Dealing With the Elements: Fall Maintenance 101

In the Fall and Winter months, the rain and the cold are two very common threats to the condition of your home. Here are a few things to keep in mind when September hits and the weather turns.

Keeping Outside Water Outside – One of the most common ways rain water finds its way into a house is not via a leak in a roof, but through a foundation. While it’s quite a project to excavate and seal an old concrete foundation, it’s often much easier than that to keep water from collecting next to the house and finding its way inside.

1. It’s a small hassle, but it’s worth the 30 minutes to an hour to clear all of your gutters and downspouts of leaves and debris. If you didn’t do it this past year, it should be done right now to clear all of last year’s leaves away for our first
   rains, then again after all the leaves have finished falling (mid-late November) to keep things clear for the remainder of the season. From there, it’s just a once a year deal in the winter after all the leaves are down for the year.
2. Next, make sure that all downspouts are either connected to a drainage/storm water system, or at the very least, directed a good 4-6 feet away from the foundation of the house.
3. It’s also very helpful to make sure that the ground next to the foundation doesn’t slope toward the foundation, rather grades away. Direct any standing water away from the foundation and into the yard. If necessary, dig out a gentle trench one to two feet from the foundation and about three inches lower than the earth next to the foundation. Send the trench to a spot where the yard does slope away and direct the water out that way.

If you’ve been having basement/crawlspace water issues, these three items are the first things to address.  If these have been addressed and you still have water coming in, it could mean some trenching around the foundation, finding the cracks or voids and sealing those up. There are products to seal cracks from the inside without trenching, but that option is temporary at best. Eventually, the water will push the product away from the concrete and your “seal” will fail.

Freezing Hose Bibs – Experts say our winter could be a fairly mild one, but don’t get lulled into a false sense of security. Invariably, even a “mild” winter can produce a couple of below-freezing nights. If you have any outdoor hose bibs (faucets) that are original bibs without the “no-frost” valve that gurgles out a little water after you turn it off, then there’s water trapped in the bib that is waiting to freeze over the winter months and crack the valve housing. Even if it’s been fine before at colder temperatures, the next freeze can push it over the edge and spring an annoying leak the next time you go to water plants in the spring.

Use a foam cover, or even crumpled up paper packed around the bib, covered by a tied-off plastic bag to create an air buffer between the elements and the water in the bib.

Tree Roots and the Side Sewer – When the leaves fall, trees don’t necessarily stop growing roots. A majority of root growth does happen in Spring and mid-Summer, but depending on the tree, they can keep going – and they go deep! What are they looking for? Plant stability, minerals and water.

Enter the Side Sewer, or the sewer line coming from your house that connects to the main sewer line for your municipality out in the street. Older side sewer lines often are concrete or clay tubes, or “tiles”, loosely fit together to create one long string of connections to the main. Over time, all of those connections become susceptible to root entry. Once roots have found an entry point, they begin to grow inside that entry, attracted to waste water that flows through the line. The more roots that grow within the line, the more blockage and obstruction for the waste that is being sent down the line by you.

Secondly, those roots cause damage to the old concrete or clay tiles making up the line. Over the years, the concrete or clay breaks down and roots only exacerbate the problem. Tiles collapse and then it’s time for some very costly repair. There are three levels of fixing a sewer problem due to root penetration.

1. Keeping root growth under control by adding a root killer product can help keep growth under control and prevent roots from blocking the line and causing the sewer waste to back up into your basement or worse, your bathtub. Root killer periodically flushed down your toilet decays roots and should be part of regular maintenance in homes where there are large trees growing over a sewer line and/or where the side sewer line is fifty years old or more.
2. If roots need to be cleared from a line due to blockage, an electric rooter machine that rotates a cutting blade through the line is used to cut through root clumps and clear the line out. Once that is done, start the program in #1 right away, working to keep those roots you now know you have under control. Machines can be rented at Home Depot or other heavy tool rental stores for $60-$100. Services will come out and perform the same task for $300-$600.
3. A collapsed line means pipe replacement. Sorry. The key here is to collect three bids. When you have a blocked line, it’s very hard to be calm and patient. Contractors know that and some will use that to their benefit. Stay calm and do what you gotta do to get at least a second opinion unless you have the utmost confidence in the contractor. Repair costs vary widely. I have a favorite contractor and have heard of homeowners using others and paying double what they should’ve. Variables include: does the repair include digging up the street? Is the problem central to one specific locale, ei. a turn or elbow that has broken, or is it a systemic root problem throughout? What obstructions exist for the digging and can the repair be done without full trenching? These repairs can range from $1,000 to $30,000.

Sewer inspections can be done fairly easily and pretty quickly for about $225 to $300 and that can arm you either with wonderful piece of mind, or the knowledge you need in order to prevent or at least delay having to get into solution #3.

How’s that for homework? Spend a day devoted to these three issues and you will be a much happier homeowner the rest of the season. As always, don’t hesitate to email or call me if you run into a snag, have questions, or even need a referral for a good contractor out there. ‘Till then, be careful on that ladder!

Todd Crooks
Real Estate Broker

206-715-4483

toddcrooks@comcast.net

www.toddcrookshomes.com

Dealing With the Elements: Fall Maintenance 101

In the Fall and Winter months, the rain and the cold are two very common threats to the condition of your home. Here are a few things to keep in mind when September hits and the weather turns.

Keeping Outside Water Outside – One of the most common ways rain water finds its way into a house is not via a leak in a roof, but through a foundation. While it’s quite a project to excavate and seal an old concrete foundation, it’s often much easier than that to keep water from collecting next to the house and finding its way inside.

1. It’s a small hassle, but it’s worth the 30 minutes to an hour to clear all of your gutters and downspouts of leaves and debris. If you didn’t do it this past year, it should be done right now to clear all of last year’s leaves away for our first
   rains, then again after all the leaves have finished falling (mid-late November) to keep things clear for the remainder of the season. From there, it’s just a once a year deal in the winter after all the leaves are down for the year.
2. Next, make sure that all downspouts are either connected to a drainage/storm water system, or at the very least, directed a good 4-6 feet away from the foundation of the house.
3. It’s also very helpful to make sure that the ground next to the foundation doesn’t slope toward the foundation, rather grades away. Direct any standing water away from the foundation and into the yard. If necessary, dig out a gentle trench one to two feet from the foundation and about three inches lower than the earth next to the foundation. Send the trench to a spot where the yard does slope away and direct the water out that way.

If you’ve been having basement/crawlspace water issues, these three items are the first things to address.  If these have been addressed and you still have water coming in, it could mean some trenching around the foundation, finding the cracks or voids and sealing those up. There are products to seal cracks from the inside without trenching, but that option is temporary at best. Eventually, the water will push the product away from the concrete and your “seal” will fail.

 

Freezing Hose Bibs – Experts say our winter could be a fairly mild one, but don’t get lulled into a false sense of security. Invariably, even a “mild” winter can produce a couple of below-freezing nights. If you have any outdoor hose bibs (faucets) that are original bibs without the “no-frost” valve that gurgles out a little water after you turn it off, then there’s water trapped in the bib that is waiting to freeze over the winter months and crack the valve housing. Even if it’s been fine before at colder temperatures, the next freeze can push it over the edge and spring an annoying leak the next time you go to water plants in the spring.

Use a foam cover, or even crumpled up paper packed around the bib, covered by a tied-off plastic bag to create an air buffer between the elements and the water in the bib.

 

Tree Roots and the Side Sewer – When the leaves fall, trees don’t necessarily stop growing roots. A majority of root growth does happen in Spring and mid-Summer, but depending on the tree, they can keep going – and they go deep! What are they looking for? Plant stability, minerals and water.

Enter the Side Sewer, or the sewer line coming from your house that connects to the main sewer line for your municipality out in the street. Older side sewer lines often are concrete or clay tubes, or “tiles”, loosely fit together to create one long string of connections to the main. Over time, all of those connections become susceptible to root entry. Once roots have found an entry point, they begin to grow inside that entry, attracted to waste water that flows through the line. The more roots that grow within the line, the more blockage and obstruction for the waste that is being sent down the line by you.

Secondly, those roots cause damage to the old concrete or clay tiles making up the line. Over the years, the concrete or clay breaks down and roots only exacerbate the problem. Tiles collapse and then it’s time for some very costly repair. There are three levels of fixing a sewer problem due to root penetration.

1. Keeping root growth under control by adding a root killer product can help keep growth under control and prevent roots from blocking the line and causing the sewer waste to back up into your basement or worse, your bathtub. Root killer periodically flushed down your toilet decays roots and should be part of regular maintenance in homes where there are large trees growing over a sewer line and/or where the side sewer line is fifty years old or more.
2. If roots need to be cleared from a line due to blockage, an electric rooter machine that rotates a cutting blade through the line is used to cut through root clumps and clear the line out. Once that is done, start the program in #1 right away, working to keep those roots you now know you have under control. Machines can be rented at Home Depot or other heavy tool rental stores for $60-$100. Services will come out and perform the same task for $300-$600.
3. A collapsed line means pipe replacement. Sorry. The key here is to collect three bids. When you have a blocked line, it’s very hard to be calm and patient. Contractors know that and some will use that to their benefit. Stay calm and do what you gotta do to get at least a second opinion unless you have the utmost confidence in the contractor. Repair costs vary widely. I have a favorite contractor and have heard of homeowners using others and paying double what they should’ve. Variables include: does the repair include digging up the street? Is the problem central to one specific locale, ei. a turn or elbow that has broken, or is it a systemic root problem throughout? What obstructions exist for the digging and can the repair be done without full trenching? These repairs can range from $1,000 to $30,000.

Sewer inspections can be done fairly easily and pretty quickly for about $225 to $300 and that can arm you either with wonderful piece of mind, or the knowledge you need in order to prevent or at least delay having to get into solution #3.

 

How’s that for homework? Spend a day devoted to these three issues and you will be a much happier homeowner the rest of the season. As always, don’t hesitate to email or call me if you run into a snag, have questions, or even need a referral for a good contractor out there. ‘Till then, be careful on that ladder!

Todd Crooks
Real Estate Broker

206-715-4483

toddcrooks@comcast.net

www.toddcrookshomes.com

 

 

 

Greener Grass and the 1030 Exchange

Investment Properties

We’ve talked a lot about buying, owning and selling homes in the Todd Crooks Homes Blog. To date, all of our focus has been on residential homes and those we actually occupy ourselves. But there is another world of real estate. That is the world of investment properties. Most have to do with leasing to a tenant that pays rent to the owner. One type of tenant-occupied investment property is a residential property that has one or more tenants living there. Many times, it’s a single family home with one renter, or a family. Other possibilities range from a duplex with just two separate living units, all the way to an apartment complex with many units. The other typical tenant-occupied investment property is a commercial building, specifically zoned for and occupied by a business. The typical “flipped” home, where an investor purchases a home that might need some work, gets things spruced up (in varying degrees) and sells the home for a profit is yet another common type of property investment.

Why Sell an Investment Property?

As in the world of stock and bond investment, investors sell investment properties all the time. Reasons for selling vary depending on the needs of the investor. Some investors have just been at it long enough and it’s just time to sell, bank the proceeds and enjoy the beach. Others might be recognizing the grass really is greener elsewhere and a tweak of their portfolio is in order. As an example, they’ve had a rental property for years and years, the property has declined, has some major needs going forward and it’s probably time to take it down and build something new on that lot. That might not be an area this investor feels comfortable as a project and just wants to continue being a landlord. It’s time to sell this one and look for another, sounder rental property for his portfolio. Or, an investor owns a commercial building in Boise, Idaho, has it managed by a company there and this owner has decided a building in Seattle where she lives would be easier and cheaper to keep track of. The problem for these two investors is likely the capital gain taxes that result from a sale, especially in a very profitable one.

Enter the 1031 “Like Kind” Exchange

The 1031 Like Kind Exchange is a tool that can be used to defer capital gain taxes. The name comes from the IRS tax code Section 1031 that states, “No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.” A 1031 Exchange is also a way of converting the savings in capital gain taxes into additional buying power on a replacement property. Because you receive more proceeds from the sale due to capital gain taxes not entering into the picture, the amount of property you can afford to buy as a replacement is maximized. A 1031 Exchange enables you to avoid capital gain taxes and put that money right back into the replacement and continue your portfolio’s upward growth.

What’s the Catch?

As with anything associated with the IRS, there are several things you need to know going in. Expecting to use a 1031 Exchange on a property without knowing ahead of time if it really qualifies is a common pitfall. For instance, that home you purchased to fix and flip may not qualify even though it’s an “investment property” in your eyes. In most cases, you would need to hold the house for twelve months and rent the home to a tenant to establish it as an investment property. There are also very strict timelines to follow regarding identifying your replacement property, whether or not you actually wind up with that specific replacement, as well as how long you actually have to close on that property. You’re required to identify a potential replacement property within 45 days of closing of the “relinquished” property and you must close on the new property within 180 calendar days of the first closing, or before your tax filing date to complete the exchange – whichever is shorter. That tax filing date issue can severely shorten your time allowed and is one that can easily be missed or misunderstood, creating a real problem.

Know the Plan Going In

As a Realtor®, I caution you to be wary of another Realtor® that tells you they can fully counsel you on a 1031 Exchange. Navigating a 1031 Exchange is a Tax and Real Estate Law issue and should be handled by an appropriate attorney. A real estate broker typically has a working knowledge of these transactions, but not the full picture of the complexities of each individual transaction and how to ensure your exchange will be successful. Sure, you’ll pay attorney fees, but you will likely save more in tax liability and audit hassles down the road, especially if it is your first 1031 Exchange, not to mention the fact your 1031 may not ultimately fly without an attorney’s help. Your Realtor® should, on the other hand, be equipped to refer you to a good attorney to contact for that piece of the puzzle. One additional piece of due diligence you’ll need to perform is having a very good idea who is holding your money in-between closings of your Exchange. A firm called the Qualified Intermediary, or “QI”, will hold the proceeds of the first sale and use those proceeds to fund the replacement sale. It’s critical to understand that these firms are not federally regulated and it’s up to you to make sure there are safeguards in place so your money is protected. Here, your attorney will help you determine the answers to several questions: In whose name the money will be held? What are the requirements for withdrawal and deposit? Is there a third party auditor for this QI? Is the QI insured by a larger parent company and, most importantly, are there adequate taxpayer security mechanisms in writing that ensure they will be held to for your protection?

Final Thought, First Step

In short, the 1031 Like Kind Exchange is a key part of transacting investment properties because of the likely capital gain tax implications of the sale of your investment property. It is, however, a complex process that leaves no room for doubt and carries no forgiveness for missteps. If you own an investment property that you think you’d like to sell and replace with a different property, your first step is to reach out to your real estate broker. There, you’ll discuss the value of your current property and replacement possibilities in your target area, including property availability and pricing. Then, you and your Realtor® can share those notes with your tax/real estate attorney, determine definitive qualifications and plan out what you need to do in preparation, both strategy and timing-wise. Ultimately, a 1031 Like Kind Exchange done right will help you maximize your investment, keep the grass always “investment green” – and hopefully will have you resting on a beach someday with other successful real estate investors.

 

 

Todd Crooks
Real Estate Broker

206-715-4483

toddcrooks@comcast.net

www.toddcrookshomes.com

 

 

The Journey of Owning and Selling a Home: Pacific Northwest Edition II

Welcome to Installment II of The Journey of Owning and Selling a Home: Pacific Northwest Edition

In Installment II, “A Seller’s Journey” we’re going to cover the process of preparing your home to enter the market and why it’s important to carefully choose your Listing Agent/Real Estate Broker. I’ll explain some of the key services you’ll encounter during a transaction and what they actually do within the transaction. Finally, we’ll touch on market-driven strategies involved in maximizing how much your home ultimately sells for.

 

Installment II: A Seller’s Journey

Representation vs. the FSBO

It’s time to sell, now what? Your first step in the process should be to enlist a Realtor, or real estate broker as a listing agent to market, manage and complete the process. Owners will occasionally decide to sell their property on their own, normally referred to as a “For Sale by Owner”, or FSBO. The determining factor is often the commissions saved when bypassing a Realtor. However, a real estate transaction should never be undertaken without some form of representation, in part due to the extensive legal ramifications. If you choose not to use a Realtor, then you most certainly will need an attorney’s council to help guide you, ensuring documents are legal, complete and that the process moves forward smoothly. Another sometimes fatal missing piece to a FSBO sale is marketing. According to the National Association of Realtors, real estate searches via Google grew over 250% in the years from 2008 through 2012. Google reports that 90% of all real estate buyers now search online for their next home. Websites like KellerWilliams.com, Redfin, Trulia, and many others have become staple searches for home buyers. If a Seller isn’t online in a comprehensive way, that home is limited to as low as 10% of the existing market. In a Seller’s Market, that may seem OK given the low competition, but the instance of multiple offers that drive the price up decreases dramatically. So, we’ve paid an attorney, limited our marketing – and have likely taken a lesser sale amount in the end, even with considering a seller’s market. On top of that, you are a one person show, presenting, negotiating and selling the property on your own. Yes, there a cost to Realtor representation, but choosing a broker wisely and you will ultimately save time, probably net more cash in the end and be much, much happier.

Preparation

With your broker, you’ll carefully determine levels of preparation and determine timing. If you’ve been following the suggestions in Installment I, “A Homeowner’s Journey”, it’s very possible all you need to do is some minor tweaking before the home is ready to sell. If not, there might be a few things that you could do to bump up your chances at a faster, higher offer amount. There are two things to now consider with two different impacts.

The first is the ever familiar “curb appeal”. It’s in your best interest to make it as easy as possible for a buyer agent to present your property to their client in a positive light. The buyer agent can easily look past minor yard needs and cosmetic issues like dirty windows, but those first impression stumbling blocks can lock into their buyer’s mind and make their agent’s job an uphill climb before they even enter the home. Addressing outside cosmetic issues might not yield hard dollars in return, but it most certainly increases your market size by putting the buyer focus where it belongs, the real features of the home. It can mean the difference between three weeks on the market and three months.

The second consideration is “building condition”. Depending on the potential value of the home, updating a kitchen or bath can be a good way to attract better offers when compared to the same space needing a lot of work. By looking at comparable homes for sale or recent “solds” in the area, your broker can help you get a sense for the expected return on your improvement investments. Every neighborhood is different and a remodeled kitchen may have a lot of impact in one area and price range, while the same project in another area might be best left for the buyer to take on themselves. Your broker will be an invaluable resource for deciding what to do and how to go about it. Hopefully, he or she will even have contractor contacts to share for work that needs to be done. There are also some good websites these days that can not only give an approximation of cost, but even provide professional contacts for bids.

The Listing

The “listing” is a collection of all the information relating to the home, including a collection of photography and area amenities that is entered into the Multiple Listing Service and fed to the rest of the world. To understand the importance of the listing requires understanding what happens behind the scenes. Typically, a buyer will have their own representation to help them whittle down property choices to look at. In an attempt to narrow the search and help maximize time efficiency for their client, the Buyer’s agent will scan the Multiple Listing Service, or MLS, for up to the minute properties for sale and pull together a list of perhaps the top ten candidates. From that list, they’ll go out and take a look, hoping to find “the one”. A listing agent must create a library of top notch photography, researched and included information all the way down to bus routes, local amenities and even school assignments. The most comprehensive listing has a much better chance of making that buyer agent’s “top ten list” and can vital to driving traffic to the house.

The Proactive Broker, Title and Escrow and What it Means to You

There are a myriad of reasons for the need to sell a property. While those reasons will certainly affect your broker’s overall strategy, the question of who actually can legally sign documents and sell the property is an often overlooked piece of the puzzle. Here’s just one scenario where assumptions made by a broker can cause real headaches as you draw near to the closing of a sale. An elderly parent, let’s call her “Mom”, still owns and lives in the family home, but reaches a point where long term care is necessary. A few years ago, she and you arranged for you to become her power of attorney, just in case. Her health is failing and she feels it would be better for you to manage the sale of the home so that funds are liquid and available for her new costs. You contact a broker, meet him or her, provide the Power of Attorney documents and proceed with a listing. An offer comes in, a contract is born and everyone is excited because things are rolling along super smooth.  About two weeks into the contract of a thirty day contract closing, the broker remembers that Title and Escrow will probably need a copy of the Power of Attorney documents and the Title and Escrow company didn’t prompt the broker to get that over right after the original contract signing.

Title and escrow are two functions that are most often provided by the same company. Typically, that vendor will be arranged by your listing agent. The function of a title company is to review everything that has to do with the legality of selling the property and making sure that, in the end, the contract is enforceable and valid. The title process includes looking at a historical chain of sales, making sure there are no missing pieces to the records, and verifying that all documents are in harmony with each other so that the contract is complete and actually has a leg to stand on. They will also be looking for past property disputes and resulting easements, making sure anything that could create a challenge to the sale, or “cloud on the title” is resolved prior to closing. Once Title has done their job, things move to Escrow, where the settling of financing and other funds, as well as final signatures are dispensed and recorded so that the sale can close.

We’re fourteen days into the contract for Mom’s house, with a closing date just two weeks away and the Buyer is now asking if it might be possible to close earlier. You love that idea because you’ll get the proceeds that much sooner and can get some additional furniture for Mom’s new place a week ahead of time. Here’s the problem. The broker missed the fact that, while the Power of Attorney documents very clearly spell you out as the Power of Attorney, the broker missed a small but important part of that language that says “in the event of incapacitation”. Mom’s not incapacitated; she’d just rather you deal with it. Big difference. Upon receiving the broker’s copy of the Power of Attorney the title company quickly contacts your broker to ask for the official declaration of incapacitation, signed by Mom’s doctor. Now things just went from super smooth to “You need what???” You’re probably not closing on time, let alone early. That should’ve been called out even before the listing went in and certainly prior to offers coming in – and could just kill this purchase and sale agreement.

Granted, that scenario reflects a small percentage of the transactions that occur, but it illustrates a very important component in shopping for a broker. Think of the process as a sidewalk with the potential of patchy ice spots. You might not always spot the ice, but your broker should be able steer you around those. The broker you choose must, at that very first meeting, demonstrate more than just “I’m going to get you the very most for your house faster than anyone else”. Let’s face it, every broker knows that’s at the top of your list, but you also need to be comfortable that your broker will proactively ensure a smooth transaction and anticipate any contract pitfalls as well.

The School of Hard NOCs (the Negotiator, the Offers and the Process To Closing)

This is ultimately where the payday is born. With everything we’ve covered thus far managed well, the big task remaining is the tough job of making sure your home sells for as much as the market will possibly bear. A good Buyer’s Agent will make sure their client is not over paying for a house by presenting data that argues their offer price. A good Listing Agent may work to counter that argument with separate data. Ask your broker what his or her multiple offer strategy is as well. After the price and initial terms are agreed to by both parties, there can be a second and even third layer of negotiations based on inspections and appraisals that you’ll need your broker to help you navigate.

 

From a selling perspective, the ideal situation is to have more than one offer on the table at the same time. A multiple offer situation is fairly common in the Seattle area right now, as we covered in my May 9^th article, “Caution: High List Price Ahead”. When you have a few offers to look at, the price is just one component to the overall offer that includes other conditions or addendums that might include financing or other contingencies. Your broker will help you evaluate the offers so you can decide what the most meaningful attributes are of each. How much earnest money is included in the offer and what does that actually mean and why should the type of buyer financing matter to a seller? Is it a cash buyer and is that really better for your situation? It’s important to truly understand the impact of all the components of any offer.

You did an excellent job getting your house ready for the market, the listing was stellar and you got multiple offers to boot! Now, with “Mutual Acceptance”, or the signing of a full purchase and sale agreement, with all contingencies and resulting negotiations satisfied, we can move to closing. Upon Mutual Acceptance, it often takes 21 to 45 days for the transaction to close and possession transferred to the buyer. Your Listing Agent will be working behind the scenes during that process to make sure buyer financing is on schedule and Title and Escrow is ready for closing things out. You can count on your broker to keep you abreast of any paperwork deadlines, with plenty of time to spare. There will be a signing appointment at the Escrow office, usually a day or two before closing where the buyer(s) and seller(s) typically come in for separate appointments. Finally, the really cool part; the title and deed are recorded with the County, the buyer gets keys, you get the money and congratulations! Your transaction is closed.

What Now?

Now you have a very good overview of why broker representation is critical, how your broker helps in deciding the best preparation strategy prior to the listing of your home and just how important that listing is. There are a lot of ways a sale can go sideways during the process and how your broker should be able and ready to anticipate challenges so that they never become an issue jeopardizing the sale. You’ve been introduced to some of the behind the scenes players like Title and escrow and hopefully learned more about the importance of your broker’s negotiating skills, offer analysis and what’s involved in moving a transaction to its closing. It’s quite possible all this information has led you to more questions. Email me or give me a call and let’s go over them, one on one.

You may be at least considering the process. You’ll first want to know what your home is worth. That’s not the Zillow value, assessed value, or even appraised value, but the best selling value. So let’s talk. I want to be your broker. Let’s make a plan. If you’re not in the greater Seattle Metro area and Eastside, that’s OK. If I can’t get to your area, let’s talk anyway and I’ll help you find the perfect broker for you wherever you are.

 

Todd Crooks
Real Estate Broker

206-715-4483
toddcrooks@comcast.net

www.toddcrookshomes.com

The Journey of Owning and Selling a Home: Pacific Northwest Edition

Home ownership comes with joys and, once in a while, some frustration. In this two installment series I’ll walk you through what to consider while you navigate the years you spend in your home. In this first installment, “An Owner’s Journey”, we’ll touch on being in your home and what that may mean to you. We’ll discuss the components to balance when determining improvements and look ahead to typical repairs you may face so you can be ready for what may arise.

Installment Two: A Seller’s Journey will take all we learn from the first installment and apply that to the journey of selling a home. Both installments cover a broad range of topics, but may lead to even more questions. As you read, be sure to write down questions that pop into your head, contact me and we’ll delve further into your specific needs or questions.

Installment 1: An Owner’s Journey

What does the idea of owning a home represent to you?

There is a broad spectrum of what home ownership can mean to a homeowner. It can be as simple as just having a place to call your own. It might be a home where you are starting or raising a family.  Perhaps it’s merely a stepping stone. Then, there’s the investment house, whether it’s a rental, or a house you know you can put some effort into and hopefully sell for a big return down the road. The first thing to keep in focus is what it means to you.

Along with all that home ownership means to you, your home represents a sizable potential toward your asset portfolio. The maximized value of your home is important not just for the purpose of eventually selling, but for short term access to funds as well.

Many homeowners choose to access money available within the value of their home via a home equity loan. A lender considers the amount still owed to the bank for the primary mortgage and provides a loan to the homeowner related to the difference between the amount owed on the mortgage and the actual value of the home, or equity. You may need to access equity in your home to remodel, perform repairs, pay toward college tuition, or simply leverage another investment. The Lender will begin by having an appraisal done on the home. That appraisal will determine the definitive overall value. The new appraised amount, against the amount already owed, will determine how much the Lender is willing to loan you. That can be in the form of an equity line of credit or one big home equity loan – big, assuming you have a healthy amount of value in the home over and above your current mortgage amount owed.

You should also be mindful of your long term plans. Protecting your home’s value means higher net proceeds on an eventual sale. Whether you plan to sell in twelve months or twenty years, it’s healthy to always factor in how what you do affects the value of your home.  Naturally, balancing that with your practical needs is important as well. The good news is that it’s your home and ultimately your decision.

 

What to consider when improvements are in order

The impact improvements have to value is always one of the first considerations. Usually, we tend to plan improvements that at least partly increase the value or appeal of our home; adding a bathroom, updating a kitchen, building a deck, etc. There may also be something you need out of your home that actually decreases value, but current life situations simply outweigh that fact. As an example, your four bedroom house is great, but you need one of those bedrooms to be much larger, so you decide to open things up and combine two small bedrooms into one larger master suite with a bigger closet. Ideally, you did it understanding the ramifications and made an informed decision after weighing all the factors. If your needs outweigh those other factors, start drawing up the plans.

If you live in a townhome, condominium or housing development/community you likely have restrictions for improvements, especially outside, that limit your choices for what you do. Your community probably has a homeowners association, or HOA, with rules on a wide range of things that can vary from just a few restrictions, all the way to what color you can paint your house.

Last but not least, municipalities, or zoning and code jurisdictions often require permitting for many of the projects you might undertake. Depending on the city/municipality in which you live, the permit process varies widely. In Seattle, there’s not much outside of painting and other cosmetic work that can legally be done without a permit. Electrical – including adding a simple outlet, plumbing – including adding a hose bib for the deck, and likely that deck itself, all represent projects where permits can come in to play. An inspector that discovers a project, completed or otherwise, that was done without that permit can mandate removal of wall material to verify correct work was done, have all the work undone, and/or levy fines. In the event the project doesn’t have to be removed altogether, the homeowner will most definitely be required to get the proper permits and go through the inspection process, post-completion. A project discovered completed without permits during the sale of the home can also turn into a can of worms and a nice little negotiation tool a real estate broker just may use to get concessions for his or her buyer. Best avoided.

 

How the consideration of repairs differ from improvements

 When repairs are needed, many of the same considerations apply. How it’s repaired can affect value. HOA rules may determine the method of repair and permits may be in order here as well. A homeowner’s most common headache is the repair and upkeep of the home. As an example of how location comes in to play, in my Seattle neighborhood, the sewer systems connected to the main line are about 80 to 100 years old. That means each year, there is another house on our street that has to repair a sewer line (technically known as side-sewer). I believe it was Sigmund Freud that once suggested, “A person’s mental wellbeing can be directly correlated to the age and condition of their connected sewer line”. A broken sewer line can be one of the larger repair expenses and it’s also very easy to get three bids that vary by as much as $10,000 for the same work. Needless to say, selecting a contractor for projects that are beyond your scope of expertise is an important part of the process in terms of work quality as well as price. If you haven’t hired a contractor before, you might just want to give me a call so we can talk about that in more specific terms. Collecting multiple contractor bids, especially the first time around, can be very enlightening. Other issues can include plumbing, especially in older homes with galvanized plumbing. Even the newer plastic PEX piping has its issues that can crop up, as rodents like the “notes of roasted pear and cherry” of plastic PEX much more than “the bitter, toughness” of copper piping. Older roofs, especially torch down in the Pacific Northwest, older electrical wiring and foundation issues all contribute to regular use of headache medications.

Sometimes weighing repairs over wanted or planned improvements can feel like a juggling act. The first consideration needs to be whether or not an issue requiring repairs may lead to additional repairs if not addressed. Bad drainage from downspouts can lead to water leakage in a crawl space or basement, leading to things like rot or mold. Both are bad and get worse over time. If you want to add a dishwasher in the kitchen, but you know water is coming in from bad drainage, you have a decision to make if you can’t address both at the same time. The priority should probably be the drainage issue, as that is going to lead to increasing repair costs the longer it’s ignored. Let’s say you really want that dishwasher, but also notice there are two double pane windows that have become foggy and you determine they have defective panes. Let’s say you can only focus on one of those expenditures every three or four months. The windows aren’t likely to cause other problems beyond the fogginess in the glass, short term. The dishwasher just may save you a ton of time in the kitchen over the next four months. You might decide to buy and install the dishwasher, dealing with foggy windows for a little longer. If you can afford to do the dishwasher, take care of faulty drainage and replace the windows all at the same time, congratulations. You’re probably in a better spot than most of your neighbors.

 

Is it really that hard to be a home owner?

We’ve touched on a lot of things that admittedly cost money and time. Whether you own a car, boat, 35 foot RV, or a home, there will always be at least a little work to do. For a homeowner, the payoff in ownership is both personal as well as financial and it’s definitely worth it! Admittedly, it can be easy to feel a bit alone when confronted by mounting homeowner issues, especially if you haven’t crossed that bridge before. Because a good real estate broker is uniquely qualified to consult on these issues along the way, I see the new role of the real estate broker as more than just the person that simply handles a transaction and disappears until the next one.  Your broker can and should be available to help you weigh how your improvements or repairs might affect value – and how to go about it without making things possibly worse. The help will not only save heartache, but it’s also free.

So, it doesn’t have to be hard to be a homeowner, especially when you know someone’s got your back. The fact that you go in with both eyes wide open actually makes the journey all that much more enjoyable. We’ve covered some of the key things you’ll encounter as a homeowner, from the idea of comparing your needs and the impact they have on value, to prioritizing wants and needs when repairs are looming. We’ve also touched on how even your locale can affect not only what might need to be done, but how it actually gets done. In the end, it all boils down to using the resources around you, making informed decisions and creating a home that is truly yours. So have fun and make it yours.

Oh yes, and don’t forget to call or email me with those questions!

 

Stay tuned for Installment Two: A Seller’s Journey.

How the Listing and Selling process works in the Seattle Metro Area. More on how to maximize your return on your home investment and why good representation is crucial, even in a hot Seller’s Market like ours.

 

 

Todd Crooks
Real Estate Broker

206-715-4483
toddcrooks@Comcast.net

Caution: High List Price Ahead

 

 

The Sellers’ Market                

Currently in the Seattle area we’re in the midst of a bonafide “sellers’ market”. A seller’s market is typically defined as a shortage of available homes to buy, compared to the available buyers in the market. It typically shows levels below an inventory of six months worth of available listings. In other words, most listings are moving in less than six months, start to finish. Last year, the number went as low as 2% in March and didn’t get that much better for buyers in December when it raced all the way up to a meek 3.7%. In March, a Zillow.com study put Seattle as the #5 ranked seller’s market in the US. That can be rough for a buyer competing for a home against other offers.

That said, just because a price is set on a listing doesn’t mean it’s a price worth agreeing to. There are a couple of reasons for a home initially listing at a price that might not be a good representation of the market. The Seller might be motivated by their original purchase price, especially if they purchased between 2004 and 2008. They might be hoping to have more equity built up than is realistic based on location, condition and the comparable properties around them that have been, or are, on the market. Another possibility is that the shortage of comparable properties in a Seller’s Market prompts the listing agent and seller to decide to “test the market” and let you, the market, decide what the property will bear.

Buyer Caution

Here’s where a dose of caution is the best medicine for a pricing headache. We likely won’t see the same kind of bubble in real estate we saw in the early 2000’s without a little volatility to go along with it going forward. While most prices have just about come back from 2007-2008 levels, not all have and paying that 2007 premium price now can be dangerous, especially if there’s a chance you may want or need to sell in the coming two to five years. The goal is to build equity in a home, not tread water. That means offers must be thoughtful, backed by data (comparable properties, interest rate directions, etc.) and fair. If you pay too much now, you may be ecstatic when you move into your new awesome home, but if and when you need to sell, you could wind up with zero equity or worse – a Short Sale. In a multiple offer situation, make sure you know the real value and base your offer on that. If another offer shoots you down because it’s considerably higher, be prepared to let them deal with the possible consequences and wait for the one that you know will make you ecstatic at move-in – and keep you financially healthy for the long term. A good broker will help a lot by negotiating on your behalf with hard data in comparables to justify your offer and help the Seller come to terms with reality if the house you want is simply overpriced.

The Low Appraisal

Also know that, these days, there is a little more “protection” against overpaying for a home. Federal guidelines since 2008 have made it very tough for an appraiser to just go along with the market and simply appraise at a pending value based on the hot activity in an area. During the bubble, there was much more acceptance of appraisal values based on what the market was about to do, or what current non-sold pricing was. Now, Fannie Mae guidelines put more restrictions on an appraiser regarding speculation and require more data based on previously sold properties. That means an appraiser used to look slightly forward, but now we are seeing them tend to look more backwards in time, slowing that rampant price growth a little more. What that means to a buyer is that you also need to be prepared for the possibility that you made a very generous offer on the home that you though was still a good value, but the appraiser comes in with a value that is even lower. Your mortgage firm isn’t going to like that one bit and there will be some decisions that need to be made between Seller and Buyer as to who is going to come up with the difference between the pending sale price and the appraised price. The Buyer has the option of just putting more money down so that the overall mortgage stays within the percentage of allowed financed dollars. The Seller can drop the sale price to meet the appraised price, or you can meet somewhere in the middle. This is an area where, unless you have a wealth of experience as a buyer, you absolutely need very good representation to help you negotiate with the Seller and come to a decision on what your course and outcome will be.

Conservative Patience

It takes patience, analysis and grit, but a Seller’s market doesn’t mean you must necessarily overpay for your home. It just means you need to be cautious. Some might worry I’m giving away listing agent secrets. I love to list homes and can tell you that a sound listing price is way better than aiming high and crossing fingers. For the Seller, selling a home purchased between especially ’06-’08 can be tough and will require listening hard to the broker, even if the message is not what you want to here. Listing too high ultimately leaves the home on the market too long and puts the Seller at risk of a low appraisal anyway. That is admittedly a tough spot to be in, but sometimes life happens and when you have to sell, you have to sell. Like many great brokers out there, I say aim for the Win-Win – cautiously. A Seller’s market is harder for a buyer, but people are still buying homes every day, so be patient and conservative – and have some fun!  As challenging as a seller’s market may seem, this is not the time to sit out. Interest rates just unexpectedly fell back to near all-time lows and it’s a great time to buy! With low rates and increasing values, if you were waiting for confirmation of the perfect scenario, this is it. Get out there and get in your home!

 

Todd Crooks

Real Estate Broker

206-715-4483

toddcrooks@comcast.net

The First Step… not what you might think. – Buyers Edition

Consider this hypothetical case study.

“John and Susan” have decided to stop paying rent and start buying their very first home. Hopefully, this will be an extremely exciting time for them. It starts with the two of them dropping by some open houses in a neighborhood they’ve always loved. They spot some really cool and maybe nearly perfect places online. John and Susan both have great jobs, with John just starting his own business after working in the field for someone else for over eight years.

Suddenly, “the one” appears online. They rush to go see it at an open house and are thrilled with the layout; the price seems affordable based on their estimated rough mortgage payments they figured out at the kitchen table just a few nights ago. The agent at the open house is thrilled to help them and writes an offer for them and submits it by the end of the day. Awesome, right?

Not so fast. Because John just started his own business, his income is not considered within his previous “field of work” and can’t use his work as an employee – even though it really is the same field of work. Given that he’s required to have his business for at least two years before his new income can be used for the qualification for a home purchase – he can’t be included on an application until he’s been running his business for two full years. That leaves just Susan’s income, which wasn’t quite enough to qualify for the full purchase price. What’s more, the agent that wrote the offer for them forgot to ask if they were prequalified for a loan and had no prequalification letter to include in the contract. Two other offers were turned in the very next morning in time for them to also get consideration and, with all prequalification in place on the other offers at the same offer price, one of the other two offers was accepted and John and Susan didn’t even get a shot at it.

The first step is to talk to a real estate broker – or a few – and accomplish two things:

1) Get a feel for the agent. Find out if you think working with that agent is a good fit. Does he or she listen more than they speak, or do they just talk until you’ve started to wonder when it’s going to be your turn to tell them what you really need and want? Is he or she professional, thorough, but personable?

2) Choose your agent and make a checklist of things you need for your search. If the agent that very quickly helped John and Susan had remembered to ask about prequalification, a little time and a lot of disappointment could have been saved. Even with that, they never had a shot at the house in the first place because there was no one there in the beginning to help them determine the factors involved in even qualifying for a loan. Even a real estate broker doesn’t have all the info needed to fully counsel a client. That said, a good agent should be able to educate a buyer on what they need to do in order to be ready when the big offer moment arrives: asking questions, identifying potential obstacles and steering you in the right direction. Consider the real estate broker the “conductor of the train”. They are the one charged with keeping everything on track, at the right time, in the right place.

Therefore, your choice of agent is your first step. It might be a little counterintuitive, but your relationship with your real estate broker can help set the course for not only your eventual loan/preapproval. They should even be able to give you some nifty etools you will use in your search and provide you with literally up to the minute updates on brand new listings. That way, a sellers’ market doesn’t find you just a few steps behind other buyers. You’ll know exactly what comes next each step of the way – all the way to closing.