Closing on the sale of a home that’s not your own

I always laugh at the MLS when it gives a selection for how long the owner of the property has owned it. 1) More than a year 2) less than a year3) the seller does not yet own the property… Ahhhh, that last one… those were the days when someone was purchasing a property to flip it and has already put it on the market to entice a buyer.

I know there are other reasons to use this function but it still gives me the giggles. But here is another reason a seller is selling a property that isn’t really their own- when they have inherited the property.

Let’s say you have a seller who puts a property up on the market. The inheritors never lived in the home and their parent, who had life tenancy, died a few years ago. This may not be a complicated situation. The folks who were on the deed were the children of the last remaining parent. However, one of the adult children died before the mother did and didn’t have a will.

The children of that inheritor inherited her share of the property (or at least they think they did) but to further complicate things, the father of those children (essentially, the grandchildren of the original owner) wants a piece of the pie.

I don’t know the end of the story yet but I will tell you that it has taught me a very valuable lesson- when you become an adult and you start gathering assets, don’t let the state decide who gets what. I know the rules are different depending on the state you live in but, regardless, make that decision for yourself while you are well and of sound mind.

Get a will made and don’t let your family fight over something silly. You can’t take it with you and neither can your heirs.

Starting your search

One of the first things you should do as a buyer in this fantastic buyers’-market is find out your buying power. I advise shopping around since different lenders have different products. On the one hand, there is a myth that several credit checks will ruin your credit score- not true if you are shopping for a car, student loan or home. However, this is typically done in a short period of time. Check the internet or with your lender to find out their opinion.

For example, if you estimate you will be ready to buy six months from now, you will likely want to get prequalified in 3-4 months. However, a rule of thumb is that you do not want your mortgage payment to exceed 28% of your gross (before taxes) monthly income. So, if your household income is $50,000 a year, your monthly gross income is $4,167. You don’t want your monthly payment to be more than $1,167.

A monthly payment is comprised of PITI. This is an acronym for Principal, Interest, Taxes and Insurance. In many cases, a monthly payment will also include a fifth component: PMI or Private Mortgage Insurance. PMI is insurance for the lender, not you (even though you pay for it). If you default on your mortgage, the lender gets paid. It is typically applied to mortgages where the principal you're financing is greater than 80% of the value of the home.

Conversely, that means you have saved up 20% or more down payment for the loan. For example, if you are purchasing a home that appraises for $100,000 and you’ve saved up 20% for the down payment (or $20,000) then your principal will only be $80,000 and you shouldn’t require PMI. Plus, depending on your loan product, your monthly payment will be about $520 per month.

Keep in mind, this payment depends on a lot of things. It assumes the tax value of the property is about $80,000 at a local (High Point) tax rate. It also assumes the interest rate on your loan is true to today’s interest rates: somewhere around 4%. Get shopping!

Starting your search

One of the first things you should do as a buyer in this fantastic buyers’-market is find out your buying power. I advise shopping around since different lenders have different products. On the one hand, there is a myth that several credit checks will ruin your credit score- not true if you are shopping for a car, student loan or home. However, this is typically done in a short period of time. Check the internet or with your lender to find out their opinion.

For example, if you estimate you will be ready to buy six months from now, you will likely want to get prequalified in 3-4 months. However, a rule of thumb is that you do not want your mortgage payment to exceed 28% of your gross (before taxes) monthly income. So, if your household income is $50,000 a year, your monthly gross income is $4,167. You don’t want your monthly payment to be more than $1,167.

A monthly payment is comprised of PITI. This is an acronym for Principal, Interest, Taxes and Insurance. In many cases, a monthly payment will also include a fifth component: PMI or Private Mortgage Insurance. PMI is insurance for the lender, not you (even though you pay for it). If you default on your mortgage, the lender gets paid. It is typically applied to mortgages where the principal you're financing is greater than 80% of the value of the home.

Conversely, that means you have saved up 20% or more down payment for the loan. For example, if you are purchasing a home that appraises for $100,000 and you’ve saved up 20% for the down payment (or $20,000) then your principal will only be $80,000 and you shouldn’t require PMI. Plus, depending on your loan product, your monthly payment will be about $520 per month.

Keep in mind, this payment depends on a lot of things. It assumes the tax value of the property is about $80,000 at a local (High Point) tax rate. It also assumes the interest rate on your loan is true to today’s interest rates: somewhere around 4%. Get shopping!

You'd think foreclosures were the only bargain...

I am fascinated by the new view of what a "bargain" is. It was only a few years ago that folks were having bidding wars on properties. Now, some buyers believe if they have to pay a dollar extra each month, they've been had.

There is no doubt, for those in the financial position to do so, this is by far the best time to buy real estate. Housing prices have fallen dramatically since 2007 and interest rates hold steady in the 3-4% range!

One man’s misfortune has been another man’s gain, and that is foreclosures. Many people are attracted to these properties because they have dollar signs in their eyes. They believe the added equity in the purchase of such a “bargain” leaves them in the catbird seat. However, most foreclosures were held by folks who were struggling to pay their mortgage. Is there any reason to believe that these homes were kept up by the occupants? If they couldn’t afford the payments, they certainly wouldn’t be able to afford any upkeep or repairs.

Assuming there are very few “gems” as foreclosures and most need quite a bit of work, any bargain you may get will quickly evaporate as you invest $10,000, $20,000, $30,000 to get the home into a livable condition. For the most part, foreclosures are great for investors who are experienced and can quickly assess the “damage,” determining how much to fix and whether to flip or rent. They also have the capital as this is their livelihood.

On the other hand, foreclosures are not ideally suited for first-time homebuyers. That’s not to say first-time homebuyers should never consider a foreclosure. However, between saving money for the downpayment (if any), the money brought to the closing table (tax service, inspections, appraisal fees etc…) and the new fridge, moving truck and new blinds, the first-time homebuyer is too often tapped out.

There are many fantastic deals out there that are owner-occupied, ready to move in. These houses often are in pristine condition and with the right Realtor^®, the owners can be convinced that taking less than the asking price is a smart move for everyone. Plus, the smart Realtor^® will have already convinced the seller to price the home right from the get-go.

Although banks have a magic number they want to attain and likely place the offering price in some sort of formula, the owner-occupied listing should have received a heart-to-heart talk from their Realtor^®, explaining to them a “bottom dollar” or “magic number” is unrealistic if you want to sell quickly. Sometimes, taking a loss is the only alternative to waiting. And if you've got a mortgage on the home, you've paying your monthly payment and continuing to bleed when you could have sold sooner. The sooner you realize your cheese has been moved, the sooner you will sell your home.

There may have been a time where a foreclosure here and a foreclosure there should not be considered when pricing a home. But the pervasiveness of foreclosures has brought down the “going rate” of nearly all homes which is why most current asking prices are pretty accurate.

It’s very important buyers find the right Realtor^® who will show them the true value of homes they are considering and who will explain to them that foreclosures are not the only bargain on the market. It is also critical that sellers find that same type of Realtor^® who will not blow smoke just to get the listing. Sellers must have a frank talk with their Realtor^® about the rapidly-changing market and that their home today is not worth what it was four years ago.

So proud!

Every year, the High Point Enterprise puts out a guide to High Point. This year's version came out in the paper yesterday and in the section addressing real estate, they placed two pictures of homes in High Point. Just so happens BOTH of those homes are houses my husband built!

The first one is the first NAHB Green home in High Point. We know other tract builders have built MANY other green homes in High Point since then but before we started bragging about this in early 2009, we checked with the NAHB to make sure no one else had applied at the same time so we were pretty sure we were the first. ;)

The second picture is of a lovely craftsman style home Steve picked out in 2007. Always trying to keep up with trends, he finished this house in 2008 and now, craftsmen are all the rage. Same thing happened in the 90s- my husband traveled to California, stole the idea of bullnose corners for homes and then all of a sudden, in the late 90s, early 2000s, builders in this area started doing them all over.

Maybe it is coincidence the best pictures they had of High Point homes were two beautiful houses Duke Brothers built, but I would like to think that ours shine above most.

So proud these two awesome houses are now representative of what High Point can offer you in the way of quality real estate!

If you know anyone anywhere who is thinking of moving to North Carolina, tell them to consider High Point. If they are moving to High Point, tell them to consider a custom home by Duke Brothers. We build some of the best quality you will ever buy. The investment is worth not giving your money away to the utility companies. It might cost a little more, but you won't be disappointed!

Hindsight is 20/20

I was watching an old episode of one of my favorite TV shows, Monk, when I came across this: The episode is The Girl Who Cried Wolf from Season 3, 2004. Mr. Monk and the infamous Harold characters are fighting over how the magazines should be organized. One of the magazines in the background is a copy of San Francisco and the headline on the cover reads: Surreal Estate- will the bubble ever burst?



Yes, Virginia, the bubble will burst in the worst way...

Marketing

I know this isn't an "energy efficient" topic but I just had to make a comment about a letter I received recently.

For the holidays, I sent a new calendar to my family, friends, and past clients to thank them for their business, wish them a Merry Christmas, and hope they think of me if anyone they know needs a Realtor in the near future.

I had a few leftover calendars so I thought I would send them to some local folks who might appreciate the business we are in- selling healthy, energy efficient homes.

Keep in mind that sending yearly calendars is a common practice among Realtors and, in this market, we need to find any way we can to ferret out folks who might be considering getting in the market. Imagine, if you will, YOU working 40 hours a week and not getting paid until your account "closes." IF your account closes. Not a fun career all the time. When you fairly new and you're trying to create a steady client base, we need all the help we can get.

The letter I received back was ironic in soooo many ways.

First, the letter was a tad bitter. Instead of addressing me directly like the letter I sent explicitly made clear, they sent it TO WHOM IT MAY CONCERN in all caps.

Second, it was from a local mental health organization. Tsk, tsk, mental health workers playing mind games? One would think that they would be kind, gentle, thoughtful people. But instead, they took the time out to express their crabbiness that I had sent a letter to a docctor who does not practice at their facility anymore. Fair enough- a nice way to say that is "please take us off your mailing list." Looks like someone needs etiquette lessons....? Or maybe even some counseling themselves.

Finally, the ironies of all ironies, the very end of the letter said they were trying to save trees by not receiving unsolicited mail. That's pretty funny they decided to kill a tree by responding to me via snail mail instead of writing me an email, which was available in my original letter.

So a couple things have been accomplished here- if anyone ever asked me, a fairly linked-in and connected community figure, where I'd recommend to get behavioral health or disability services, I would make sure they avoid this place. Secondly I wonder where they market themselves. I know for a fact they have a website so obviously they think there is some value to marketing.

Lighten up, people! You would not hurt my feelings by sending me an email asking me to take you off my mailing list. But you do yourself some damage by acting like an ass in a response letter.

Merry Christmas! Hope your 2011 brings you less anxiety and more meditation.

Green Siding Options

By: John Riha

Selecting green siding is a matter of weighing trade-offs in longevity, insulation, biodegradability, maintenance, and, in some cases, cost.

If you think you’ll pay a premium for selecting green siding for your home, think again. Many of the best sustainable choices are familiar materials that have been on the market for years. Some products are made with recycled materials and others have improved insulating qualities that add only a moderate increase in price. When choosing replacement siding, weigh the pros and cons of sustainability, thermal performance, and the cost of eco-friendly products.
Evaluate sustainability

When choosing siding, consider its sustainability. Sustainability is an estimate of how long a material will last; if the material can be recycled; if it contributes to health concerns; and if it’ll readily biodegrade in a landfill. Maintenance, too, is a key consideration. High-maintenance materials that require regular upkeep, such as repainting, and use additional resources and energy over their lifecycle, are less sustainable.
Improve energy performance

A siding replacement project offers an excellent opportunity to boost your home’s energy performance and make your house healthier. Adding a house wrap (which prevents water infiltration and air leaks) and rigid-foam insulation is one of the best ways to reduce energy consumption and protect your home from moisture condensation inside walls—a major source of mold problems—no matter what type of siding you choose.

Adding insulation increases R-value—a measure of insulation performance. A house with 3-1/2-inch stud walls filled with fiberglass insulation has an R-value of about R-12. Adding rigid foam and house wrap can boost insulating performance to between R-16 to R-20, reducing your annual energy costs 5% or more.
Costs of green

Siding replacement has proven value. A siding replacement project using foam-backed vinyl siding returns more than 80% of its initial cost at resale, according to Remodeling magazine’s Cost vs. Value Report—one of the highest values in the annual survey.

Because many types of siding are extremely long-lasting, they can be considered green options, but without a premium price. However, improving thermal performance—and, therefore, boosting the siding’s greenness—with house wrap and rigid-foam insulation adds cost—about $1,800 for an average house, according to Fine Homebuilding magazine. Many green consumers feel that contributing to a healthier, sustainable environment is more important than higher initial costs.
House wrap

House wrap is a thin, tough, semi-permeable membrane that’s applied over the outside of wall sheathing and under the siding. It’s designed to block water and reduce air infiltration while allowing moisture vapor to pass through.

Sustainability: Extremely durable and long-lasting, this flexible, plastic material is recyclable.

Energy efficiency: Using house wrap, along with properly sealed joints at windows and doors, can reduce air infiltration and save on annual energy bills. Some varieties, such as DuPont’s Tyvek ThermaWrap and Low-E Housewrap from Environmentally Safe Products include heat-reflective layers that increase insulation performance by a factor of R-2.

Cost: 25 cents to 50 cents per sq. ft., installed
Rigid-foam sheathing

Rigid-foam sheathing is lightweight, easy to apply, and comes in a variety of thicknesses. Unlike fiberglass insulation, which fits between studs, sheathing blankets the entire exterior wall. It can be applied directly over existing wall materials, such as hardboard, stucco, and wood, providing a smooth substrate for new siding.

Sustainability: The manufacture of extruded polystyrene (XPS) sheathing is associated with the production of chlorofluorocarbons (CFCs), which damage the ozone layer, although some manufacturers are researching CFC-free production methods. Expanded polystyrene (EPS) foam sheathing doesn’t produce CFCs and is considered environmentally friendly. EPS can be recycled but doesn’t degrade readily in landfills.

Energy efficiency: Insulating values of R-3 to R-7 per inch thickness.

Cost: 20 cents-$1 per sq. ft., depending on thickness and thermal performance.
Insulated vinyl siding

Insulated vinyl is similar to regular vinyl siding, except it includes a layer of EPS foam insulation. Its thickness makes it more rigid and easier to work with than regular vinyl.

Sustainability: Vinyl requires little maintenance and will last 30 to 50 years, but it’s made from polyvinyl chloride (PVC), a chemical compound that doesn’t degrade in landfills. During manufacturing, PVC produces byproducts that include dioxin. Vinyl siding can be recycled.

Energy efficiency: Adds approximately R-3 to walls

Cost: $3-$8 per sq. ft., installed; 15-30% more expensive than regular vinyl
Fiber-cement siding

Fiber-cement siding is a low-maintenance product made from sand, Portland cement, clay, and wood pulp fibers. It’s termite-proof, fire-resistant, and doesn’t rot.

Sustainability: Extremely durable and long-lasting, it’s available with low-maintenance finishes that last for decades. But fiber-cement carries high embedded energy—the energy necessary to fire the kilns that heat its raw materials. Any energy expended toward a material ads to its carbon footprint. The newest varieties are lighter and include more recycled material.

Energy efficiency: Negligible R-value, but its superior stability helps keep the building envelope free of cracks and caulk failures.

Cost: $5-$9 per sq. ft., installed
Wood

Unmatched beauty makes wood a premier choice for siding.

Sustainability: Although a precious natural resource, wood is a renewable product that can be recycled and readily degrades in landfills. To ensure the wood products you buy are harvested from sustainable, managed forests, look for certification stamps from the FSC (Forest Stewardship Council) and the SFI (Sustainable Forest Initiative). Wood siding is a high-maintenance siding that requires refinishing every two to five years.

Energy performance: Wood is a natural insulator, but as a siding it offers a minimal R-value of about R-1.

Cost: $6-$9 per sq. ft., installed
Stucco

Traditional stucco is made from sand and Portland cement mixed with water to make a workable plaster. Modern stucco often includes epoxies to harden the material. It’s tough, durable, and resistant to insects and fire. Well-maintained stucco will last for the life of the house.

Sustainability: Eco-friendly varieties of stucco are made with an earth-and-lime mixture instead of Portland cement and epoxy, reducing the embedded energy and CO2 emissions associated with cement production. Painted stucco requires periodic touch-ups and repainting every 5-7 years.

Energy performance: Negligible thermal performance, but effective at reducing air infiltration while remaining permeable to moisture vapor.

Cost: $6-$9 per sq. ft., installed
Engineered wood

Engineered wood products are made from wood fibers, resins, and wax. They’re pressed in molds to create panels resembling real wood lap siding and shingles.

Sustainability: The high wood waste content of engineered siding boosts its sustainability factor. Engineered siding comes with baked-on factory finishes that reduce maintenance, but warranties of about 20 years are less than for other types. It easily biodegrades in landfills.

Energy performance: Negligible

Cost: About $2-$4 per sq. ft., installed

John Riha has written six books on home improvement and hundreds of articles on home-related topics. Heís been a residential builder, the editorial director of the Black & Decker Home Improvement Library, and the executive editor of Better Homes and Gardens magazine. His standard 1968 suburban house has been an ongoing source of maintenance experience.


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