Guidelines for a Successful Home Inspection

You would think that once a buyer and seller have agreed on the price and terms of the sale of a home that the hard part would be over.  This is not always the case.  Home inspections if not handled correctly can sometimes cause more anxiety than negotiating the price and terms of the home.  Knowing a few simple guidelines will help in working through inspection issues.

Inspection Period aka Due Diligence Period

In Georgia this period is usually called the Due Diligence Period.  It is during this time, which is agreed to by both buyer and seller, that the buyer has the right at their own expense to inspect the property for defects.  The most common types of inspections are Home Inspections, Termite Inspections, Radon Inspections, Septic System Inspections and HVAC Inspections.  These and any other inspections that a buyer would like to have performed on the property must be concluded during the Due Diligence Period.

During The Inspection

In most cases a buyer, or their agent, will arrange to have all required inspections scheduled during the same times.  With the exception of the Radon Test, which takes several days, all other inspections could be conducted at the same time.  By scheduling inspections this way it cuts down on the amount of time required which provides more time to resolve any issues that may need to be addressed.

It is a good idea for the buyer to attend the inspections so that they can see first hand what is being reported.  It is never a good idea for the seller to be present during inspections.  Some agents attend inspections, while others may stop in near the end of the inspection, while others do neither.  I personally like to receive the inspection report from the inspector and after evaluating it, go back out to the house to view each item of concern.   This equips me to properly advise my client on what is involved in addressing the inspection issues.

Evaluating the Inspection Report

Once the report is received, generally via email from the inspector, it is important to go through the report with your agent.  Generally the inspection will identify items as “Serviceable” or “In Need of Repair”.  The ability of the agent to assist in the evaluation will depend on whether they attended the inspection and whether they understand what is needed to address the items identified in the inspection report.  Each item should be considered individually and should reflect the seriousness of the defect, resulting in whether a buyer will request that the seller correct the defect; or whether the seller will consider agreeing to correct the defect.

Writing the Amendment to Address Inspection Concerns

Once evaluated it is now time to prepare the Amendment to Address Inspection Concerns.  Although there are numerous ways to accomplish this; there are some that I would advise against due to the effects it has on the seller.  One method to avoid is to merely reference in the amendment the item number in the inspection report that needs to be corrected.  This is the easiest for the agent because it requires little, if any, effort in drafting a corrective action for the items to be addressed.  It is also difficult for the seller to convey to a contractor exactly what needs to be done.  The best way to handle it is to categorize the items being requested.  Here are a couple of examples that will provide greater clarity and will increase the likelihood of a successful resolution to the Inspection Amendment.

Exterior Deficiencies

1. Seller agrees to replace the existing LP siding, and prime, seal, caulk and paint it to match the existing siding at the following locations.

Both sides of the chimney, where the siding meets the deck.
The bottom courses of siding behind the AC unit.
2. Additionally seller agrees to caulk and paint to match all rusting nail heads installed in the siding.

Electrical Deficiencies

1. Seller shall cause the electrical outlet to the right of the refrigerator in the kitchen to be GFCI protected.

2. Seller shall replace the GFCI outlet on the rear deck and cause it to be operational.

3. Seller shall remove the exiting fixture above the master bath tub and dispose of it at their discretion.

4. All electrical repairs shall be performed by a licensed electrical contractor.

Plumbing Deficiencies

1. Seller shall cause the water pressure to be adjusted to a PSI of between 35 and 80.

2. Seller shall have a licensed plumber evaluate the moisture in the combustion chamber of the hot water heater, and to repair and or replace the hot water unit as recommended.

3. Seller shall cause the toilet in the main level full bath to be properly secured at the floor.

4. All plumbing repairs shall be performed by a licensed plumbing contractor.

In Conclusion

By following these simple guidelines many problems and misunderstandings associated with Inspections can be avoided, and anxiety will be reduced.  Buyers should require that receipts for work be provided prior to closing and sellers should not be offended by being asked to provide them.

Van Purser is a licensed real estate broker in Georgia.  Since 1981 he has successfully purchased and renovated over 400 homes.  His expertise is in the area of foreclosures, rehabs and fixer-uppers.  Additionally, he has represented hundreds of clients over the years as a broker with Metro Brokers, RE/Max and now with his own firm.  He and his wife, Jeanne, who is also a broker, have been married since 1977.  Van can be reached at 770-623-3313 or by email VanPurser@VanPurser.com

Flip this Alpharetta Foreclosure

I – Clay Jeffreys and overseer of this blog 🙂 – thought it would be great to include this post from regular guest contributor Van Purser. While this blog details flipping a home, it also provides some insight into work that can be done on a home as a primary residence or investment property using the Fannie Mae HomeStyle loan I discussed in an earlier post.

In our last newsletter we reported on the status of a HUD foreclosure we were planning on purchasing to renovate and sell.  Since that time the renovation was completed and the property was resold and closed on April 12th.

We felt that this particular home, located in The Hunters Forest subdivision, off of Jones Bridge Rd, should sell for the mid to upper $140’s.  We had originally planned on adding a sunroom to elevate the price to the mid $150’s, but decided not to.  We felt that with our purchase price of $71,000 we would still be able to make a profit without adding the sunroom.

Our plans were to close just before Christmas, and to begin the renovation shortly after the beginning of the year, so that we would have it ready to return to market by March.  Instead we closed on November 30th, and started the renovation immediately, in order to provide work for our crew in advance of Christmas.  It worked out great. We finished on Christmas Eve.  Three weeks, and over $32,000 later we were finished and ready to put property on the market.

We started out $154,900, but after a month realized that the market would not support it and reduced the price to $149,900.  This increased activity, but did not yield a contract.  We continued to monitor the market and decided to reduce the price again to $144,900 after a couple more weeks.  Within a few days we were under contract at $142,000.  Not exactly what we had hoped for, but still worth the effort.

We were so please with the renovation, and the BEFORE & AFTERS show the transformation that took place.  One thing we did differently on this home was re-trim the entire home.  This added a lot of character to the home.  Another thing we did was add the dividing wall between the living room and dining area, to provide some separation.  Also, we had to add a new deck and start over in the bathrooms.

Homes like these are available for purchase, and will provide an opportunity to improve the neighborhood and to make a profit.  If you would like to try one, let me know.

When Considering a Real Estate Broker…

Many people incorrectly assume that real estate agents are all basically alike and that having a real estate license is the sole qualification necessary to represent the interests of a buyer or seller. This misunderstanding has resulted in incorrect advice, unmet expectations, financial misfortunes, and broken friendships. There is a better way.

In Georgia, anyone who successfully attends an approved 75-hour real estate course and makes a minimum grade of 75 on the state exam may secure a real estate salesperson license. If they remain in the business for three years, take another 75-hour course, and complete additional continuing education, they may take the brokers exam. This results in a total of 175 to 200 hours of classroom training for brokers. But 80% of all new real estate sales licensees don’t make it to the third year.  Additionally with the turmoil of the real estate industry over the last several years, many agents have left the industry in search of other professions, leaving behind the most experienced,  qualified and tenacious agents and brokers.

Few people realize that in the state of Georgia, the relationship between a broker, their licensed salespeople, and the clients they represent are modeled after the same laws of agency that apply to attorneys and accountants. This means that you should select your real estate professional in much the same way you would an attorney or accountant. If you were facing a life-defining legal issue or a financially-defining tax issue, would you want someone with little or no experience representing you or someone with a proven track record? The answer is obvious: You would want the most qualified, experienced person you could afford. By securing the most qualified person, you will increase the likelihood of achieving your desired outcome. In fact, experienced real estate professionals pay for themselves.

Flip this house

This home is a recent foreclosure we purchased in Lawrenceville.  It was actually listed through our Multiple Listing Service and was originally on the market for $69,000.  We made an offer for $58,000 which was accepted. The inspection revealed a couple of structural issues that needed to be addressed, so we amended our purchase price to $54,800.  For a complete Before & After click here or on the image below.

The renovation took a longer than usual, three weeks instead of two, but not bad considering the amount of work that was done.  The largest contributor to the extra week was the amount of landscaping that was needed.

The yard had eroded over the years due to water run off.  We decided to remove several trees in the front yard, add a rail road tie retaining will in the rear yard and front yard, and we added a tie wall and walk way on the right side.

Cris Abbott, a local contractor, did the work at a very reasonable price. Additionally Cris piped all of our downspouts away from the house.  The balance of the project included the normal things you would expect in a house with deferred maintenance; a new roof, siding repair, new gutters, exterior paint, and we had to side the utility building before painting.

On the inside new light fixtures, plumbing fixtures, new HVAC, plus appliances, painting, counter tops and new vanity tops plus refinishing the hardwoods completed the make over.

By the way; if you have extra money now is a good time to pick up some REALLY GOOD DEALS to resell or to rent out.

Van Purser is a licensed real estate broker in Georgia.  Since1981 he has successfully purchased and renovated over 400 homes.  His expertise is in the area of foreclosures, rehabs and fixer uppers.  Additionally, he has represented hundreds of clients over the years as a broker with Metro Brokers, RE/Max and now with his own firm.  He and his wife, Jeanne, who is also a broker, have been married since 1977.  Van can be reached at 770-623-3313 or by email VanPurser@VanPurser.com

Real Estate Perspective for 2010 and 2011

It seems that we were never lacking for additional nuisances in real estate during 2010.  Throughout the year we experienced a number of unprecedented events that had a significant impact on our local real estate market.  And, as we enter 2011 the stage is set for another defining year.

The Conclusion of the Buyer Tax Rebate

As of April 30th of 2010 the Tax Rebate ended for all but military personnel.  This routinely modified attempt by our government to intervene in the free market system was marred by variations to the program, to include rebate amounts, whether it was to be repaid or not, and starts and stops that seemed to have no rhyme or reason, and delays in qualified recipients receiving the rebates.

We did however see prices on homes increase slightly as would be buyers rushed to go under contract before April 30th. However it was not without a price, overwhelmed lenders could not complete the loans in time to meet the June 30th deadline to close, so the deadline was extended until September 30th 2010.  This set the stage for fraud to occur as reports surfaced of contracts occurring after the April 3oth deadline.

Record Number of Foreclosures

2010 was year that our nation saw more than a 1,000,000 foreclosure hit the market. At one time foreclosures made up approximately 40% of all sales.  We also saw the cumulative effect of the foreclosure crisis resulting in home values, declining an average of 25% over the last three years.  2011 is forecast to produce more foreclosures that 2010; with approximately,250,000 properties being foreclosed.  The result may be a double dip in sales prices and declining values. In light of this 2011 should also bring out many would be purchasers who have been trying to time the market; hoping to capitalize on continuing historically low interest rates and a true bottoming of prices.  After 2011 we should see a decrease in the number of foreclosures hitting the market and as a result increasing sales prices and values.

Robo Signers for Foreclosure Proceedings

2010 also revealed how overwhelming the sheer volume of foreclosure is on our nation’s lenders and mortgage servicers.  Faced with mounting case of defaulted loans and the need to work them through the foreclose process; which by the way differs from state to sate, many lenders failed to execute the foreclosure process according to the rights and responsibilities set forth in the notes  and security deeds, and according to individual requirements of each state.  Much of this was also a result of the way mortgages are traded, serviced and hypothesized in the open Market.

2011 should result lenders paying closer attention to all governing documents and statutes, as they experience an increasing number of law suits resulting from their mechanized approach to processing foreclosures.

Record Low Interest Rates

2011 from all indications and from those far more equipped than I to forecast interest rate trends, seems to suggest that we will enjoy historically low interest rates for a while longer, but not forever.  This coupled with a bottoming of prices should be the catalyst for many waiting buyers to make buying decisions this year.

Increasing Number of Short Sales

2011 will also a year that we will see an increasing number of Short Sales hitting the market.  On the surface this seems like a bad thing, but it may have some positive effects.  First Short Sales are often time occupied by the owner, which means that the house has not sat empty for moths while a foreclosure is processed.  It may also mean that the property because the owner continues to live in it may be in much better condition than a foreclosure.  Often times this will result in a higher sales prices that a foreclosure would yield; thereby reducing the number of homes that sell at foreclosure prices.

What does listing status reveal about a property?

Active, Withdrawn, Expired, Sold, Contingent-KO, Contingent-Due Diligence, Contingent-Other, Pending, and Pending Lender Approval. What does all of this mean and what should it mean to you?

First of all these are various ways of describing the “Current Status” of a listing.  Unfortunately, there is often a delay between the change in a property’s listing status and when it is actually publicized.  Let me explain.

Phase One-An Active Listing Status

Phase One occurs when the listing is taken by the broker.  The listing is then entered into our local MLS’s, and will then appear as an Active Listing in other sites that receive their feeds from the local multiple listing services.

Phase Two-Under Contract Status… BUT!!!!

Hopefully while active, a buyer surfaces and agrees to buy the property under terms and conditions that the seller will agree to.  When this happens the broker is responsible for changing the status of the listing to that which reflects the terms agreed to by the buyer and seller.  These terms will usually consist of one of the following statuses; Contingent-KO, Contingent-Due Diligence, Contingent-Other, Pending, and Pending Lender Approval.  Each of these still provide for the property to be shown, but with the knowledge that the property is under a contingent contract.  In other words it will usually show as an active listing on all sites other than the local MLS that provide the feed.

Contingent-Kick Out Status

This status is generally associated with a contract that calls for the sell of the buyer’s property in order to close.  It provides the seller the right to “Kick Out” the contract if another acceptable offer is received, and if the buyer does not remove the  contingency from the contract within a set period of time (for example 48 hours, 72 hours). If the seller does “Kick Out” the contract in order to accept another offer, the buyer would normally be entitled to a full refund of their earnest money. These listings will still show up on web sites as available listings.

Contingent-Due Diligence Status

This status generally is associated with a contract that provides the buyer a set number of days to perform their Due Diligence on the property.  During this time unless negotiated otherwise, the buyer can usually terminate the contract with out penalty, and receive their earnest money back.  This period will generally provide the buyer the right to terminate the contract for reasons such as a home inspection, loan qualifying, appraisal, and even buyers’ remorse.  The length of time provided for the Due Diligence period is usually a result of the negotiations between the buyer and seller along with the counsel and guidance of their agent or broker.  These listings will still show up on web sites as available listings.

Contingent-Other Status

This status generally is associated with a contract that provides the buyer and/or the seller an out based on the occurrence or non-occurrence of an event.  Examples could be obtaining financing, rezoning approval, bankruptcy, divorce settlements, approval by a tax advisor or accountant, approval by a spouse, or even the approval by local authorities to approve plans to renovate.  This is a “catch all” for anything and everything.  These listings will still show up on web sites as available listings.

Phase Three-Pending Sale Status

Once all of the contingencies have been satisfied or expired, the listing status will/should go to Pending.  Unfortunately this is not always the case; and with some contingencies lasting until the date of closing, the status may go from Contingent to Sold without ever going Pending.  In my opinion this should never happen, provided the listing agent has done their job. When this does occur it is usually the result of the efforts of a good Buyers Agent.  Pending Listings normally do not appear on web sites as available listings.

Pending Lender Approval Status

Pending Lender Approval is a status that is intended to reflect a short sale contract.  Once a listing reflects this status it suggest that the parties are waiting for the lender to approve the contract that the buyer and seller have agreed to; which if approved will result in the lender accepting a reduced pay-off on their loan.

Generally speaking, once lender approval is received the listing status should change to some form of a Contingent Contract.  This is due to the fact that the date that lender approval is received usually replaces the Binding Agreement Date in the contract, and the date from which all other dates and time lines are gauged.

Expired Status

Reflects the fact that the property failed to sell within the designated listing period.

Withdrawn Status

Reflects the fact that the listing was Withdrawn from the market while it was listed.  Any number of reasons can cause this to happen.

Tools for viewing foreclosures

With all of the foreclosures and great deals on the market having the right tools on hand when looking at a property can save you lots of time and money. By knowing the tools and by having them on hand, you will be able to properly evaluate a home on the first visit, resulting in being able to make an offer afterwards, without the assistance of an inspector or engineer, and without needing to return for a second or third visit prior to making an offer.  This alone will allow you to make offers more quickly and will result in more deals going under contract.

A Flash Light
I can’t tell you the number of times would be buyers show up with a pin light on their key ring to look at property.  A heavy duty flash will allow you to examine attics, crawl spaces and basements.  In many case houses do not have utility service on, so no power and no lights.  Additionally, a heavy duty flash light can provide a defense to any one who may be in a home who should not be there.

A Collapsible Ladder
This should be a no brainer.  Many of the collapsible ladders will fit in a trunk, and when extended will provide access to many ranch, split level and split foyer roofs. In addition they are great for entering small attic accesses which do not have pull down stairs.

Binoculars
This is a great tool to have.  It allows you to see from the ground many of the things that you can not see unless you actually get on the roof.  Additionally, it allows you to take a very close look at soffits, gutters, window sills, and of course chimneys.  Just be careful and don’t be looking too closely at the neighbors homes or you may get in trouble.

A Probe
The one I like to have is home made.  Crafted (if you can call it that) from an extend-able painters pole.  Cut the roller holder portion of the paint roller off with a hack saw, and straighten it, you will then have an extend-able probe with approximately a 12-14 inch heavy steel pointed rod on the end of it.  This makes probing around foundations to detect soft spots or cavities in soil a breeze.  Additionally, it provides the ability to extend your reach to test for damaged siding and wood as well as first story gutters.

Camera or Phone for Photos
If you’re like I me, sometimes if I look at several homes I may get them confused.  Taking a few photos will help me recall the property and remember some to the more critical items associated with each property.

25’ & 100’ Tape Measures
Ok the 25’ tape will be used the most. for items such as counter tops, floor covering, windows, and the list go on and on.

The 100′ tape comes in handy for roofs, gutters, some decks, fences and driveways.

An Old Credit Card or Flexible Putty Knife
Talk about a time saver, this is huge.  I can’t tell you how many times I have gone out to look at house and there was no lock box, which means no key. By having one or both of these tools you will more than likely be able to push the edge between the door and door frame so that as you slide it down it will compress the door latch, allowing for the door to open.  Talk about a time saver, another trip out could be at least two hours and another day, and might cause you to miss the cut off time for an offer.

A Marble & a 4’ Level
OK, I know it sounds stupid, but using a marble is a great way to quickly determine if a floor is not level.  Believe me, you set it down on tile or hardwood and if it takes off, you better take a closer look at the structure below.

As for the 4’ level, it too is great for determining if floors are level and if door frames and walls are plumb.  I find it very helpful in checking out block or poured wall foundations for deflection or leaning.  Oh yea, it is great for determining if chimneys are pulling away excessively from exterior walls.

A Couple of the Basics
Don’t’ forget a pair of pliers and a can of WD-40.  The pliers are great for pulling up edges of carpet to see if hardwoods are underneath, and the WD 40 is great for spraying door knobs and keys so that they will actually unlock the doors.  You can’t depend on anything working the way it should.

Have fun with the tools we have discussed.  And do know, I am not suggesting or advocating your use of these tools in the ways I have described, however if you choose to use them in a similar way, I can assure you, you will save time and money.

“Shadow Inventory of Homes” OOOH!

First things first, what are these “Shadow Inventory of Homes”?

The “Shadow Inventory of Homes” is homes that normally would have already been foreclosure properties.  These homes have been delayed from going into foreclosure by loan modifications, moratoriums or otherwise being stuck in never-never land between delinquency and repossession.  Due to efficiency increases of banks and government, these types of homes are moving through the system at a faster rate and will soon hit the market as short sales or foreclosure sales.

What will this do to the value of homes?

From several studies conducted by independent consultant firms such as John Burns Real Estate Consulting, the Bookings Institute and many others and also the reports in the Wall Street Journal, the belief is that values will fall again.  Some feel that the fall will be rapid and hopefully short lived and others feel that the fall will continue on for several years.  No matter what happens the values will more than likely fall or in the best case scenario, remain constant.

The main reason for this value decline is the sheer numbers of homes on the market.  In the majority of the markets across the US the current supply of homes will take over 1 year to be absorbed.  This 1 year absorption does not take into account this new influx of homes.  To top all that off, many lending institutions have already exhibited their lack of tolerance in holding on to a property and selling it for a reasonable price.  Their goal it to get the property off the books rapidly and if that means lowering the price to do so, then that is what they do.

On the bright side, if you are an investor, these homes will probably be sold at a much lower price and this will help the movement of these homes through the market.  The hope is that the investor movement of these homes will be at such a pace (due to the low prices) that the effects of these homes coming on the market will be limited.

We can only hope!

Again, small business to the rescue…..You have to love those entrepreneurs!

Atlanta Real Estate Statistics – July 2010

It seems that the effects of the $8,000 Tax Rebate has all but evaporated.  Although the “close by date” for the program was extended through September 30th, 2010 for all but non-military buyers, it appears that the majority of the pending sales were in fact closed by the original dead line of July 30th, thus providing the backdrop for the significant drop in closings for July.

Closings
There were 3,887 closings for all single family units in July which was a decrease of 28.1% from July 2009.  This is the second consecutive year to date decline after 8 months of increase out of the last 9.

There were 3,311 closings in July for all single family detached homes, which was a decrease of 29.3% compared to July 2009.  We are now 510 closings behind for the year compared to the same period in 2009.

There were a total of 576 closings for all single family attached units in July, which is down from 725 from July 2009.   This is a 20.6% decline over the same 2009 period.  However year to date closing for single family attached are 598 higher than the same year to date 2009.

Average Sale Prices
The average price for all single family units in July was $213,902, which is 3.1% higher that July of 2009. We may not see an increase in values like this for some time now that the effects of the Tax Rebate have been experienced.

The average price for single family detached units was $226,186 in July which is a 4.9% increase over July 2009.

The average sales price for all single family attached units in July was $143,290 which is a decline of 7.7% from July of 2009.  This is the 33rdyear to year decline in the last 37 reporting periods.  In light of the number of new construction units available this downward trend will probably continue.

Comments
In spite of historically low interest rates the real estate market continues to struggle with establishing a foundation for recovery.  In the absence of incentives, low rates are not providing an environment conducive to encourage would be buyers to enter the market.  Until the job market begins to turn and people return to work, we will continue to struggle with excess inventory and flat or declining values. Please use your vote in November to reflect this critical issue.

National Statistics

National Perspective

Realtor.com July Home Sales

Pending Home Sales

Flip This House

One of our recent flips was a ranch on a full basement in Alpharetta.  The home had been lived in for a number of years by the then current owner.  The home needed updating to bring up the value, but it was mostly cosmetic in nature.  We thought it was about time to get one that did not need so much work.  Check it out.

On the outside we replaced the roof with an architectural roof, removed the LP siding, replaced it with HARDI Plank and repainted the exterior.  This made a huge difference in the exterior appearance, and did not represent a huge cost.  We also had to water proof a portion of the front foundation wall.  This required bringing in a back hoe, digging down to the footer, filling cracks in the block wall and then applying water proofing before covering it back up.  I would prefer not to have to do this again. Once finished we added concrete curbing to create a very attractive and curb appealing front yard.  At $3.50 a linear foot the curbing was a great investment.

On the inside we painted, replaced the majority of light and plumbing fixtures, replace kitchen appliances and added a Heat Pump and duct work in the basement so that we could consider that finished space.  At less than $4,000 it was a good investment.

In the end we sold the house for more than any other ranch had sold for in the subdivision.  If you have extra money; now is a great time to purchase investment property; AND if you need someone to manage the project from Alpha to Omega, give me a call.