Buying a Home “As Is”

At some point in your home searching you are likely to see a listing where it says the home is being sold “as is.” I decided to mention this so you can watch for it, but also so you will give careful consideration to what it means.

1. AS IS generally means the home must be purchased in its current condition, i.e., the seller is not going to do any repairs, should they show up in your visual inspection or in the home inspection. Use of these terms may vary from area to area and may have somewhat different meanings. You may also see “seller will not do any repairs.”

2. AS ISmay have particular implications for the contract, an inspection contingency that buyers often insert in their offer, and other matters. It is smart to talk to your agent to find out what this may mean for you locally. This does not mean, I don’t believe, that you can’t do an inspection (although check on the requirements) but that you will be on the hook for them yourself. Depending on the issues it could raise a question or red flag for your mortgage company and in the appraisal of the property.

3. I would not necessarily assume that AS IS means you CANNOT negotiate some repairs. I have had a few situations where I was able to negotiate some repair work for my buyer clients on AS IS properties. This is more likely in cases where there are safety issues (problemswith the electrical wiring, presence of carbon monoxide from the furnace) or perhaps structural or foundation defects. A lender is not going to want to, and may not, fund a home that has significant structural or similar issues because of the risk to the loan. So do your due diligence.

4. Another matter to consider is insurance. An insurance company may not insure a home that has significant risk factors, or past claims. And if you doget insurance and a problem occurs with the home that is deemed to be a pre-existing or long-term condition, the insurance may not cover the claim. Plus you may lose the policy.

This is NOT to discourage you from looking at homes that need work, andwhere the seller is not willing, or is unable, to make any repairs. However it IS a caution to you to do your investigate work carefully and work closely with your agent when SOLD AS IS pops up. I have also seen a few cases where this was not mentioned up front but arose later in the negotiations, particularly in the case of lower offers.

Finally, in these cases it is even more important for you to do a home inspection so you know what you are getting.

Why Do You Bother with Open Houses?

This is a serious question – why do you bother with open houses?

For those of you who are not committed to buying or are not serious buyers, for whatever reason (financially not ready, haven’t made the decision, don’t know what you want, have no real interest in buying a home), I am wondering why you are bothering to go to Open Houses? Are you finding it helpful to crystallize your thinking about what you would like to buy? Are you going because you feel it’s the right thing to do? Bored and nothing else better to do? Checking out decor? Getting home decorating ideas?  Or do you just enjoy looking at houses?

I’m not suggesting that you stop going if you really want to continue, but I do wonder about your reasons and the time you are spending doing so. I would recommend a bit of self-reflection here to consider this further.

If you are serious about buying, then you SHOULD bother with open houses, if you are not doing so.There are plenty of them out there, at least in my area of San Diego, and it’s a good chance to learn as much as you can about the market. The more education you have, the better your decision making will be when the right house comes along.

If you are already committed to an agent…great. Just be courteous and show them the loyalty they are extending you, and let the agent at the OH know you are already working with someone, and provide YOUR agent’s name. It will prevent some confusion should you decide you want to make an offer. Better yet, if you know in advance about the OHs you want to attend, your agent can call the OH host and let them know you will be by. And keep your agent informed of the homes you see and what you think about them.

So, why do YOU bother with open houses?

Have a great weekend!

Seller’s Disclosure

The laws regarding disclosure by sellers of defects and overall condition of their homes varies quite a bit. You may or may not see such a disclosure, as is some states it is not required. Check with your agent on this.

A seller’s disclosure, while it does NOT replace having your own home inspection, is a good thing to have. Here is California we have a form call the TDS (Transfer Disclosure Statement) that is required for residential property of 1 – 4 units (there are some exceptions, such as a foreclosure sale). Other states have different forms which sometimes are optional and may be used more commonly in some areas than others.

The seller is required to disclose the overall condition of the property and any known defects (heating, plumbing, AC, electrical, structural, roof, etc.) and is expected to be honest in this disclosure. If the seller does not know of a defect or is unsure, it is fine for that to be disclosed. Some states may require this disclosure be made available for all to review, and in others is need only be provided to a buyer upon an accepted offer (other practices may prevail).

In CA it should be given to a buyer before an offer is extended, but may be given to the buyer after the offer has been made and accepted. If done in the latter case, the buyer has the right to terminate the offer IN WRITING, within 3 days of receiving the TDS.

Armed with the TDS (or other disclosure) the buyer is in a good position to more fully consider the condition of the home along with the home inspection report, and decide if moving ahead with the transaction is a good idea or not.

Termites – Who Needs Them

This article is about termites, sort of.

I am NOT a termite expert; not sure I would know one if I met one (and as an agent I cannot put myself in a position of advising you on whether or not the home you are thinking about buying HAS termites and what specific damage they may be causing).  But there are experts out there, and this is about knowing your options as a buyer. And that I can advise you on.

As I understand there are different types of termites, depending on what part of the country you are in. They are much more problematic in some areas (such as here in CA) than elsewhere.

A home inspector can generally tell you if there is evidence of termites – either active infestation or not, as well as possible damage. You have the option of having an additional inspection done as part of your due diligence if they are a concern – and this would be advisable so you know what the problem is and how to correct it. Here in CA a termite inspection is customary – it is conducted by the seller who provides the buyer with a copy of the inspection results and the recommendations about what needs to be corrected. Generally the seller is responsible for taking care of Section 1 problems (i.e., active infestation and damage), to be done before closing so a clearance can be obtained from the inspeciton company (required for mortgage purposes). There may be exceptions to this process, and buyers and sellers may negotiate this. In other areas where termites are less common, it seems that it is up to the buyer to have an inspection, and then, if there are issues, the buyer and seller may need to negotiate appropriate resolution.

There are a number of ways that termites (and other wood-boring insects) can be dealt with. One method, which you often see, is to tent the home (humans and pets need to vacate for several days) and use a pesticide. Damage to beams or other wood caused by termites should also be repaired. A reputable termite inspection company will advise on what remediation method is recommended in order to eliminate the termites so a clearance can be provided.

BTW if you want to learn all sorts of stuff about termites, including how to deal with them, Wikipedia has a great write-up. You may not care about reproduction and that sort of thing, but the end of their article has some helpful information.

Are You a Lookey Loo?

I’m wondering…are you a lookey loo (or “lookey lou” if your prefer)? You have probably heard this moniker, but if not, it is a common one in our business. Agents, and others in the business, refer to folks who are “just  looking” and not serious about buying as lookey loos.

Lookey Loos like to come to open houses just to, well, look – perhaps they are interested in checking out how homes are designed, decorated and furnished. Maybe they are seeking ideas for their own remodeling. Some appear to be dreaming about a new and more expensive home but are not really serious – they truly don’t want to buy or are not in a financial position to afford the kind of homes they are looking at. Neighbors, of course, are always curious, too – either they haven’t been in the home or they are comparing to their own. And there are likely other reasons too. Seems like some folks have nothing better to do on the weekend so they go to open houses. Maybe it’s a hobby?

Being a lookey loo is fine. If that’s what floats your boat, that’s cool. If you enjoy spending time exploring homes for sale, go right ahead. It’s nice to let others know you are “just looking” so you don’t mislead them, however. But usually it’s pretty obvious.

My question, however, is are you acting like a lookey loo but are actually serious about buying? Are you finding it hard making a decision? Are you trying to see every possible home in or near your price range, but finding that you cannot commit to making a decision on a home that suits your personal and financial needs? Are your actions saying “lookey loo” but are you telling your agent, or yourself, that you ARE a serious buyer.

Just something to think about. If you are really interested in making a home purchase, but not making the decisions you need to, I simply suggest that you consider why this might be so. Are you wasting your time right now? Perhaps you are mentally not ready? Or are scared to make the big decision(that’s common, especially for first time buyers). Acting like a lookie loo when you ARE serious  is a waste of time. And you convey a message to others that tells them “I’m just looking” so they won’t be as helpful to you as they could. So you might not get the help you actually need.

Before you head out this weekend to look at open houses….again…ask yourself. Are you a lookey loo?

Have a terrific weekend!

Homebuyer’s Fair

For those of you in the first time home buyer’s category, obtaining lots of information is critical to your success as a consumer when looking for a home (well, it’s true of seasoned buyers too).

There are lots of ways to do this.

• Reading this blog
• Attending buyer seminar offered by agents and other real estate professionals
• Researching the Internet
• Talking with friends and family who have bought
• Working with a knowledgeable REALTOR
• Reading books, or reports from agent sites

And so on. Many communities offer programs to assist new buyers and these are worth checking into. In some areas you may qualify for special financing once you complete such a program, provided you purchase a home without your community.

If you are a resident of North County San Diego. There is a HOMEBUYER’S FAIR for first time buyers being held on JUNE 16 from 10 AM until 3 PM. The event (the 8th annual) will be held at  Palomar College in Oceanside.

June is designated as NATIONAL HOMEOWNERSHIP MONTH by HUD, and many communities offer similar services during this time to help buyers.  Check with your town or city offices to see what they have to offer you. It might be a great resource.

Lease with Option to Buy

I have been asked about obtaining a lease with an option to buy, so I thought a few words might be helpful.

Simply, this arrangement is when you, as a tenant, enter into a relationship and contract with the landlord that gives you the option to buy the home or condo at some agreed-upon point in thefuture. Typically you would agree on a price as well. In some agreements the rent you pay can be applied toward the down-payment on the option to buy.

It is important to keep in mind that an option is simply that. You are not necessarily bound to proceed with the contract unless terms in the agreement require that you do son. however, it also means that the seller is not bound to sell you the property either – it is an option.

If you run across a property that is listed this way and you are interested, make sure you understand the terms and conditions fully, and consider the implications of this arrangement. They are not particularly common and are not for everyone. Check with your agent. You might also consider consulting an attorney.

Submitting a Buyer Letter with your Offer

Buyers often ask me if they should submit a personal letter with their offer, as a way of personalizing the proposal to the sellers. This is a good question, and it really depends on the situation.

I have done this successfully in a number of situations, especially when there are multiple offers being considered. While sellers are, naturally, concerned about the offer itself (especially the dollar amount), they may be drawn to a buyer whose offer is very competitive but who also submits a letter describing why they love the house, why it works for the family’s needs, and so on. Many sellers are very attached to their homes; have fond memories of loiving there, and feel a personal loss in selling. So someone who comes along that appears to love the home as much as them tends to be appealing, even if the offer is not the highest amount or full price. There is a definite psychological and emotional component of a sale for many sellers, and a letter can appeal for those reasons.

In cases where money IS the only real issue, or the home is a rental and owned as an investment, then a letter is probably not going to make a difference, since the seller only is worried about how much, rather than who.

Even if yours is the only offer, a personal letter MAY make a difference, or at least make the seller feel more comfortable about a less-than-full price offer, and therefore open to negotiation.

But if your offer is quite low, it is doubtful that any letter is going to make a difference. Money still speaks loud and clear to sellers, especially in this market. Submitting a letter could have the opposite effect – after all, if you love the home THAT MUCH, why are you submitting such a low offer?

Take a Break if You Need To

House hunting is tough, as I’m sure you are finding out.

There are lots of decisions to make, as we have already discussed – what to buy, how much to spend, what loan to use, the whole loan process itself.

And it’s very emotional. You get excited about buying, you spend countless hours on the Internet looking at homes for sale, you peruse the newspaper (perhaps), and take hours driving around a zillion neighborhoods, visit more open houses than you can count, and, hopefully, spend time looking at homes with an agent. It really IS time consuming and tiring, especially if there is a lot of inventory OR you take the approach that you need to see EVERYTHING in your price range (I do not recommend that).

If you reach a point where the process is getting tedious and you have not found the right property, it’s OK to take a break if you need to. Really, it is. Now, if you have  a deadline for some reason, such as the end of your rental or because you need to get settled before that first baby arrives, you may not be able to take the time off. But otherwise it could be a good idea for your personal situation. It helps to clear the head and sometimes a little incubation gives yourenewed energy and enthusiasm. And sometimes everything becomes very clear and you can refocus and find what you want right away.

If you do take a little time off, or slow down the process, I recommend you continue to watch the local housing market on-line in case things shift in some way, or the perfect house comes along. It happens!

So don’t feel quilty. It is feels right to continue on, then do so. But a short break may be right for you, too. You decide.

Selecting Your Transaction Services

As part of your purchase, there will be some services that you will have as part of the transaction. This will vary depending on the state you are in and the manner in which a real estate purchase is transacted. While your agent will assist you in handling much of the paperwork, others will need to be involved too.

You get to choose the inspector you wish, assuming that you have an inspection (it is strongly recommended that you do so).

You will certainly have a lender involved, unless you are a cash buyer. While you can choose your mortgage broker and the loan program (depending on what you qualify for), once that is done there will be someone assigned to handle your account (it is often the broker you used) as well as some people behind the scenes.

In Massachusetts, for example, the transaction will involve an attorney, who will develop the Purchase and Sale agreement once the offer is agreed on. You can select this person (talk with your agent) to represent your interests. There will also be an attorney that handles the closing for the bank (it can, in some cases, be done by the same attorney with approval from the bank). The process may be similar in other states as well.

Here in California the transaction is coordinated by an Escrow Company, who holds the down-payment and manages the flow of paperwork until the transaction is completed (this is how the process is handled in a number of states). As a buyer, in your offer you can request a certain escrow company to do this, but often the seller is the one who selects this vendor.

A title search is also done to make sure there is a clear title (i.e., the proof of ownership) to be passed on to you. This may be handled by an attorney (e.g., in Massachusetts and other attorney states) or there may be a separate title company that handles all the title work. This is true for California. Again, as a buyer you can request a particular company, but sometimes the seller will prefer to make this selection. You may see it stated in MLS listings that the seller will select the services (both title and escrow) so you know in advance if you may have the opportunity to select the vendor or not.