by neil kearney | Apr 24, 2007 | For Buyers, For Sellers, Real Estate 101
-Multiple Offers-
We are working in a buyers market. The average days-to-offer in our market is around 75 days. It is unusual to have houses go under contract right away. You would think that multiple offers and offers over full price would be non-existent; but they happen. 
When there is a large inventory of houses on the market buyers become very good at spotting a good deal. When after looking at 20 homes, buyers see a new listing that they “know” is a good house for a good price, they tend to jump on it. If they are smart they give a good offer and wrap up the negotiations as quickly as possible. Chances are they are not the only buyers looking in that area and price range. What happens if two buyers decide to write an offer on the same house. Here is some advice from the buyer and seller perspective.
From The Buyers Perspective:
- Check to see if you have competition. Your agent will call the listing agent to announce your intention to write an offer. Make sure you know if you are competing with another buyer. At the same time have the agent ask for the sellers preferred closing date and for any items that will be excluded from the offer. All of the information below assumes that there is another offer.
- Make your decisions quickly. Getting your offer in a day ahead may make a big difference. Ask for a quick acceptance deadline.
- Do your homework: Check comparable sales and decide the maximum price you will be willing to pay. Also, think about how you would feel if you would lose this house over a couple of thousand of dollars.
- Do a thorough walk-through: When you see a house you are interested in, take your time. Check on the condition of the house, what would you need to do to make it yours. Are the systems (furnace, roof, windows) in good condition?
- Prepare a clean offer: Don’t ask for Sellers to pay for appraisal, cleaning, HOA transfer fees etc. When the seller is considering two similar offers, $50 can make a big difference and send a signal that the buyers asking for all of the small stuff will be tougher to work with down the road on inspections etc.
- Have your financing in place and make sure to include a letter from a lender along with the offer. I prefer to see a local lender who can jump in and make the closing work in a difficult situation rather than somebody who is working a toll free line.
- A nice touch is to write a personal letter to the seller explaining who you are and why you love their house. The seller has an emotional attachment to the house and wants to sell to someone who will take care of their house.
- Consider an escalation clause. When the house is a good value and you know there is competition one effective method is to write in an escalation clause. This clause in the contract automatically raises the bid price if another offer beats theirs financially. For instance it could read “the offer price shall be automatically raised to a price $1,000 above any other bonefide offer, the purchase price shall not exceed $xxx,xxx”. This is where the buyer has to know how much they are willing to pay; is it full price or $5,000 over?
From The Sellers Perspective:
- If you are attracting more than one offer it shows that you have taken care of your home and priced it correctly.
- You want to make sure that all interested parties have a chance to submit an offer. Have your agent communicate to each agent who has shown the property recently to gauge interest.
- When reviewing offers look at these main points: net price to you after all closing costs, dates and terms and buyers ability to pay and close.
- Try to read between the lines and get a feel for motivation. A buyer who has been transferred and is living in temporary housing is a stronger candidate than an investor who will not be living in the house.
- Try to tie up some of the loose ends now. Use a counterproposal to change dates and terms. You will never again be in a better negotiating position.
- Choose what feels right and be open with your agent .
- Remember, you have a right to choose what offer you accept but you do not have the right to discriminate against a buyer. Choose an offer based upon what is on the paper.
From The Agents Perspective:
- Make sure the communication lines are open. Get a dialog going with the other agents. If all parties feel informed about the process and situation there will be no hard feelings. If a second offer comes in after the first, it is customary to call the first agent and give them a chance to change their offer.
- If you are in an agency position with your client they will lean heavily on an agents advice. Give them good information and let them choose from the possibilities.
Every situation is different but remember the buyers agent is charged with helping the buyer get the house and the sellers agent or listing agent is charged with getting the best price and terms for their client.
by neil kearney | Apr 16, 2007 | For Buyers, For Sellers
Rent To Own
As I drive around in my market I tend to see homemade signs posted at major intersections with houses advertised as “Rent to Own”. In this 
post I’d like to layout a typical rent to own deal as well as show how the unscrupulous can take advantage of an unsuspecting buyer.
First terminology; rent to own is the same as a lease purchase. It is a combination of a lease and an option to buy a house for a certain price. This type of deal attracts people who are not quite ready to buy but are willing to bet that they will be able to purchase in a relatively short period of time. Most of the time the attracted buyers are either just getting started or are starting over after a bankruptcy or other credit issue.
Here are the main features of the deal:
- Buyer and Seller agree to an option price and the time for which the option is good (usually 3 years or less but is negotiable).
- Buyer pays an non-refundable option fee upfront to Seller (usually 1% – 5% of purchase price) . If they exercise the option the option fee goes toward the purchase price of the house.
- Buyer agrees to pay monthly rent to the Seller. Usually, the buyer pays a premium on the market rate rent and that premium also pays down the option price of the house.
Advantages for Seller:
- Expands the pool of possible buyers to their house. This is especially helpful in a slow market.
- Option money is upfront and payable to the Seller.
- They can usually collect above market rate rent.
Advantages for the Buyer:
- They are able to lock in a sales price on a house.
- They are able to pay down equity each month they pay rent.
- They are given time to accumulate a down payment or repair credit.
Buyer Beware:
There are situations where the Seller is just looking for a victim. There have been many instances where sellers are just looking for the upfront money and premium rent and then find a technicality to evict the buyer/renter before the option can be exercised.
by neil kearney | Apr 12, 2007 | For Buyers, For Sellers
Condition at Closing
or How to Avoid a Mess at Closing
One of the greatest sources of letdown and conflict in a real estate transaction is the condition of the house after the Sellers 
move out. Provisions in the purchase contract allow for the buyer to do a walk through inspection prior to closing. I advise my buyers to do this walkthrough as late as possible so as to see the true condition of the property as it will be left. What to look for in a walkthrough could be its own topic but in summary; we are checking to make sure that the inspection items were completed as agreed upon, the inclusions are still at the house, that there has not been any recent damage to the house and finally to check the cleanliness of the house. The first three items are fairly “cut and dry”, either the refrigerator is in the kitchen or it’s not. I have found that cleanliness is very subjective. What may be very clean to one hurried, harried seller may be “filthy” to the buyer. I try to mitigate this by talking about this subjective divide as we write the agreement and make the language in the contract as plain and literal as possible. Instead of saying carpet cleaning (sellers picture the Bissell in their closet, buyers picture the $500 top of the line pro), I would make it clear that the carpets are to be cleaned by a professional with the receipt provided.
No matter what you try to plan for it is an issue. Sometimes it becomes an outlet for buyer frustration after a particularly tough set of negotiations. Sometimes it is a seller with good intentions but not enough time. Sometimes it is a professional hired who does a less than professional job. All I know is that I have hired cleaners, pitched in with the sellers as we did a last minute shine or have cleaned cupboards and closets myself. Small important details in making the closing day go smoothly and making my clients happy.
So some parting advice:
To Sellers:
- Plan in advance. Closing and moving is a very hectic time and it is not always easy to complete all of those little last minute tasks.
- Bring in help. Hire a cleaning company or better yet family. It is always very hard to go back to the old house to clean while all of your stuff is at the new house.
To Buyers:
- Get it in writing. If you are worried about the condition of the house, set forth your expectations in writing.
- Be realistic. Maybe you have to tidy up a bit when you move in to bring it up to “your” standards. Don’t let it ruin your day.
by neil kearney | Feb 22, 2007 | For Buyers, For Sellers
Inspection Issue – Lead Based Paint
The discussion of lead based paint comes up in every transaction that involves a house built before 1978. All sellers and landlords are required to disclose in writing the knowledge of any lead based paint hazards and provide results of any previous tests that they may have to any potential buyers or tenants. 
Lead based paint has been linked to health difficulties primarily in children but can also be hazardous to adults. Most older houses have lead paint somewhere under the layers of paint in the house. So what is the hazard. If the lead paint is contained it is not an immediate hazard. Only when the paint is released by chipping, sanding etc. It can be in the air, contained in dust or it can be in exterior soil.
In a real estate transaction a Lead Based Paint Disclosure must be filled out and signed by the Seller, Buyer and both real estate agents. This disclosure must be signed before and concurrently with the purchase agreement. If it is done after the fact heavy fines can be placed on the Realtors. Along with the disclosure booklet explaining the hazards of the condition must be received by the buyer.
The buyer has the right to have the house inspected for lead based paint hazards but in my experience I have never seen a buyer have the tests performed. The testing is expensive and can be invasive (samples). I think the object of the program set forth by HUD is education and I think that goal is being fulfilled.
The EPA has a very informative
websitewhich has more information if you are interested in learning more.
The cabin shown above is still standing, although I’m sure it is a lead based paint hazard. It is my grandfathers old cabin in MN near Itasca State Park. He passed away just over 8 years ago and my cousin and I have since built the new cabin below on a different location on the land overlooking Gill Lake.
by neil kearney | Jan 29, 2007 | For Buyers, For Sellers
Boulder County is located in a zone of high potential for elevated radon levels in the air. In real estate transactions radon almost is always an issue. It is almost always tested for and when the reading comes in at a level above 4.0 pCi/L (picocuries per liter) then the Buyer and Seller negotiate what will be done and who will pay. But first some background that can be found EPA’s Radon Website
What is Radon?
Radon is a gaseous radioactive element having the symbol Rn, the atomic number 86, an atomic weight of 222, a melting point of -71ºC, a boiling point of -62ºC, and (depending on the source, there are between 20 and 25 isotopes of radon – 20 cited in the chemical summary, 25 listed in the table of isotopes); it is an extremely toxic, colorless gas; it can be condensed to a transparent liquid and to an opaque, glowing solid; it is derived from the radioactive decay of radium and is used in cancer treatment, as a tracer in leak detection, and in radiography. (From the word radium, the substance from which it is derived.) Sources: Condensed Chemical Dictionary, and Handbook of Chemistry and Physics, 69th ed., CRC Press, Boca Raton, FL, 1988.
What are the Health Effects From Exposure to Radon?
No immediate symptoms. Based on an updated Assessment of Risk for Radon in Homes, radon in indoor air is estimated to cause about 21,000 lung cancer deaths each year in the United States. Smokers are at higher risk of developing Radon-induced lung cancer. Lung cancer is the only health effect which has been definitively linked with radon exposure. Lung cancer would usually occur years (5-25) after exposure. There is no evidence that other respiratory diseases, such as asthma, are caused by radon exposure and there is no evidence that children are at any greater risk of radon induced lung cancer than adults.
What is the Average Level of Radon Found in a Home?
Based on a national residential radon survey completed in 1991, the average indoor radon level is about 1.3 picocuries per liter (pCi/L) in the United States. The average outdoor level is about 0.4 pCi/L.
So, you can see why it comes up often in a real estate transaction. Of course some people are more worried than others and this becomes part of the art of negotiation. During the inspection period (which is usually between 10 days and 2 weeks long) a buyer has the option to have a radon test performed usually by a general home inspector. The cost is somewhere around $100 for the test and it takes 48 hours to perform. If the results of the test come in above 4.0 pCi/L then it is very common for the Buyer to ask for the Seller to mitigate so that the radon level inside the habitable part of the home (not crawlspaces etc.) is below 4.0 pCi/L. The cost for mitigation can vary but in our area the typical cost is between $800 and $900.
What is done to mitigate the radon level in a home?
Most often a 4″ PVC pipe is inserted into a drilled hole in the basement slab. This pipe is routed to the outside of the home and above the roof line. Somewhere along the pipe a fan is installed that will run continuously and will suck the sub-slab air to the outside creating a vacuum. The diverted airstream does not allow radon to seep up through the concrete into the house.
Radon is a fixable problem and it is a good idea to have the test done. I tell my clients that even if they are not concerned about the risk most likely the people who buy the house from them will be.
by neil kearney | Jan 11, 2007 | For Buyers, For Sellers
It seems each New Year brings with it more issues that come into an already complicated real estate transaction. Litigation and legislation seem to be the main 
influences that keep our contracts expanding. New for us in Colorado this year on the approved contracts are sections that pertain to HOA documentation, dealing with foreclosed property and issues regarding the disclosure of methamphetimine. All of these issues came from 2006 legislation at the state level and are designed to protect the public.
- Common Interest Community (CIC) – The new section about HOA’s sets forth that a Buyer will be required to become a part of the association and will need to abide by all of the rules. In order to agree a buyer needs to understand the rules, right? So the contract now says what information will be required (Bylaws, Rules and Regulations, most recent annual balance statelment, annual income and expenditures statement, annual budget, moste recent annual owner’s meeting minutes and any directors meeting minutes from the past 6 months) and who is responsible for providing it. This comes down to the Seller getting and paying for the documentation. If the Buyer objects to any of this information they can cancel within a date set forth in the offer.
- Foreclosure – This new section requires that an addenda be attached to the contract if a foreclosed property is being purchased by an investor. This is supposed to protect homeonwers who sign their house away to investor/predators who claim to have a way to save their home. This does not apply if an owner occupant buys a foreclosure.
- Methamphetamine – This is a growing issue locally and nationally. Most manufacturers of this nasty drug “cook” the stuff in residential houses. The residue is toxic and will contaminate a house. In order to clean up a house it must be cleaned to the standards of the State Health Department. The new language in the contract requires Sellers disclosure of presence of a meth lab. Even if the Seller says that the house has not been used for that purpose Buyer may investigate by hiring a certified hygenist to test. If the Buyer finds meth residue as a result of the test they can cancel at any time up to closing. This is fairly new so I will be interested in finding a certified hygenist and seeing how much they cost.
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When there is a large inventory of houses on the market buyers become very good at spotting a good deal. When after looking at 20 homes, buyers see a new listing that they “know” is a good house for a good price, they tend to jump on it. If they are smart they give a good offer and wrap up the negotiations as quickly as possible. Chances are they are not the only buyers looking in that area and price range. What happens if two buyers decide to write an offer on the same house. Here is some advice from the buyer and seller perspective.
