Easy Agent Blogs

Falling in love with a house is a lot like falling in love with a person. It’s almost impossible to see any flaws, even if they’re apparent. When so many other aspects seem perfect, it’s easy to fall into denial about the possibility that there may be problems.

Down the road, when the initial blush wears off, the negative aspects become more apparent. By now, though, it’s difficult to reverse any decisions you’ve made. This is why it’s important to keep emotions out of the home purchase process. Yes, it’s difficult, but it’s also imperative that you do so.

Although there are many so-called “red flags” to look for when touring a home, let’s take a look at the top five that – if you see them — should make you reconsider submitting an offer without a contingency for further inspection.

Sloppy Maintenance

So, the gutters are full and grass is growing in them. Maybe the homeowner is a busy person and hasn’t had a chance to clean them.

If this sounds like something you might think, adjust your expectations. If the homeowner is too busy, too broke or too lazy to perform routine maintenance, what else might be wrong with the home? Look for the following telltale signs of sloppy home maintenance and neglect:

• Peeling paint and cracks in plaster
• Low water pressure (may be an indication of plumbing problems)
• Missing roof shingles or signs of roof wear
• “Spongy” feel to the floors around toilets and bath tubs
• Torn window screens and cracked window glass
• Ceiling stains

To check the home’s water pressure run water in the bathroom sink and, while it’s running, flush the toilet. If the flow from the faucet decreases, water pressure is low, according to Pat Mertz Esswein of Kiplinger.

Of course these aren’t the only signs of deferred maintenance but, if present, they should set off alarms and prompt you to place a call to the appropriate contractor for an inspection.

Foundation Problems

If the yard is sloped toward the house instead of away from it, there could be a water intrusion problem, which is pricey to repair. The condition is known as “negative grade,” and it directs rainwater right to the home’s basement and, worse, its foundation.

Since 99 percent of foundation problems are caused by water, according to

Chris Elliot of Homeland Inspection Services in Colorado, this is a condition that the homeowner should remedy, or pay to have remedied, before you purchase the home.

Check the foundation for cracks larger than 1/3 inch, those that zig-zag diagonally or bulging of the foundation. Determine if the floors slope.

While this may be normal in a historic home, in a modern home it may be a sign of a defective foundation. One other sign of foundation problems are horizontal cracks or jagged cracks that run diagonally across a wall.

Foundation repair bills can run between $900 and $10,000, although the average American homeowner spent $4,447, according to a survey conducted by HomeAdvisor.

That’s a hefty amount of money for a homebuyer who just had to shell out tens of thousands of dollars for a down payment and closing costs so if anything looks unusual, and you love the house, call an engineer for a professional inspection.

A Neighborhood in Decline

There is an old adage in the real estate industry that when one home in a neighborhood goes on the market, two others will follow. Then, there is the one that says if you notice more than two or three homes for sale in a neighborhood, be suspicious.

In a recovering housing market it’s normal for homeowners who have been sitting on the sidelines to jump into the market. In a normal market, however, when many homes in a neighborhood are up for sale, it’s time to do some investigating.

There are various reasons that homeowners may decide to leave a neighborhood en masse.

The relocation of a sex offender to the neighborhood, for instance, not only causes families to flee but home values to drop by as much as 15 percent. Other causes of neighborhood decline include:

• An increase in crime
• Urban decay
• New zoning restrictions
• Businesses fleeing the area
• Traffic rerouting
• Bad (noisy, messy, etc.) neighbors
• Local government action, such as closing a nearby school

Red flags need not kill a real estate deal, but they should let you know that something isn’t right and needs inspection by a professional.

Every year, thousands of American children suffer from lead poisoning. In fact, 1.2 million children have lead poisoning, according to researchers at the Public Health Institute.

Surprised? Aside from sporadic recalls of toys that are found to contain lead, we don’t hear much about the dangers of lead that still exist in 2019.

Dust from lead-based paint, whether in the form of chips from peeling paint or “on surfaces that rub together, such as windows and doors” can pose health hazards, according to the Environmental Protection Agency (EPA).

So, federal law requires that homebuyers must be warned that homes built before 1978 may contain lead-based paint on the walls.  

A little history on lead-based paint

From the 1920s until 1978, lead, which is found naturally in the earth’s crust, was used in a wide range of American products, such as pottery, gasoline, plumbing supplies and even women’s cosmetics.

As the toxic effects of this heavy metal became apparent, the U.S. government banned its use in paint. That was in 1978, so homes built after that are free of lead-based paint.

About 75 percent of homes built before that, however, contain at least some lead-based paint, with those built before 1950 containing the most.

Why you should be concerned

Because children’s bodies are growing, they absorb lead more readily than do adults. Their nervous systems also react more strongly to lead than ours do.

The EPA says that children suffering from lead poisoning show:

• Lower IQ
• Behavioral or learning problems
• Delayed growth
• Anemia
• Hearing problems

Does your current home have lead-based paint?

Not all homes built before 1978 have lead-based paint. If you are concerned that yours might, purchase a DIY lead-testing kit. ConsumerReports.org offers advice on which tests are best and a walk-through of how to correctly use them.

If you prefer to have a certified inspector check your home, use the EPA’s online search function to find one near you.

If the tests are positive for lead, don’t freak out. If the paint isn’t peeling or otherwise rubbing off and creating dust, you may choose to leave it alone. Removing lead paint requires a professional and the services tend to be expensive.

If you choose to leave the paint in place, inspect the surfaces at least twice a year. Look for paint chips and dust on the floors and window sills.

Other tips include:

• Repair water damage immediately.
• Mop floors at least once a week with warm water and TSP. Experts recommend that you wear safety equipment during the job and use two buckets (one for the TSP solution and one with clear water for rinsing).
• Wipe window sills weekly.

Home seller requirements

All home sellers with homes built before 1978 must provide potential buyers a pamphlet with information about the hazards of lead-based paint. You can view the EPA-authored pamphlet at epa.gov.

The seller must also divulge any information about the paint in the home – whether it contains lead. This is typically accomplished with a lead-based paint disclosure form.

Finally, buyers of homes built before 1978 must, by law, be given 10 days to inspect the paint in the home. The buyer can waive the inspection and the 10-day period is negotiable.

If you have any concerns regarding lead-based paint in a home, we urge you to hire a certified inspector before committing to buying the home.

Shopping for a condo with a pre-approved FHA-backed loan? Here’s a tip: don’t look at even one condo in a community that isn’t approved by the U.S. Department of Housing and Urban Development.

Since an estimated 90 percent of the U.S. condos communities are not FHA-approved, there’s a good chance that you could fall in love with a home only to find out that FHA won’t guarantee a loan on it.

Thankfully, if you’re working with the right real estate agent, you’ll know which communities are approved before you start condo hunting.

FHA requirements for condos

There are a number of reasons a community may be considered too much of a risk for it to qualify for HUD approval and most of them can be traced back to the homeowner association.

Some of the problems HUD considers too risky include:

A high number of rentals

HUD wants to see no more than half of the units occupied by tenants. There is a way to get around this, however.

If the association can show at least three years of stable finances, has a current Reserve Study and shows low delinquency rates, HUD may ok a loan in complexes with up to 65 percent rentals.

Too much commercial space

If part of what attracts you to the community is the Starbucks and grocery store on the bottom floor, ensure that the space devoted to these and other commercial concerns doesn’t exceed 50 percent of the community’s total square footage.

If it does, the community won’t be HUD-approved and FHA won’t back a loan for one of its homes.

Too many deadbeats

If too many homeowners aren’t up-to-date on their fees, HUD won’t approve the community. How many is too many? Anything more than 15 percent of homeowners, delinquent for more than 60 days.

One individual owns too many of the units

Often, investors will snatch up multiple units in a community. Whether it’s one individual or a group of investors, if they own more than half the homes, HUD will take a closer look.

If the remaining homes are owner-occupied, it will pass this part of the inspection. If not, the community won’t be approved.

Too many lawsuits

HUD will check to ensure there is no outstanding litigation going on. Believe it or not, this is one of the more common problems that condo associations run up against when attempting to become HUD-approved.

These are just a few of HUD and FHA’s requirements for condos and they are always subject to change. You can find additional items at FHAReview.com.

Being approved has additional advantages

When buying in a managed community (one overseen by a homeowners association), the homebuyer is presented with a pile of paperwork to read and approve.

These documents include just about everything you need to know about the community, including:

• CC&Rs, short for Covenants, Conditions and Restrictions. They let you know what you can and cannot do in the community, such as noise rules and pet restrictions.
• The budget and other financial documents
• HOA meeting minutes
• Articles of incorporation
• Bylaws
• Rules and Regulations. These include anything not mentioned in the CC&Rs.

The advantage to buying a condo with an FHA loan is that you’ll have an additional set of eyes poring over these documents – the government.

This doesn’t mean you can shirk your due diligence, however. If you don’t understand anything in the paperwork, run it by your attorney.

But the biggest advantage is that the HUD approval process weeds out communities with shady financials or other problems. And, communities must be re-approved every two years.

Find out if that condo you have your eye on is FHA approved on HUD’s website. Then, contact us for a private tour.

Over the next decade or two, members of the silent generation and older baby boomers will be leaving their children and grandchildren $68 trillion, most of which will be in the form of homes.

“More than half of all existing-homes are owned by baby boomers and the silent generation,” according to Mark Fleming with First American Title.

Heirs have several choices as to what to do with these assets. The three most common include:

• Move into the home and live in it
• Rent the home to tenants
• Sell the home

Many of our clients decide to sell the home, splitting the proceeds among the heirs.

Last year when Louise Bishop and her brother Frank Becker inherited their childhood home in a Minneapolis suburb, they entertained all three options.

Going through their dad’s paperwork they learned that he’d fallen behind on payments and the home was in pre-foreclosure. Working with the bank’s attorney, they were able to secure a hold on the foreclosure so that they could sell the home.

Sounds easy, right? There is a lot to consider when deciding to sell an inherited home.

Will your pocketbook stretch?

Dad was a bit of a hoarder, which Becker and his sister learned as they sifted through their late father’s belongings. Faced by more than 50 years’ accumulation of that they’d need to somehow dispose of was challenging enough.

Two inoperable trucks, a salvaged boat on a trailer and odds and ends from Dad’s old plumbing business littered the property.

Hiring the professionals required to remove all the “junk,” clean the home and perform needed upgrades was expensive. Thankfully, Louise and Frank had the funds between them to pay for it.

We’ve worked with other families whose bank accounts aren’t as flush, in which the home sale may involve a lower asking price for the home to compensate the buyer for having to perform the removal.

Then, there may be liens on the home. Those will need to be paid off before selling the home. Your best bet is to hire a highly experienced real estate agent to help you walk through your options.

There’s often an emotional toll to pay

Cleaning out a lifetime of memories, in a home that you may have grown up in, while still grieving the loss of a parent is something nobody should have to go through.

But we do, and it can be quite emotional. Be ready for it, in yourself and other family members.

Take it a step at a time

Other family members swore that Louise and Frank’s father didn’t leave a will (known as dying intestate). This means that state law will determine how and when the property can be disposed of.

Louise, however, clearly recalled her mother telling her that her did, indeed, have a will. Within 30 minutes of rifling through paperwork, the will was found, with clear instructions as to the division of Dad’s property.

The best first step then is to locate any paperwork having to do with the house. This includes loan paperwork, letters from the lender, tax information and deeds.

When you hire an attorney (another expense, but necessary), he or she will want to know how title was held, among other things.

Why an attorney?

Check state probate rules to determine if the home will be included in the probate of the deceased’s will.

Probate is a legal proceeding that determines the legitimacy of the will or, lacking a will, identifies the deceased’s legitimate heirs (according to state laws regarding inheritance).

It’s a long and often expensive process. Thankfully, Becker hired an attorney who agreed to take the bulk of her fee at the close of probate.

Speaking of probate, if you’re facing the procedure, it’s important to get familiar with it. Don’t dispose of anything of value before probate. Anything that might be considered part of the estate must be included in probate.

We aren’t lawyers

The information we’re providing is from a layperson’s point of view. We are not lawyers and cannot dispense legal advice.

We can tell you that you’ll need professional legal and, perhaps, tax advice and assistance if you plan on selling an inherited home.

 

Hooray for the homebuyer who understands the importance of lining up financing before ever stepping foot into a house for sale or placing eyes on a real estate listing website.

It’s one thing to understand the steps to take in the home buying process and yet another to understand the whole “how does the loan stuff work?” question.

Because it seems like such a mysterious process, most first-timers look for the lender with the lowest interest rate, sign on the dotted line and call it a day.

That is a huge mistake, and here’s why: there’s more to a loan than the interest rate and not all loan products are identical, so it takes some serious comparison shopping to make sure you’re getting the best deal out there.

It starts with a comparison of the three most important parts of a mortgage loan – those for which the borrower has to pay.

Find some lenders to compare

Your best source for contact information for at least one lender is your real estate agent. Check online sites for attractive rates and add those lenders to the list.

One of the most popular comparison sites is BankRate.com.

If you’ll be using an FHA loan, you’ll need to shop among FHA’s approved lenders, which you can find here.

Don’t forget to list your local bank, especially if you have a good working relationship with the manager. Finally, consider using the services of a mortgage broker. These men and women shop for loans that match your criteria and circumstances, from a variety of lenders.

Rate

The first thing you need to understand is that advertised rates don’t necessarily apply to the product you want to purchase.

We wanted to find out which loans were offered for comparison today at Bankrate.com. The criteria we entered was for a purchase loan, for a purchase price of $257,939, a down payment of 5.4 percent (the nationwide average), a credit score of 720 to 739 for a 30-year loan.

The lowest interest rate offered for this scenario is 3.625 percent. But the site lists other options we may be interested in, including several lenders offering 2.625 percent rates.

Look closely, though, and you’ll see that those low rates are for a 20-year term.

These rates, by the way aren’t the whole ball of wax when it comes to understanding how much your loan will cost. It’s the annual percentage rate, or APR, that you want to use when comparing rates.

The APR reflects the interest rate plus fees. According to Bankrate.com, “the APR shows which loan is less expensive over the entire term of the loan.”

In our scenario above, both loans offer the same interest rate. Their annual percentage rates, however, are 3.631 percent and 3.64 percent.

Know how much – to the penny – that you’ll be putting down in cash for the home. Then, determine what kind of a mortgage rate you want: fixed rate or adjustable.

Finally, decide on a term for the loan: 30 years, 15 years, five years, etc. You may eventually change your mind on the last consideration after shopping around, but that’s ok.

Now, pick up the phone and make some calls. Ask the following questions:

• Request the lender’s current interest rates and find out whether these rates are the lowest for just that day or for the week and if the rates quoted are for adjustable or fixed mortgages.

 

• If you’re inquiring about adjustable rates, ask when the rate increases, how the payments vary and whether the payments will go down with a reduction in the interest rate.

 

• Ask for the loan’s annual percentage rate (APR) and use that to compare the cost of each loan you’re comparing.

Points

Bank of America defines points as “fees paid to the lender at closing in exchange for a reduced interest rate.” One point equals one percent of the loan amount.

Ask the lender’s representative to translate the points quoted into a dollar amount. This makes it easier to determine exactly how much you’ll be paying for the loan and, thus, easier to compare it to other offers.

Fees

Costs of the loan listed vaguely as “fees” need to be itemized for you to compare one lender to another. Ask the loan representative to do that for you.

The Loan Estimate Form

Legally, the lender must provide you, within three days of applying for the loan, a Loan Estimate Form, detailing of all fees that will be due at closing.

This form is what you will use to compare lenders. If you notice any large discrepancies between lenders, call them and ask for clarification.

When you’ve chosen a lender, see if it will allow you to lock in the interest rate, especially if the Feds seem on the verge of raising them. There may be a cost involved, so find out what that is.

To pay less on your monthly house payment requires that you take this initial step – even before choosing the house you’ll eventually purchase.