Case Study: Move-Up Buyer – Part I

I’m currently working with a terrific young couple who followed this blog for a couple of months before asking me to help them move up to a larger home.

At our first meeting, a few weeks ago, we discussed their home’s value/equity position and considered various options.

As a precaution, I recommended that we get them pre-approved for the financing of their new home before listing their present home to ensure that they would be able to buy before listing their home.

As much as I enjoy working with homeless people, I don’t want to be the cause for their homelessness! 🙂

My recommended lender promptly approved their new financing and provided a firm, underwritten loan commitment.

Then, we listed their present home.

I recommended a “retail” price for the home, despite having a very low short sale comp two doors away, because the home was in model home condition and gorgeous.

The home went into MLS at 2:00 p.m. three weeks ago today and we accepted an all-cash offer by 6:00 that evening.

Fortunately, we sold their home to an investor with an all-cash deal that avoided what could’ve been a low  appraisal.

As part of the deal, I negotiated a rent-back provision so my clients could rent back from their investor purchaser until we could find and close on another home.

We closed escrow for the sale of their home this past Thursday after a smooth 18-day escrow.

Our next challenge?

Finding that nicer, larger home my clients want and need!

Stay Tuned For Part II

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Case Study: Finding A Home With Guest Quarters

I have a buyer client who would like to buy a home with living quarters (aka a guest house) for their aging parents.

They can go up to $500,000 and would like to be on at least an acre in either Eagle or Meridian.

They would like separate living quarters with a kitchen, living area, bedroom, and full bathroom.

600 to 800 square feet of living area would probably work.

Sounds reasonable, right?

Well, it isn’t easy, thanks to a variety of reasons.

You wouldn’t believe the myriad rules that apply to separate living quarters in Ada County and its various cities.

There are regulations pertaining to zoning, attached vs. detached quarters, square footage, kitchens, and other features.

Naturally, the rules are inconsistent when considering properties in a city vs. Ada County.

To further complicate things, many homes are in subdivisions that have CCRs that prohibit having more than one living dwelling on a lot.

We’ve been looking for a year or more with no luck so far.

Interestingly, I have run across several such properties that were created without governmental approval and are illegal.

It shouldn’t be this difficult, given the number of families who are interested in this living arrangement.

I was told, yesterday, that the City of Eagle is considering a new regulation that would allow separate living quarters under certain circumstances.

If it passes, it’s a step in the right direction, but it would not remove the provisions in subdivision CCRs prohibiting guest quarters.

In the meantime, we will keep on looking.

 

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Case Study: This Week's Buyer – Update #1

Here’s an update on my earlier post about last week’s buyer:

  • I researched 57 properties and previewed 11 of them.
  • I selected 4 properties that best matched my buyer’s criteria.
  • Over the course of the week, two of those four properties sold with multiple offers on each listing.
  • I showed my buyers the remaining two properties.
  • My buyers made a full-price, all cash, offer on the property they liked best.
  • The seller accepted my buyer’s offer as written within two hours.
  • I have opened escrow and the home inspection will be done this afternoon.
  • We are scheduled to close on 3/11, but will work toward closing sooner.

Closing will be somewhat of a challenge because we must coordinate our closing here with closing the sale of my buyer’s home in another state.
Stay tuned for further updates!

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Case Study: This Week's Buyer

I am currently working with repeat past clients who are relocating to Boise.
They, and their family, have completed several transactions with me and we have become good friends.
Because I helped them buy and sell their previous home here, I have a clear understanding of what they want and where they want to live, which allows me to go shopping through their eyes.
Their present home is sold and scheduled to close in early March; thus we cannot consider short sales or tenant-occupied properties.
As many of you know, I don’t like to show homes “blind” (that’s real estate speak for showing homes the agent hasn’t seen).
I think it’s unprofessional and inconsiderate of their buyer’s time for a real estate agent to show homes they haven’t personally seen and evaluated.
When I’m working with buyer clients, I prefer to:

  • Counsel my buyers to identify needs, wants, likes, and dislikes.
  • Search MLS for listings matching my buyer’s criteria.
  • Review those listings thoroughly and eliminate the obvious misfits.
  • Drive by and eliminate listings that don’t meet my buyer’s criteria.
  • Preview (personally inspect) and eliminate listings that don’t meet my buyer’s criteria.
  • Show only those listings that meet my buyer’s criteria.

My Progress So Far:

  • My initial MLS search yielded 57 listings.
  • I eliminated 54 homes that were on busy streets, beat-up REO listings, homes not yet built, etc.
  • I have 3 beautiful homes that match my buyer’s criteria and will show them to my buyers this Saturday.

Yes, it’s lots of work, but it will make the home buying process easier for my buyers.
Stay tuned for results!

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Case Study: Buying A FNMA REO

I recently represented a buyer who purchased a FNMA REO (foreclosure).
This transaction illustrates what can happen if you’re a buyer who wants to buy a foreclosure.
The Property
List price was $214,900, offered “as is”.
The property was 14 years old, in a good neighborhood, but, well  .  .  . 14 years old.
It had light gray linoleum with mauve accents in the entry, kitchen, and nook.
The cabinets were painted white, the countertops were a light gray laminate, and the kitchen had a mixture of original white and almond appliances.
Most buyers would want to update the home with new carpets, hardwood floors in place of linoleum, interior paint, new appliances, and granite countertops.
The lot had a big back yard that sloped down toward the house (remember this fact), which caused me to caution the buyer about the possibility of moisture in the crawlspace.
The Transaction
We wrote an offer for $195,000 with $2,000 earnest money, a pre-approved loan, owner-occupied, $100,000 down, and a 30-day escrow, contingent only upon satisfactory results of a home inspection.
I carefully crafted the offer with language allowing the buyer to withdraw if they deemed inspection results to be unsatisfactory.
FNMA responded verbally with no written counteroffer.  Normal real estate practice is to provide a written counteroffer to facilitate negotiations.
FNMA’s verbal counteroffer was $212,000 and close on 1/14/11, which raised the question of why they would want to wait longer to get their money when the buyers were ready, willing, and able to close sooner?
FNMA also arbitrarily mandated that the property be considered a second home because my buyer was keeping their free and clear home elsewhere while moving to the Boise area.  In doing so, they escaped paying the full amount of selling agent commission they had originally offered me in the listing.
FNMA also required the buyer to sign a blank lead-based paint disclosure, unsigned by FNMA, as a pre-condition of looking at the buyer’s offer.  The property was built after 1978 and thus not subject to the federal law requiring lead-based paint disclosure.
The buyer submitted a second offer at $205,900, which was verbally accepted by FNMA after the offer had legally expired.
It took FNMA several days to provide us with an actual signed copy of the offer along with a rambling 13-page addendum, complete with a scrawled illegible signature and typed initials instead of the usual written initials commonly seen in contracts.
The listing agent was unable to tell me who her FNMA contact was or where they were located and told me that all she could do was “put it in the system”.
We completed the home inspection and the inspector found water in the crawlspace (remember the fact above?), newly-installed vapor barrier, missing foundation insulation on three of the four foundation walls, and two empty one-gallon Clorox jugs in the crawlspace.  All conclusive evidence of someone previously trying to fix an undisclosed mold problem.
There were also other numerous issues found by the inspector; some requiring substantial repairs.
The buyers exercised their right to cancel the transaction in the event they deemed the inspection results to be unsatisfactory.
The Bottom Line
Lots of wasted time, the transaction failed, the buyers spent $300 on a home inspection, the buyers didn’t get the property, and FNMA still owns the property.
Further, FNMA will now be legally required to disclose their knowledge of a material fact (if, in fact, they do so), which will impact the sale price or cause the property to remain unsold.
Meanwhile, we taxpayers are footing the bill for the way FNMA does business because FNMA was taken over by the federal government in September 2008 to keep it afloat.
All of this could have been avoided by FNMA completing a home inspection and providing full disclosure (not required by law for REO properties) up front, or better yet, making the necessary repairs.
If the buyers had purchased this home, their total investment, including purchase price and improvements, would have been roughly equal to that of a well-maintained home being sold by a motivated seller willing to conduct business normally and close escrow.
We are now looking for such a home.
I am confident that I will be able to find it.

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