down are not just not available.
  2. Skin in the game—Twenty percent has been the norm forever. It really serves to ensure that the homebuyer has “skin in the game” and is financially viable for the homeownership responsibility.
  3. Smaller monthly mortgage payment—More money down means you borrow less, which means you will have a smaller mortgage, which means you will have a smaller, more affordable mortgage payment.
  4. Lower interest rate—The interest charged on a loan with 20 percent down is often lower than the interest on a loan with less money down. Your lower interest rate will save you thousands if not tens of thousands of dollars over the life of the loan.
  5. No private mortgage insurance (PMI)—Putting 20 percent down allows you to avoid private mortgage insurance. Also called lender’s mortgage insurance, PMI is extra insurance that lenders require from most homebuyers who obtain loans in which the down payment is less than 20 percent of the sales price or appraised value. Many lenders will even add a percentage that is like an insurance policy onto the mortgage interest rate.
  6. Instant equity building—A significant down payment builds instant equity in your home. A 20 percent down payment immediately puts equity into a property when you purchase it. That down payment safeguards you if the market turns downward temporarily.
  7. Great saving skills—Saving for a full 20 percent down is a great way to establish practical and healthy saving practices. If you have saved up for 20 percent down, you have probably learned how to manage your money wisely. That skill is going to come in very handy because the money outflow doesn’t stop once the seller hands over the keys to the front door!

The George L. Burlingame House at 1238 Harvard...

Let’s say you have $80,000 saved toward a down payment. You’re wondering, why buy a $400,000 house with 20 percent down when you can buy an $800,000 with 10 percent down? Wow: more house, better neighborhood! Hey, that sounds like a deal. But it’s not.

The entire real estate market and our economy in general were affected by the number of homebuyers who artificially exaggerated their purchasing power with this thinking—buying properties with 15, 10, 5, or even 0 percent down, thinking they were getting more house for their money.

But what really happened was that homebuyers purchased homes that were higher priced and far more expensive than what they could ultimately afford.

Stick to the 20 percent rule and you’ll be buying safe, sane and secure!
.

Break It, End It, Change It

#1 in a series on “Change” (in Real Estate)

Karen Schlosser

Karen Schlosser

If It Ain’t Broke, Break It…Necessary Endings…The End Of Business As Usual

These are titles of books that I’ve read, in whole or in part (my disclosure), that have to do with change. Admit it…the business of real estate has changed much to the chagrin of many…sellers, buyers and agents. Some of those same folk are trying to keep real estate “business as usual”:

Why? You tell me. Is it that they feel life isn’t fair? Do they feel it’s harder to work in today’s environment and they don’t want to exert the necessary energy?

Is life fair? I believe life is fair, you get out what you put in.

Is it harder to work in today’s environment? It certainly seems harder because it is different.

I recently had a conversation, albeit brief, with a seasoned professional who remarked about a situation that she had advised a client was illegal/unethical by saying, “I’ve never seen it 27 years, it’s crazy”. My immediate thought was this professional marches to the mantra, “If I’ve Never Seen It, It Must Be Illegal/Unethical”. Before hanging up the phone I should have suggested that she read the books above that underscore:

There has been change;
There will always be change;
There needs to be change;
Shift happens.

But alas, it would have fallen on deaf ears because someone who marches to the mantra, “I’ve never seen it, so it can’t be” is living in a rigid world, one that is inflexible, unwilling to learn or change, a march that will hinder their personal or company growth. Why is this topic on my mind? Because of my daily conversations with agents, buyers, sellers and prospective real estate consumers who continually ask questions about the market, about the business, so I thought I would answer some of the most popular questions that I’ve received in the past few weeks.

Q. What’s going on in the market? (February 2012 Charts)
A. People are buying, selling and leasing homes. When you take a look at the attached charts you will see sales are up 16% February 2012 over February 2011; over 40% of the sales are lender-involved (i.e. short sales, lender-owned, government-owned); active residential (single family & condo) inventory is down by 14% for the same time period; absorption rate is down by almost 30% from 13.4 to 9.6 months; proceed with tempered enthusiasm because the average sales price is down by 10% from $143,926 to $130,087, a result of more homes selling at a lesser price which you can see by the chart that displays the number of homes sold in various price ranges. Although absorption rate is down it is still way above the range of a balanced market which means it is still a more favorable environment for buyer’s to reap benefits as well as seller’s who are buyers.

Q. Can a seller write an offer to a buyer?
A. Yes.

Q. Is a seller or buyer required to response to an offer or counter-offer?
A. No.

Q. Is an agent required to present all offers and counter-offers, both verbal and written, to their client? Until when?
A. Yes, until the property closes or instructed by their client to do otherwise.

Q. Is a verbally accepted offer enforceable?
A. No.

Q. Must a seller complete a residential property disclosure form even if they have never lived in the property?
A. Yes, unless the seller falls into one of the limited exemptions. Never having lived in a property is not in and of itself an exemption.

Q. If a seller receives more than one offer, are they required to tell the parties there are multiple offers?
A. No.

Q. If an agent receives more than one offer on a listing, can they tell the parties there are multiple offers?
A. No, unless their client directs them to do so.

Q. Can a seller counter more than one offer at the same time?
A. Yes, provided they use skill and care.

Q. Can a seller counter for more than the asking price?
A. Yes.

Q. Can a buyer terminate the contract within the Inspection Period set forth in the [Board of Realtors] Contract to Purchase?
A. Yes.

Q. Can a buyer terminate the contract within the Settlement Period set forth in the [Board of Realtors] Contract to Purchase?
A. Yes.
Q. Does the [Board of Realtors] contract become null and void because the buyer and seller did not enter into a written settlement agreement during the Settlement Period as set forth in the [Board of Realtors] Contract to Purchase?
A. Yes.

Q. During the Settlement Period, can a buyer withdraw their requests for repairs/remedies and purchase the property “as is”?
A. Yes.

Q. Can a seller terminate a contract during the Inspection Period or Settlement Period as set forth in the [Board of Realtors] Contract to Purchase?
A. No.

Q. Can a buyer terminate a contract if the property doesn’t appraise for the final sales price as set forth in the [Board of Realtors] Contract to Purchase? Even if it’s $1,000 less than the final sales price?
A. Yes. Yes.

Q. Can a seller terminate the contract if the buyer does not provide written verification of funds or pre-approval letter or written loan commitment as set forth in the [Board of Realtors] Contract to Purchase?
A. Yes.

Q. Can a seller accept more than one offer contingent upon third party approval(s) and submit all accepted contracts to their lienholder(s) for approval?
A. Yes.

Q. Should a seller send all offers received to their lienholder?
A. Yes, particularly offers that may net the lienholder more money.

Q. Can a seller’s lienholder sell the property to more than one buyer?
A. No, but if they could they would.

Q. Can a seller counter an offer on a short sale?
A. Yes.

Q. Can a lienholder require the seller to sign a note to repay some or all of the deficiency?
A. Yes, unless the lienholder has subscribed to follow the HAFA guidelines.

Q. Can a lender require that the buyer use a particular title company?
A. No.

Q. Can a seller require that a buyer be pre-approved by a particular lender?
A. Yes, if it is written into the contract.

Q. Can an agent offer to reduce their commission, buy a home warranty, pay for closing costs, provide maid service for a year, or something form of inducement to a buyer or seller to enter into a contract to buy or sell?
A. Yes, provided it is written into the contract and signed by all parties.

Q. Will every person who wants to buy a house be able to?
A. No.

Q. Will every house sell?
A. Yes, for the right price and circumstances.

Q. Will the sun be shining tomorrow?
A. Yes…somewhere.

This post is from:

Cincinnati Area Real Estate Agents, a LinkedIn page
Related articles

Tips for Fire Safety in Your Home

Important to know. [Realtors: Good info to share with your clients, too]
Tips for Fire Safety in Your Home
There’s more to fireproofing a home than keeping a fire extinguisher in the kitchen and testing fire alarms.

inShare21

Secrets of the Staging Pros: Easy-to-do ideas

We asked staging experts to reveal some of their favorite tools, accessories, and strategies when home staging.

February 2012| BY Melissa Dittmann Tracey

Inspired by Nature

Barb Schwarz, credited with being the creator of home staging and CEO of www.Stagedhomes.com, says one of her favorite staging tools is pulling from the natural elements of nature. For example, Schwarz says she’ll creatively use “twigs, branches, seashells, green cuttings from the outdoors, orchids, real trees as possible, hand woven baskets, cotton, linen, burlap fabrics, real leather, and earthy colors as well. You cannot lose when using the colors of nature. This creates a comfortable, natural look and setting in any home for sale.”

Cover of "Home Staging: The Winning Way t...

Easy-to-Move Furniture

Stager Charlene Storozuk, owner of Dezigner Digz, says a must-have tool for staging properties is furniture sliders. “I have two sets: one with felt backing for moving furniture across wood and tile flooring and another set with plastic backing for broadloom,” Storozuk says. “All I have to do is lift the corners of each piece of furniture, one at a time, and slip a slider underneath. Once all four corners have a slider in place, I can easily move the furniture around on my own. Not only do the sliders save me from throwing my back out, they also save the home owner some money since I don’t have to pay an assistant to help me move furniture.”

Information at Your Fingertips

Ashley Whittenberger, owner and principal of Interiority Complex LLC, says her iPhone is a must-have tool for staging. “I can access real estate comps, easily share my database of preferred vendors who can help my clients get their home into tip-top shape, take pictures of the property for my records, share sample photos of items I might suggest to purchase, and of course, access the Real Estate Staging Association’s Home Staging Savings Calculator,” Whittenberger says.

Evoking Buyers’ Senses

Susan Tokarz-Krauss with Real Estate Designed to Sell in Grants Pass, Ore., says creativity goes a long way in staging properties. “Whether I lightly stage, redesign, or do a full staging of a vacant home, it’s very important to engage the buyer’s senses,” Tokarz-Krauss says. ”I use lighting — on timers — to set the mood and provide security. I use ‘soft’ scents such as vanilla to create that special ambiance, and I play light jazz or seasonal music in the home. Colorful pillows and accents make the room ‘pop,’ but the scents, music, and overall ambiance is what helps potential buyers personally engage with the home.”

Melissa Dittmann Tracey is a contributing editor for REALTOR® magazine. She can be reached at mtracey@realtors.org.