THE PROBLEM WITH GARAGE CONVERSIONS

Many older homes come with a two-car garage, approximately 20 by 20 feet, or 400 more square feet of living area if you convert it. It’s already under the roof and walled on three sides, making it appear inexpensive to remodel into a den, bedroom or guest suite.

The problem is that a garage conversion can cause more problems than it solves. Unless you remodel the outside of the garage along with the driveway, it will always look like a conversion. When the driveway leads straight to a wall, it never looks right.

You’ll face problems with the interior, too. The garage floor elevation could be different than the rest of the house because it’s a concrete slab. Garages aren’t insulated, so there will be a noticeable difference in sound absorption, temperature and finishes.

When you sell your home, you can’t count the square footage you gained within your asking price. Homebuyers want the security, storage, and utility of a garage, and will likely build the cost of reconversion or building a new garage into a lower offer.

No matter how you count it, square footage gained at the cost of a garage isn’t worth it.

Why it Matters Whose Name is on the Deed to the House

So a friend of yours wants to buy a rental and asks you to go in on the purchase, destined to make “bags of money” they say. You and a roomy are DONE with rent and found the “perfect house” to save ” bags of money”. Who needs a ceremony and piece of paper to make our connection real, a house is that committment we were waiting for. “If these scenarios sound familiar then lets dig up some thoughts to ponder in case all that glitters is not gold and someone descides to leave the nest, potentially leaving someone high and dry.

First of all, verbal agreements are a terrible idea for these situations. Friends, roomates or “close as can” be romantic partners can sing whatever song they choose but unless it is in writing it is no good. Whatever name is on the deed will get the house if someone leaves. With everyones name, who invested or continues to invest via mortgage payments, on the deed then everyone owns the house.

If all applied for the mortgage, all signed for the mortgage, then all are responsible for the debt and pay until the mortgage is paid off ( possibly when house is sold.) This will happen even if a couple un couples, family rift on the rental or roomy’s find a different room. Even amicable partings will leave the house as it was set up at time of purchase.

Talking things out prior to the purchase is the best option, verbal situations are great here. THEN call an attorney to find out your best options and get it in writing, however all involved want it. I have had many buyer clients in these situations, and a call to Maether Law Firm has always found the best solutions. Unfortunately, even some seller clients that did not consult an attorney ahead of their purchase have had to give Bryan Maether a call to see what they can do after the fact, not a good place to be and less options at this point.

Home ownership, or rental investment properties, are great and I would highly recommend them, and give me a call. But as with everything else about the purchase of that property ( area to purchase in, style of house, how much square footage, how big a lot etc.) the paperwork needs to be addressed. Making sure your home has a solid foundation and updated electric makes for a sound home investment. Adding a well thought out, firm, closing paperwork packet makes all the expectations of your “bags of money” dream house complete.

“Contingent” – Means what for the Property Purchase Offer?

When you were a child your mom or dad may have said; “clean your room and I will take you for ice cream.” Ice Cream is contingent on cleaning your room.

Purchase contracts could have contingencies attached to them as well. A home inspection or radon test is a contingency. The buyer will ask for these items, for the home inspection and radon the results will have to be approved by them in order to move forward with the transaction. But it doesn’t end with these items. Either party, buyer or seller, can add a contingency and as long as the other party agrees, its a deal.

In this era of multiple offers we have seen many contingencies and few contingencies. A buyer will offer a weeks stay in a timeshare in Key Largo if the seller accepts his contract. The contract is contingent on this timeshare if the seller is going to accept it. In a buyers market ( we have a sellers market currently), the seller may offer a years snow removal to sweeten the deal for the buyer, and the contract is contingent on this snow removal.

Depending on the type of market we are in, and how many multiple offers are submitted, will dictate if contingencies are in order. What contingencies do we normally see the buyer include? Home Inspection, radon, staking the lot during the seller purchased survey, seller concessions, delayed closing for 4 months ( normal closing takes 2 mos.) If a buyer is submitting an offer and there are multiple offers then the less contingencies that are required of the seller the better. If an offer gets “heavy” with contingencies it makes the offer more undesirable for the seller to accept. If there are “lighter” offers with fewer contingencies then it is easier for the seller to follow through with the offer so more desirable.

Overall some contingencies are a good idea, they provide a level of comfort that is important to the buyer. But their are some that are nice things to have but not necessary for the buyer to have a sound investment purchase. A qualified Accredited Buyers Agent will know what is a valid ask and what can be accomplished after the purchase. Contact me for any questions regarding contingencies and how they affect an offer.

Will Home Prices Keep Rising ?

Homebuyers are getting a lot of mixed messages this year. Interest rates are near record lows, but housing prices are still rising. So should you continue to rent or go ahead and take the plunge to buy? That depends a lot on both your needs and where you live.

You may be wanting more space for home offices, play areas for kids, and more.  You may not have to be close to work, which is one reason why there’s a current exodus out of expensive cities like New York City and San Francisco to suburbs or smaller towns. Another reason is cost.

According to HomebuyingInstitute.com,  home prices will almost certainly continue to rise through 2021, primarily due to limited supply and strong demand. Interestingly, the pandemic appeared to fuel the housing market. Realtor.com reported that median home listing prices rose 15.4 percent between January 2020 and January 2021. And, in the 50 largest U.S. metros homes sold 12 days faster in 2021.  

At the same time, the number of homes for sale in January was down 42.6% year over year. That means 443,000 fewer homes for sale which only exacerbates demand.  

Mortgage interest rates hit record lows in January 2021, with nowhere to go but stay the same or go up. You may want to take advantage of that to keep monthly payments low before housing prices rise further.   

Meanwhile, some home markets may level off, while others like Austin, Seattle and Tampa are expected to heat up.

5 Year Equity Plan

When you buy a home, plan on staying there for approximately five years. Why? You’ll need equity in order to sell the home without losing money.

Equity is your percentage of ownership VS how much the bank owns. With any mortgage loan, the first few years of payments go more toward paying interest than reducing your principal. To build enough equity to sell at break-even or a profit, you’ll have to recoup closing costs and fees as high as 14% in some areas. To build equity over time, do the following:

Put more money down. If you put 20 percent down, you’re in good shape, but if you put down 3.5%, 5% or 10%, it will take longer to build equity, so be patient.

Pay your mortgage on time and in full. Paying principal builds equity. The more months you pay, the more equity you’ll build.

Make additional mortgage payments. You can add an extra $50, $100, or any amount per mortgage payment. This will also help you get rid of private mortgage insurance or allow you to refinance to a PMI-free loan once you reach 22% equity.

Let time and the housing market work for you. The housing market typically rises one to two percentage points above inflation annually, but if you’re lucky, your home may gain much more value than that.

Building equity takes time, money and luck, which is why following the five-year equity rule will help you plan when to sell your home.

Its Moving Day! What a seller takes and what they leave?

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Sellers have so much to do to get moved by closing day.  But long before that day a detailed conversation needs to be had with their REALTOR® to make sure what they want they get, and what the buyer does not want goes. 

Sellers must leave:

  • Any items attached to the structure. ex: lighting, built in shelving, bathroom medicine cabinets.
  • Any objects that are critical to the mechanical systems (plumbing, HVAC, electric).  Ex: thermostats, water softeners that are owned by the “homeowner” and not rented, built in dishwasher
  • Any outside items not free standing. Ex: Pavers, landscaping, plants, trees(picnic table, grill etc. can go if not built in).

What if there is something you want to take?  No problem just talk to your REALTOR®.  We handle that in a few different ways.  One way is to note it in the listing on the MLS that the “name the item” does not convey. Which means it does not go with the house.  That way the buyer knows ahead of time they will not have that item and that it will be replaced prior to closing and final walk through.  Another way to advance your option to take an item is to replace it prior to listing your home.  Find a suitable replacement, install, take your preferred item, and pack it away safe and sound, ready for moving day. 

Once buyers start showings of a property, they assume the items attached to the house will stay with the house and they are purchasing those items as well as the structure.  If those items are not there during the final walk through, then a credit may be requested at closing for a high-end upgrade that was missing.

What do you need to TAKE with you or discard?  Everything…. UNLESS the buyer approves in writing, prior to the final walk through, that it would be OK to leave.  Extra paint in the garage that matches the walls, fuel can for the lawnmower, cleansers under the sink, slate pool table in the basement, nuts and bolts jars in the shop all need to be discarded of properly (not just thrown in the trash for trash day after you have moved).  The structure needs to be “broom clean” per the purchase contract that you signed, that means swept and all debris discarded.  If you think the buyer may want an item talk to your REALTOR®, they will make a list and share it with the buyer’s agent to find out what they want you to leave.  If you do not take care of it, and the final walk through takes place with all these items still there then you will be asked to remove prior to closing. If you do not have enough time to complete it before the closing, they will keep some of your proceeds from the sale to have someone come and clean out the items, that could cost thousands depending on what was left.

The theme through this packing and moving process is never assume “the buyer won’t mind” and TALK TO YOUR REALTOR®!

Who needs a home inspection? Buyers, Sellers, Both or Neither?

Nobody HAS to have a home inspection, but for buyers it is recommended.

There is a form highlighting the need for a home inspection, buyers review it and sign that they received and understand. See Link to form  For Your Protection Get a Home Inspection https://files.hudexchange.info/resources/documents/For-Your-Protection-Get-a-Home-Inspection.pdf

The inspector also needs to be licensed if the contract contingency is to be authentic.  If you want Aunt Linda to come, look at the integrity of the house then most times it is allowed but unless she is licensed, she cannot fill the role of home inspector.

The inspector will evaluate the physical condition of the house.  Give an idea of the remaining useful life in the utilities and major systems of the house,  giving you information regarding what items may need to be replaced or repaired at a future date.

Recently, I was having a discussion with an inspector, and he relates an increase in buyers getting inspections after closing.  After they move in, they find things aren’t the way they thought and now they are mounting evidence that they may have been duped. 

One of my buyers was having a home inspection, the inspector was checking for carbon monoxide from the furnace with a detection gadget.  The reading was so high, the sellers had no idea, they and their small children were immediately removed from the house and could not go back until the furnace was replaced.  They were so thankful for the home inspector.

Who else may want a home inspection?  Possibly the seller.  You can do the preinspection home inspection.  If you as the seller wanted to know what was going on with utilities or structures in the house, that you may not have knowledge of already, then this would do the trick. If this was the option you chose, then you may find out that repairs for many of the items they find will need to take place anyways.  It can make for a more secure contract to purchase if things are already taken care of.

Most home inspectors will have you there so they can go over upkeep items that you may need to do as time goes on, they will provide a computer report the day of or day after the inspection.  Pictures and evaluations are provided.  You use this report to go over items with your real estate agent and figure out what may need to be addressed, if any ( remember the preinspection home inspection?) and what would not.  This takes place before the contract is finalized, since this is a contract contingency. Because of it’s potential, the home inspection and Radon test requests  are well laid out with dates and schedules that must be adhered to maintain purchase contract validity. You can protect your future repair costs to a point for items that you could not see or have expertise to evaluate at the initial showing.  But if the house is legitimate and no misrepresentations are made by the seller then it is a solid purchase and your home inspection just confirmed that.

Don’t Get Tripped Up By Hackers on Wire Transfers for Closing Funds

 

Changing financial protocols for everything from our banking to our grocery payments have morphed into unrecognized pathways compared to previous times.  They make us giggle with convenience or weep with frustration for identity theft.  In the real estate industry, we have a mantra stamped somewhere in our soul “roll with the flow and what the client wants let’s make it happen.”  So if a credit card payment is what is needed that’s swell, if a cashiers check is the only acceptable payment let’s get it done, “oh, you have a bag of cash from grandmas knitting basket? Well let’s see what the bank can do,” “can you put a down payment of bitcoin? Let me check.”  Wire transfers have been a standard for some time and thought to be the Work Horse of the closing process.  They are secure, timely and make the process end on a smooth note with everyone’s money getting in place so happy homeowners or sellers can move in and move on.

So, what has changed?  Nothing in so far as they are and will still be used and considered the most secure form of payment especially for the larger sums associated with real estate. The alert comes to our property buyers.  Many times attorneys are the handlers for the wire transfers, real estate agents may have alerted a client that they should call their attorney and get their wire transfer information but most often a good attorney will do all that in their sandbox of the closing process. That was the beauty of the wire transfer process, money needs to go here make it happen and done.  With the hustle of hackers this process has been muddied on occasion.  A well-meaning email from an agent to the buyer’s attorney and the buyer cc’d regarding a desired closing date turns into access for hackers to get the associated email addresses and all the info needed.  From their they forge an email, make access to the original attorneys’ email account blocked, and request a wire transfer to an account of the hacker.  Even if the buyer emails back to confirm the amount or the wire account number it is received by a hacker and confirmed.  $90,000 from your savings account ear marked for your home purchase is gone.  Never made it to the required closing account, and you are out $90,000.  YES, you are out $90,000. 

So, how do we stop this from happening?  A little personal attention is required, call.  Everyone wants the email with the wire transfer instructions, after all how can us mere mortals figure out the process so easily handled by financial gurus unless we have a reference (aka the email) to take to the wire depot?  Here is the golden nugget… always call your kind, helpful and efficient attorney to confirm that they sent a wire transfer request email AND verify that the numbers are the same.  As REALTORS® we love efficiency in the process, almost as much as paperless transactions.  But sometimes the personal touch just fits, and a phone call is the best way to protect your assets.