A few weeks ago I wrote that changes are coming for the Offer to Purchase and Contract used by real estate agents in North Carolina.

Well, the time is nearly upon us.

As of January 1st, 2011, this document (PDF) will used when a buyer wants to buy and a seller wants to sell. It will be at once longer and more straightforward.

While there have been tweaks over the years to our forms (which are a product of joint efforts between the NC Association of Realtors® and the NC Bar Association) this represents several major changes for both parties in a real estate transaction.

Personally, I’m all in favor of the changes. It makes pretty clear what the responsibilities of the parties are and reduces what has been a long list of target dates down to three – effective date, due diligence date and settlement date. It makes clear there are responsibilities that both parties have. In short, it removes any doubt that this is not a game. It makes the idea of “fishing expeditions” by either sellers or buyers much harder to pull off because everyone will have some skin in the game.

But I’ve written about all that before. For now, feel free to look over the form and ask questions. To be clear: This is not a form a consumer gets and fills in themselves. It is what agents use in facilitating a transaction between parties. Just sayin’.

Sample Offer to Purchase (PDF)

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The thoughts & opinions are mine. The quips that fall flat are someone else’s. Please feel free to shoot me an email with a question or a good joke.

And remember, real estate agents aren’t bad. We’re just drawn that way.

If you’ve ever bought or sold a home in North Carolina and will be doing so again, be prepared to make a radical shift in your thinking about the process. In my opinion, the changes are for the better.

Read below for a very brief and by no means thorough or scholarly history of how things have progressed in real estate practices in these parts:

Dark Ages:

Caveat Emptor was the name of the game. If you wanted to buy, that was fine. If there were problems with the house, oh well.

• Offer to Purchase: one sheet of 8.5 x 11 paper. (This is how it was when I started as an agent in 1987.)
• Technology: Carbonless copies and thermal paper fax machines. We were amazed.

The Middle Ages:

Something called “Buyer Agency” came into being in North Carolina and finally agents who worked with buyers could start pointing out all sorts of issues with houses that they couldn’t previously. [NOTE: I'm not talking about material facts with a house like known structural problems, a fire at the house, zoning matters, etc., These are points that even if sellers didn't want disclosed agents had an obligation to pass along] Home inspections, performed for the buyer’s benefit – and at their expense – became the norm.  This lead to repair negotiations between the parties which can be more contentious than those regarding price. The parties could be weeks and weeks into the process and have things fall apart over whether the non-leaking roof that was 18 years old needed to be replaced or who should fix the linen closet door that won’t stay shut.

• Offer to Purchase: 4 sheets of legal paper.
• Technology: Voice-mail!  No more little pieces of pink paper with messages on who to call back. Cell phones weighed about 100 and pounds and looked like plastic, grey bricks.

Recent Times:

Buyers make offers with several conditions, all attached to dates that might or might not be firm and enforceable. Namely, applying for a loan, getting loan approval, having inspections completed, submitting requests for any repairs and closing. Sellers have dates as well, like how many days they had to respond to the previously mentioned repair request.

There are 2 options regarding property inspection time:

1. Alternative 1 – A prescribed time to make any inspections/inquiries about the property after which time a repair request can be submitted, triggering a time frame for the seller to respond to the request. All of this is solely for inspections. Loan application and approval conditions have their own dates. Lots and lots of dates.
2. Alternative 2 - a drop-dead date to do whatever checking out of things desired at the end of which the buyer decides to buy or not buy. Period. In exchange for which the seller may get a non-refundable fee.

Although it has been the practice to do so in many parts of the country, few buyers have chosen Alternative 2 around here . The inspection period is still a nerve-wracking time for all parties and the process can be gummed up by debate about whether requests being made are reasonable or not. Just you go ahead and try to define what is reasonable when it comes to a used house’s condition.

Go ahead. I’ll wait……

Exactly. Very, very hard to do.

So, again, the parties can be a long time into thinking a sale is moving forward, packing boxes, arranging movers and end up with a fallen through contract.

• Offer to Purchase: 8 – count ‘em – 8 sheets of letter size paper. You’d think all that legalese would make it clear who agrees to what and what are the consequences if things get off track. You’d be wrong.
• Technology: Multiple online outlets for buyers and sellers to post listings, look at houses, research schools, get estimates of value. Cell phones play videos and fax machines and email seem quaint.

Starting January 1, 2011:

There will be no Alternative 1 or 2. There will be what is called a “Due Diligence” period, what is now known as Alternative 2.  Buyers can have all inspections, investigations, pondering and re-thinking of the purchase desired. But at the end of the due diligence period the buyer must agree to move forward or move on. The buyer can decide they want out of the contract for any reason – or no reason. It’s their call. The ‘due diligence’ fee paid to the seller, if any, is non-refundable but credited to the buyer if the property closes. [This 'due diligence' fee is separate from earnest money which serves a somewhat different purpose. See an explanation of earnest money here.]

This is a very big change. It takes the cumbersome list of dates down to three:

• Effective date (date which all parties have signed/initialed all terms)
• Due Diligence date (date by which all conditions are to be met and buyer makes decision)
• Settlement date (generally referred to as ‘closing’)

What this means to buyers is that they need to have all their ducks in a row before making an offer because the due diligence date also includes loan approval date as well as all inspections. And don’t count on sellers giving a pass on that non-refundable fee. Most will want an amount that makes it worth their while to take their property off the market. Buyers will have skin in the game from the beginning.

It also means sellers will need to get their homes as ready to sell as possible since all a buyer needs to rightfully withdraw from the sale is to get a bad vibe about things, no matter how new the roof is or how beautifully the linen closet door closes.

All in all, this will make the process equitable and for only serious parties, on both sides of the transaction.

I just can’t wait to see what the Next Big Thing in technology is. Maybe an app that makes us comfortable with change?

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The thoughts & opinions are mine. The quips that fall flat are someone else’s. Please feel free to shoot me an email with a question or a good joke.

And remember, real estate agents aren’t bad. We’re just drawn that way.

Sunday, September 12, 2010

Today will be a busy day. In a few minutes my husband and I will go to Greensboro Country Park to see our youngest child – really a grown man *sigh* – ride in his first competitive bike event, The Carolina Cup. Should be fun.

This afternoon I’ll be holding an open house at 2814 Park Place. 2:00 – 4:00.

The weather is a bit drippy but both events will be fun. C’mon by.

The most important element of buying a home – even more than deciding what style, size and school district – is determining how much you can afford. Unless you pay cash (my name is Casey, please call me immediately) you will need to find out how much of a mortgage you qualify for and are willing to pay.

Calculating this is not like figuring the trajectory needed for the Hubble Telescope to take that money shot of Jupiter, but it isn’t as easy as 2+2=4, either.

There are plenty of online mortgage calculators which are accurate. But they don’t necessarily give the complete picture. Most of these calculators do a simple equation based on a given set of variables:

“loan amount”   x   “interest rate factor”  = “mortgage payment (principal & interest ONLY)

There’s simply more to a payment than that. Also, these sites are not equipped to advise you whether you’ll qualify for a mortgage or not. (More on that in an upcoming post.) But for now let’s look at what else is included in mortgage payments.

First, in addition to the principal & interest (P&I) figure one gets using the formula above, most buyers will need to include taxes & insurance (T&I) with their monthly payment. These four components together are commonly referred to as “PITI“.

The T&I are called ‘escrow items’ and equal 1/12th of the annual tax and insurance bills. The lender holds this money in an escrow account. When the tax and insurance bills come due, they’re paid by the lender from the escrow account.

The ‘taxes’ portion refers to the property taxes due on that particular piece of real estate. Since each house will have a unique property tax bill, that cannot be calculated by the online sites. One needs to find out the annual property tax amount, divide by 12 and add that number to the P & I. (In Guilford County, property taxes can be found here. To understand how property taxes are determined in Guilford, read this post)

The ‘insurance’ component is homeowner’s insurance, a figure determined by your insurance agent. Again, take the annual insurance premium, divide by 12 and add to the P & I & T.

Voila! PITI.

But wait. There’s more.

Depending on the type of loan (conventional, FHA or VA) there may or not be mortgage insurance, known as PMI or MPI. This is not homeowner’s insurance but is mortgage insurance, paid as a premium to cover the lender in case of the loan not paid back.

These premiums are really hairy to calculate as they are based on how much down-payment is made, the amount financed and other variables. Here is when speaking with a good, knowledgable lender is absolutely a must. And, not for nothing, but a lender on the other end of a 800 number is almost certainly NOT going to know about the property tax and insurance situation for your particular locale. Call someone who knows your market.

To illustrate what I mean, here’s a recent communication from my favorite lender, explaining yet another change in FHA loans:

Huh?

Fear not. Getting all this figured out doesn’t have to fall on you alone. Or on me, thank goodness. Asking qualified professionals for help just makes good sense.

Now, where’s my Advil?

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The thoughts & opinions are mine. The quips that fall flat are someone else’s. Please feel free to shoot me an email with a question or a good joke.

And remember, real estate agents aren’t bad. We’re just drawn that way.

I am working with a couple who are looking for a larger home to accommodate their growing family. During a recent showing appointment where we had been to about half a dozen properties looking for a “possible maybe” candidate for their next home, we were making final plans to get their existing home on the market. They, like most folks, need to sell before they can buy. We discussed what finishing touches they need to make to their place and what they can expect once officially on the market.

The wife was getting visibly more tense as talked about her home being shown, having open houses, photos being taken and posted online. She then asked, “Which do you think is more stressful: buying or selling”?

“Selling”, I replied, without hesitation.

While the home buying process can seem scary and intimidating, selling is downright nerve-wracking.

To have the best result when trying to sell your home, you need to put its best foot forward. You are inviting total strangers to come inside where you eat, sleep, bathe and unwind. You set yourself up for criticism and rejection. Let’s face it, unless you are fortunate enough to have the first person who comes through your home make and offer, you are by definition being rejected by every person who looks and takes a pass.

It’s like not being in grade and not being picked for kickball all over again.

And you need to remain in a constant state of readiness. No dishes in the sink, no carpets left un-vacuumed, dust-bunnies constantly being corralled. And you need to leave for a couple of hours at a time, whether you have somewhere to go or not. And for most sellers you can’t buy your next house until somebody decides to buy yours so your life is on hold waiting for some stranger to step up to the plate.

All in all, its a dreadful experience.

But its one where, when completed, you get to move to the next part of your life.

Just be prepared to be stressed. And excited. And disappointed. And gratified.

And whenever in doubt, vacuum.

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The thoughts & opinions are mine. The quips that fall flat are someone else’s. Please feel free to shoot me an email with a question or a good joke.

And remember, real estate agents aren’t bad. We’re just drawn that way.

The new tax rates have been set for Guilford County. You can see them here (PDF).

To figure what your tax bill is going to be when it is mailed out later this month, find your municipality – for example, Greensboro – and multiply that total rate (1.3699) by the tax value of your property, in hundreds. That is, a tax value of $100,000 would mean you multiply the tax rate by 1000. (If you don’t know the tax value of your property, go to the Guilford County Tax website and pull up your address)

This rate is slightly lower than the 2009 rate of 1.3274

The upshot is, if your house has a property tax value of $100,000, your tax bill this years will be $1,369.90. Last year it was $1,327.40.

It’s rare but not unheard of that property tax rates decline one year to the next. In Guilford County, tax movement in the rate is usually fairly small, whatever direction it goes.

It’s when property values are reassessed that things get really exciting. That is done only once every eight years in Guilford County, so there is the chance for wide differences from one valuation to the next. The next revaluation will occur in 2012.

Hmmm. The same year the Mayan calendar says it’s all going to end.

We should be so lucky, right?

[UPDATE: My friend, the very smart Realtor Candice Joyce, commented on this post with the following:

That’s the rate per $100 of assessed tax value so don’t forget to place a decimal point before last two digits…..or divide value by 100 then multiply by tax rate=same result.

Thanks, Candice. (Math. Ick.)

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The thoughts & opinions are mine. The quips that fall flat are someone else’s. Please feel free to shoot me an email with a question or a good joke.

And remember, real estate agents aren’t bad. We’re just drawn that way.

This is a question that virtually every buyer with whom I’ve worked in that last three years has asked in one way or another.

The answer is: No.

It’s understandable that those of us with active empathy centers in our brains may feel badly, walking through a vacant house that was home to someone and from which that someone was kicked out. But the sad fact is that, whatever damage might be done to the former owner’s credit, state of mind and life situation has already happened by the time you as a buyer walk through the front door. You are not taking advantage of someone else’s misfortune. You are looking at a property owned by a bank.

A bank.

And a bank is about as far from being a sympathetic figure as you’re likely to find in this historically grotesque economic chapter in American history.

If you still feel pangs of guilt, consider this: Buying that foreclosure will remove it from the market, thereby reducing the surplus population. I mean, surplus inventory.

Sorry. All this real estate drama has me in a Dickensian frame of mind.

So, look at all homes that meet your needs. Make your decision on which one rings your chimes, regardless of the circumstance of the seller.

That’s how it’s done.

Looking at this gaping, rather messy closet feels like an invasion of privacy, doesn’t it?

It would be, unless the closet is in a house that is on the market.

I’ve had more than one buyer client ask if it’s alright to do things like look in closets, try out water pressure, check out how clean the built-in oven is. These are all things that only either the crassest people or our closest friends would do under normal circumstances.

Selling or buying a house is far from normal circumstances. It is a time when total strangers roam through your home. Someone else is trying to visualize their furniture in your living room.

And they want to know if the closets are large enough to hold the by-product of her shoe sickness, his fascination with remote control airplanes and the equipment from the seven sports their two children play at any given time.

So, buyers – go ahead and look. It isn’t naughty.

Sellers – tidy up for goodness sake. While knowing the water pressure might be important, there are some things NOBODY wants to know about you.

The thing to keep in mind for both buyer and seller is that a home on the market is a product for sale. If you want to sell it, put things in order. If you want to buy it, kick the tires, so to speak. Flush the toilet, see if the oven has been cleaned recently – or ever – and look in the closets.

Really. It’s ok.

During a recent real estate continuing education class a discussion started about how, in North Carolina, our listing agreement has been changed to include, amongst many other things, the option for the seller to advise intent to have a home inspection performed. This is a fairly new idea and one that is met with resistance by both some sellers and a few agents alike.

On first blush, all parties might agree: Why should the seller pay for something the buyer should do for themselves? It also is true that whatever home inspection a seller gets, no matter how thorough and from how reputable an inspector, the buyer’s equally reputable and thorough inspector may find different issues. But, frankly, there are “issues” and there are ISSUES. A good inspection at the beginning should reveal items that would most likely turn up through the buyer’s inspection and should rightfully be addressed. I’ve written on this before, oh so pithily. Let’s face it, you as a seller may be able to ignore the leak in the upstairs bathroom, but the buyer’s home inspector won’t. And neither will the buyer.

So, having your home pre-inspected can make very good sense for a seller. I’ve advised clients for years that, as exciting as the home selling/buying process is, what you don’t want it to be is made up of surprises. You want a nice, happy, uneventful transaction. There’s enough inherent adrenaline-producing steps in a smooth sale that no one needs extras. Finding out the crawl space shows a rotten floor joist is something you want to know before a freaked out buyer is demanding it be repaired. Any who wants a rotten floor joist, even if you’re NOT selling, right? This is your house, for crying out loud.

Also, when there are legitimate repair issues, better to address them, and be able to show prospective buyers what a conscientious homeowner you are and avoid the inevitable. Not only that, but it shows you have nothing to hide. Let’s all admit that one of the biggest challenges to the home buying/selling process is everyone’s fear of being taken. Anything a seller can do to show a bright light on things goes towards relieving the buyer’s anxiety.

Granted, there are situations where a seller simply doesn’t have the money to make repairs. But even then, knowing what lies ahead helps you plan accordingly.

Again, avoiding surprises is good.

In the Greensboro area, a home inspection will cost around $350, depending on the age and size of the home. Could be more or less. A good home inspector will provide your report in a very timely manner – within 24 hours – and it will be detailed with copious digital photos of all repair items. There will also be notes about what is not a repair issue but a “keep an eye on” issue.

By the way, above I mentioned that some Realtors don’t agree with the idea of the seller’s getting home inspections in advance. I have to say I feel the reasons some agents object are the types of attitudes that don’t enhance our image. Some think it’s a waste of their client’s money as the buyer will get their own. That seems short sighted to me, for reasons already stated.

But some agents feel (**shiver**) that they don’t want to find out anything that then becomes a material fact about the property which they themselves must then reveal to all parties.

This makes me sad.

The real estate industry has come a very long way from the caveat emptor days when buyers were on their own. Agents should be advising their clients – both buyers and sellers – of the best way to achieve their goals in the smoothest, most sensible and, yes, most ethical, manner possible. The vast majority of agents do. There are a few who need to consider getting into another line of business. Say, selling Ginzu knives door to door.

Back to seller: There’s really no downside to getting your own home inspection when putting our house on the market. A fairly small investment of money gets you a lot of information and can enhance your position in this very competitive market. Show buyers you have nothing to hide. Heck, you’d probably get your car detailed and have a tune-up in order to get the best price when selling.

Tune up your house.

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If you have questions, comments or a good joke to share shoot me an email.  I’m a full time Realtor®, I love what I do and would be thrilled to hear from you.

The opinions I express here are just that – my opinions. The lovely gentlemen who own Yost & Little Realty have nothing to do with what I write. They tolerate me, but they didn’t raise me. So don’t blame them.

There are many clocks in our house. From the digital ones on the DVR box, wall oven, under-cabinet radio, alarm clocks for for both Mr. Durango and me to the ones at the bottom of the three computers to the watch our oldest son left here after visiting this weekend – it started beeping at 6:30 this morning – to the grandfather clock in the front hall to the mantel top clock in the den to the cuckoo hanging in our kitchen (the cuckoo CLOCK is hanging, wiseguy) we are covered, clock-wise.

Even so, time can still manage to slip up on us. And it is slipping up on all the 1st time home buyers who haven’t stepped up to take advantage of the $8,000 tax credit. As it is currently designed, the last day to close on a house and receive the credit is November 30th.

December 1st will be a day late and $8,000 short.

Let’s be clear. There is still time to find a home and go through the process and close by the deadline. But if you are hoping to take advantage of the credit, you might want to get going before the new seasons of “Lost” gets started as I understand that show can be quite the time suck.

There is a chance the deadline will be extended. And there’s a chance my youngest will become obsessive about his room being tidy as well. We can continue to have faith, but let’s not bank on either of things happening in a timely manner.

What should be your first step if you haven’t already started towards buying in time for the credit? Pretty much the same as always. Time is just really of the essence in this case.

So, my personal recommendation is to get thee to a good lender immediately. The loan process is what can take the longest in a real estate sales transaction and it can be started before you find the house which can save time. A lender can actually get your loan approved, contingent on whatever house you find appraising at the contract price, before you step foot into the first property on your search list. And the benefit is that the lender will have the information needed to finalize the loan once the house is found and you’ll know your perimeters, money-wise.

Once you’ve established the loan, get with a good agent and start looking at houses. Don’t mess around with looking with several agents. That’s not efficient, not effective and wastes time. You have to get to know each one, answer the same qualifying questions over and over and ultimately that doesn’t serve your purposes.

Find an agent you like and go for it.

Once you find the house, the negotiations will take as long as they take. Perhaps you and the seller will come to a meeting of the minds in a day. Maybe a week. That’s up to the parties. Try not to get bogged down in whether the seller will leave the 15 year old swing set or if the living room is intolerably orange. And if the seller gets bogged down in their own issues, consider moving on to another property.

It’s unpredictable but as a rule, when a buyer wants to buy a house that a seller wants to sell, things get worked out.

So, the countdown has started to November 30th. Here’s your “to do” list if you want to get that $8,000 tax credit:

• Communicate with a good lender and start the approval process
• Establish a relationship with a Realtor with whom you’re comfortable and start looking at homes that meet your needs and price range
• Eliminate those homes from your mind that won’t work. Try to compare no more than two houses at a time and eliminate all the rest. Otherwise, they start to run together and you can’t remember which one had the half bath off the kitchen that skeeved you out and which one had the killer deck.
• Stay on top of whatever your lender has told you she needs to get things completed
• Be prepared to get a bit freaked out. Nearly all 1st time buyer do. You’ll be glad you went through it all once your in your own place.

This is a rare, as in never before, opportunity to not only become a home owner but to receive massive coinage for the privilege of doing so.

It all adds up to this being the time to make that leap and reap the rewards, happiness-wise.

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The thoughts & opinions are mine. The quips that fall flat are someone else’s. Please feel free to shoot me an email with a question or a good joke.

And remember, real estate agents aren’t bad. We’re just drawn that way.