Common Home Repairs….First Five Years…Real Problems

All homes take maintenance. Some maintenance can be a minor repair by the owner and sometimes it can indicate a more serious problem. Blog posts shouldn’t be an effort, but something I read earlier made me wonder. Without the flowery paragraphs following a list of simple repairs, I think we can all use “google” to look for a video showing minor repairs or understand whether the items are covered under a builder’s warranty for new construction. Earlier I searched for “five common repairs” and any number of matches came up with uncommonly similar wording.

No homeowner I know is particularly concerned with “minor” repairs. We all need to plan for the big issues. Out of the list of common repairs, I see a handful of bigger underlying issues. Leaking faucets or toilets can lead to a bigger issue. Leaks can lead to mold or deterioration of framing. Peeling paint can indicate a poor paint job or an issue with moisture. Jammed disposals are easy, but thinking about how to use a disposal can make a difference in the lifespan. My wife has had some interesting adventures with disposals over the years, with broken glass, can lids, peach pits and rice, but most buyers and homeowners need to know how to plan for the big repairs, not the small repairs.

What can’t you afford? You should always consider the big items. How old is the roof? How many years of service are left on the major appliances? Is the kitchen up to date? Bathrooms? Is the flooring new, a current color? What kind of maintenance is needed to the home….painting inside or out? How old is the HVAC? What about pools or landscaping? When possible, I try to help a client consider the short term costs associated with buying and the costs associated with “OWNING” a home. Failing to plan for the big items can make a difference for many owners. The random crack or garbage disposal adventure won’t break the bank. A leaking roof at the wrong time or a broken air conditioning unit in summer can cause a serious problem.

 

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Pocket Listings….What do I think?

There are times when pocket listings or “unpublished” available property has a certain logic. It is never my preference, but recognizing and accommodating owner’s circumstances is important. Consider someone thinking of moving out of the area, but still working. Sometimes it takes time to sell something truly unique, but selling after taking a new position can create a disadvantage. Regardless, there are reasons an owner would choose not to list and trying to look for a way to accommodate partially limited exposure, is occasionally necessary.

Sometimes an adjoining owner will give me a price, but would prefer not to have the traffic or attention you would normally hope to attract. Just to make something clear, I would always prefer an exclusive right of sale, full promotion and signage. Sometimes an owner would like to avoid disturbing a tenant, sometimes an owner is not in any particular rush and sometimes the “pocket listing” asking price is equivalent to saying, “If you find a buyer willing to pay….”X”, I’ll sell.”. I can think of sevreral reasons an owner might prefer to discretely offer a property to potential buyers and reasons a buyer might prefer to remain anonymous until negotiations are completed.

What do I think? I think accommodating the client is important and considering whether privacy is a benefit or handicap.

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Standard Marine Potential and Everything Changes

Everything changes and in a few years, this property on North 2nd May be part of great changes to a long-underused area in the Historic District.  

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Dodd Frank Dismantled?

This morning began with a story on the possible dismantling of Dodd Frank. I can’t say I understand all the implications, but real estate has become more complex in the last 10 years, with little benefit from my perspective as a broker. Some of the regulations seem to have been more geared toward slowing a recovery, than encouraging or allowing the market to set values. In my simplistic view of the world, changes and increases to regulation don’t always have the intended effect.

“We have the best, most highly capitalized banks in the world, and we should use that to our competitive advantage,” he added. “But on the flip side, we also have the most highly regulated, overburdened banks in the world.” Gary Cohn, White House National Economic Council  Source: https://www.wsj.com/articles/trump-moves-to-undo-dodd-frank-law-1486101602  2-3-17

I’ve mentioned it before, but I dislike absorption rates in appraisals. Using a trend to compare inventory makes sense in a big area, but what happens if the market begins to recover? The use of a trend could lengthen the time with depressed values and, in turn, lead to lower prices for owners, lenders trying to recover after a foreclosure and owners selling to avoid foreclosure. What decisions might change if a market in decline, remains at a low level for a longer period? I think the unintended consequences of regulating are a cost to the entire system. Consider the Consumer Financial Protection Bureau (CFPB). Essentially, the agency was authorized by Dodd Frank and meant to improve the stability of the sector with added rules….a lot of added rules. Appraisal guidelines, closing procedures….but above all compliance and a growth of government. The changes coming could be dramatic, but could only mean a rewriting of pieces of the act.

The freeing of credit, loosening of appraisal or underwriting guidelines, has the potential to extend gains in all sectors of the real estate market. I would prefer less interference in the changes to the market, but reduce or eliminate loans with low down-payment. Equity creates stability, in my opinion. The issues with an unstable market come from a lack of equity and from speculation. As prices falter or drop, loans with low equity default sooner. If all loans required a higher down-payment, the decline in a slowing market would be far less likely. If appraisal guidelines gave more leniency to appraisers, areas with few comparable sales would be less damaged in a slow market. I can remember a number of sales with too few similar comps. Time limits and geographic limits often resulted in comparable sales I would never have considered reasonable. One duplex was appraised as a duplex, then the lender decided it was really a single family home, then a duplex….. The value was unquestionable, but there were almost no comparable sales with similar square footage or at the same size and considered a “Duplex” at the time. When it becomes incredibly difficult to reach reasonable, there is a problem. Dodd Frank isn’t responsible for every regulation and I’m just thinking back to changes without a visible improvement I’m able to see for my industry. I’d like to see stability in the market and a stable banking system, but I think the same can be accomplished, at least for lending, with added equity required.

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Weak Negotiation, Backups and Possible Future

Politics and business look a lot like passages from Sun Tzu, if you stop to think. Without being partisan or going too far into a political judgement, there are some common rules to negotiating. When your position is weak, recognizing this is important. As an agent, a weak position could be working with a highly motivated buyer with a financing position competing to purchase a property with more than one buyer. In politics, the current delay of cabinet confirmations is a perfect example. Most or all will likely be confirmed, but the delay is counter-productive. If you consider Rex Tillerson’s senate confirmation today, recognizing the division serves neither party could preserve a greater chance for future bipartisan decisions.   If the wall isn’t moving, pushing harder is a waste of time.

On open ground, do not try to block the enemy’s way. Sun Tzu

Burning all bridges happens in real estate negotiations as well. As an agent, I choose to be professional in all positions, but recognize every sale and negotiation may not be successful. Preserving credibility for your buyer and yourself sometimes leads forward.  Sometimes an owner and listing agent will share the accepted offer.  This can move my buyer toward being a backup.    Failing at first, sometimes offers an opening. Some buyers back away entirely, but there is almost always some slight possibility of a later second offer. What we’re watching with Trump’s confirmation is equivalent to two buyers. One buyer (political) can almost certainly succeed…on this confirmation and each one after. If the weaker party (with fewer votes) continues to protest, there is a smaller chance of future negotiation, even for second place.  As time passes, their voices may not even be considered.

By the way, I’m finding some of the votes for or against someone like Gorsuch for the Supreme Court, a little fascinating. If the candidate is truly exceptional, why would one party or another choose to obstruct. I’ve been on boards with an obviously difficult choice. It wasn’t my first choice, but I also recognized the consensus and futile nature of voting in opposition to a good, if not my first choice of, alternatives. I’ve also watched board members change votes for, what I felt at the time, amounted to purely political reasons. This is likely to happen in the Gorsuch confirmation. Even though it serves little or no purpose to oppose and even thought Gorsuch appears an almost certain confirmation, he will be opposed for political reasons.

Making anyone an opponent, when you have no possibility of gain, is just foolish…. If you have no chance to win, leave everyone feeling you were a professional and reasonable voice.

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Halfway Selling and Cuban Coffee Thoughts

Success with a client means listening. Talking over coffee, getting to know the property and the client is always a part of the job. Thinking about the relationships I have with clients, I can remember the kind of trust a good transaction leaves behind. I’ve read books about sales, relationships, maintaining relationships, real estate practice and even psychology or marketing related to the business. Does it matter? I think, for me, having a relationship after the sale and building trust that lasts through future business means more than the first sale.

If I make the sale and feel I may never work with the client again, whether I missed something or I failed to connect, it is a disappointment. I always feel the cup is only half full if I leave out either side of the transaction.

By the way, one of the best coffee stops on Amelia Island is at Hola Cuban Café on North 2nd Street. Not much more than a courtyard and tiny interior, this was my first exposure to Cuban coffee and now a stop several times each week. Running into the same people each week, with the running group toward the end of the week, local business owners and the owners, interesting on their own, is the kind of thing I enjoy about living here, but also the kind of place to build friendships. As adults or in sales, it is far too easy to be caught up in life and forget the details. The details make life worth living and make sales into something far more. Years ago, my original broker’s motto was “People Who Care”. She passed away in 2000, but I still think about her approach to life and sales. Care about your client. Treat the client with respect and try to give more than they expect. At the end of the day, the relationship and your reputation is always more important than a sale.

 

 

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Low Ball Offers

Presenting an offer can become personal when the offer is far below the asking price. The best advice I ever heard from an old agent is to think of the offer as a “wish”. Spending time with realistic buyers is a big part of making your living, but all good agents think through the best way to present an offer without creating an emotional reaction from the seller. It can be easy to miss the potential for damaged relationships, when working with offers for a living.

“Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing;” Source: A portion of the Transaction Broker Notice, Florida Statutes 475.278

What is a “low ball offer”? 10% under asking price probably isn’t lowball, but 20 or 30%? It all depends on the market segment and price range. If you see the chart, higher price ranges tend to see a greater drop during negotiation. The days on market is usually higher as well. I like to pull average sales prices and look at average sales price as a percentage of original list to final selling. This can soften the blow to an owner, but can also help a buyer with a “lowball everything” mindset.

  • Is there any chance of reaching agreement?
  • Do all parties have data on the market?
  • Research on the individual property to determine if it is a potential exception?
  • Condition of property and alternatives?

Knowing the trend in negotiation can help bring reality to an offer for agents, buyers and sellers. Assuming each property is different can help. As a broker, I know each property is different, but I also have a good idea when there is no possibility. The numbers you see below are sometimes skewed by new construction selling at more than list price or by distress “outliers” or statistically unhelpful sales.

The ratios now are higher than they were a few years ago and the number of distressed properties is far lower than it was in 2007 to 2011. Knowing the type of property, having a feel for how the property is priced when listed, saves time for me and makes a big difference to a client.

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Community, History and Diversity

I’m an Amelia Island native and have lived here for the majority of my adult life. The charm everyone finds on Amelia Island is really all about the diversity in such a small place. Beaches and river views just a short drive from each other offer amazing views, but the working pieces of the island made is a great place to grow up. My family came here originally, when my father moved here with the opening of Rayonier in the 1939, from another facility in Washington State. Mom worked at the Jacksonville Journal, the Nassau County School Board in accounting and finally opened a real estate brokerage in the 70’s.

The scenery you see along the water and interesting skylines all trace the history of the working waterfront. Whether you’re looking at the port cranes, the mill silhouetted in the sunrise or shrimp boats docked. Our local seafood and dining, recreational fishing or watersports….it all tells a story. The identity or “sense of place” developers try to recreate is something natural to Amelia Island. Where else can you find pirates, a history of 8 different flags, Spanish, French, English, American….legends of buried treasure, ghosts, old forts, world class fishing, world class beaches, dining, locally caught seafood, a historic district, two 5 star resorts, A rated public schools……. Should I go on?

I know of no other place I’d prefer to live and, adding a nearby international airport, diverse tax base and diverse people, we’ll be a more attractive destination for many years.

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Tax Certificates, Auctions, Debt, Divorce, Death and More…..

Every sale has a story. Moving up, moving down, divorce, death, debt, job change….everyone has a motivation and reason to sell. If selling, it makes sense to minimize clues to the level of motivation. Considering the sale of a property, from a buyer’s perspective, it makes sense to look at public record, unpaid taxes and any other visible clues. What was paid and when, is debt attached, are taxes paid, are there any other issues with potential to change the seller’s reply to an offer? I
routinely take time to look for any public records or public information of potential interest to a buyer. Are permits closed? Is the property well maintained? Are permits closed and

It is possible to seriously damage the marketability of a property. Some of the most damaging information can be inadvertent, but sometimes seeing a property from a buyer’s perspective makes a huge difference. One property, years ago, had been scheduled for an auction. The auction, although unsuccessful, had been advertised online and the ad remained for many months…possibly remaining now. When working with a subsequent buyer, guess what came to the top of a search for the property address? Another red flag can be unpaid property tax. After two or more years, certificate holders can apply for a tax deed. See the information below, but unpaid taxes, like any other debt, can say something about level of motivation.

Finding a way to help both parties reach an equilibrium or fairly negotiate, can sometimes be about seeing whether there appears to be any possible room to reach an agreement. Is there room to sell at market value? After looking at one property for a client, I made a mental list of the loans, back taxes and deferred maintenance. The loan alone, showing a liz pendens from a lender, may already exceed the list price, but tax certificates had been sold…amounting to around $20,000.00. The loan at around $350,000, with potential for attorney’s fees and back payments alone, might easily reach the mid $400’s…before considering the cost to repair the neglected property. Market value for the property, if fully restored, is around $400,000, in my opinion. This is a very unlikely sale, but I’ll add up the financial obstacles. From a buyer’s perspective, $350,000 is stretching the comfort level. The property doesn’t justify the $350,000 offering price, but the location has potential. Looking at the seller’s side, I see a minimum $141,000 shortage. Unless the lender takes a reduced payoff or the seller can bring a lot of cash to close, this sale would have almost no chance to close.

Tax Certificate Sale: Beginning on or before June 1st each year, the Tax Collector is required by law to hold a tax certificate sale. The Tax Certificate Sale is conducted online at:  www.bidnassau.comThe sale offers certificates for the amount of tax debt including applicable interest and fees. The sale is conducted in an auction style with participants bidding downward on interest rates starting at 18%. The certificate is awarded to the lowest bidder.  A tax certificate earns a minimum of 5% interest to the investor until the interest has accrued to greater than 5%, with the exception of “zero” interest bids, which always earn “zero” interest.The tax certificate, when purchased, becomes an enforceable first lien against the real estate. The certificate holder is actually paying the taxes for a property owner in exchange for a competitive bid rate of return on his or her investment. In order to remove the lien, the property owner must pay the Tax Collector all delinquent taxes plus accrued interest, costs, and other charges. The Tax Collector then issues a check to the certificate holder.A tax certificate is valid for seven years from the date of issuance. The certificate holder may apply for a tax deed when two or more years have elapsed since the date of delinquency. If the property owner fails to pay the tax debt, the property is sold at a public auction. The highest bidder will receive a tax deed for the property. Source: http://www.nassautaxes.com/PropertyTaxes.aspx 1/14/2017

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Research, Accurate Listings, Expectations…and Never Boring

I don’t know everything. You don’t know everything. Everyone is missing a gap in knowledge somewhere and being honest with a client is much more important than pretending to be a walking encyclopedia. Knowing where to find information and having the sense let a client know it might take a little time to verify, makes a huge difference. I’m thinking about the day and a specific conversation with a new agent, but I also just mailed in a check for Errors and Omission Insurance. I hope to avoid using the policy, but carrying a policy, even after so many years in the industry, is more important than you might think.

Several months ago, I met a client interested in an opinion of value. As a broker, I frequently spend time looking at properties…often unpaid, but the goodwill is a kind of profit. The property was worth quite a bit more than the owner originally assumed. Anyway, during the visit, I realized the boundary had a problem and he probably had an issue with two easements. One looked like an easement by prescription and one was worded in an odd way. Since I’m not an attorney and avoid going beyond the limit of my license, I referred him to an attorney and a surveyor. Knowing what a prescriptive easement might be and might look like made a difference, but I found more than one reason to send him to an attorney. Warning flags for me included multiple quit claim deeds without preparation by an attorney, the owner’s original purchase without title insurance or a survey, buildings I thought might be unpermitted, a neighbor expanding a very narrow unrecorded easement…and, if that weren’t enough, what looked like an error on an earlier deed. As a broker, I could only advise a visit with an attorney and explain why I felt he might need the added advice, but this owner needed professional help before selling. I spent a few hours doing some homework, but saved serious time and money by being thorough.

How much detail goes into each listing? It all depends, but the more I know, the less time I waste. I’d much rather spend the time before meeting a client and before listing a property….and would think the chance of liability drops if I take the time to prepare. I’ve lost a few listings over the years, oddly enough. One property had been a dry cleaner and disposed of waste on-site. I couldn’t, technically, prove the disposal, but I lost the listing to an agent unfamiliar with the history of the property. I can only hope the property sold with an environmental audit. An elderly woman wanted to sell, but an “out of state” relative decided to list at a price significantly below my opinion of market price. To this day, I don’t know why I lost the listing, but feel the property sold at 20 to 30% below market. Real Estate can be an odd adventure. We’re expected to know a little about everything….just enough to recommend the right professional, but knowing too much occasionally loses the client. I wouldn’t change a thing!

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