Domino Theory

In the real estate business we occasionally run across a situation where a seller needs to sell their house and get the profits from it before they can buy a new house. In a perfect world a Realtor can set it up so that the seller can close on their current house and purchase their new house in back to back closings. I have done this several times and have learned form my experiences. It is best if you use one title company to do both closings. This way you are not running across town to get from closing 1 to closing 2 title companies. Also when money from the first closing has to get to the second closing title company, the money must be wired which could take hours. The logistics are critical to get the job done.

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I recently had a transaction where 3 or 4 houses were involved. Each owner had to get the money from their current house in order to purchase their new house. Hence the domino theory. My listing was the first house to close and everything depended on it to start the dominoes falling.

My listing was a very nice ranch in Pike Township. The sellers had taken excellent care of it and it had great amenities. The sellers were some of the nicest clients I have ever had. The house had a good offer on it in 55 days. We negotiated a closing date a couple months out so that my sellers could find another house to buy although we had already been looking. We found a new house and made an offer. After negotiations were done which included having back to back closings at the same title company we had two dominoes in a row. The sellers of the house that my buyers were purchasing were in the same situation. They needed the profit from their house to buy the next one. They found a new house and were set to close on it the same day but not at the same title company. I am told that there was one house(domino) after that but did not verify.

Everything was set. We all were ready to close July 10th. My sellers had already moved everything out of their house and it was being held by a moving company. They were living in a essentially bare house with 2 very small children which was very challenging. Their plan on closing day was to pick up what was left and put it in their car, do the 2 closings at the title company and meet the movers at their new house to unload their furniture. It just so happened that the owners of the house they were buying had the same idea and did the same thing.

On the evening of July 9th I got a call from the buyers agent who had the buyer for my listing. She had bad news. The lender had checked the buyers credit that day and found out that the buyer had made a late payment. The closings were off. The dominoes were not going to fall in the morning. I was told that it could be a week to 10 days before the lender would allow a closing. They had to verify that the buyer did not owe any money where they made the late payment and get a credit re-score. I notified my seller. They were willing to wait. The sellers of the new home they were buying were also willing to wait.

After massive communications with my sellers, the buyers agent, the listing agent of the house my buyers were going to buy and the lender of the first buyer, we all ended up in a holding pattern. Days turned into weeks and weeks into a month. Patience was drawing thin and at any minute somebody might pull the plug and the dominoes would not fall. My sellers costs were adding up. They had to pay their lender a fee to extend the lock on their mortgage rate. They also had to pay the moving company to store their furniture. The lender was not communicating what was going on which left everyone very skeptical. There were two times during the month that the lender ok’ed the close and then canceled the day before. My seller and I communicated regularly. My main question to them was how badly did they want this new house. There answer was “very badly”. They were willing to wait.

Another challenge came into play. My sellers daughter was starting school. The new school district would not allow her to attend unless the family was living in the school district or they could tell the school when the closing date was. After 4 weeks we had no answers. It meant that the daughter might have to attend the school in their present school district for a couple of days and then transfer to the new district once they closed on the new house. Not a good situation for a child just starting school.

After the 5th week we finally got a verified closing date. It was going to be the day before school started in the new school district. At that point I questioned it. Was it really going to happen?

On August 14th the dominoes started to fall. The lender showed up at the first closing. He acted like nothing out of the ordinary had happen. He even talked about the last two days before closing that he had spent on the golf course. My seller heard that and told me after the closing that he almost threw something at the lender. The lender also gave me a folder filled with information about their company and a stress ball. It was to late for a stress ball. What I wanted was a quart of whiskey. The amount of stress this lender had put everyone through was just unreal. This lender will remain nameless but it is a lender that I have never referred business to and never will.

I am a very patient person. Probably to patient at times for my clients. I did not lose my patience on this transaction but I did write a letter to the lenders branch manager and regional manager. I don’t think it did any good but you never know.

No two transactions are the same in a Realtors life. In my 13 years as a Realtor I can’t remember a transaction that affected so many lives at one time and caused so much misery. Hopefully it will never happen again.

Short Sale Story

ShortSaleExitRecently I had a listing that was a short sale. A short sale is where the market value of the house is lower than what is owed to the lender on the mortgage. The owner contacts the lender and asks if they can sell the house for less than what is owed. Depending on the circumstances, the lender will decide if they want to allow it. It is like a typical sale except that there is a pile of paperwork that has to be done, fiery hoops to jump through and the seller may end up owing taxes on the difference between what is owed to the lender and the closing sale price (please talk to your tax accountant about this, I am only a Realtor). Short sales have a reputation in my business as being extremely slow, very difficult and reduced commissions. Very few Realtors will do short sales because of this. The are certain circumstances where a buyer might want to buy a short sale house. Short sale houses are normally priced at or below market value, could take months to close which might be good if the buyer was in an apartment with a current lease or needed a lot of time to get a mortgage.

In this case another agent in my office called me and asked if I wanted a short sale listing. This agent did mostly commercial sales and did not want to do a residential sale but wanted a referral fee. I accepted. Turns out the owner walked away from the house and left the state. I was to contact his attorney who was handling the sale of the owners property. I never meet or talked to the owner. The attorney was my only contact. The lender had already secured the property and had changed locks on the doors. I was unable to get in the house to see the condition. The attorney said to list it anyway while he tried to get me the combination to the lock box the lenders property management company had put on the back door. I assumed the house was in marketable condition and looked up comparables in the area. I came to the conclusion that in marketable condition the house was worth $70,000. I listed it without going inside and without inside pictures. Two days later the attorney got me the combination to the lock box. When I entered the house, I was horrified. The house was in extremely poor condition. The owner had left all the furniture, boarded up some windows from the inside, there was 14 inches of water in the crawl space (entrance to the crawl space area was in the main hallway floor area hatch with a piece of plywood over it), the front door and the front service door were sealed shut, there was all kinds or “stuff” left in the attached garage, all the floors were in sad shape and the list goes on and on. I immediately called the attorney and told him that the market value of the house was not $70,000 but half of that. The attorney said to change the price. After getting the proper documents and signatures, I changed it to $35,000.

There was only one thing about the property that I thought would be a big draw. The owner had a four car detached built behind the house. It was much newer than the house and in good shape. The one downside to the garage was that it was locked and there was no key in the lock box for it. I could not get in to show it. The detached garage was a big draw. Potential buyers wanted it for boat storage, car storage and workshops. It was built behind but sort of close to the house and there was very little room to get a car around the house and into the detached garage. This did not seem to defer buyers.

I ended up with 4 offers and one potential offer. They were between $11,000 and $30,000. The lender went with the $30,000 and had the property appraised. The appraisal came in at $24,000. After the appraisal the lender became easier to work with. They were owed about $80,000 on the mortgage. It was a FHA loan which means that it is insured for about 80 percent of the appraised value. They had a offer $6,000 higher than the appraised value. They were ready to close even though they were going to lose about $55,000 plus closing costs.

I ended up representing both seller and buyer in this transaction (Limited Agency). Ten days before closing, the buyer called me and said that they wanted to see the inside of the garage before closing or they were not going to buy the property. Although this had not come up before, I thought that it was a fair request. I called the lender and told them my buyers request. Their response was that it was not up to them, it was up to the property management company. I called the property management company and told them my buyers request. Their response was that it was not up to them, it was up to the lender to issue orders. I went back and forth for days with no progress. The day before closing, I called my buyer and explained that I was getting nowhere with the lender or property management company and that I would pull the plug on the closing if they wanted. After thinking, the buyer decided to take the property anyway.

The next day the closing went smoothly. The buyer left the title company and was headed to the property to drill out and change the locks. Turns out the garage was just fine. The next day when the buyer went to the property, their keys did not work in the locks. The property management company had come after the new owners had changed locks and had drilled out the new owners locks and put in new ones so that there was access to the garage. The new owners drilled out the property managements new locks and put in a second set of their locks and called me. I immediately called the lender and tried to explain. The lender was confused. I then called the property management company. They said they would talk to the lender.

The new buyer wanted to be reimbursed for their lock expense and did not want the property management company to touch the property again. Apparently the lender and property management had very poor communications. I guess the property management company had not known that the property was sold and closed. I kept in touch with the buyer until the property management company contacted me and wanted the buyers contact information. I gave it to them and have not heard from anyone since.

2014 Indianapolis Five Star Real Estate Agent

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Five Star Professional partnered with Indianapolis Monthly to determine the real estate agents in the Indianapolis area who provide exceptional service and overall satisfaction. The Five Star Professional research team contacted clients, peers and industry experts, and asked it they had experience working with a real estate agent. Those who participated in the research provided the name of a real estate agent and rated that individual according to criteria such as integrity, communication and customer service. The survey data was collected and scored, resulting in the list of 2014 Indianapolis Five Star Real Estate Agents. The research methodology allows no more than 7 percent of real estate agents to be named a Five Star Real Estate Agent.

2013 Indianapolis Five Star Real Estate Agent

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Five Star Professional partnered with Indianapolis Monthly to determine the real estate agents in the Indianapolis area who provide exceptional service and overall satisfaction. The Five Star Professional research team contacted clients, peers and industry experts, and asked it they had experience working with a real estate agent. Those who participated in the research provided the name of a real estate agent and rated that individual according to criteria such as integrity, communication and customer service. The survey data was collected and scored, resulting in the list of 2013 Indianapolis Five Star Real Estate Agents. The research methodology allows no more than 7 percent of real estate agents to be named a Five Star Real Estate Agent.

Home Builder Confidence Highest Since 2006

The positive news for the real estate sector continues, as home-builder confidence is at it highest level since 2006, according to the National Association Of Home Builders. The National Association Of Home Builders/Wells Fargo Housing Market Index rose two points in December to a seasonally adjusted level of 47, from it downward-trending November level of 45.

Property Tax Deduction Deadline Is 12/31/2012

Over the past 3 years forms have been sent with your property tax bills to renew your deductions. The most important deduction will fall off if you don’t file the form by the end of the year. I am talking about the homestead deduction. Without it your property taxes could go up by as much as 30 percent or maybe more.

I had forgotten if I had filled out the form or not. I called the Auditor’s office to find out if I had. They took my address and told me I had filled out the form and I was good to go. As simple as that.

You have 2 weeks to take care of this. Marion County and Hamilton County residents can do it online. Other county residents might not be so lucky.

Follow the link for more information;
Property Tax Deduction Info

2012 Indianapolis Five Star Real Estate Agent

2012 Indianapolis Five Star Real Estate Agent – Tim Lord

From the July 2012 Indianapolis Monthly

Five Star Professional partnered with Indianapolis Monthly to determine the real estate agents in the Indianapolis area who provide exceptional service and overall satisfaction. The Five Star Professional research team contacted clients, peers and industry experts, and asked it they had experience working with a real estate agent. Those who participated in the research provided the name of a real estate agent and rated that individual according to criteria such as integrity, communication and customer service. The survey data was collected and scored, resulting in the list of 2012 Indianapolis Five Star Real Estate Agents. The research methodology allows no more than 7 percent of real estate agents to be named a Five Star Real Estate Agent.

Things That Will Make Your House More Attractive To Buyers

1. Curb appeal – This is the first impression. A well manicured yard with no overgrown bushes or trees makes it look like the seller really cares for their property. Make sure the gutters are not clogged and overflowing with leaves. Don’t leave garbage cans in front of the house. Make sure all kids bikes and toys are in the garage or are in the back of the house. How old is the roof? Does it have streaks and stains? I believe the roof is the most important thing about a house. If the roof leaks then you are going to have major problems. I have shown houses where the buyers were turned off by the curb appeal and did not want to see the inside of the house.

2. Front door – Make sure the front door looks good. In my opinion the front door is extremely important. This is the first part of the house that the buyer will see. It should not need repairs or painting. If there is a storm door, make sure that it works well. If there is a hydraulic system to close the storm door, make sure it is set so that the door will close fully. The locking system on the door should not have any problems and be easy to use. I have spent 5 minutes trying to open a front door with a key that was not cut right. That is a big turnoff for buyers. Lock alignment is also important. You should not have to push or pull the front door in order for it to lock. The biggest turnoff for a buyer is to see that someone kicked the front door open. Cracked or broken door frames should  immediately be fixed so there are no signs of someone breaking in.

3. Carpet and Paint – Two things that will increase value. Make sure that you use neutral colors when you paint. Child’s rooms that have been painted in the past with cartoon scenes rarely sell well. Buyers have a hard time envisioning the room with their furniture when they are staring at a Garfield Cartoon scene on the wall. If you can’t get your carpets to look new by cleaning and shampooing them then it is time to replace. You don’t have to go top of the line. Here is a trick. Once you put in new carpet, put a sign at the front door to “remove shoes”. Psychologically buyers think you really care about your house. I am impressed with Frieze carpeting and my buyers are also.

4. No personal pictures, certificates, degrees or trophies should be hanging or out to be seen – The less buyers know about you the better. When I am representing a buyer, while they are looking at the house I am trying to find out about the owner. A doctor’s degree on the wall would suggest that the owner has money and might let the house go for less or I could negotiate more out of the owner. An accountant’s degree on the wall might suggest that negotiations might be tuff. On the other side of this, the buyers might end up staring at the personal pictures on the wall and not be looking at the house. Keep these distractions to a bare minimum.

5. Kitchens and Bathrooms – If you are going to update anything in the house, this is where to start. Make sure your bathrooms have adequate lighting, newer vanities and NOT carpet flooring. The plumbing hardware should be modern and not from the 1950’s. Make sure your bathtubs and toilets are clean and the shower curtain is new. The vanity counter top should not be cluttered. Having nothing on it is better. Also make sure the mirror is clean.

Kitchens where the appliances are going with the house sell faster especially if the appliances were bought in the past few years. Make sure there is no clutter in the kitchen. Organize the pantry and all kitchen drawers. Give the buyer the impression that you are well organized. If they open your “junk” drawer and have a hard time closing it, chances are that they will be distracted by it. Kitchen counters should be as clean as possible. Kitchen sink hardware should be newer. Kitchen floors should stand out. Ceramic tile floors are nice but if you or the kids tend to drop things, the tile can crack. Otherwise a good linoleum floor will do if it is neutral.

6. No clutter – Think in these terms; the less clutter you have the bigger the house looks. If you put clutter in closets or the garage ORGANIZE IT! Use boxes or plastic bins. Buyers don’t like to open closet doors and see a mess. They would rather see an empty closet. That way it looks bigger. If you just can’t seem to get rid of the clutter, rent a Pod. They will bring it to your house, you can fill it up and then they will come and get it and store it for you. I have shown many starter houses that were bursting at the seams with clutter. Many of them ended up using the garage for storage and would leave the car in the driveway. I can remember showing a house to some buyers once where there was so much in the garage that you could not get within 10 feet of the furnace, hot water heater or the circuit panel. They immediately lost interest in the house.

7. Furnace, AC Condenser and Hot Water Heater – If these items are at the end of their life expectancy they should be replaced. I have seen many deals fall though because during a home inspection these items were rated at the end of their life expectancy and the sellers would not replace them.  If they are in the beginning or middle of their life expectancy, make sure they are serviced regularly. I like seeing service/date stickers on a furnace. Tells me the seller cares.

8. Water Spots, Nail Pops and Ceiling Cracks – Water spots on ceilings is a sign that there was water intrusion from the roof, attic area or second floor. If a one story it came from the roof or attic. If two story, depending on what floor, it could have come from the roof/attic or second floor bathroom or second floor laundry. Even though the water intrusion was repaired, it could leave tell tale water stains behind. My experience is that when buyers see these stains, they see issues even though the water intrusion has been repaired. If you paint over these stains, you first need a primer. Otherwise the stain will show though the new paint. You can find a good primer at any hardware store specifically for this issue.

Nail pops are caused by an imperfection between the drywall and the attachment. The average nail pop is the size of a quarter and either bulges out of falls in. The drywall has either moved and the nail stayed, or vice versa. Roofing causes a lot of vibrations, and if your sheetrock was not installed properly or the nail was not covered properly, your nail may indeed pop. I see a lot of nail pops in houses that are between 2 and 5 years old. It is not a big issue and easy to fix. It is a large distraction for buyers looking at a home.

Ceiling cracks are common in older homes (over 30 years) although I have seen them in homes that were 10 years old and younger. They are usually caused by stress or foundation settling. Although there is no need for alarm if the crack is not pulled apart, it is a big distraction for buyers. A home inspector can usually tell if it will be an issue.

9. Doors and Windows – Today’s window’s and doors with windows come with double or triple pane glass. If the seal on the window breaks and moisture gets in, it causes the window to fog up. This is common on older vinyl windows. You can either replace the window or have it repaired. There are several companies today that can repair the window for a fraction of the cost of a new window.

10. Seller Home Inspection – This is one of the best ways to eliminate surprises. Usually the buyer in their purchase agreement requests that they are allowed to do a home inspection. The buyer pays for a home inspector to look at the house and tell them if there are any defects or issues with the house. Defects have to do with health and safety or would have a significant adverse effect on the value of the property. A lot of times defects show up where the seller had no idea there were issues. In many cases the buyer will ask that the defect be fixed or they don’t want the house. This may cause the seller to have to spend money to repair the defect in order to sell the house. An unexpected expense.

If the seller, before listing the house pays for and has an inspection done, it eliminates all the surprises. A seller then can decide if they want to pay for the repairs or sell the home as is or list some of the defects on the Sellers Disclosure. A pre-listing inspection can determine what the real market value of the house is and if repairs would make the house worth more than the cost of repairs. After the seller has the inspection done and makes repairs, they can have the inspection report and paid repair invoices out where the buyers can see them when they are viewing the house. This should impress buyers knowing that the house has already had an inspection and defect repairs have been made. In some cases buyers if making an offer on the house will not want an inspection because one has just been done and defect repairs were made.

Bottom line – Make sure there are no distractions in the house that will make buyers find reason to lower what they perceive market value is. Many times I have seen buyers look at a home that was properly priced at $100,000 for the condition it was in and want to make an offer of $75,000 because they found issues with the house. They will go out of there way to find issues with the house so that they can low ball the price. If you eliminate the distractions and issues most likely you will get fair offers on your house.