Choosing a Realtor

Buyers should give careful consideration when choosing an agent to represent them in the buying process. When dealing with the most important investment of your life you want a strong advocate rather than someone who merely shows you houses and encourages you to buy. The agent whose name appears on the advertisement or sign for the property you have an interest in represents the owner or seller of that property so their first obligation is to that person.

Most buyers will appreciate the value of having their own Realtor represent them when preparing to buy real estate. The Realtor knows – or should know – the ins and outs of negotiating contracts, how to recognize value, what pitfalls to watch for and whom to recommend as members of your team. When choosing one, take care to get to know the agent by interview, just as you would any contractor who you will trust with large sums of money in order to get a job done.

Some things you might like to know may include; the level of education the agent has achieved. Have they taken a number of relevant classes that are not required in order to better serve their clients? What is the most challenging transaction they have been involved in and what was the outcome? The answer to that question will likely be quite revealing – letting you know what to expect of that party when you face challenges in your own transaction. If your agent is new, did they go to their broker without delay for advice regarding how to handle the difficult situation or did they “wing it” and get lucky?

Experience is not always the best teacher as people in an industry for an extended period of time may become jaded and develop a cavalier attitude about transaction related challenges. Even worse, they may be set in how they go about doing things and unresponsive to what you need from the relationship. It is better to establish your expectations up front rather than discover difficulties in the middle of the buying process.

Is the agent available to show you properties at times that will not negatively impact your work schedule? Will they accommodate your children or adjust their schedule around the times you have child care? Will they search the Multiple Listing Service and recommend houses to visit and advise you of which are more desirable explaining the circumstances that influence that desirability? Are they only intending to show you properties that their brokerage has listed or does the list of homes they recommend viewing include a good cross section of listing from a variety of agencies? Are the properties they recommend within your price range or are they trying to stretch your comfort zone by showing you houses beyond your requested budget?

When you prepare to buy a house you should consider that you are building a team to help you. We have discussed your lender and title company in recent weeks. Often those relationships will be from a pool of folks recommended by your Realtor and hopefully with the reasons why they receive the agent’s endorsement. They should also be ready with a list of inspectors they trust as well as specialists for inspections or testing beyond the abilities of a typical home inspector.

It is your right to know the level of service that causes the agent to recommend members of your buying team so ask questions. If your find your Realtor is not as interested in your well being as they are in making a commission, fire them! Call their broker -who is ultimately responsible for all their agents’ actions- and asked to be released from any contractual obligations you may have with that brokerage. Usually the broker’s desire to maintain a good reputation will cause them to accommodate your desire.

Choosing the right title company

You are about to make what is likely the largest investment of your life – a piece of real estate. In Idaho selection of the Title Company is the buyer’s. Title is the right to use your property as you see fit. Any restrictions on its use will be recorded as a condition, covenant or restriction. A title report will reveal these CCRs as well as any number of easements which provide access to your property. Title insurance guarantees the rights of the property owner and is often paid by the seller of the property to warrant to the purchaser that they are protected from defects and will have unencumbered title. If the buyer encumbers the property the lender will require a second policy to protect their interest in your real estate.

Even though many title companies in our area buy their title insurance from the same provider, the level of service provided varies greatly. Some are very efficient and communicate exceptionally well with all parties involved in the transaction while others take a more casual – even cavalier – approach to your investment. Whether buyer or seller you owe it to yourself to review the title company suggested as the one responsible for insuring and closing your transaction. Since it is the buyer’s choice it is the buyer who should be comfortable with the insurer and request that particular company in the Purchase and Sale Agreement.

Your broker will likely recommend a title company to you but it is wise to ask why they prefer that one. “Because I have always used them” or “We went to school together” or “We golf together every Wednesday” are not good reasons. Remember the decision to buy real estate is a huge one. You should be prepared to ask some questions of your agent that go a little deeper. How does the suggested company like to communicate? Do they phone, fax, email or text pertinent questions and documents? If you think email is an antiquated way to communicate would you use a company that still faxes documents?

Is there a particular escrow officer or closer that your agent or broker recommends and why? Does that person stay in touch from opening to closing of escrow? What type and at what frequency will that person communicate? When should you expect to hear from that person if at all? Do they have a history of discovering transaction challenges early and dealing with them head on? How often are your agent’s transactions closing on time or prior to the agreed upon closing date? How often are there last minute details that cause the parties to scramble for information requested by the title company that could have been addressed sooner but delay the closing?

The buyer gets to choose the company but the seller has a right to object if they feel the transaction will be better served elsewhere. If a seller questions their agent or broker and finds that there have been challenges in the past with the buyer’s choice, the seller may ask for a different company to close and insure the transaction in a counter offer.

Just like real estate agents and brokers and doctors and lawyers not all title companies are created equal. As with all aspects of your real estate transactions do a little homework and ask some direct questions before agreeing to the first title company suggested.

How Good is your CMA?

How good is your CMA?

With the shortages of inventory reported here week after week, more and more agents are advertising free Comparable Market Analyses in an effort to garner more personal inventory. This marketing strategy has always been used by some. Judging from the emails sent daily within our agent network it is easy to see the desperation that comes from the lack of available houses currently listed in the Multiple Listing Service (MLS) and more agents are resorting to offering this free service.

Some agents have equipped their sites with Automated Valuation Models or calculators that purport to estimate the value of your home. Typically, registration is required so that the agent can capture your name and address to pursue you in attempt to list your home. This is all well and good and nobody is fooled but the tactic can be a disappointment to a homeowner when the agent actually visits the home and determines what a calculator cannot – the condition and marketability of the home.

You do not need to register on an agent’s website to use an AVM to estimate value. You can go to any number of nationally known websites that host these calculators. These can be even more misleading since these sites exist to generate income from agents who pay for positioning there. The problem is that these sites do not have sufficient data to generate good estimates of property values in Idaho. You see Idaho is a “non-disclosure” state meaning that sold prices of properties may not be disclosed except to Realtors who report that information to their MLS. We then use that information to report the trends you read here and to allow our members to do an accurate evaluation for buyers and sellers of real estate.

These CMAs, generated by our members for you, can be achieved with a few keystrokes in a matter of minutes by any neophyte member of the MLS. There is no substitute though for a boots on the ground analysis that comes from truly understanding the market, the neighborhood and the subject. This of course requires a personal visit to the property. An AVM does not require disclosure of defects nor can it automatically adjust for amenities atypical to your neighborhood. A agent’s visit may quickly ascertain that the proximity of your home to a recent mudslide or the 118 stairs to your front door will have an impact on your home’s value. These characteristics can be calculated by adding adjustments to yours and the properties it is being compared to with some effort on behalf of the person performing the analysis. Once these additions or subtractions are made to yours and the other homes within the analysis your agent can better predict the selling price of your property.
With the sellers’ market we find today in many price ranges your agent may want to temper this analysis with a little common sense. Rather than relying on the default searches that look for sales over the last year, perhaps your CMA should only reflect activity over the last three months. What happened a year ago may no longer have any relevance when buyers are having a very difficult time finding homes to buy. If your are in that sellers’ sweet spot where there is only a three month supply and you’re not in a hurry to sell your agent may advise you to list at the higher end of the recommended price range since there is little competition and statistics show prices still rising.

Unlike a McDonald’s where kiosks are replacing people to take orders or big box stores with self checkout kiosks your real estate needs the personal touch of a human being with an understanding of your property and its competition or your CMA is not worth the paper it isn’t written on.

Moving out

We have discussed here before “the roll” of real estate. That is the term used to describe how the market moves upward and inward following the major interstate highways of our region. Due to the impact rising prices are having in major cities along the west coast we are seeing in migration from those cities as sellers capture equity and take the opportunity to get out of high priced, high traffic, high crime and high anxiety metropolitan areas.

Our area is so desirable that even in the winter months we are receiving buyer visits from California, Oregon and Washington states attracted by our scenic beauty, affordable real estate and lack of all the pressures of where they came from. As reported by the Case Schiller Housing index Seattle, Portland
and Denver saw the highest year-over-year gains among the 20 cities reviewed over each of the last nine months. In October, Seattle led the way with a 10.7 percent year-over-year price increase, followed by Portland with 10.3 percent and Denver with an 8.3 percent increase.

For us Seattle and Portland have the most impact although we have noticed some Colorado license plates cruising North Idaho these last couple months. The reality is that for many of these people in high performing real estate markets, everything they see here is a bargain compared to where they are coming from.

In mid-summer the average Portland, Oregon home price was $412,000. The Portland market is the first place many of those escaping California put down roots since real estate is cheaper there. At that same time the Seattle Times reported that “The price of the typical single-family house across King, Snohomish and Pierce counties has now risen 53 percent in just four years.” The average price then was $560,000, still much cheaper than a Bay area home at $712,000.

When people from these areas pick up a local paper and see that the rare murder is front page news – for several days in a row – and that our crime section shows largely DUIs, petite theft and possession of paraphernalia they are amazed. In many metropolitan areas murders are commonplace, armed robberies the course of the day and road rage an occurrence during the average commute.

It is no wonder then that at year’s end we see an increase in our sales of properties of $500,000 to $999,999 properties. The types of equity people are realizing from sale of their properties in the areas described above make our Multiple Listing Service average price of $240,147 a real bargain. One visitor recently explained that it is very hard not to think of every property viewed as one that should be taken advantage of because it is so cheap.

History would dictate that it is only a matter of time before our own average prices reach beyond $300,000 but at that time imagine what the emigrating home sellers will be getting paid to leave the metros they will still want to escape. Who can blame them?

Closing Soon?

If you have gone through all the steps of inspection and repairs and financing has been verified you are likely looking forward to closing on your real estate transaction. At this point some people heave a sigh of relief and put their concerns aside. Not so fast.

Prior to closing there are still a number of details that need your attention. Even signing the final documents with the Escrow Officer do not finalize the transaction. It is only after sufficient funds have arrived and the deed transfer is completed by recording it at the County that the transaction is closed. That means the monies have been disbursed to the entitled parties with the remainder going to the seller who releases the deed.

Often folks think that sitting at the escrow desk and signing papers is the final step. Likely that is because the agent has alluded to this meeting as “closing” when in fact, it is merely “signing”. Many seasoned agents will tell you of at least one time where everyone completed the signing – both buyers and sellers – only to have a lender withdraw their commitment to fund due to unforeseen changes in circumstances. In those instances “closing” does not occur that day, or perhaps ever with that particular buyer.

When a buyer and seller agree to a transfer of real estate at a certain price that begins the process. Buyer and seller may negotiate further due to needed repairs discovered by inspection or defects in title disclosed in the initial; Preliminary Title Commitment. We are informed by several title company folks that many agents do not read these documents and in fact some do not forward them to their clients. As a buyer or seller you will want to see this document since it will inform you not only of financial obligations against the real estate, but of all other parties with claim to the property. If you are at this stage in the process you will want to insist on seeing this important document.

Usually those with claim to the property do not have ownership but rather rights to trespass known as easements. Common easements disclosed are for utilities such as power and water, streets or roadways, communications like cable and telephone or other access incidental to maintaining functioning amenities that compliment the property. Sometimes though, those easements can be perceived by a buyer as egregious, especially when they allow unfettered access by a neighbor to cross the property as a walkway or in anticipation of a future subdivision that will place a road across that property. Others will object to obtrusive Conditions Covenants and Restrictions (CCRs) that govern the property and are referenced in this preliminary title commitment.

By the same token a buyer will be well served to read this “prelim” carefully to ensure that they will have unfettered access to the property they are buying especially if access is across another property or via private road. This document will also inform the affected parties of any lawsuits that may have been filed against the property. These “lis pendens” can take several months, even years to work themselves out in Court, often at significant expense to those parties involved. Conflicts that may affect title will usually be noted as exceptions in the preliminary report which means that the title company “closing” the transaction will not insure against those defects.

This document as well as the settlement statement you will sign at escrow should be reviewed carefully by all parties including the agent that represents you. Assuming everything will be fine is okay as long as it is verified in writing.

Short inventory slows sales

Post Falls and Rathdrum where new construction reigns are performing exceptionally well in this summer’s housing market. Both cities are outperforming last year’s sales by double digits while Coeur d’Alene and Hayden are under performing. It is not that there is no interest in these markets rather it is just darn tough to find a good value there.

A look at year-to-date statistics at the end of July shows that new homes account for a whopping 24 percent of our total single family home sales this year. No doubt that is why Post Falls posted a 19 percent increase in home sales over last year. Rathdrum, Hauser, Twin Lakes showed a 14 percent increase.

Showing declines in housing sales were Coeur d’Alene with 5 percent fewer sales and Hayden with a 13 percent decline. Average prices however continued to creep up in this high demand market. The average price of a single family site built home on a lot less than two acres in size in Kootenai County is up 3 percent over July 2015. In Coeur d’Alene you will pay 6 percent more than last year, Post Falls 10 percent, Hayden 6 percent and the same 6 percent increase in Rathdrum.

The Silver Valley reports a significant increase in home prices. With exactly the same number of home sales there year over year their average price improved a respectable 15 percent over the previous July.
South including Benewah County home prices are up 6 percent over last year. Sales there are up 20 percent from the prior year attributed to 6 additional sales.

To the north we see a mixed bag of results with North Kootenai County reporting increases of 26 percent in volume and 14 percent in average price while Bonner and Boundary Counties show a slight dip in production. The 3 percent reduction in activity there is due to 4 fewer home sales with a 6 percent drop in price for the average home sold since July 2015.

Residential listing inventory continues to present challenges for buyers. As of the end of July we showed 9.4 percent fewer listings than at this time last year. Rather than wait for a suitable home some buyers are opting to build new homes and as seen by the increases there are sinking roots in Post Falls and Rathdrum.

It is not just North Idaho where the real estate market is strong. Jonathan Smoke, realtor.com®’s chief economist stated in an article on Friday; “Also, repeat buyers say their major challenge is finding a home to buy.” The share of repeat buyers who say “finding a home” is a problem rose to 25 percent this July, realtor.com® reports.

“The good news for would-be buyers who have struggled to find a home or have been outbid in prior attempts is that the balance of power shifts a bit more in your favor in late summer and fall,” Smoke writes in his column at realtor.com®. “This is the time of the year when sales slow down, but inventory is at its peak. That means there are more homes for sale per buyer now, and yet mortgage rates remain close to their all-time lows. The window to enjoy the best summer in a decade for real estate remains open for the well-qualified and those ready to act.”
Many would be buyers hope he is right.

Bad reputations are easy to earn in a good market

For those who read this blog regularly you know that housing inventory is sparse. As mentioned a couple of weeks ago this scarcity of inventory can cause agents to compromise their ethics to get their clients into a home and builders or developers want to get more from each buyer due to demand. Some find excuses to add cost to a reasonable deal after the deal has been made.

Recently we caught wind of a Realtor who agreed to provide a lot at listed price to an out of town buyer. No negotiation just list price. The buyer verbally agreed to purchase the lot on his next visit and his agent asked the listing agent to reserve it.

After a weekend passed the listing agent called the buyer’s agent to inform him that the developer had incurred some type of cost when a previous buyer relinquished that lot. In fact, that developer should have been allowed to keep the original buyer’s earnest money and therefore would have no cost in taking the lot back but instead would have profited from that event. The buyer’s agent informed the buyer that the lot would now cost $2,000 more than originally offered and the buyer reluctantly agreed. Bad reputation for the developer whose integrity is now in question by the buyer, the buyer’s agent and those with whom they associate.

Fast forward now to the selection of the home and the written agreement that binds both parties. When the builder forwards plans to the buyer’s agent the garage is on the opposite side of the house than where it was offered. When the buyer objects to the flip flop the builder says it will be another $2,000 to put it where it was originally illustrated. This, aside from the fact that the buyer’s agent had informed the seller’s agent which side the garage was desired upon which just so happened to be where the original drawing had offered it.

It seems at times that some builders and developers faced with a brisk market after sitting for years on unsold inventory suddenly see an opportunity to maximize profits by changing the rules once a buyer is engaged. How short sighted is it to take advantage of low inventory and buyer competition by attempting to change the rules after the deal is struck?

Usually a home will see new owners every five to seven years as the inhabitants lives change and their families grow or shrink as children are born or leave the nest. How inclined are you to buy a lot from the same developer or hire the same builder if they change the rules the first time you deal with them?

Be careful out there. Sooner or later the market will turn and those same agents, builders and developers will be begging for your business as they were just a couple of years ago. Remember the Realtors’ credo; “If is is not in writing it did not happen.” Get the terms of your build in writing and make darn sure your Realtor enforces that written document. It is the only way to avoid becoming a victim in a competitive marketplace.

For developers, builders and their agents; we understand you must strike while the iron is hot. Just make sure your thumb is not between the hammer and the anvil.

The challenge is determining value

As the old adage goes; “He who is his own lawyer has a fool for a client”. Some believe the same is true of folks who attempt to sell their own real estate. We certainly do not fault those who try but the National Association of Realtors says, listing with a professional will increase their profits. For-sale-by-owners (FSBO) actually end up having to spend a lot more time marketing and showing their property than they ever imagined and tend to end up with a final selling price that is lower than comparable listings that were sold by an agent, according to research.

Take a look at the numbers from NAR’s survey: The median selling price for all FSBO homes was $210,000 last year. When the buyer knew the seller in FSBO sales, the number sinks to the median selling price of $151,900. However, homes that were sold with the assistance of an agent had a median selling price of $249,000 – nearly $40,000 more for the typical home sale.

Aside from disruptive scheduling and always being available to receive inquiries, the biggest challenge to the FSBO property owner is knowing how to price their real estate competitively. Some will turn to a third party aggregator like zillow.com or a local agent’s website to utilize the automated valuation model provided there. These AVMs are notoriously unreliable since there has been no physical inspection of the property. Unlike neighboring states, sold prices of properties in Idaho are not disclosed as public knowledge so the lack of that data presents a real challenge.

We know that lenders hire professional appraisers to visit, photograph and measure properties before they loan against them. If lenders were comfortable using an AVM, banks would have no use for appraisers and that industry would die. Instead, after the collusion that took place in some real estate markets during the feeding frenzy of the last decade, new government regulations are now applied to make sure the banks and buyers are getting accurate information from appraisers. Like our Realtor members of the Coeur d’Alene Association of Realtors, appraisers mine our Multiple Listing Service for data they can use to justify the value of a home.

That data is extremely valuable but it can not identify whether or not the subject property was damaged in one of our recent storms. The MLS comparable sales do not tell us if the subject property was once a meth lab or had its wiring and plumbing or other fixtures stolen. Only a physical visit will reveal some defects so relying on an online calculator is risky at best.

The value of using a Realtor goes beyond their knowing what a property is worth. We do disclose sold prices among ourselves and once a month you read a compilation of that data here. More than just having data though, a Realtor has to stay connected to be successful. That means being available to communicate at all times. We need to be receptive to phone calls, text messages and emails that originate from a variety of sources unavailable to the general public. Because the transfer of property is our occupation we have adapted our lifestyles to facilitate that. Many FSBOs have a hard time making that adjustment.

Most Realtors visit several properties a week which allows us to temper our valuations by comparing other properties we have visited to the one we are evaluating. When we utilize the Comparable Market Analysis program we pay for through our MLS subscription we are adding or subtracting value by making adjustments for extra amenities one property has over another. It takes experience to do that properly. If you are trying to sell your own home you will be money ahead to hire a professional to help you determine its real market value.

You know what April means

It means that it is Fair Housing Month! This month the Department of Housing and Urban Development issued guidelines for handling convicts under Fair Housing laws. The lengthy titled;

Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions” spells out how convicts should be treated when considering them as tenants or participation in a real estate contract.

In part, the guidelines address a disparity in the treatment of certain classes of convicts: “Across the United States, African Americans and Hispanics are arrested, convicted and incarcerated at rates disproportionate to their share of the general population. Consequently, criminal records-based barriers to housing are likely to have a disproportionate impact on minority home seekers. While having a criminal record is not a protected characteristic under the Fair Housing Act, criminal history-based restrictions on housing opportunities violate the Act if, without justification, their burden falls more often on renters or other housing market participants of one race or national origin over another (i.e., discriminatory effects liability). Additionally, intentional discrimination in violation of the Act occurs if a housing provider treats individuals with comparable criminal history differently because of their race, national origin or other protected characteristic (i.e., disparate treatment liability).” says the document.

While historically many landlords have been aware of the pitfalls of discrimination based on race, color, religion, sex, disability, familial status or national origin some refused to rent to convicted felons. Now that practice is being scrutinized by HUD as possibly discriminatory. In this document HUD defines a three step process which, like many things governmental is too wordy to reprint in this limited space. Here are the abbreviated three steps: “In the first step of the analysis, a plaintiff (or HUD in an administrative adjudication) must prove that the criminal history policy has a discriminatory effect, that is, that the policy results in a disparate impact on a group of persons because of their race or national origin. This burden is satisfied by presenting evidence proving that the challenged practice actually or predictably results in a disparate impact.”

In the second step of the discriminatory effects analysis, the burden shifts to the housing provider to prove that the challenged policy or practice is justified – that is, that it is necessary to achieve a substantial, legitimate, nondiscriminatory interest of the provider. The interest proffered by the housing provider may not be hypothetical or speculative, meaning the housing provider must be able to provide evidence proving both that the housing provider has a substantial, legitimate, nondiscriminatory interest supporting the challenged policy and that the challenged policy actually achieves that interest.”

The third step of the discriminatory effects analysis is applicable only if a housing provider successfully proves that its criminal history policy or practice is necessary to achieve its substantial, legitimate, nondiscriminatory interest. In the third step, the burden shifts back to the plaintiff or HUD to prove that such interest could be served by another practice that has a less discriminatory effect.”

For the complete text of the governments new stance on housing discrimination for convicts go to hud.gov and look for “In Focus”.

Early Spring brings early bargain hunters

Spring has arrived in north Idaho with crocuses, daffodils and tulips popping up everywhere. With the departure of the last low level snow folks from and foreign to North Idaho are beginning to show more interest in getting out and in investing in some of the great real estate values in north Idaho.

Certainly more affordable homes are low interest rates are reasons that home sales continue to accelerate as reported here last week. The early spring weather and escalating prices in California and Western Washington are driving out of State buyers earlier this year.

Interest in waterfront properties is on the rise. Our statistics which we reported in some detail last week show that in the first two months of 2016 are over 160 percent of 2015 sales the previous year. That is comparing 21 sales to eight at this time in 2015. While we do not segregate waterfront inventory for purposes of reporting residential inventory we do know that inventory is down by seven percent. A quick search on Friday showed a total of 224 waterfront homes ranging from a $96,000 home on the Pack River to a $10,000,000 home on the Spokane River. Only 170 waterfront listings were available for less than a million dollars and only 78 available for under $500,000. This could be a year where we see escalation in those prices.

True, as the calendar dictated Spring arrives, more properties will come on the market, waterfront and common residential but the supply appears to remain short in all market segments.

With the State entertaining new regulations on submersible pumps for domestic use lake water, no doubt there will be some owners who, no matter the cost, will not want to hassle with replacing pumps if required and will put their properties up for sale rather than make that improvement.

Once again we are pleased to report that, of those properties on the market, we are seeing plenty of activity and for waterfront at least, that activity is earlier than expected albeit welcomed.