Looking back on 2011, it was a very tough year in Residential Real Estate in my hometown of Millburn and Short Hills, NJ, there were many factors that made it harder than ever to sell or buy a home. Some obstacles are out of my control (like the behavior of the buyers, Realtors, lawyers, extreme weather, lenders and appraisers) but others can be avoided and for the New Year, I’m turning over a new leaf and keeping my eyes open on what can, and will go awry.
Don’t get me wrong; I’m not afraid of hard work, in fact, I enjoy challenges and I actually derive a lot of satisfaction from throwing myself into difficult projects and conquering them. Since I opened Towne Realty Group in 2006, I have to commited to working hundreds of hours of labor without pay (which is exactly what Real Estate agents do every day.) I don’t get paid one dime until after a closing, the first month’s rent is paid, or passing of title. Even better, I usually spend thousands of dollars of my own funds to promote a property (with floor plans, photos, brochures, web postings, videos, postcard mailings, ads in local papers, open house luncheons and other expenses) for weeks, months and even years, without ever getting paid; that’s right, I lay out the money, work for free and earn nothing, sometimes for over a year, until a buyer is found and the closing has passed.
Starting with sellers – there are some things must be addressed.
1. Are the mortgage and taxes current? (These days, I don’t always get the truth so I need to conduct my own mini title search to be sure.)
2. Is there enough equity to sell the house for less than the ‘dream’ price and still pay closing costs and commissions?
3. Does this person/family need to move or is this just a passing fancy, if the price is right? How strong is the motivation?
4. Can the seller afford to buy if they don’t sell first? Should I be running out to show this prospect homes if the sale of their own home is the only way they can qualify as a purchaser?
5. If this seller is also a buyer: Have they spoken to mortgage lender or a bank to have credit checked and get pre-approved for a loan? With banks tightening up their lending requirements, if a credit score dips below 700, that alone can kill a deal.
6. Can the seller say out load: “I know I may need to sell for what I paid or less than what I paid for this house, and I can live with that.” If those words cannot be uttered, this could be a dead end.
Knowing what the clients have paid and invested, and understanding their expectations of what they will net, is critical to the process of listing, selling and getting to a closing. If a seller is moving into rental, rather than buying another home, this becomes less important, but they still need to have decent credit or enough cash to get into a rental. Landlords often require credit checks with decent scores or several months of rent paid up front, if there is a problem with the tenant’s financial history.
One of the things that takes the most time is going over the seller disclosures and understanding the history of the house and the land.
IS THERE A SURVEY? I will look for a copy of the survey and really push them to find it in their papers, the safety deposit box or with the last attorney or agent who assisted them in a closing or refinance. In some cases, I have requested that they get a new one. It can cost up to $1,000, but not having a survey has caused delays and it can force a seller to leave money on the table.
Easements, boundary disputes, and tax records with incorrect lot sizes and acreage can be instant deal killers. If the land is measured incorrectly, it can also impact the tax assessments and create a higher and unfair property tax.
In 2012, I will be reviewing the old sold and expired listings, making sure the lot size adds up and doing my own math on the measurements. I was shocked to find that the municipal and multiple listing tax records were wrong on many properties. Lots sizes were off by as much as a QUARTER OF AN ACRE on one lot I examined. It is easy to calculate the lot size of a basic square or rectangular lot, but irregular shaped lots need to be evaluated by a qualified surveyor or architect so the acreage is listed accurately. A lot that is listed too small or one which has the size is overstated, is sure to have financial repercussions later.
Many disclosure items are obvious to the naked eye. I don’t need to interview a home inspector to see that a driveway is cracking, the front steps are deteriorating, the paint is peeling or that there has been water in the basement. What I can’t see is what is happening inside the chimney, whether there are hidden termites, if there is high radon level or whether an oil tank has leaked deep into the soil.
Even with all the proper papers showing an underground storage tank was abandoned properly, or a tank scan showing that there is no buried tank on the property from the previous owner, I can no longer trust those records and feel safe. Several of our listings in 2011 had serious problems with tanks that had long ago been emptied and filled with sand. If someone wants to hire me to list his house, the tank must come out first. If they do not agree, I will not move forward with the listing.
This is my New Year’s Resolution: Remove that empty, abandoned tank, or I will not accept the listing. Too many months and hours of my life have been spent arguing and discussing what I knew from the start — the tank must come out. We maintain a list of companies that will scan, dig, clean, and/or remove tanks.
When was the last time someone poked his head inside that little trap door that leads to the attic? My last listing that had one of those hard-to-reach-attics that required a ladder to gain access through a small closet. The mold was so thick, that all new roof sheathing was required (meaning a new roof) and expensive mold remediation plan was needed to the tune of over $45,000.
NEVER AGAIN will I take a listing and not have someone qualified to peek into that crawl space in the attic and also the basement!
A pre-listing home inspection is critical for sellers who have been in their homes for several years. Let’s just say I don’t like surprises. When it comes to selling a home, I call the building department and find out if there are open permits. I don’t want to find out later, that something easy can be resolved before I get started. Some open permits might actually trigger a tax increase or make it impossible for a seller to appeal his taxes.
Here are some other deal savers that I will be working on for 2012:
1. Does the sump pump have a back up battery? If not, get one installed or consider a generator. In a year when Hurricane Irene and a freak autumn snow storm cut off power and gas for over week, twice within 2 months, many typically dry basements, took water.
2. Have you had any issues with your neighbors? On either side, behind you and across the street. I want to know about this up front so when the buyers are talking to the man raking the leaves, we don’t get a charming anecdote that can kill the deal.
3. What insurance claims have you made on your home? Sometimes too many claims will be recorded on a particular home and make a house harder to insure, as if it has a pre-existing condition.
4. Knowing some of the answers to feng shui questions up front can also help. Since approximately 40% of our buyers are foreign born, the direction of the house, the way the stove faces and the energy or karma of the house can be vital to the deal.
5. Can you and should you get flood insurance? It can’t hurt to review the flood maps in any area and make sure that this property is or is NOT in a flood plain or zone.
As always, there are no guarantees that following these steps will make things easier. In fact, all of these recommendations take extra time, money, patience and may just end the notion of moving forward, but at least I will have the satisfaction of knowing that I did my homework and came into the transaction fully prepared. If you have questions about any of these points, please give me a call at 201.417. 1600.