Saturday, July 4, 2020

Happy Independence Day!


What this weekend is all about.  Enjoy the cookouts, but we can't forget that anyone born here or comes to join us has already won life's lottery.

Sunday, June 28, 2020

Is Now a Good Time to Buy a House?

These are unusual times and many people are wondering if it is a good time to buy a house. Quite a few have dropped out of the market because of the economic uncertainty or the economic certainty of having their job or business shut down by government edict. Some are just too frightened to come out from under their covers. What I have to say here may be a little controversial, but realtors are a lot like economists in this sense: if you took all of them in the country and laid them end to end, they still would not reach a conclusion.

What's Happening to Sellers?

Many of the lookie-loos and mildly motivated have dropped out of the market, either for fear of the kung flu or, perhaps, better screening by real estate agents. People are not exactly breaking down the seller's doors for a chance to look at their properties even with, or perhaps because of, the increasing use of video tours. Sellers looking to cash out their homes are taking a more realistic look at the values after weeks of inactivity.

Here in Pinellas County FL when I get a notice of new listings, it comes along with a list of price reductions. These price cuts amount to about half of the new listings. This morning I received a message with 48 new listings and 27 price reductions. They aren't always big price cuts, but the action is designed to get the house more attention.

Many sellers are ready to bargain and hungry agents are ready to help them get the place sold,

Who Is Buying and What Are They Looking For?

According to a recent report about a quarter (27%) of homeowners would consider a move during the kung flu panic if their circumstances warranted it. While it may seem high, the changes brought about by being stuck at home have caused some to reconsider their ideal configuration.

Perhaps it is a sign that not all is gloom and doom on the economic front that searches for new home construction have increased by almost 75% over last year. Many are looking to move away from the open concept designs that have been popular in recent years. With more people working from home, a trend that doesn't look like it will go away after the panic, a little privacy seems more desirable. Having a way to remove yourself from the noise and commotion of family life is now looked on a good thing,

There are also the usual considerations like changes in family size and financial resources. Some have found the lockdown and increased spending in certain areas to be a windfall and, unfortunately, some have seen their income evaporate along with their freedom.

Cheaper Money

With efforts by the Federal Reserve to keep interest rates low and banksters eager to make loans – in spite of their underwriters - this may be a great time to look for financing before things open up very much and those with the resources come back to the market with a vengeance. We have to keep in mind the Fed's fetish for fighting inflation by raising interest rates when things get going well.

When you are buying a home to live in for an extended time period, usually payments are the primary consideration. To put this into perspective, if you buy a house now with an extremely low-interest rate, you may still be better off than if you can get it a little cheaper after a rate increase. This type of thing happens at times when payments are too high and sellers lower prices to accommodate increased borrowing costs. Or you could pay a higher price with a higher interest rate, The future's not ours to see,

What Will Happen to the Home Prices?

Here is where I polished my crystal ball to get a clearer picture – it still appears cloudy. We have to be careful of any prognosticator that may have an interest in a self-fulfilling prediction. Hence we can't really turn to the political class to tell us what to expect. Some want to see the economy booming with people having money in their pockets to live the American dream and other pols think they will benefit from a crashing economy causing people to turn to them for solutions.

It's hard to say what is going to happen, it may depend on which dog we feed the most. I tend to have confidence that we will see things straighten out, but I have no idea of the time table. There are some things to keep in mind -people will always need a place to live and dips in housing prices are usually temporary pauses in the general upward trend. If you are an investor, there is another trend to consider: if fewer people can qualify for a home loan, they become renters. During these periods rents generally rise because of the increased demand.

That said, there are the local conditions to take into account. If you are in an area with a net loss of population, it may be a little longer before prices stabilize. That is some of the northeast high cost of living and high tax states are seeing an outflow of people who realize that they can live better and cheaper in warmer climates. Then there are the areas where people come to. This will provide better support for housing prices.

So, What Do You Do?

A lot depends on your plans. If you are not looking to stay very long, you may want to make other arrangements, as short-term buying may not be a good decision. However, if your plans are to make the place your home for a longer time, temporary fluctuations shouldn't be too much of an issue.  Like I said, the general trend is upward.

The thing one has to keep in mind, if you believe we will come back, you may well be in better shape buying now. The lower price and lower interest could well leave you in a comfortable position, even if the prices drop a little more. If you wait until the economy rebounds and the Fed decides to put the brakes on by raising interest, the place could end up costing a good bit more,

Sealing the Deal

If you are looking to buy now, you can go with the low down payment FHA loan with about 3%. If you've saved up some more and are looking for a conventional loan, you can get away with 10%. But, for this privilege, the bank will insist on Private Mortgage Insurance (PMI). This extra fee will continue until you pay the note down to the point where you have 20% equity.

Something I did a while back and some lenders will do today is set up a thirty-year note for 80% of the price and a shorter-term second mortgage for 10%. What this gave me was a monthly payment similar to the 90% loan with PMI. The difference is that the extra payment actually reduces your amount owed and eventually goes away rather than paying for the insurance that keeps the banksters happy,

So there is not an easy, one size fits all answer to this question. I hope I've given you a few more things to chew on than you get from the talking heads on TV.

Sunday, June 21, 2020

Does a Bad Inspection Report Kill a Deal?

This is a question that concerns both home buyers and sellers. There is no firm answer, other than that it may require some creativity and flexibility from both parties. The severity of the problem, at times, is a matter of perception and the degree of desire to complete the sale.

What's the Problem?

Each buyer brings with him or her there own experiences and background. So what is a deal killer for one may not even raise an eyebrow for another. For instance, I recently sold an older home where the inspector, without comment, noted that there were galvanized pipes running out to the street. The buyer had just spent several thousand dollars replacing the galvanized pipes in the home they had just sold. For them, this was too much for them to handle so they backed out of the deal.

I got some estimates for the replacement, however, I did not intend to do the job unless it became necessary to complete the sale. However, the numbers would have been useful if it came down to a negotiating point. Even this proved to be unnecessary as just a few days later we found a buyer that didn't care one way or another and was content with the pipes as they were.

Nitpicky Details

Often times inspectors will come up will all sorts of minor points that don't make a whole lot of difference one way or another. That is what they are trained to do. Although, it seems that some take kind of perverse delight in finding the “how did you ever see that” type of detail. 

I was buying a house a few years back and the report came back with about 12 to 14 items that needed attention. Among them were cracked outlet covers and a loose fence post. I already was aware of most of the things and it was a little annoying, but the guy was just doing a thorough job. The one thing I asked the seller to fix was a mis-sized circuit breaker. I hadn't noticed that and it was fixed without me having to do it.

Often the inspector will have a list of things you can ask the seller to take care of. If they are not major, they usually agree to most of them and it saves you a little work.

What if it Isn't Little Stuff?

Sometimes the inspection will turn up issues that many home buyers will not pick up on. This is why you hire these guys. Sometimes they can keep you out of a money pit. Suppose he finds that the HVAC is held together with chewing gum and baling wire, or the roof isn't as good as it looks and will need replacing in a year or two? Are these deal killers?

It all depends on how badly you want to buy the house, how badly the seller wants to sell the house, and how good a negotiator you or your agent is. Let's say the major repair costs around $15,000 and you really don't have the extra money to handle it. There are various options – assuming the seller is flexible and willing to talk about a solution. If he is not, it's often best to walk away and keep looking.

You could ask them to drop the price by that amount or at least a portion of it. That sounds good but probably won't help as it won't lower your down payment that much and you still won't have the money. If it is a cash deal, that can be a workable alternative, You could ask the seller to replace the roof before the sale is complete. This takes the problem out of your hands – sort of. This way you have no control over the process and you may get a good job or you may get a cheap job. You could offer to pay the full price that you agreed to with the amount for the repair held in escrow to pay for the job, That is the title company or the attorney that handles the closing will keep the money in their account until the buyer is satisfied the job is complete – then pay the bill.

These are three ways of working and there can be combinations depending on what works for each of the parties. The point is that a big bill does not necessarily kill the the deal, but it probably does require some sort of give and take to make the deal work... if you still want to,

If it is a Deal Killer

What do you do if the problem is more than you want to deal with? Any reputable agent will include an inspection contingency clause in your agreement. In my part of Florida it is usually ten days from the time the seller accepts the contract, but even that is negotiable. This gives you that much time to have the inspector evaluate the property and it is usually a no questions asked satisfaction contingency. This should be scheduled as soon as possible to give you the maximum amount of time to make your decision.

When working with investors, usually on fixer-uppers, some will want to have larger deposits and no contingencies. I understand they don't want to tie up the property and have someone back out, but personally, I tend not to deal with them.

I had one deal where we gave the place a once over and made an offer. After it was accepted but before the inspection appointment, I was giving it a much closer look since actual money was involved. The house was a brick bi-level on a lot that sloped to the back. As I was examining it closely I found a crack in the foundation at one of the back corners. As I followed it up, it ran halfway up the house – through the bricks, not just the joints. It could have been fixed, but I really didn't want to deal with it.

I talked to the agent and canceled the contract as that is the purpose of the inspection contingency – no matter who finds the problem.

Seller Surprise Protection

While it is not usually done, I have come to be of the opinion that the seller could benefit from an inspection when putting it on the market. This way you have a pretty good idea what the buyer will find, It is possible then, to fix many of the smaller issues and be prepared for the major ones if any. If it is a good report, you can show it to potential buyers. If it is not good, you can mitigate the problems so as not to scare your buyers away.

Saturday, June 13, 2020

Shrubs. Bushs and Trees – The Finishing Touch


When I finish remodeling a house, one of the last things I do before showing it for sale or rent is make a run to the garden center and pick up some finishing touches for the outside of the property. I don't go into anything elaborate as I am not trying to personalize the place to my tastes. However, a few plants judiciously place add tremendous value to the curb appeal of the house. They make it look finished – that the building was not just dropped onto the lot.

Is home landscaping different than other landscaping?

You see some of the high-end office buildings with elaborate landscaping – and you are impressed. That is what they are trying to do. This is really more than most people want to do with their home – even if it is a McMansion.

Home landscaping is no different than any other kind of landscaping. It is just a matter of degree. Where the office park may have dozens of trees and shrubs around their buildings, you may need only a dozen or so. It is natural for people to want their home to look as good as possible. Who doesn't want the kind of yard that the whole neighborhood is envious of? The beauty of home landscaping is that it does not have to be hard and much of it you can do yourself.

All it takes is a bit of elbow grease and some time to design your own home landscaping. Yes, I said design. To get the best out of your investment, put some thought into the project. You will be much happier than if you just grab a little of this and a little of that at the garden center.

Getting Ideas

There are many products on the market that will help you to find the best home landscaping idea out there. You can choose to use home landscaping software for one. These programs can be a great help as you are trying to decide what will best suit your home and yard. With these programs, you get to see some different layouts and options that may work for you. This is always good when you are trying to narrow down your choices.

If home landscaping software is not for you, you can try doing a search online for some creative home landscaping ideas. The internet is full of interesting sites that you can use to help get everything done the right way. It is important to do plenty of research before you start your own home landscaping so that you keep the number of mistakes made down to a minimum. If you do make a error, don’t worry about it, pretty much anything can be fixed.

Before You Grab a Shovel

Before you start your home landscaping adventure you will need to look into any gas and electrical lines that may be running through your yard. If you have a Miss Utility phone number in your area, she can get these things marked for you. If not, check with your local utility companies.

This is very important if you are planning to be doing a lot of digging. You cannot afford to hit any of these things, not only can it cost you a bundle to fix, it can also be kind of dangerous. Hitting an electrical line with a metal shovel could be a shocking experience. If you survive you will have to deal with grumpy utility workers, or ones laughing at the silly homeowner who didn't check things out first.

Checking with Big Brother

You will also need to find out about zoning restrictions and HOA regulations that could affect your home landscaping. In some places, you cannot have trees too high and even some fences are not allowed. Find out these kinds of things before you start your home landscaping work and you could save a lot of time, money and fighting a battle you probably can't win.

Working with the Pros

After you go through the planning stage and come up with the winning combination, you may find that you have a Cadillac plan and Volkswagon budget or ambition. You can either scale back your plans or hire a professional landscaper for all or part of the project. They can help with design ideas as well as advising on what vegetation works best in your climate and soil. You are paying for their experience as well as labor.

Whatever you do, keep in mind that these plants will need to be maintained to keep them looking good. Be sure you are familiar with their care and feeding. You want to get the most for the time and money you invest in beautifying your home, so a little education goes a long way to keeping things beautiful. Good luck and happy pruning.

Landscaping Ideas

Sunday, June 7, 2020

Working with Contractors


Unless you are one of these all knowing TV construction wizards, sooner or later you will need to hire someone to do some work on your home or investment property. For some of the smaller or less technical projects a local handyman can do nicely. However, as Clint Eastwood once told us, “a man's gotta know his limitations.” The same applies to the people you hire.

Licensed and Insured

When you need them, the place to start is licensed AND insured contractors. This should just be the minimum to get them in your door. Don't be afraid of offending them by asking to see their certificates – and check the dates to be sure the policies are still in force. Legitimate guys have these things handy and expect to produce them.

There are at least two types of insurance to look for. One is workers comp to be sure anyone injured on your property is covered and not your responsibility. The second is liability coverage in case the clumsy new guy falls off the roof onto your classic '58 Ford station wagon with simulated wood trim and chrome reversed rims. The repairs on both would be covered.

I am not a lawyer and I never played one on TV so I don't want any of the esquires reading this to think I'm giving legal advice. It's just some things I learned over the years and am passing them on for what it is worth. Generally it is not an issue, but let the contractor pick up the materials. Some property owners have supplied the materials on jobs that ended with tragic accidents and ended losing everything since in some states this alters the relationship between the owner and the worker This can also apply to your handyman changing your window screens.

Where to Find Them

Often the best contractors are found by word of mouth. If they treated someone else well, there is a good chance they will treat you well. It's not assured, but it's a good place to start. Investors that are part of a Real Estate Investors Association (REIA) often have an advantage here, as often there is a ready supply of recommendations available. Most have their favorite plumbers, electricians or general contractors, along with other tradesmen with unique skills. However, if a hurricane just blew through the area, you probably won't get a roofer recommendation from them – until their own work in finished.

If you're not part of an investor group, what then? Ask people you trust that in related trades. They tend to know who the good guys are and who the pretenders are... just like nurses know who the good doctors are in their hospital. Sometimes realtors can be helpful.

When all else fails, you can look at the ads. Check their length of time in business. This is not always a good indicator as I have had good results with a young electrician who had just gone out on his own. He was hungry and did an excellent job – at a reasonable price. However, he was recommended by someone I trusted who knew him.

With any contractor, don't forget to check with the Better Business Bureau to see if they have records of complaints. If there are any it's not necessarily a disqualification. Check out how they were resolved. As with other checks, the BBB is not fool proof and not everyone who gets a bad deal reports it.

One more thing, sometimes a guy will knock on your door telling you they are working in the neighborhood trimming trees, paving driveways, or something like that. They are not necessarily crooks – usually just guys trying to make a living, but it puts you in the position of not comparing prices to know if you are really getting a good deal and if they are on the up and up. Knowing what makes a good job and about what it should cost is essential to getting the best deal.

Inspecting the Work

On permitted work, the city or county will usually do a decent job of ensuring that the work is technically correct. That doesn't mean that you will be happy with the job. That means you need to keep an eye on the project. Just because the bureaucrat thinks the job is done well, doesn't mean you will.

However, don't be a jerk about it. Many years ago I was working with a large computer dealer with a repair department. They had a sign that said their rate was $25 an hour, $35 an hour if you watched, $45 an hour if you laughed and $55 an hour if you helped. Check out what they are doing, but let them do their job. An occasional question or two is not a problem but don't be a pest.

Paying the Bill

On big jobs you will be asked for a payment up front. A deposit is reasonable. A quarter or a little more may be right – sometimes up to half if they check out very well. An excessive deposit is often an indication they are on thin ice financially and don't have the cash or credit to get the materials. For example, on a $15,000 roofing job I recently gave a $3000 check the day before they started work, and the balance after the job was approved by the county inspector.

There is another tip, the job is not completed until the permit is closed out. You don't want open permits to explain and handle when you sell the property. The job is not done until the paperwork is done, in the construction business as with any other business.

A Good Contractor

A good contractor will get the job done right. They will get the job done on time. And they won't over charge you. Just be aware that sometimes when a job is opened up, unexpected problems do legitimately arise. That is why you need to deal with people you trust to give you the straight story.

Saturday, May 30, 2020

Pictures Sell the Property


If you are looking to sell your house, condo or manufactured home, you will need to have some pictures for your ads and flyers. Better pictures will get you more interest, which usually results in a better price. You can hire a professional for several hundred dollars, but if you want to do it yourself, there are a number of things you can do to make the pictures better and make your house look better.

Equipment

Pros generally use a DSLR cameral with a wide angle and 50mm lense along with flash and remote triggered flash. Unless you are into photography I wouldn't suggest that you go out and buy a professional outfit, as along with the equipment, most pros have the experience to make the best use of it. All is not lost if you don't have all the gadgets. Keep it simple and you will get better pictures than most homeowners and surprise yourself with the results.

So what do you use? If you have a relatively new phone, you probably have a decent high resolution camera already. With a few hints you can improve your work considerably beyond the snap shots most people get with this equipment. Start by holding the camera in the landscape mode. Hold it straight so the lines like door and window frames are not crooked. This can be corrected with a program like Photoshop, or, if you don't want to spring for that, GIMP is an open source free program you can download that does a nice job. Hold the camera at about eye height to get a normal perspective. We will talk about flash when we get to lighting. A tripod can be helpful if you aren't real steady with the camera.

Preparing the house

It should go without saying that the should get a good cleaning AND decluttering. You don't want to see fingerprints on shiny surfaces like glass or counter tops. You may want to rearrange the furniture to make better pictures. Don't worry that you can't watch the TV from the staged location. It's temporary!

Clean the magnets, kids pictures and recipes from the refrigerator. Everything should look as close to new and as generic as possible. You are showing a house that is for sale, not your home. Clear off the counter tops but put a few accessories out that add some color. This can be a nice dish towel or pitcher or anything that would be interesting in the kitchen.

This same thinking applies to the bathrooms as well. Toilet seats should be down. If the shower curtain has seen better days, it may be time to replace it. Mirrors clean and toothbrushes, toothpaste and shavers up away.

Along with having clean windows, taking the screens out of the windows will give you cleaner pictures. Blinds and curtains should usually be open to get as much natural light as possible for your pictures. Doors between rooms are should also be kept open. Ceiling fans and televisions should be turned off to avoid distracting elements in the pictures.

Taking the pictures

A little planning will help insure you don't miss the home's best features. Start out with a shot list and check them off as you work your way around the house. Take a couple pictures in each room. Don't include small powder rooms or closets, unless there is a unique selling feature. Do include mud rooms, utility rooms and entry ways.

You don't always have to shoot from a corner. At doorways or through doorways lends some interest and perspective. Remember to hold the camera straight to minimize crooked doorways and windows. Get a closeup featuers you want to emphasize.

Don't forget the exterior. A straight on shot from the street usually isn't the best view. Step off toward the side a bit and shoot from an angle. Include the back yard and features like a pool, barbecue area, deck and anything else that the buyer may find of value.

Don't be afraid to take a lot of pictures. You won't use them all, but you have the opportunity to pick the best ones.

Lighting

Here we have a brief discussion of color temperature. Not all light has the same color. This variation is what is referred to as color temperature. Sun light, particularly toward sunset has more of a redish cast to it. This is said to have a warm temperature. Flash is whiter and is a cooler temperature. Some LEDs even have a slight bluish tint. This is not a complete listing as you can get light bulbs in various temperatures – such as daylight bulbs.

We will discuss the mixing of daylight and artificial light because different types produce different impressions. As with vertical line distortion, color can be corrected within reason. Just be aware that pictures taken with natural light, table and ceiling lights and flash will look a little different. Warmer temperature light give the place a more homey feel where the whiter flash gives a cooler more distant feeling. Sometimes you will have good natural light from the windows but some darker shadows that need to be filled in. Use flash as needed to fill this in. If you are unsure, take pictures with various type of light and see which looks the best.

Lighting is where we see one of the greater differences is between the camera phone and professional equipment. Pros can bounce flash off of walls and ceiling for a softer, less direct appearance.

Some of the most dramatic exterior photos are taken at dusk with the interior lights lit to give the place a warm and inviting appearance. This can be a little tricky, but may be worth the attempt. Otherwise most photography should be done on a sunny day to maximize the natural light coming through the windows.

Final Thoughts

There are a couple more cautions before you start your project – several things to be aware of. Be careful of windows and mirrors that you don't get reflections of yourself in the picture. You are not for sale, neither are pets. As cute as they can be, animals should not distract from your pictures. Look out the window before you take your photographs. Are there cars or other distracting items that will detract from the picture. If so, move them. Taking pictures for flyers, ads and maybe videos is not rocket science, but it requires attention to details. Study professional work like Better Homes & Gardens, see how the pros frame their pictures and what the lighting looks like. You can't help but take better pictures by emulating them,

Sunday, May 24, 2020

Memorial Day – It's not about the cookouts

This weekend we commemorate Memorial Day. It's usually a time for getting together with family and friends for a cookout or a day at the beach. However the day is much more than that. It began as Decoration Day when communities remembered those who died in the War Between the States, As time went on and our country became involved in more actions against evil leaders wishing to impose their will upon the world, the day became a day of remembrance of all that were lost in keeping us free, and the name was changed to Memorial Day.

This year as many of us have had freedoms limited, may we remember what we had – and pledge to ourselves and our families that they shall be restored, it would be good for us to remember those who lost their lives standing against the enemies of freedom. To this end, I am recognizing the things said by some of the leaders who fought against the greatest evil of their time – and conquered it, but at such a great price. They were the leaders of the greatest generation – my father's generation.



Dwight D. Eisenhower

Dwight D. Eisenhower reminded us that “There is no victory at bargain basement prices”. He was the allied commander that pulled together armies from many nations that stopped and destroyed the Nazi empire, threatening to enslave the world. After that, he led our nation to a time of great peace and prosperity.

However he had several warnings for us. He said, “History does not long entrust the care of freedom to the weak or the timid”. We can not let our enjoyable comfort blind us to the need to be watchful and prepared. In fact he was concerned that our desire for peace and safety take us away from the vibrant nature we achieved under his watch. “We will bankrupt ourselves in the vain search for absolute security”, reminds us that spending money is no substitute for involvement in the world and doing the right thing.

He also had some words that we can apply today: “There is nothing wrong with America that faith, love of freedom, intelligence, and energy of her citizens cannot cure.”

George S. Patton

One of the generals Eisenhower counted on to get the job done was George S. Patton. He had this view of bravery. “If we take the generally accepted definition of bravery as a quality which knows no fear, I have never seen a brave man. All men are frightened. The more intelligent they are, the more they are frightened.” He understood it was normal to be afraid when facing dangers, but said this. “Courage is fear holding on a minute longer.

In words that we can use today: “There is a time to take counsel of your fears, and there is a time to never listen to any fear.”

Winston Churchill

Then there was the man who held the British Empire together during its darkest days, Winston Churchill. He had an appreciation for the sacrifices of those who held off Nazi attacks during the Battle of Britain when he said, “Never in the field of human conflict was so much owed by so many to so few.”

Churchill found that life is not as complicated as some would make it in an effort to back away from realities as he said, “All the great things are simple, and many can be expressed in a single word: freedom, justice, honor, duty, mercy, hope.” Words that have, unfortunately, found little use in everyday conversations lately.

Then his words for today: “Courage is rightly esteemed the first of human qualities... because it is the quality which guarantees all others.” 

Going Forward

The World War II generation was not the last to sacrifice for freedom. There have been many others right down until today who left home and loved ones to stand in the gap for us against those who would do us harm. We need to take some time to remember them as well.

While this day is meant to retain their memory, let's not forget the veterans who came home and are in need of our support.

Sunday, May 17, 2020

What's Your Home Worth?

Things will be opening up soon from the kung flu catastrophe, and you may be thinking about selling your house. The time isn't quite here yet as every week I many houses listed for sale and almost as many price reductions. But with or without the blessing of the powers that be, we will be back doing business again. When that time comes, the market will be interesting and it will be to your benefit to be ready... if you want to sell.

When that time does come, you will have some decisions to make. How much are you going to ask? What will you base this price on? How firm will you be on that number? It's part art and part skill with a little intuitive magic thrown in for good measure. There are a few rules to keep in mind when you start figuring.

Four Rules

Rule one – Zillow's Zestimate is not sufficient research.

Rule two – the assessed value is often a percentage of the market value and, again, is nothing you can hang your hat on.

Rule three – the sentimental value of the memories is of no importance to the buyer, unless they are a family member, and in that case, you should probably want to give them a break anyway.

Rule four – As P.J. O'Roarke tells us, “Something is worth what somebody will pay for it. Nothing else, nothing more, nothing less.”

Real-Life Example

This last rule is especially applicable to the, sometimes illogical, world of real estate. I had a small rehabbed house listed for $165,000. I was hoping that it would appraise for something near that amount so my buyer could get financing. I had four buyers at that price. Unfortunately they all had personal issues that made the deal fall through. The guy that actually bought it asked for some closing costs to be rolled into the price. That bumped it up to $179,000 – and that appraised without a problem – at well over $200 a square foot.

Apparently ads on some of the For Sale By Owner sites stay there almost forever. I recently got a response from some fellow who was interested in the property but felt that $195 per square foot was way overpriced for that area and he wanted to talk about it. I wish I could have seen his face when he got my emailed response telling him what the house actually sold for.

I learned a couple of things from this. 1. Among them is that if you make it nice, people will want it. 2. Perhaps I should have asked for more, but my “realistic” side told me not to. 3. The buyer and lender combination will be the final determinant of what they can pay.

Place to Start

Before getting too deep into the pricing of your property, it would be good to contact your mortgage company to get the payoff on your loan. It is not the amount showing as the balance on your monthly statement. The banksters have other fees they tack on if you pay the loan off early so it will probably be a thousand or two more. Just don't cut the numbers too close.

If you have access to county real estate sales records, this would be helpful. Look at what similar houses are selling for in your area, but don't go beyond any major highways or geographic boundaries. They may look the same over there, but there are often factors that impact the price that are not immediately obvious.

How Does Your Property Measure Up?

Look at the condition and features of the property. You may have to account for some problems or imperfections. Several hundred dollars for a property inspection may be a good investment to see how solid your property actually is. If your house is in good shape the report may help you sell it. If it isn't, you need to know what the buyer will see that will impact his buying and pricing thinking. You may even want to take care of some of the problems to make the house more saleable.

If you know what the guy across the street or down the block sold his place for recently it could be a good place to start. But that doesn't mean you should be asking the same for yours. If you had the chance to look at the house when it was for sale think about how similar it is to your place. The same applies to any house in the neighborhood.

Look at pictures of the properties on the market and compare them to yours. Does the other house have a new kitchen and bath, does yours? How about the floors? Check the public records and compare the number of bedrooms and bathrooms as well as the square footage. While most houses on the market have been priced by experienced realtors, they are just as fallible as you or I. The prices are not set in stone. Don't take asking prices too seriously. It is the actual sales price that matters. Remember rule four. Sometimes the asking price is a product of wishful thinking and sometimes the realtor had a bad day or didn't do their homework properly.

Rrice per square foot is another major factor to consider. This is an essential number as two houses may look a lot alike but are priced thousands apart. You may find the one has 300 fewer square feet. Look at the pictures (this is where Zillow and Trulia are helpful). All these factors contribute to the value of a property. Find at least three, preferably four or five comparable properties to arrive a what seems to be a reasonable price for yours. If you are uncomfortable with this or nothing seems to make sense, for several hundred dollars you can get a professional appraisal.

Set Your Price

This is the acid test of your calculation, and here is where Mr. O'Roarke's rule comes into play. If the price is right you should not have a difficult time making the sale. If you are fortunate, you may get several parties interested in it and sell for an even higher price.

If the property does not sell in several weeks while others are selling, be prepared, both mentally and emotionally to lower the price. When other similar houses are selling, but yours is not, it is either something with the property or location, like sitting next to a crematorium or a politician's office or the price is too high. Some people will offer you a low ball price and hope you take it. It's called a low anchor and even if you don't take the original offer, they hope it will set your thinking downward. Unless the place has been on the market for a considerable amount of time, don't fall for their tactic. There is part art, part science, part magic and sometimes just plain luck in pricing a house for best results.

A Word of Caution

These are interesting times and it will take some people a while longer to come out of their stay-at-home shell. Some have been beaten up financially by being locked out of their business or job. Many will come back but don't expect them to rush out the first week to buy your house

Give it a little more time than you would normally expect before you start dropping the price. The confidence of the buying public will determine when they are ready to move. They have been bombarded daily with tales of death and destruction. This has emotionally damaged some people more than others. Be patient, if you can. If there is interest but the buyer hesitates over price, before dropping it too much, offer to throw in something additonal, like a home warranty, or some piece of furniture or an outdoor grill that they admired. It's not always about the numbers.

Good luck! Happy selling!



Sunday, May 10, 2020

What Does A Home Inspector Do For You?

Editors Note: We looked at home inspectors a couple of months ago primarily from an investors perspective.  Since then we have had questions about their value for the average homeowner.  So we are revisiting the subject with them in mind.

If you are buying and/or selling real estate you will come in contact with building inspectors. I'm not talking about the ones from the local government that tell you what you can and cannot do with your own property along who can do it. That is a rant for another day. We are looking at the inspectors buyers hire to check out a piece of real estate before they commit to closing.

They can be somewhat annoying even when checking out a property you wish to buy, but they can also be extremely helpful. They are the ones who squeeze into crawl spaces under the house and skulk about in attics so I don't have to. In fact, you will not find me creeping around two foot high caverns dodging sewer pipes, air ducts, and the usual assortment of critters that populate the crawl spaces under many homes.

I say they can be annoying because most have a fetish about finding every real and imagined flaw in the property down to cracked switch plates and missing screws that are scheduled to be replaced anyway. However, that IS what they are paid to do. I must say that I somewhat solved this problem with an arrangement with an inspector friend of mine when I was working in the formerly free state of Virginia. We agreed that he would not give me the notebook, but would just hit the things I really had to fix. It worked out quite well. I saved a bit of money and he did not have to document every unimportant detail many of his colleagues thrive on, and he had the promise of a flow of repeat business.

You may wonder why I deal with inspectors when I buy since I seem to have an aversion to their work. The fact is, if I plan to sell the property after fixing it, I want to know what the next guy's inspector is going to ding me for when he crawls over the property. Which brings us to the question of them being a necessary evil. Here we get a little more philosophical. Nothing that is necessary is evil and nothing evil is necessary... ever!

These guys have saved me a bunch of money and they have kept me from buying a money pit at times. This is why I like to be present when the inspectors are going through a house I am looking to buy. A couple hundred dollars is not a bad price for this and I want to get my money's worth.
It is just understood, that if you are not an investor, but are looking for a home to live in, especially if you have never owned a house before, a good inspector can be your best friend. If at all possible, being there during the process and following him or her around will be an education. They will point out things many homeowners never even think of. There are things they will show you that are not bad or in need of repair but just items that you should be aware of and will make your time in the home less expensive and more enjoyable.

That is why I like a disinterested third party, like the inspector, digging around to pick up on things the seller was hoping I wouldn't see. If they find something you were not aware of, at that point, you, as the buyer, have a decision to make. You can look for an adjustment in the price or you can walk away from the deal IF you have an inspection contingency in your agreement. Any reputable real estate agent will include that in your contract. You usually have somewhere around ten days to check things out. If he tells you it isn't necessary, it is time to look for another agent, run, don't walk away. The only time an agreement with no inspection contingency is acceptable is when one investor is wholesaling a property to another professional who should be able to do his own evaluation.

If you are a homeowner selling a home you've lived in for many years, there may be things you never really noticed or have just decided to live with that may not set well with a new owner. It could well be to your benefit to have an inspector come around before you put the place on the market. If you get a good report, your agent can use it as a marketing tool to show the prospective buyers that the house is solid. If you do not get a good report, it is usually better for you to know about it than to have your buyers inspector present the problem in the worst possible light. You then have the choice of fixing the problem or telling potential buyers about it and factoring it into the price before they come back asking for an even larger discount.

When I am a seller, I don't want to be around when my buyer's inspector comes around. I don't want to give the impression that I am colluding with him or intimidating him. ( I wouldn't want Adam Schiff or Robert Mueller wasting my time coming after me.) I also don't want to be around to answer any impertinent questions that may arise. Beyond that, the practice of being absent may well keep me out of trouble and preserve the physical well being of the guy picking apart my completed work... even though, knowing they will be around helps us do a better and more complete job.

So, like them or not, inspectors are part of the real estate business and since we must deal with them, we may as well understand how the game is played and use them to our best advantage.

Saturday, May 2, 2020

Offer, Counter Offer


If you have a kitchen, you have counter tops. If you are starting from scratch, you have a wide variety of choices, and if you are remodeling you have a couple more choices based on the size of your bank account or limit on your credit card. You see the remodeling shows on TV creating really nice kitchens with high end appliances and super counters. Is that your dream?

Some people see this and believe that such things are beyond their reach. Sometimes they are right, but often this is just an assumption and not based on research. We aren't going to look at the six burner commercial gas ranges they put in some of the kitchens but we will look at the counter tops. The range of prices and materials range from squeaking by on a low end rental to really nice dream kitchens. But keep in mind that except for the very low end and rich folks mansion high end, many of the choices are grouped in the middle. The point of this is consider the wide range rather than settle for something because you don't think you can afford what you really want.

If your kitchen has been around a while, most likely it has laminate (or Formica) counter tops. They by be stained or show marks where a hot pan was improperly placed. If they are solid and in otherwise good shape, you have several options if you have neither the budget nor inclination to pull them up and replace them.

The least expensive approach is to clean them up really well and use either counter top paint or self sticking laminate to cover them. If you have a drop in sink you will have to take it up to install the laminate properly. With the paint you can get a variety of colors to match pretty much any taste. The laminate can have a marble or granite pattern and can look quite nice. If you don't feel comfortable, or you just can't get the front edge done to your satisfaction a piece of wood trim can be used along the visible edge. This trim can be painted or stained to match or contrast with the cabinets.

If you are replacing counter tops, unless you have a woodworking shop to make them from scratch, the next step up is the preformed laminate tops available in various sizes and configurations at the blue store and the orange store... and other home improvement stores around the country. They can be used in most applications and give a professional, finished look. They come in a limited range of colors, but are great for the do-it-yourselfer or budget remodeler.

If these don't meet your needs, the same stores and remodeling contractors can get you laminate counters in a mind boggling array of colors and styles custom made for your particular needs. There is very little you cannot get in the custom laminate tops, and they have improved over the years, but still are subject to hot pans and sharp blades. If you are settling for this choice because you because you think one piece tops are beyond your budget, these are getting mighty close to the low end of granite.


You can also look at butcher block materials for all or a portion of your kitchen. They are attractive and sturdy, but subject wear and scratches. Especially if used as a cutting board and food preparation surface.

When you get into one piece tops there are several choices and granite is usually the first one that comes to mind. It is about as durable as you can get. As the installer told my wife when they were putting it in my kitchen, the house could burn down and they could just clean up the tops and use them again. They are almost indestructible.

Corian is a similar looking material and makes very nice tops. However, it has issues with scratching and staining as well as cracking when exposed to excessive heat.. I once bought a new range for a very good price at the blue store that had been returned because it had a rear vent and the Corian installer said that was a no-no... that it would damage the counter top.

Engineered quartz makes very nice counter tops as well, and while it and Corian are priced close to granite, they do not go into the stratospheric prices of granite at the upper end. The quartz is usually a thinner material and is slightly more destructible than granite. When you rehab houses, it is amazing what you find sometimes. I bought a fixer house with quartz tops where the seam at the kitchen sink had come apart and behind the sink it was broken out where the faucet came through. I have no idea what the tenant had done to the thing, but I learned that tops like this could be broken. Fortunately my granite supplier could send a repairman over and got everything looking like new. So for about the price of preformed laminate counters I was able to keep my quartz tops. What a bargain!

If you want the granite look without the granite expense, it is possible to build a solid counter top of at least ¾ inch plywood and cover it with granite tiles. This has a good part of the durability of the one piece with a much smaller price tag. Just make sure the joints are really tight. This is not a tutorial on how to do this, but between YouTube and various DIY sites, the information is available.

For the high end, industrial look, concrete is a good choice that can be formed into pretty much anything you want. Since it is a porous material it needs to be sealed to prevent it from absorbing water and materials that will stain. It can be chipped and make sure your cabinets can handle the weight.

You can also get stainless steel tops if you are a serious gourmet type cook or if you just like the clean, sleek look of the material. Some use ceramic tile rather than granite tile – it can look nice but it can chip and you have to use a good sealer on the grout lines.

As you can see there are choices for most any budget and taste so you don't have to settle for plain old Formica – even though it is used in some pretty nice kitchens.

Saturday, April 18, 2020

Keeping in Touch for Free


With the recent need to set aside the benefits of face to face meetings many of us have taken to working from our homes, Along with the obvious advantages of bypassing the commute to the office and having the refrigerator only a few steps away, there are some downsides to this new found immobility.

For many in the real estate investor community the dealing with remote associates is nothing new. Unless the investor is one of the big guys, he (or she) probably doesn't have a regular office and on site team to work with. Many of us get by with a cell phone and email. We sign contracts online. We do preliminary research online... including reviewing pictures and videos, when available, online. We have learned to function pretty well with this arrangement.

However we still had the gift of mobility to back up our electronic connections. I would meet with buyers, sellers and contractors at one of my many remote offices around town. My empire is so large, I probably have at least one in your town. You can recognize these offices by the big sign out front that says Dunkin' Donuts, or now some of the new ones just say Dunkin'.

I hope to get back to that practice as soon as possible because studies have shown that 55% of communicating happens through facial expression and body language and another 38% through tone of voice and only 7% through the actual words. (Dr Mehrabien at UCLA.) We can pick up the tone of voice through the phone, but even that is totally missing from email communication. One trick that former FBI hostage negotiator Chris Voss suggests to help prevent miscommunication is to read your email aloud in the most hostile tone of voice to see how it sounds... and then fix it before hitting Send.

Years ago I was working for an energy company in Virginia. I couldn't say how many states they had facilities, but communication was an expensive issue. People would travel to a nuclear plant in Connecticut or a coal-fired plant in West Virginia – or perhaps workers from the various plants would come to the home office. They would lose a day or two traveling for a meeting that lasted an hour or two or three.

Then along came video conferencing. We could have a team of people in Richmond meet with a team from Connecticut. The meeting would run for an hour and then we could get back to our regular tasks. The process that saved a multi-billion dollar company hundreds of thousands of dollars a year was generally out of reach for small business people.

Along came programs like Skype, Webex and Zoom among others and this capability is as close as your laptop or cell phone. And much of it is available at no charge. As I look over the connections I have available just now at my desk, figuring what would work best for me I see I already have a couple of the programs already and I'm pretty sure you do to.

The first one I found is part of the ubiquitous Google suite called Hangouts. You can do one on one conversations up to ten participants... twenty-five if you spring for another package. Being so readily available has its drawbacks as well. There are a number of young ladies... make that women... on LinkedIn who seem to think it is a dating app and are looking for sugar daddies among the businessmen who frequent the site. They tend to want to start on Hangouts. I've had one act offended when I told her I wasn't interested, but happy hunting.

In any case Hangout is available and ready to go. It ties into your Gmail contact list and is one more way Google insinuates itself into our lives. You can make calls and send texts from it as well. Google also makes an Android app called Duo and you can get about ten people on the line with that one as well, but it does not do SMS texts. It does have end to end encryption if you don't want anyone else to know what you are up to.

Another choice I found was WhatsApp. It's less common than Google as you have to look it up and download it, but it also ties in to you Gmail contact list – with your permission and lists those who already have the app, which is kind of a nice thing. I got it when my grandson was traveling through Germany as it works well internationally. It's a nice program, not quite as common as Hangouts, but is well worth checking out.

Then I checked out my Skype program which I used several years ago with great success. It was easy to use and the picture quality was acceptable. You can get a free trial, which is a tip-off to what I found when I logged in to my account. Micro$oft has made this a paid service. It's not expensive unless you are on the phone all day. It does have the advantage of allowing you to get a local number even in another country if you so desire. I don't know if Google Voice does that.

This week I had the privilege of taking part in a meeting with about a dozen others using a program from Jitsi.org. It seemed to work very nicely with inputs from spreadsheets and an overhead projector. It is free for occasional use and inexpensive for use of regular teams that need to stay in communication. If you have a group that needs to meet periodically, it's worth looking at.

There are others, Cisco Webex that I have not used and Zoom which is more of an enterprise solution. The point is that you can keep in touch and see who you are talking to and what they are talking about without driving all over town or across the state or country. This time that we are locked up, or I guess I should say locked down may just teach us to use some tools to make us more efficient, which is not a bad thing. This stuff will help, but no matter what Dr Fauci would like us to do, there is no substitute for getting together with real people.

Sunday, April 12, 2020

What's With The Housing Market?

I look over emails every day with a dozen or more sellers dropping the price of their property. This is a response to the temporary situation along with a need or perceived need to sell their house quickly. It may also come from agents who need to sell something to keep the paychecks flowing.

It seems that everything is working against the sellers these days. And it's not too great for the buyers either. I've seen reports that in some areas realtors cannot have lockboxes – not even on vacant properties. I'm not sure what that is about other than the need to exercise some of the newfound power by some members of the ruling class.

It may be a back door attempt to stifle the showing of properties which is already hindered by the hesitancy of sellers to allow strangers into their homes and the difficulty of presenting properties while maintaining “social distancing” standards. It may be that the powers that be should just be honest and ban the showing of real estate if they are that concerned.

They can ban this all they want, but that doesn't help the realtor trying to help his or her clients – any more than much of the whole shutdown helps anyone whose income has evaporated. It also doesn't help the family who needs to sell their home as quickly as possible.

As I mentioned earlier about the drop in real estate prices, it's not necessarily a reduction in value but an increase in the need to sell. But lowering the price of a piece of real estate does absolutely no good if no buyers are coming around to see the place.

As I look through Craigslist ads, about all I see in the Tampa Bay area are mobile or manufactured homes. The owners looking to sell the houses seem to have disappeared. I don't know if they have just put their plans on hold or if they have given up then listed their property with a realtor. Whether they have done that or not, their house or condo is still competing with many others for a smaller pool of buyers.

Video tours have helped fill the gap up to a point. However, before I agree to buy a property, I want to see it, especially if it is one I will live in. The videographers are doing a very good job of showing properties. They were most helpful in creating a piece for a property I recently sold. I am told that you can't put lipstick on a pig and make it something else, but as an old photographer I can tell you that I can take a questionable house and make it look like a nice place to live. I am not unique in this. Anyone good with the camera can do the same thing – and they do. Many times I thought I was going to see a nice looking house and it just didn't turn out so well. The pictures were right, but there was a lot you couldn't see.

Perhaps if one really has to sell, it would be time to go with one of the hedge fund corporate buyers or local investors. These people are not foolish, they know the market is not the same as it was months ago, and really, it is most likely not the same as it will be several months down the road when America is open for business again.

Two things can be learned by looking at today's market. First is that unless some disaster really strikes or the naysayers keep us shut down indefinitely, the low prices may not hold for long. For the buyer this is an opportunity as we are in a buyers market for those who are anxious to sell. On the other hand, unless one really needs to unload a property quickly, holding on a few more months could be quite beneficial. When things open up, the pent up demand from those who have not been greatly damaged by the shutdown could well push the prices up again. It's not time to panic and dump the place cheap unless you really, really need to sell.

However long we are stuck in this holding pattern, there is definitely one more lesson that is to be learned or reinforced if it has not already been learned. That is, for all the benefits of owning real estate – the income and capital appreciation along with the tax treatment, it is not a liquid investment. Whether it is your home or rental property or vacant land you can't just go to your online broker and sell when the urge strikes you. It is market-driven and the value of a property is not necessarily what the Zestimate says or what the appraiser says. The value of a property is just what someone is willing to pay for it.

Sunday, April 5, 2020

The Value of Trust


I recently had the privilege of hearing a talk about trust that Stephen M R Covey gave to the students at Liberty University. He is ths son of the man who has given us books like 7 Habits of Highly Effective People. The apple did not fall from the tree with this fellow. He spoke of trust as being a business virtue in addition to being a human virtue. He talked about activities and organizations where trust is present operating with more efficiency and speed along with being more satisfying to work with.

I got to thinking about how this applies to the real estate business, whether it is working with agent buying a home or as an investor rehabbing a house. I thought back to some of my experiences with and without the quality of trust. While I didn't see it that way at the time, it turns out life proves his theory.

Hardly anything can be done in this field without a team of people. Trust is the lubricant that smooths the rough edges and fills in the bumps in the road. When I first moved to the Sunshine State I knew no one and had no connections. My first deal here was wholesaling a small house in northern Pinellas County. It so happened that the investor who bought it connected me with a title company that just makes things work.

I didn't know them or the investor, and we worked through several issues. Over time I developed a degree of trust with the investor and I believe he, with me as we have done other deals smoothed out with familiarity and trust. This is even more so with the title company as we have done multiple deals and they have come through every time. I just have to email them the paperwork and I know things will be handled professionally and legally. I don't waste time with worry or excessive follow up.

When working on houses, the same holds true with the tradesmen involved. They can make your profit or kill it. You need to have people you can trust, not just to do the job, but do it on time for the quoted price. When you start out you have to go by recommendations if you can get them. Learning this by experience can be quite expensive, but sometimes it is necessary. For the investor, it involves forming relationships with other investors who may have come across your situation before. For the new home owner getting to know they neighbors is a good place to start.

I had a water leak in a second floor condo that had to be fixed NOW! I did not have a plumber at the time so I relied on one recommended by a lady at the local REIA. It turned out to be a good choice. Even as a new client, the guy showed up within the hour and the situation was resolved... and he didn't take advantage of the situation with the bill. From that one experience he earned my trust and I have used him on multiple jobs satisfactorily.

As time went on and he developed some health issues he recommended another plumber to do the work he was no longer doing. I didn't hesitate to call the new guy because I had confidence in the man who recommended him. He turned out to be just as good. This saved me a lot of time and aggravation looking for replacement.

The reverse of this situation is also true. When you depend on someone who promises to get the job done and they bail on you, you lose time and have to pay more to get another tradesman to finish the job... if you can find one who is willing to pick it up in the middle.

I had this situation on another job where my electrician that I had used for small jobs in the past started the job but was not qualified to finish it. He disappeared without a word. I wasted time trying to find someone to finish the job. Then I got another recommendation. It was a young Vietmanese guy. It seemed he had just gone out on his own. He pulled the permits got the job done and he will be called next time I need an electrician.

So what do we get from all this? What happens when your trust is misplaced? Yes you learn, but you don't stop trusting. If things look good at the beginning you have reason to trust until you see a reason not to... but you don't go looking for reasons not to. If someone is untrustworthy they will reveal it themselves.

Of course it is better to deal with people you know and trust. But how do you find them? Where are they?

The place to start is to be trustworthy yourself. In my case, no investor would risk their relationship with someone important to their business if they thought you were a jerk and going to treat their guy badly. Then you need to, using common sense and wisdom, show some trust in the people you are dealing with. If they sense you don't trust them, it will be hard for them to trust you and become dependably trustworthy. You have to do a cost benefit analysis. Build trust on smaller efforts and let it work it's way up. When it does you will spend far less time and get more done.

I go to meeting with a group of investors. There is a certain trust built into that group. You are expected to treat each other fairly. If someone talks about a rental property they want to sell, it is understood that you will not bother the tenant. If it is a contract to be assigned, it is expected that you will not go around them to the owner and try to cut them out. People that can't work with this way are banned from the group. Her lack of trust not only slows things down, it brings it to a halt. You only cheat someone once.

Most people will live up to your expectations. There are those who will try to take advantage of you, but its kind of like the old adage – if you want a friend, be a friend. It also helps to pick your friends wisely. Don't hang out with shysters.

You can find out more about this concept of trust being a business virtue as well as a personal one in Covey's book Speed of Trust. Living that kind of life will make things work better and you will feel better than if you are trying to hustle everyone.. Better to have people trust you than have them count their fingers after they shake your hand – like I do with most lawyers.