Real Estate Snippets

Housing Inspections

There are inspections and then there are inspections.  The purpose of a housing inspection often impacts what kind of things are "called". 

For instance, the purpose of a point of sale inspection (inspections done by the city so the homeowner can sell their home) is to maintain a minimum standard for the housing in a community.  As a result, city inspectors have different "hot buttons" than an inspector with a different purpose.  Common things called on a point of sale inspection include smoke detectors, missing hand rails, torn screens, broken windows, peeling or chipping paint, backflow preventers on threaded spigots, and GFCI outlets.  If the roof is REALLY bad or the cement is terribly broken, or a fall hazard, those things may be called as well.  Most often the point of sale inspection does not require an existing home to be brought up to today's code.  Many times the point of sale inspection has a simple check list and doesn't delve beyond that.

The buyer's inspection is an entirely different kind of inspection.  The buyer hires a private inspector for their inspection.  The purpose of the buyer's inspection is to find every little picky thing that is wrong with the house so the buyer is aware of the flaws prior to continuing with the purchase.  Because the city is looking for minimum standards and the buyer's inspector is looking for perfection, the two inspections will have some results that are very different and some that overlap. 

Other inspectors who view the home have other purposes.  The appraisor is looking for enough value to guarantee the loan.  The plumbing inspector will be looking for plumbing issues.  The home warranty inspector will only care about the appliances the warranty insures.  An insurance inspector will look at mechanicals and safety issues to find the least amount of risk.  The tax assessor . . . well, we all know the government wants to collect taxes!

St. Paul's Vacant Building Ordinance

We've all been busy the last two weeks.  School is upon us.  The Great Minnesota Get Together was in full swing.  Preparations for the Republican National Convention were pressing forward.  When all those things are accomplished, St. Paul will still be stuck with the vacant building ordinance changes which the City Council approved this year.  One can go to the St. Paul City website to read the actual ordinance or check out the blog "A Democracy" which transcribed an interview with the City Council president about the ordinance.  I'm still not sure the council's intended results for the ordinance change are what will happen, but time will be the only true test.

Showing Requests

It's got to be a comedy of errors, otherwise how could so many things go wrong with one showing request? 

The buyer's agent called to request a showing.  The clients declined the first request.  Four days later, the agent called again requesting another showing.  My clients happily agreed.  Two hours before the showing, Mr. Seller (AKA I Can't Believe This Is Happening!) called me in desperation.  A pipe had broken in the basement and they had water everywhere.  Could I please contact the buyer's agent and cancel the showing? 

Ten days later, the buyer's agent called a third time.  Was the plumbing fixed so they might come through tomorrow?  Mr. Seller readily agreed to this third attempt to see their St. Paul house.  Just before the scheduled showing time, the buyer's agent called to cancel the showing.  The buyers had had an emergency come up and couldn't come through the house after all.

What a set of weird circumstances!

The fourth request came when my cell phone was stolen so the message was stuck in limbo land.  The buyer's agent tried once again amazing me with his tenaity.  "Could his clients come through on Monday evening?  They still want to see the house."  Of course, the sellers agreed, only to once again have the showing canceled. 

The final cancellation was permanent.  The buyers had made an offer on another house that hadn't experienced such a comedy of errors.  The moral of the story:  If the house is not seen, no one will buy it!

Marketing Schemes

Enough of these letters have come my way that my immediate reaction is that they are a scam.  Regrettably, not every recipient of the above letter is going to be  wary of the offer presented.  The letter is carefully laid out to appear like an official document sent from the FHA when it actually is an attempt by a mortgage company to solicit mortgages. 

The mortgage company name has been blacked out to protect the company's reputation and to protect me from being sued!  The fine print at the bottom of the letter clearly states the mortgage company does not represent the HUD FHA, but the consumer's eyes are drawn to the bolded words "FHA Division" and the highlighted bar that reads "ATTENTION:  READ THIS FHA NOTIFICATION IN ITS ENTIRETY".  The letter is a notification ABOUT changes in FHA financing in an attempt to capture refinanced loans, but the letter is not FROM the FHA.

The command to read "this FHA notification in its entirety" could be represented as a warning to the consumer to read the entire letter including the fine print on the bottom when the marketing expert who created this advertisement knows the consumer will not get that meaning.  The average letter recipient focuses on the government looking logo and the words "FHA notification" and "FHA Division".  A sense of urgency is created through these powerful words.

My caution to readers is to read the fine print.  It's in the fine print that the mystery of this "notification" will be solved and the consumer will be protected.

Purse or Roving Office

Some people consider a purse to be a fashion statement, but for real estate agents, a purse often contains a mini-office.  Such was the case with my purse.  Those who lifted my purse wondered if I used it as a free weight.  The thief who lifted it found quite a cache inside:

• cell phone with my complete database and calender
• blue tooth hands free device
• financial calculator
• tape measure
• a Leatherman multi-tool
• not one, but two checkbooks because REALTORS® are encouraged to keep their personal accounts separate from their expense accounts
• ditto for the two credit cards
• enough identity cards to wallpaper a room including insurance, medical, REALTOR® membership card, health club membership, video store membership, library card, health directive card, real estate agent license, driver's license and social security card (I know, I know.  One should NEVER EVER carry their social security card on their person, but I was of the generation who was encouraged to carry it with them at all times.  The habit was still in place.)
• a new wide angle digital camera
• $25.00 cash
• my written messages that need to be returned but are now permanently lost including the person who called wanting information about contract for deeds
• a list of tenant prospects with their numbers
• various personal hygiene articles like tooth paste, tooth brush, chap stick, mirror, nail clipper, nail file, comb, lotion, a tube of medicine, Benadryl tablets, dirty tissues (which I hope the miscreant who stole my purse has to get all over their sticky fingers!), wet wipes, packets of eye glass cleaner, etc.
• a minimum of 10 pens and pencils
• business card case (leather, but I'm glad it wasn't new!)
• wallet
• credit card case
• receipts for clothing that was to be returned

Needless to say, the theft of my purse has been an inconvenience at best and a fiasco at the worst!  Ironically my keys (master key to the apartment would have required many locks to be changed, house keys, children's house keys, office keys, 3 sets of car keys, etc) were in my pocket so properties and vehicles are safe.  My  own business cards were in the car waiting to be loaded into the card case so the thief has to research where I work. 

The cell phone calls are forwarded to another number until the phone can be replaced.  A borrowed camera is a temporary fix.  The Leatherman . . . my dear Leatherman . . . $80 of multi-tool won't reap that much on the black market.  Old voice mails are stuck in limbo land until a new phone is purchased.  Credit cards were closed.  Bank accounts were closed.  New accounts opened.  New identity cards ordered.  New driver's license was the easiest of all.  IF you have no identity, but had a license before, the computer age has allowed the State to check your old driver's license picture to see if that's you and issue a replacement license. 

The total financial loss can't be calculated.  The calls that can't be returned are an unknown monetary loss.  Replacing the purse and its contents will be spendy, but not nearly as frustrating as the loss of time spent closing, placing fraud alerts, and opening accounts.  The time inconvenience will continue for months beyond the initial reports as fraud alerts will require additional documentation every time an account is opened or accessed, and that's if serious fraud is not involved through stolen identity!

Carbon Monoxide Detectors

It's been the law for a while, but the time for practicing the law has come.  In the 2006 session of the Minnesota State Legislature, a new law  (Minnesota Statute 299F.50) was passed requiring carbon monoxide detectors be installed in all residential units in Minnesota.  The actual wording is that every residential property owner is responsible to have "an approved and operational (my emphasis) carbon monoxide alarm installed within ten feet of each room lawfully used for sleeping purposes".  The statute went into effect January 1, 2007, for all new construction residential buildings; August 1, 2008, (that's this month) for single family homes; and August 1, 2009, for all multi-family buildings.  The owner of the buildings are responsible for providing the carbon monoxide detectors and the residents are responsible for keeping the detectors supplied with batteries and operational.

The law doesn't say how a carbon monoxide detector is approved, nor does it define who will be responsible to supervise whether these detectors exist in homes.  It also does not define the penalty for not complying!  I have visions of city and state inspectors going from door to door throughout the state asking to come in to check for the detectors and making non-compliant home owners stand in the corner!  Reality probably will filter down to a simpler method like attaching a requirement to the various point of sale inspections in municipalities where they exist.  St. Paul currently only requires a hard wired smoke detector as part of their truth in housing inspections, but chances are very good the  carbon monoxide alarm will be added soon.

Two exceptions to the rule exist:

1. State owned properties.  My question is, "Aren't residents of state owned properties as vulnerable as residents of privately owned properties?  Why the exception?"
2. Properties that have no sources of carbon monoxide or minimal sources.  The perfect example of this is an apartment building that is powered solely by electricity and has NO gas to the premises!

I'm guessing there's not been a run on carbon monoxide detectors at the stores.  There are many different varieties from which to choose.  However, I doubt home owners will comply until the law makers figure out how they plan to enforce this new law!

FHA Mortgages

FHA mortgages are experiencing a resurgence.  The average home buyer doesn't really understand why that is important or how it impacts them.  A home buyer usually applies for a loan accepting what the loan officer suggests for the loan program.  Seldom does the consumer ask why an FHA loan is suggested over a conventional mortgage.

Whereas I am not a mortgage officer and my explanations are very basic, here are a few characteristics of FHA mortgages.  Knowing a little bit about FHA lending can prepare the buyer for how an FHA loan might impact the transaction.

• An FHA mortgage is insured by the federal government.  There will be a mortgage insurance premium rolled into the buyer's mortgage to cover this insurance.
• Prior to the easy (and sloppy) lending of the feeding frenzy years, FHA mortgages had easier qualifying criteria making it easier for a home buyer with less than perfect credit to obtain a mortgage through FHA programs.
• The minimum down payment with an FHA mortgage is 3% and that amount can be in the form of a gift from a relative, charitable organization, or employer (Some changes have been made to this rule in the Housing and Recovery Act of 2008.).
• Appraisals for FHA mortgages often included "work orders" which had to be completed before the lender would grant the mortgage.  Since FHA buyers often were more "borderline" in their financial strength, FHA wanted to make sure the homes they financed were not going to require extensive repairs which could sabotage the new buyer's successful repayment of the loan.

There are several reasons why an FHA loan could impact the purchase of a home, especially if there is a multiple offer situation or the buyer has chosen a foreclosed or short sale property.  In a multiple offer, an FHA mortgage of identical terms may lose if the other offer is a conventional mortgage.  The fact that qualifying criteria and down payment requirements are less can give the message to the listing agent that an FHA buyer is less strong than a conventional mortgage buyer.  The possibility of work orders being required by the appraisal can decrease the seller's "profit" from their house sale as well.  Sellers who are selling their homes for less than they owe (short sales) are obviously strapped for money and often do not have the funds to make repairs making an FHA buyer less attractive.  Foreclosed properties that are owned by lenders often have deferred maintenance which will be considered as work orders by FHA and lenders are unwilling to spend money to fix a property in which they have already lost money.

Whereas some home sellers are skittish about FHA financing, most are not.  FHA was designed to encourage home ownership, especially for first time buyers.  In today's market with the tightening of mortgage guidelines, FHA mortgages have returned to being a viable option for many buyers.

Short Sales

Short sales have become so common that the shorts have become holey!  They're hardly worthy of news anymore.  Seldom do St. Paul agents ask, "Have you ever done a short sale?" because any active agent has.

Today I got a call from a listing agent.  The agent specializes (she says) in short sales.  Six months ago my clients wrote an offer for one of her listings.  It was a good offer for a short sale.   We only reduced the price by 10%.  Many short sale offers are well below that.  At the time, the listing agent assured us we were the highest offer and the only one the lender was considering. 

We waited . . . and waited . . . and waited . . . and waited . . . and waited . . .  Well, you get the idea.  The time was NOT short, and our patience was getting short!  Finally, my clients liked another home that was for sale by a live person, one who didn't have to get bank approval for the sale.  What a novel idea! 

We gave notice to the short sale listing agent that we needed an acceptance by the end of the week or we would withdraw our offer.  The listing agent disclosed that another higher and better offer had come in and the bank was going to accept that other offer.  My clients moved on to their second choice and moved in 6 weeks ago. 

The short sale agent called today inquiring if my clients were still in the market because the sale had fallen through.  My clients' dream house was once again up for sale.  The agent assured me the lender would be prompt in signing the purchase agreement and moving to close this time around. 

Too bad, so sad.  My clients have already happily moved in to their second choice home.  New paint covers their walls, a jacuzzi tub has been installed, and the kitchen is organized.  The former short sale home is now listed as a pre-foreclosure which means the lender is soon going to be the reluctant owner of another home.  The irony is that the house will probably sell in the future for far less than we offered. 

My clients' take:  "It's funny how stupidity is ultimately self destructive 100% of the time."

My take:  "Short sales make real estate agents short tempered!"

Legoland at the Mall of America

Legoland at the Mall of America isn't in Saint Paul, but it's worth the trip across the river just to see the variety of things that can be made from these fabulous building blocks. Grandmas and Grandpas can  especially enjoy taking their grandchildren to this wonderland as there are lots of hands on places to build and play, and there's NO ENTRANCE FEE!  A word of warning to the novice Mall of America visitor.  It's big!  Taking note of the parking location and entrance is wise.  If one loses one's car at the Mall, it may never be found!

Lead Paint

When writing a purchase agreement for a home built before 1978, a "lead paint disclosure" is required by federal law as part of the purchase agreement.  This disclosure by the seller to the buyer tells whether the seller knows of, or has tested for, lead based paint in the home.  On the disclosure, the buyer is given the opportunity to have a "risk assessment" done on the home and is also given a pamphlet called "Protect Your Family from Lead in Your Home."  The pamphlet instructs how to keep your home safe if it does have lead paint: no sanding, no scraping, and no hot air guns to strip the paint.  The recommended course is to wash to remove anything lose and repaint or encapsulate the painted surface.

Lead assessments were a hot button in the mid '90's.  The City of Minneapolis inspectors did assessments on rental properties throughout the City.  The resultant condemnations created quite a stir among landlords and owners.  In some areas, two-thirds of a block would have the florescent signs of condemnation on the front and back door.  The only way to remove a property from the condemnation list was to remove or "abate" the lead.  In most cases this involved hiring a company to remove or encase the lead without scraping, sanding, or heating the paint. . . a very pricey undertaking involving suits and masks and special equipment.  Some owners of condemned houses actually walked away from them (today's "walking away" from homes is reminiscent of those days) because of the financial impact on their business.  The City eventually realized their "plan" was not working, and today it's less common to see the lead condemnation notices.

In my 15 years of experience, only one property being actively marketed had a lead risk assessment done.  The inspection report was on the counter with the other disclosures at the time of the showings.  Because the emphasis has been on lead paint, it was a surprise to read there was lead in the varnish used on woodwork or in the wallpaper.  Granted the lead levels were much lower for varnish and wallpaper, but the lead was still present.  None of my classes had shared this tidbit of information!

It was a relief to realize I had unwittingly protected myself while removing the many rooms of wallpaper in my lifetime.  Instead of dry peeling the paper, my method had been to thoroughly soak the walls and loosen with a putty knife.  The soaked bits that were scraped off did not become airborne, but were bagged and removed from the home.

Buyers of home built before 1978 should remember to not let their children eat the paint and to keep painted surfaces in good repair, not allowing them to chip and flake.  We older people managed to survive lead paint in all of our homes (Maybe that's why we're so weird!), but as the paint ages, it needs to be kept repainted to maintain its safety.