Home Styles and Fashion Collide

I was reading an interesting article in October’s issue of Old House Journal about various styles of homes that have been introduced over the past century. I thought it was interesting that you can often tell when a home was built just by looking at it’s main design. I'm not sure this is true today.

Century of Home Styles
At the turn of the century we had grand Victorian homes followed by the simpler Bungalows or quaint Tudors. In the wartime 1940’s we built lots of bare-bones matchbox homes in subdivisions and later graduated to the knotty pine and vibrant tile bathrooms of the 1960’s.

Things went cheap again in the 1980’s as quality was replaced with quantity evidenced by streets of new homes filled with carpet & vinyl. Homes just got bigger in the 1990’s as the McMansion’s became popular.

Now- Mix and Match
So what about today? I won’t go into all the new building materials and techniques that have become less expensive and longer-lasting, but as far as style, it’s a pluralistic time where many different styles are very popular.

For example, there are brand new subdivisions filled with Craftsman-styled homes and others that are completely contemporary. Still, there are others built for economy that are still filled with carpet and vinyl.

My Fashion Sense
The clothing fashions these days seem to be following this trend. I not really into cutting-edge style, but I have noticed that there are many different trends that have made a comeback, from the thick-rimmed glasses to the colorful dresses from the 1960’s.

The point is that we all have individual tastes and needs. We’re living in a time where this individuality is celebrated. It’s become cool to be unique. Whether it’s your home or your jeans. People want to have their own style.

When it comes to homes, I think this is great. I’ve always loved variety and I enjoy having clients looking for a Bungalow in East Nashville and others looking for a modern condo in Germantown.

When looking for a home you first should consider the needs you have for space and function. After that, there is a wide range of options depending on which neighborhoods you prefer and how much you can afford.

Whether you prefer to tight-roll your jeans or cut them full of holes, there’s a house for you!

-Peter

www.NashvilleCityHomes.com

Inspection Contingencies 101

For home buyers, the inspection is the time when you look deep into a home's 'eyes' and see if you want to go further in the relationship. For Sellers, it's often full of anxiety, wondering what problems lurk around their home, or how 'alarmist' the home inspector will be. Standard real estate contracts all have 'inspection contingencies' these days, let's take a closer look at this section of the contract.

First, remember that everything is negotiable up front. Typically, sellers expect there to be an inspection, so this isn't usually a point of contention. Buyers will ask for a certain length of time to perform all inspections and let the sellers know their response. If they've asked for a 10 day inspection period, then the buyer's have 10 days to do the home inspection and any follow up inspections such as getting a mold report or a contractor's estimate for things that came up.

When they are ready to respond, the buyer has three options:
1. OPTION 1: Terminate the Contract- I always include this option for my buyers because I'd hate for them to get stuck if the inspection is terrible. The buyers will get their earnest money back and head off to look for another home.

2. OPTION 2: Accept the Home "AS-IS"- This is the desired outcome. It's always nice when there are no inspection surprises and the buyer can happily move forward. With most of the bank-owned properties, this will be your main choice unless you want to terminate. Banks are not interested in doing any repairs whatsoever.

3. OPTION 3: Renegotiate /Ask for Repairs- The usual contract offers this option where the buyer can send a list of requested repairs to the Seller. If the cost of the repairs is above the previously agreed upon repair costs, if there were any, then it's time to renegotiate. Depending on the nature of the work to be done and other circumstances, we can negotiate not only repairs to be done, but perhaps ask the seller to pay closing costs "in lieu of repairs" or even reduce the sales price. It all hinges upon how important it is to the buyer and how motivated the seller is to sell. Things can get messy at this point, but we are usually able to find an agreeable solution.

This is just a simple overview. Inspections and negotiations can get complex sometimes. I always try to help my clients understand what's going on each step of the way. Once we get past the inspections, the focus is on getting the transaction closed and keeping things on track.

My advice: Don't skip the inspection. You always want to know what you don't know about the home you are purchasing.

-Peter

www.NashvilleCityHomes.com

7 Things to Look For in a Home Inspector

Over the weekend, I heard someone describe my favorite home inspector as “alarmist”. Now I could see how you might get that impression, but I wouldn’t use that word for him. Alarmist has the connotation that he blows things out of proportion. Instead I would call him very thorough.

The discussion made me think about what makes a good home inspector. Believe me, you want a good one- and you often won’t know what was missed until you own the home and you ask yourself, “Why didn’t this come up in the inspection?”

Here are some things to look for…
1. Experience- The best inspectors have done hundreds, if not 1000+ inspections. They’ve seen about everything and they are passionate about houses.

2. Licensing- Typically in Tennessee the home inspector needs to be fully licensed. You can't just have a friend look the home over for you. To negotiate repairs under the typical inspection contingencies the inspector must be licensed.

3. Report- Mainly, you want to see a good summary of the issues that need to be addressed. Some inspectors will provide you with a fancy multimedia report. One inspector I know even shows you a PowerPoint slide show at the end of the inspection, giving you a visual tour through the home’s issues. This may be overboard, but having some pictures in the report of the major issues is standard and very helpful in visualizing some of the problems that are difficult to see, especially in attics and crawl spaces.

4. Thoroughness- The best inspectors will ‘leave no stone unturned’. In other words, they’ll squeeze into tiny attics and crawl spaces to make sure they don’t miss anything. This is so important. I’ve had at least two instances where major issues were found in homes only because my daring inspector went into small spaces that other inspectors might skip and call “inaccessible”. This might actually build the case for hiring a skinny inspector, but I’ll leave it at that! In the end, the buyer should have a detailed and possibly lengthy analysis of the home. I always say that you'd rather know up front what you're buying than find out later.

5. Passion- My favorite home inspectors will take the time to talk with my client about the issues. They have a teaching spirit and strive to help the buyer understand how homes work and what problems in the report are big concerns and which ones are more commonplace and can be lived with.

6. Non-Alarmist- Some inspectors, for whatever reasons, do tend to go overboard and scare home buyers more. For example, I had one inspector who was telling us how unlevel the floors in a home were (which we knew). He actually pulled a marble out of his tool belt and let it roll across the room to emphasize how bad it was. He also made a big deal about some smaller items that weren’t up to codes even though this home was built in the 1920’s. After a while, it’s hard to know what items are actually concerns, and which ones are found in every home in the neighborhood. A great home inspector will make this distinction for you.

7. Price- This barely made my list, because the prices for different inspectors doesn’t vary that much, but if you know of several good ones, it might vary as much as $100, and be worth checking out. BTW- inspections are almost always paid for at the time of inspection, not at the closing. Most will take a personal check and often credit cards as well.

If you’ve read this far, you might as well just give me a call for a referral for a great inspector. I try to go on all my buyer’s home inspections, and I have seen all kinds of homes. Even the best homes have issues to repair or keep an eye on. If you’re buying a house, please have a home inspection and get a good one!

-Peter
www.NashvilleCityHomes.com

The Sellers Are All Banks!

Okay, not ALL the sellers are banks, but some days it seems like it. Yesterday, I showed six homes to one of my incredible buyers and half of them were bank-owned. It's a dynamic that is definitely a change from a couple years ago. Working with a bank to purchase a property is a little different than negotiating with a human. Here's what to expect:

1. Banks are not 'emotionally attached' to this property like normal homeowners may be. They are mostly interested in the bottom line net sales price and how quickly they can get it off their books.

2. In my experience, banks are not as 'desperate' as most buyers seem to expect. They are not likely to take an offer of 10% off the list price under most circumstances. If they were that motivated, they would have dropped the list price. They may be negotiable on price, but we'll have to go back and forth a few times to hash it out.

3. Typically, we'll write up the initial offer and send it to the bank's listing agent. They will then log into the banks online system and input the info from the offer and hit 'send'. We'll then wait a couple days and get a verbal counter offer. In one transaction I was working the listing agent said that she didn't even talk to anyone at the bank about the offer. It was all done through email. After the bank counter-offers we generally work out the details verbally.

4. Once all the terms have been agreed on verbally, the bank will send us a packet of their addendum. Often this is longer than the initial offer and will spell out all the terms. As one recent client rightly pointed out, the language is more bent toward the bank. I'm sure they have a team of lawyers that came up with it to protect them. We'll read it over very carefully! After we sign the addendum the listing agent will often have to overnight them to the bank's asset manager to sign and send back. Once the bank has signed off, you then have a binding contract.

5. Within the bank's addendum will be several pages telling you that they absolutely do not warrant anything about the property and that you are taking it "AS-IS". Of course, it is highly recommended to do a home inspection and make sure you know what you are buying. These properties are often in rough shape with the utilities off, so the inspections are an important step.

6. Because they are selling "AS-IS", don't expect them to fix anything that comes up in the inspection. You may be able to renegotiate the price or something, but the bank isn't likely to spend money repairing the HVAC.

Bank-owned properties can be a great value because:
A) Often these properties are on the market for less than the previous owner paid for them in the last couple of years. For example, I saw a great home in Madison yesterday that was built in 2001. Someone bought it in 2006 for $131k and got foreclosed on. Now this home is listed at $115k and still in great shape. In this case the next buyer should have some great equity when the market comes back. I see this dynamic all the time.

B) They may have a smaller pool of potential buyers because of the rough, AS-IS condition that most of these homes are in, and because the banks will often ask for a large earnest money check with the offer. That home in Madison required a 2% earnest money check or around $2500, weeding out some buyers.

It would be interesting to see how many homes in our housing inventory are bank-owned an how that has affected supply and demand. It seems like the human sellers that don't have to sell for some reason are waiting for the prices to go back up. I don't blame them for that, though I look forward to working with the humans again soon...

-Peter

www.NashvilleCityHomes.com

Making An Offer With an FHA Loan

With the changes in the mortgage industry many home buyers are turning to FHA Loans because they still offer the opportunity to purchase a home with little or no down payment. There has been a noticeable increase in buyers using FHA even among my own clients.

The problem is that there are a lot of misunderstandings about how this works, some of which I addressed in my article, "Myth-Busting FHA Loans...". Today I wanted to talk about how to structure an offer when you're using FHA.

Two main questions-
1. Should we ask for the Seller to pay for some or all of your closing costs?
2. Do we need to ask the Seller for down payment assistance?
Both of these items are built into the offer, often on raising the sales price so that the bottom line is still agreeable to the Seller.

Closing costs are extremely common to ask for. The costs vary, but most programs will only let the Sellers pay 3% of the purchase price toward your closing costs and prepaids. This will save you (as the buyer) some out-of-pocket cash and basically let you roll these fees into your loan. We want to make sure to include this in the offer.

The misunderstandings come when we're talking about down payment assistance. Currently, the Seller can contribute to a 'charity' such as Ameridream which, in turn, will contribute toward the down payment. There are rumors that new legislation in congress will change this, but for now, it's still happening. (Read how it works here.) It's best to talk to your lender about this because often then banks will have specific wording that they want put in the contract to make this happen. So, in addition to asking for closing costs, we would ask for 3-5% of the purchase price to be paid toward the down payment.

Help the Seller Understand
Often, the biggest hurdle to overcome with an FHA-financed offer is helping the Seller understand it. They often think that the Buyer is trying to be sneaky and take advantage of them. The key is to tabulate all of the numbers and focus on their net proceeds- how much they will make from the sale. It can also be helpful to compare these numbers to how a conventional loan would be handled so they see the differences.

The goal in every negotiation is agreement- a win/win situation. For the most part, Sellers seem open to these type of offers, but it takes a little more time to educate them and build trust. As it becomes more common, I'm sure it will get easier for us all.

-Peter

www.NashvilleCityHomes.com

Good Bones Make a Great Fixer Upper

I enjoy working with clients who have the passion to take a neglected home and renovate it. Make no mistake, this is a BIG job. It will consume your life if you aren't careful, which is why it's so important to look for good bones.

"Good bones" is a way that people describe the fundamental parts of a home that are difficult and expensive to change. Things like floor plan, room sizes, electrical/plumbing systems, ceiling heights, etc. You can paint and add granite counters to any home, but if it’s missing some of the fundamentals, you may have trouble selling it later.

I was exploring some of East Nashville’s fixer-uppers this morning with a wonderful client of mine. We looked at some that needed hardly any work and others that needed complete renovation. Since I try to attend every home inspection personally and I've renovated a home myself, I’ve learned quite a bit about the systems in a home and where the common problems are. Sometimes I probably point out too many things to my clients, but I want to help them understand what their getting into.

Here are some bones to look out for:

Floor Plan- Watch out for funkiness. Does the layout make sense? Is one of the bedrooms a walk-through? Are there closets? Where will the fridge and dining room table go? Where is the washer and dryer? A home with a great floor plan will be easier to sell down the road.

Structure of the Home- How is the foundation? Are the floors level? Is there water damage? What’s causing it and is it easy to repair? Is the roof in good shape? Is there a basement or crawlspace? Any water problems down there? (BTW- water issues are the #1 killer of a home, reminding us all to clean out our gutters!)

Systems- Are the systems outdated? What about the HVAC? Are there old ducts wrapped in Asbestos tape? Is the wiring grounded? Fuses or circuit breakers? Any knob & tube wiring? Galvanized or copper plumbing? How’s the water pressure?

Location- This should probably be at the top of the list, since it cannot be changed. More than anything else, location will greatly affect the value of the property. Don’t think you can overcome it by dressing up a home in the wrong neighborhood!

Lastly, when you’re considering a fixer-upper, you have to know the numbers going in. What are other homes in the neighborhood selling for? How much money and time will it take to renovate it? How quickly are home selling? What are the trends in the area?

It’s a lot to think about, but when you’ve made a thoughtful choice, renovating a home can be an enjoyable and profitable experience. Otherwise, you may lose your shirt…

-Peter

www.NashvilleCityHomes.com

Myth-busting FHA Loans- A Success Story

With the tightening of loan qualifications with most lenders, the 100% financing of yesteryear is all but gone. However, there is a way with FHA. In fact, I had some clients close last week who bought a home with nothing to pay except a little earnest money.

FHA loans are quite mystifying until you worked with them a couple times. I’m not mortgage guy, but let me explain the basics from my experience, both on the buying and selling side of them. First, a couple myths to bust:

MYTH 1- FHA will require lots of repairs
Years ago this may be a concern, but the revisions made in January 2006 loosened many of the guidelines, requiring fewer items to be repaired. The inspection for these repairs is done by an FHA approved appraiser as part of the appraisal.

MYTH 2- Sellers will have extra hidden costs to pay
As with any contract, everything is negotiable. It is very common that the sellers will assist with the buyer’s closing costs or possibly contribute to a charity like Ameridream to give the buyers some down payment assistance, but this is all negotiated upfront. Before we have a binding contract, the seller will know their net proceeds from the sale without fear of surprise costs due to the FHA financing.

MYTH 3- Financing for FHA buyers is more likely to fall through
I doubt it’s any more likely than with any other financing. I’m not sure about the exact stats, but the strength of a buyer’s pre-approval is always suspect until the lender has actually collected the required paperwork to make sure that they qualify and that no surprises lurk beneath the surface. It’s always good to work closely with the lenders to make sure that the buyers really are qualified, but sellers who are worried about this should probably just be thankful to have a buyer, right? :)

To achieve a 100% loan through FHA, the seller or possibly a family member contributes to a charity such as Ameridream who will, in turn, contribute toward the buyer’s downpayment. Sellers are often uncomfortable with this at first, but I always try to explain it upfront so that they understand how it works. The funds are built into the sales price and negotiated upfront. It’s completely legal, but still a little complicated. I wrote more about these programs in this article from Jan. 2007.

Back to real life… My clients last week bought a historic home built in 1932. It hadn’t been renovated, but has been in the same family since the ‘60’s. It wasn’t in major disrepair, but still had some old knob & tube wiring, and all the plaster walls intact. Very low funk factor. The only FHA repair we had to do was to replace a portion of the roof that had an obvious leak that had come through the drywall in a back addition on the house. This was no problem, since the buyers were going to fix that anyway. (It helped that their Realtor [me] occasionally does some roofing and drywall, eh?)

The lending bank was a slow mover that I’ll avoid in the future, but otherwise, the process went smoothly. In the end, the buyers were thrilled and excited to finally own a home of their own. They’ve already started ripping up carpet to reveal some well-preserved hardwood floors.

After a few successful closings involving FHA financing, I’m a fan. They do require some extra work and sometimes a lot of patience, but a qualified buyer can still own a home without a down payment.

Just make sure you work with a great lender and Realtor who can get it done for you. Thinking about it? Give me a call.

-Peter
www.NashvilleCityHomes.com

It Takes A Village to Buy a House

Today I had a client tell me: "It takes a d*** village to buy a house!"

Man, is she right. There are a lot of people involved in a transaction to purchase a home and everyone plays an important role. In her case we have been frantically getting all the ducks in row for a closing that was supposed to be today. Unfortunately, the lender has needed a couple extra days to get their loan approved. (Seems that we fell victim to the 3 day holiday weekend... :)

If you ask me, this is when having a quality Realtor makes a big difference. It's also good to have a great mortgage person, title company, insurance agent, appraiser, home inspector, termite company... you get the picture! Sounds like a village to me.

Of course, when you have a weak link in this chain, the system tends to backlog or even have to backtrack. That's why it's so important for me to form a 'team' of these people that I can count on. My clients not only get the value that I bring to the transaction, but they get the benefits of my entire network of professionals.

My role tends to be the hub of the wheel. The 'middle-man' that makes sure things are getting done and staying on track. This is much easier when I'm working with people that I know and trust.

Need a referral for a plumber? Not sure to ask about financing?
Give me a call, I know people...

-Peter
www.NashvilleCityHomes.com

Real Estate Music?

Today was a flurry of last minute chores in preparation for a couple closings next week. I had amendments to fax, tile contractors to meet, and wiring instructions to coordinate. For some reason it reminded me of my years in the music business.

How, you ask? Well, it's kind of like preparing for a new production or a live concert video. To pull it off, a lot of different things must come together- and it's usually a little crazy. (That's an understatement!)

The satisfying part comes later, when the music begins or the closing happens. It's a creative process. We have to work together to make something that we couldn't do on our own.

I usually don't get so romantic about it, but once in a while I pause to consider what an honor it is to do what I do to bring people together to an end that benefits all involved.

I guess you could say, we're making 'music'. :)

-Peter

www.NashvilleCityHomes.com

A Special Moment in Real Estate

I was recently at a walk through for a condo that a father was buying for his son to live in. These were great clients and I had really enjoyed getting to know them a little over the process of purchasing it.

Anyway, we were looking over the condo just before the closing to make sure everything looked right. It was fine and the father kept remarking about certain things to his wife that their son would really enjoy about the place. I remember him saying something like, "It will be really good for him, won't it?"

It doesn't come across in the text, but as he said it, I could feel the love that this dad had for his son. It gives me goosebumps as I write this. It was indeed a special moment.

Buying a home is more than just the mechanics of the transaction. It's about living life to it's fullest. I'm so honored to be part my client's lives and help to find them a wonderful home for their next 'season'.

I'm also blessed to relate to this father-son love. Something that I share both with my dad and now with my own son.

Life is good.

-Peter

www.NashvilleCityHomes.com

Beware of House Funk

Old homes are cool. People will pay more for historic character and charm. But what about funk?

Funk- I'm not talking about the super-cool-booty-shakin' music from the '70's. I'm talking about homes that have something weird happening in spite of being a 'charming old house'.

Here's what brought this up... I was a little bored today so I thought I'd get out and preview some homes on the market in East Nashville. I saw 12 homes- 9 of which I thought were a little funky for the price. What do I mean?

Funky House Stuff
1. Weird floor plan- This is a very common kind of funk with older homes that have been remodeled to fit a more 'modern' lifestyle. Closets, bathrooms or extra bedrooms have been added, but it ruined the house. You've seen these homes. The pictures look great until you go there are see how the rooms work together.

2. Funky attic conversion- Also very common. Seldom does a converted attic space feel right. Problems include: Steep stairs, bathrooms with angled ceilings too low to stand beneath, lack of adequate heating/cooling systems, etc. When converting an attic there is sometimes a fine line between cute/sensible and funky.

3. Mix 'n match floors- Buyers always seem to notice when there are several types of flooring that doesn't match. For example, homes with hardwoods in the old part and then laminate floors in the new part mixed with two kinds of carpet, etc.

4. Unlevel floors or leaning stuff- This is the king of house funk. If the floors are unlevel often much of the house is unlevel. You notice it with door trim, baseboard, windows that stick or furniture that rolls to one side of the room. It can be a real problem and is often the kiss of death for a property that's for sale.

5. Duplex conversions- Homes that still feel like they're divided into two have 'the funk.' Signs of this include: two kitchens, exterior entrances where the should be just a window, and one side of the house that is in much worse condition. Homes can be converted from life as a duplex, but it must be done carefully and thoroughly.

If you're looking for a house you may want to stick with Sly and the Family Stone (see below) and leave the other funk out of the deal. :)

-Peter

www.NashvilleCityHomes.com
REALTOR. City Home Specialist.

Water Can Kill a House

I see it all the time. The evidence of water damage to homes. Weakened foundations, rot, mold in crawlspaces, cracks in foundations, etc.

I was just reading an article in This Old House magazine (which I highly recommend) about ways to handle water runoff and make it look good. Their suggestion of making a ditch look like a stone creekbed isn't for every home, but even minor repairs can sometimes keep water from running into your crawlspace undetected.



I'm not an expert on this. After all, I'm just a Realtor,right? However, I go to all my buyer's home inspections and I've got the best inspector in town- he is very instructional and wildly informed on everything in your home. Nearly every home inspection includes some kind of note regarding water entry or the need for better runoff.

Here are a couple real life situations that I saw just recently:

CASE 1: I had some buyer's that fell in love with a house built in 2005. It was a beautiful brick home in a nice subdivision near Brentwood. The inspections were going well with no unexpected issues until we finally got to the crawlspace. Here it was discovered that water was regularly draining in and there was quite a bit of fungal growth present. Yikes!! [THIS is why you ALWAYS do a home inspection when purchasing a home] The inspector thought that perhaps the homes were so close that there was nowhere for the water to run, so it was going into the crawlspace.

CASE 2: Another buyer of mine had a contract on a lovely home out west of Nashville toward Percy Warner Park. Again, things were going reasonably well at the home inspection until the inspector came out of the crawlspace and mentioned something about a "swimming pool" and mold. Apparently, an addition on the back of the home was too far below grade and water was congregating under that section of the house. Once again, my fearless inspector saved my clients a huge headache down the road.

Since then, both of these clients have found other homes.

Anyway, here are some maintenance tips that I've accumulated:

1. Clean your gutters- Clogged gutters may lead to rotted eaves or standing water next to your foundation.

2. Add some gutter extensions, not just a rock under the downspout- You want to lead water as far as possible away from your home. My inspector always says at least 10 feet.

3. Make sure your drainage pipes are not clogged- Many homes are built where the downspouts direct water into black corrugated pipe that deposits water away from the home. This looks nice, but make sure that this pipe does not get crushed or otherwise blocked.

4. Landscape so that water runs away from the home- Okay, this may be obvious, but so often I see homes with landscape beds that tend to collect water next to the home. We also have many homes built on hills where water is practically directed right toward the home. If grading isn't enough then a French drain may be needed to get the water away.

Don't be afraid. If you're looking to purchase a home and have a quality home inspector, these types of issues should be found out. If you haven't found a Realtor to guide you through the process, then call me today.

-Peter

www.NashvilleCityHomes.com
REALTOR. City Home Specialist.

The Problem With "Instant Equity"

Ever seen a home listing that advertised "instant equity"? I just saw a condo where they've dropped the price and claim that you could have instant equity because a similar unit sold for $30k more.

Let's think about that for a second. I know that sometimes sellers are motivated for one reason or another, but are they really going to lose $30,000 on the deal??

In this market, it's more likely that the prices have weakened and sellers are having to be more negotiable to unload an unwanted property.

In my condo example, it may actually be a good deal, but you aren't likely to turn around and sell it right away for $30k profit. Instead, you'll have to wait on the market to heat up. So, I guess, the equity isn't so 'instant'.

Along the same vein are homes advertised for something like "$50,000 under appraised value", but yet they've been on the market for 60+ days. If it was really that good of a deal, it would have sold already!

Okay, I'll calm down now.
Have a great day!

-Peter
www.NashvilleCityHomes.com
REALTOR. City Home Specialist.

Doing Business is an Act of Creation

I've really enjoyed getting to know a couple clients lately. Both are buyers that are moving into Nashville from across the country. Due to a variety of factors they've had a rocky time buying a home which has afforded us some time to get to know each other. Thankfully, I think they are both close to finding a home and settling in.

So anyway, I came across an article today from Daniel Lapin that relates to this because it talks about how everybody benefits from a successful business transaction. He calls it an 'act of creation' which is a really interesting way to think about it. Here's what he says:

"Remember, most of us prefer to do business with folks we know, like and trust... Whenever you do business together, wealth is created. Think about it: if nobody coerced them to make a deal, it must have benefited both of them. Each must have valued what he gained, more than what he gave up. That is right. The act of doing business is the act of creation."

As a Realtor, I often feel like people see me as a salesman trying to talk them into something. This 'salesman' personality is NOT ME AT ALL! I'm not a very good persuader, however, I enjoy being a teacher and a guide- learning what a clients needs are and helping to fill those needs, all while educating them about the process.

It's a good reminder that I don't have to be a salesman, but instead work on building relationships, and letting people know that I'm here to serve them with excellence.

-Peter
http://www.nashvillecityhomes.com/
REALTOR. City Home Specialist.

Custom Home Costs in Nashville

Having your very own custom dream home built is the dream of many homeowners. It's an exciting venture and one that can be quite complex and difficult at times.

If you're considering it, the first question you should probably ask yourself is, "How much can we afford to spend?"

That's an important question to ask and have answered before you do too much dreaming about a 5 car garage and an Olympic-sized pool at your new home.

I have some clients are at this stage of the game so I called one of Nashville's top builders, Nashville Construction Company, and asked Sam Burgess about it.

Sam gave me some good 'rules of thumb' to at least help us have a ballpark idea of what the home might cost to build. First, he said that generally the home value comes out to about 4.5 times the value of the lot. That means that if you're looking at a $100,000 lot, then you'd probably expect to spend around $450,000 building a home on it.

That's somewhat helpful, but in my client's situation the lots aren't so expensive, but the neighborhood rules require that any home that is built must be 4000-8000 square feet. This size of home will cost more than $450k to be sure.

That's when Sam mentioned that we should expect to spend $175-185 per square foot for a custom home. This would include the upscale finishes, etc. that you'd expect in a custom home. Sometimes you can 'cheat' a little by having a portion of the home that is left unfinished like a basement or a bonus room. That way you can afford a larger home and finish that space off later when you've got the cash.

As I mentioned, this is just the very beginning of what can be a complex project. However, if you have realistic expectations on the front end, you will save yourself a lot of grief along the way!

If you're weighing the options and considering a custom built home, please give me a call.

-Peter

www.NashvilleCityHomes.com
REALTOR. City Home Specialist.

Keep Everything on the Table (and Avoid Jail)

It's not unusual in a real estate transaction to have the Sellers contribute toward the Buyer's closing costs. Buyers that are short on cash, but have the credit to get a mortgage often ask for this to help cover their out-of-pocket expenses. This is all fine and acceptable as long as it's DISCLOSED to all parties and APPROVED by the lender.

This means that all the transfers of monies related to a specific real estate transaction are listed on the HUD settlement statement at closing. This disclosure is important, mainly because the lender wants to make sure that the money being borrowed is actually paying for the property that secures the loan and not going to the buyer as cash under the table at closing.

Here's a real life example: I know of a situation where a lender (off the record, of course) told a buyer that in order to get some extra cash that she needed for repairs she could raise the sales price and then ask the seller to cut a personal check back to her outside of closing. At first, this may sound like a great idea, right? Why not? The seller gets their money, the buyer gets the house, the lender closes the deal. Here's why: IT'S FRAUD.

Mortgage fraud, actually, which makes it extremely odd that the lender would even suggest it 'off the record'. Lenders usually have a cap on how much can be contributed by the Seller- typically 3-4% of the sales price. If the buyer needs more cash for repairs, they can get a second home equity loan or get a second job, but they can't get it from the Seller outside of closing.

Cash-Back Schemes: The buyer and seller collude to deceive the lender as to the true sale price of a property. The seller gives the buyer a cash rebate which is not disclosed to the lender. As a result the lender lends too much, and the buyer and seller pocket the overage. This scheme usually requires appraisal fraud to deceive the lender. "Get Rich Quick" real-estate gurus' courses frequently rely heavily on this mechanism for profitability. (From Wikipedia)

Mortgage fraud is a federal crime and penalties can be quite severe. For me, I prefer to stay out of jail so don't call me if you're planning to try it!

Click here for a great article about if from Bankrate.com.

-Peter

www.NashvilleCityHomes.com
REALTOR. City Home Specialist.

Real Property vs. Personal Property

"Do the drapes stay?", "Will they leave the chandelier?"

These are the types of questions I hear when showing homes to buyers and they are good ones to ask. It's important to understand what you're getting when you purchase the home. We refer to this as real property.

Real Property is not just the land and anything that is permanently attached to it, but also the rights and benefits that are included. Anything else is typically called personal property. For my clients, the key phrase is "permanently attached".

If you can pick up an item and move it, it's probably not considered real property and it doesn't come with the house. That is, unless you ask for it! This is important to know. If a buyer wants the refrigerator, but doesn't specifically ask for it to remain in the contract, the seller will likely remove it because it is personal property and not permanently attached.

Here are some examples. Do these come with the house?

• Drapes- Not automatically. You must ask for them in the contract.
  
• Kitchen Appliances- Maybe. Some, like the refrigerator and the microwave, may not be permanently attached and you could just pick them up and move them- they don't stay. However, the garbage disposal and the dishwasher are most likely hard-wired and considered real property. Note: If the microwave is built in and hard-wired it would stay.
  
• Washer and Dryer- Not automatically. Even if the seller offers them in the listing, you should make sure and ask for them in the contract to make sure they stay if you want them.
  
• Light Fixtures- Yes, they stay if hard-wired. The kind that hang on a hook and plug into the wall are considered personal property, though.
  
• Bathroom Mirror- This can be tricky. It stays if permanently attached to the wall. If it is just hanging on a nail, it's technically personal property.

As you can see, there can be some confusion about this. That's why if there is something about the home that is important to you, make sure to include it in the contract. It is all negotiable anyway. If you really want the drapes, chandelier, or even a certain piece of furniture be sure to ask and make it part of your offer.

You should also know that if you ask for much of the personal property in your offer we may use what's called a "Bill of Sale Agreement". This will list the personal property on a separate form and keeps it outside of the actual sales contract. This is done to keep lenders from thinking that you are borrowing their money to buy a bunch of furniture, etc.

The imporant thing is to think about all of this up front. Otherwise you may find that you bought a home without any bathroom mirrors...

-Peter

www.NashvilleCityHomes.com
REALTOR. City Home Specialist.

Buyers, Be Armed!

Armed with information, that is! As you browse homes on the internet and start venturing out to see them, how do you know when it's a good deal? How do you know that you won't get stuck with a "money pit" that will require massive repairs that you can't afford? How do you beat out the competition and get a contract on the home once you find it?

Here's how:
1. Work with a Realtor- I'll try not to be overly biased when I say this: I truly believe that you are at risk when you are unrepresented in a home purchase.

• When a home is listed, the seller is already offering to pay for the buyer's representative. It won't cost you anything extra!
• Why not have a professional on your side to help you negotiate and wade through the fine print to make sure your interests are protected?
• A great Realtor will provide you with numerous tools so you can make well-informed decisions.

2. Look at a Comparative Market Analysis- Before I show a home to a buyer I do a comparative market analysis, or CMA. This CMA shows us what similar properties in that neighborhood have sold for so we can judge if the asking price makes sense. Without it, you have no basis for justifying the price.

3. Look up the tax records- I also pull the tax record for every home I show to a buyer. This extra piece of information tells us the sales history of the home and important facts like the recorded number of bedrooms and square footage. It's also helpful to know if the current owner bought it just a couple months ago to renovate and 'flip' or if it has been in one family for generations.

4. Be pre-approved for a loan- I wrote a recent article with more specifics about this, but it definitely needs to be mentioned here. When you're pre-approved, the home seller can know that a lender has looked at your finances and there should be no snags to you purchasing the home. This will be a huge advantage for you in situations where there are other competitive offers for the same home, which happens quite often.

5. Do a home inspection- This is a common part of the process, but shouldn't be overlooked. A great home inspector will give you a report of all the repairs that need to be made on a property and let you know about any 'red flags' that might need any further inspection. It is a fabulous tool and really helps with any fears that you have about the condition of the home. Cost usually starts around $250, but it is money very well spent.

6. Have your checkbook ready and be decisive- Once you've done some research and toured a few homes, you start to get a better idea of what is available and what you can expect to find. Now when you see a home that is a good buy, you'll know, because you're "armed"! At this point you should make sure to have a checkbook with you and enough funds to cover the earnest money check. Earnest money is basically a deposit that shows that you're a serious buyer and committed to seeing the process through to close.

It takes some extra effort and preparation, but it's all worth it to be in the best position possible to buy a home you love at the best price. If you're ready to get armed and serious about your home search, please call or email and we'll get started today!

-Peter

www.nashvillecityhomes.com
REALTOR. City Home Specialist.

Get Pre-Approved. (Buying a home, Step 1)

Many people, even myself, enjoy browsing homes. It's fun to imagine a different lifestyle living in a different neighborhood or having that gourmet kitchen you've always wanted. Somewhere between this pastime and having full-fledged "house fever", it's best to stop for a second and get pre-approved.

Before I go too far, I should talk about the difference between being pre-qualified and being pre-approved. Pre-qualification is less formal and can be accomplished in just a few minutes on the phone with a lender. The prequalified amount is based on information you provide about your income and debts. This is not a commitment from the mortgage company, but rather just a starting point to let you know how much house you can afford.

Pre-approval goes much deeper. This step involves providing the lender with financial statements and an extensive look at your credit history. The mortgage company may offer you some different loan packages based on your situation and then issue the pre-approval letter. This letter tells the home sellers that you are eligible for the loan and that there shouldn't be any obstacles financing it.

As you can imagine, with a pre-approval letter, you as the home buyer are in a much better position to make an offer on a property. The sellers can be more assured that your financing will come through and that the sale will actually happen. They know you're serious and that your offer is worth a serious look.

In addition, YOU know what you can afford. It's sad when buyers have looked at $300k homes and picked out several they like only to find out they can only afford up to $250k. This can easily be avoided by getting pre-approved up front.

If you're ready to make this step please call or email. I'd be happy to give you some referrals for some great mortgage lenders who will help you further understand the process and match you with the best loan for your situation. After all, if you're really serious about buying a home, why wouldn't you get pre-approved?

Peter

www.NashvilleCityHomes.com
REALTOR. City Home Specialist.

Charities Giving Down Payment Assistance

I’m currently working with a couple clients that are getting FHA insured loans. This program offers assistance to homebuyers that may not qualify for typical conforming loans with competitive rates. They also offer loans with down payments as low as 3% and even that can be paid for by a grant from a charity. What!!?? A charity?

Yes. FHA regulations state that a home seller cannot directly contribute to a buyer’s down payment. However, they can contribute to a non-profit charity, which, in turn, gives down payment assistance to the buyer. It sounds a little shady, but it is a very common practice.

Of course the sellers of the home aren’t going to contribute to this ‘down payment charity’ for the good of all mankind! This contribution is just added to the sales price. That means if a buyer wants to purchase a $100,000 home and needs the 3% down payment assistance, they should offer –roughly- $103,000 for it.

It is common for buyers to make such requests. Typically a buyer may offer a higher price if the sellers will pay a portion of the buyer’s closing costs. Some sellers will balk at this, but most are just interested in the NET, or what is left for the Seller after all those costs are paid.

This system is, for the most part, good. The sellers get their home sold, and the buyer gets a home without a lot of up-front cash. However, one problem that may arise is that the price may have been inflated to account for these costs. For example, our $103,000 sale from above would be more accurately recorded as a $100,000 sale. The problem could be that the property may not appraise for that amount and the deal would fall through, or the buyer may be generally paying too much for a home in order to finance his/her downpayment into the deal.

I was speaking to one mortgage broker recently who works with many first time homebuyers. He said that probably 85% of his business deals with FHA loans. A couple of the lenders I work with have mentioned that the FHA has loosened their eligibility requirements a little over recent years making it easier for people and homes to qualify. This means I'm sure to see a lot more FHA loans in my clients futures.

For more information, click here for a great article I found from BankRate.com.

Have questions? Contact me here.

Have a ‘charitable’ day,

-Peter

www.NashvilleCityHomes.com
REALTOR. City Home Specialist.