In the past, I talked a lot about how to buy a house, how to set criteria’s in finding your dream home, how to get preapproved, why you need to work with a smart realtor and so forth. Recently I started focusing on shedding some light about what happens during home transaction. I wrote a blog about what you need to look in the HUD final statement so you don’t lose any money on missed items. In the same context, today I am going to share some lessons my buyers learned in the past transactions which should help others and avoid similar mistakes.
1. Survey
Survey is an important document needed by a lender if you are going through a mortgage company. It’s title company duty to check with agent and buyer to make sure they have previous title from seller or order a new one as per lender’s request. In one of the transaction, title company didn’t follow up with us and lender only asked almost a week before closing during the underwriting approval process.
We had to jump on real quick to check with the seller and found out they didn’t have it. So we ended up ordering a new survey which took 4 days and really worried the buyer whether we will close on time or not. But we were able to close on time as the approval came just the day of closing and Buyer was really stressed about it.
Lesson Learned: Always check with an agent to see the survey is provided by seller and its acceptable by the lender. If not, work with the title company order a new survey or you can order yourself with help of the agent.
2. Re-Inspection
If you are buying a pre-owned property or resale property, you might find few things during the inspection process and want to get it fixed by the buyer. It is normal and most sellers would agree to get them fixed. But it’s the buyer’s responsibility to check or reinspect the problem again to make sure it’s fixed properly and working as expected. Don’t assume that if the seller said its fixed, it’s fixed and working as per expectation. They go by what repairmen said to them and they might not be living in the house to check whether it’s really fixed.
In another transaction, AC was the problem and we requested the seller to fix it. Seller did call the warranty company and they did send out service company to fix it. Few days later they sent us the copy of receipt as an acknowledgment of problem fixed. But buyer insisted to reinspect and we inspected to find the AC is still not working as expected. We reported it again and they sent repairmen again and found some other issue and fixed it. We went to check again and finally it worked as expected. Buyer was happy that he got it fixed before he moved to the house.
Lesson Learned: Don’t assume that the issue is fixed if the seller says so. Make sure by reinspecting the problem personally or hiring a professional to make it’s fixed before closing properly. After closing, it is tough to go back and fight for it.
3. Moving to your new Home
This one was a real bad experience for the buyer. They were all excited to move to their home immediately after the closing on Friday. He arranged the movers and all utility companies to show up the next day to get it all set up. But unfortunately funding from lender didn’t happen and it was a weekend. Without funding title company won’t release the keys to the buyer. Thing is funding is approved but there was a problem in the wire transfer. We tried talking to seller to approve getting the keys but they don’t want to do it due to legal issues. Buyer was totally frustrated and had to wait till Monday to get the keys after funding. He had to cancel all plans and wait for 2 days which was really bad. I tried my best but couldn’t do anything due to seller’s stubborn stance.
We were communicated about the problem after all set and done. It was lender’s problem who sent the wire to a wrong account number so the bank rejected it. They forgot to put the zero’s infront of the account number which was expected by receiving bank. Anyway, I was able to get the 2 days interest refund for my buyer from the lender as consolation but mental tension and stress cannot be replaceable.
Lesson learned: Don’t plan the move close to the closing date. Wait for the closing to complete without any problem and schedule it after closing. Things can happen from any side, so don’t expect to go as per your plan until the key is in your hand.
I hope these lessons help you to be aware of the issues which you can come across during the home purchase process and be ready for it. I will continue to share them in the future to help you all.
Have a great weekend!
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Home Buyers: Lessons Learned from Previous Transactions
Is it seller’s market now in Texas?!
I know you are looking at the title and want to ask me, “Are you kidding Vijai? Sorry, I am not kidding. I was even surprised when I saw the same titled article from the Texas Association of Realtors.As per 2012-Q3 edition of the Texas Quarterly Housing Report, Texas housing market posted a 14% increase in sales volume with roughly 6% increases in both median and average sales price. Here are few more points from the report. Click to see the full report.
Median sales prices for properties was $161,500, which is 6.46% more than third quarter 2011. Average sales price had a similar increase, up 5.74% from the same quarter last year, to $208,515. The latest statewide inventory figure indicates Texas overall has shifted to a seller’s market, and data show this is also true in many local real estate markets.
If you want to just look at Houston, here is the graph for one year,
The graphs clearly shows the inventory for year over year has came down 30% and median prices have gone up 5% for year over year. That’s not a lot of price increase but it is going up which I can really see by researching properties for my client.
But it doesn’t mean we are in seller’s market. Don’t panic. Figures might point that we are shifted to seller’s market but I would say we were back to normal and things looking much better now. But I am afraid we are on the verge of becoming the seller’s market or atleast things are pointing in that direction. I myself was house shopping for the last month or two and new homes prices have gone up up 1-2% every month in just these 2 months. That’s a true fact.
If you are buyer, be ready to pay more than last year for homes whether new or resale. If you are investor, you are not going to get same deal like a year ago. But you are seller, things are looking much better now. If you want wait more, you might get good price for your house.
Investors: Get Free Foreclosure Listings from Zillow.com
As an investor many of you invests hundreds of dollars to signup for subscriptions to get foreclosure and pre-foreclosure listings. Sometimes you have to sign up for an online account and end up going through pages and pages of listings or don’t have a way to filter them properly because these websites are not robust enough to give options to filter by cumbersome criteria’s. Some of these sites are loaded with junk popup ads which we all hate. Now you don’t have to put up with those sites anymore and on top of that you can also save dollars.
Good news is that Zillow.com recently announced that it has added nearly 2 million free listings of “pre-market inventory” to its database. This includes full addresses and details on pre-foreclosure, foreclosure, and bank-owned properties not included in the usual MLS databases. Click the below image and you will be taken to the section at zillow.com which is dedicated specifically for foreclosure listings.
In order to get your hands on to the listings, you either have to sign up as user if you don’t have an user account already or just login using your current user name. It is just that simple. After you login, you can search for any type of listing for the area you are interested. You can set your filter criteria using the filter option like below,
I checked for my zipcode 77070 and I was able to see lot of listings which I actually showed to my clients during this year. I also saw other listings which I never came across in the MLS because these properties may be sold via county auction and other auction sites. That’s really a great asset for any investor. One problem I noticed was that the listings are not updated. It still shows lots of properties as foreclosed which are already sold and no longer available in the market. So you may need to double check and make sure the property which is showing in the site is available for sale or not even though it says foreclosed.
This free listing might be a great help to many of the investors who are struggling to find the information from various avenues. But it is certainly not an up-todate listing and you better talk to a realtor to find out whether the property is available to purchase or not and get the help of the realtor to do any real estate investing.
Must Know: Investors – 5 Steps to be a Successful Landlord
I have many Investor clients who either started investing in Real estate recently or doing it for years. Both these clients often talk to me about how managing a property and making reasonable ROI is an art compared to a cake walk. Being an Investor myself, I totally agree with them. Rental property management is not an easy thing but if you get it right one time and follow it through, it is not a rocket science.
The core objective in rental property investment is to reduce the tenant turn over rate which means retain a good tenant for longer term and avoid changing tenants frequently. By doing that, you will reduce the vacancy rate and renovation cost increasing cash flow and return on investment. In order to achieve this goal, there are few basic steps a landlord should follow hard and fast.
1. Don’t mix Business and Emotions
First and foremost, do not rent to a relative or don’t have any emotional attachment to your tenant. Rental property is an investment and should be considered as Business. Don’t involve any personal dealings with it. If you have personal things, do keep it separate from rental transaction. Always try to get your rent full and don’t give excuses if they don’t pay on time. Follow the 3 by 3 rule which first 3 days to pay rent if not next 3 days to vacate or file eviction.
2. Quality Tenant is the Key
Try to find tenants who can afford to pay the rent every month. It may sound obvious, but many landlords fail in this area. They find tenants who might have good credit score but not have enough income to pay your rent. Do a detail checking on tenant’s rental and employment history to make sure their income is at least 3 times your rent. Quality tenant will pay on time and keep your property in good shape. There are screening services like Tenant Verification Services help property owners and managers find good tenants that will be reliable. Also don’t forget to check tenants background and criminal records to make sure they are clean in last few years.
3. Fixing Right Rental Amount
It is very important to fix your rent as per the market rate which also allows you to pay your mortgage(if any), taxes, insurances and maintenance cost. Don’t ever have negative cash flow or buy a property which requires you to pay more than rental amount. That’s a big NO NO. Don’t think you can increase your rent later and able to make it up. In this tough employment market, people don’t like to pay more than market rate even though the property is really good.
4. Controlling Property Maintenance Cost
Another important aspect of renting is maintaining the property at same time keep a check on your maintenance cost. Don’t go overboard by spending more than expected on your rental property. Many landlords get attached to their rental property and try to do fancy things to their property. Don’t do it. Just fix properly and enough to keep the place in good condition and reduce your cost. Having a good tenant who takes care of the property well will surely come in handy.
Also property taxes and insurance goes up every year and could really cut your cash flow. You should take that into account and make adjustments to your plan accordingly. For example if needed, you might have to take high deductibles on your insurance coverage which will reduce your premium. Also check on market condition and appraisal of your home and protest your local property appraised value which bring down your property tax payment.
5. Check Periodically and Maintain Friendly Relationship
Last but not least visit your property periodically and do a quick inspection to make sure property is maintained properly. Try to have a friendly relationship with your tenant which helps in tough times. I have evicted few tenants but none of them damaged my property because I always made them feel that I cared about them. I am not saying you should give them time for payment if they are having issues. Just saying always show that you care about them, which makes a big difference in your landlord and tenant relationship.
Above five steps really are the core concepts of landlording and help you to be successful in your rental investment. Even though rental investment has its own challenges, it is surely a much better investment decision than any other business because it allows you to own an asset increasing your network which also makes money and builds equity all at the same time. Do you think of any other investment which does it all?!
Home Buyers – Street name suffixes impact home prices- An Interesting take!!
Are you wondering what this post is all about? I had similar question when I got a report titled “Which Homes Typically Cost More – Those on Wisteria “Lane” or Sesame “Street”?” from Trulia and said “What in the world?” after reading yet another report from Trulia. Because,they try to make every data mean something and come up with some weird reports. Did you ever wonder if the homes on “avenues” are typically more expensive than the homes on “streets”? They did. This time it is about how home prices varied for different street name suffices like Street, Blvd, Lane etc.,
That’s right, they were able to determine that home in certain street suffixes sold more than other suffixes. Can you imagine that? Here is a snapshot of the report,
Using their own database of homes for sale on Trulia, they analyzed the median price per square foot for different types of address suffixes. In this analysis, they limited the results to only address suffixes that currently have at least 10,000 homes for sale (which comprise 97% of the sample).
1. ”Boulevard” owners can head straight to the bank.
2. “Place” perchers are more likely to turn a profit.
3. “Road” warriors are living richer.
As it turns out, homes on “boulevard” ($117) are the most expensive while the cheapest are those on “street” ($86) – that’s a 36% price difference! Although saying you live on “Whatchamacallit Road” may not sound that fancy, at $109 per square foot, homes located there are actually the third most expensive of any suffix type. In fact, the median home on a “road” is respectively 8% and 9% more expensive than those located on seemingly more upscale-sounding “court” and “circle.”
Here is some explanation for those prices,
Why is “boulevard” the most expensive address suffix? Well, while the word does have a sophisticated French origin, it actually might have more to do with the mix of the homes located there. Approximately, 37% of homes on “boulevards” are in multi-unit buildings, such as apartments and condos. In contrast, these types of homes make up no more than 16% of homes on every other address suffix. A greater concentration of multi-unit buildings could drive up costs as they are often located in denser, urban areas where space is at a premium.
“Boulevard” may be the most expensive suffix but with only a 2% share of total listings, it’s certainly not the most prevalent one. In contrast, 22% of listings are located on a “drive.” That’s even more popular than “street” (19%), “road” (16%), and “avenue” (15%).
Is it interesting or weird? After reading this report, Do you care about the street names and thinking about adding to your search criteria while you are looking for your dream home? I am sure some people might. Keep in mind, you decide how much you want pay and depending on which street suffixes you want to live in, “Street”, “Drive” or “Road”….
