February 15, 2014

Home Inspections: Issues with relatively minor repairs must still be addressed in order to ensure a smooth sale and safe home.

Filed under: Property Inspection — Chuck @ 1:18 pm

Buyers are often aggravated or made to worry when a home inspection report comes back with recommendations for relatively minor repairs. Meanwhile sellers can be frustrated by that kind of recommendation because they often feel that the items being cited are small and unimportant. That can lead to an impasse that bogs down buyer/seller negotiations or escalates into a disagreement that torpedoes the sale completely.

The buyer walks away and the homeowner has to start over again with the process of marketing their home. The first thing to understand, however, is that nothing contained in the report of a qualified home inspector lacks importance – otherwise it would not show up in the report. Even items that appear to be minor must be taken seriously, because the inspector mentioned them for a good reason – they have the potential to impact health and safety or the integrity and value of the property being evaluated.

Study the Report
One of the most valuable things about a home inspection is the report given to the client after the inspection is done. Unfortunately many consumers don’t realize how helpful these are, and they often just file them away with their real estate papers or toss them in the trash. Instead of doing that, get the full benefit from the report by studying it – especially regarding these kinds of relatively small repairs. By doing small repairs now you are doing preventative maintenance to prevent much more extensive and costly issues later on – including potential lawsuit liability if something like a shaky handrail or broken step causing an injury from a fall.

Get Repair Bids and Negotiate Repairs
When you get the report, make a “punch list” of repairs the inspector recommends. Share that with contractors to get competitive bids that you can then present to the buyer (if you are selling) or to the seller (if you are the buyer. You can use those bids to figure out exactly what the repairs will cost, and then negotiate to decide who pays for what. Sellers may prefer to give their buyers a discounted price, for example, or do the repairs themselves to save some money. Meanwhile buyers may prefer to have the repairs completed ahead of closing, and to have them done by professionals.

Have the Inspector Back for a Re-inspection
Regardless of what solution you work out together, it is always a good idea to have the inspector return after repairs are finished, to give a follow-up evaluation. If the repairs are done in the right way and meet the right standards then you will know that and have the inspection to support and validate that conclusion. In situations where the repair work is shoddy or incomplete, you’ll have a professional inspector to point that out for you.

Be Proactive as a Seller
All of this kind of process can be annoying to buyers and aggravating to sellers, while it can also postpone the closing of the sale or even delay loan approval. Nobody wants to experience those things. So the best strategy is to be proactive as a seller. Hire a home inspector to do an inspection before you ever put the house on the market. Do the needed repairs ahead of time, so that when the buyer later hires an inspector there is very little chance for anything to go wrong. The cost of the pre-sale inspection is very small in comparison to the value it gives you in terms of saving time and money – and it also gives you and your potential buyers more confidence that the

Real Estate Tips: New Federal Mortgage Rules Now in Effect

Filed under: Real Estate — Chuck @ 1:16 pm

Most homeowners are not yet aware that new federal mortgage rules that were authorized a while back by the Consumer Financial Protection Bureau (CFPB) went into effect and became enforceable in January, 2014. Now that those rules are law they will have an impact on mortgage borrowing, and consumer need who want to buy a home need to understand how and why they will be affected by the new guidelines.

Why the Rules Were Passed
In the aftermath of the global credit crisis and housing crash that started about six years ago, lawmakers and financial regulators were pressed by taxpayers to craft stronger rules to protect consumers. With the creation of the recently established CFPB, consumers got a powerful watchdog group at the federal level to help police the loan industry and eliminate predatory mortgage practices. This new set of rules makes illegal many of the unethical lending tactics that led to the foreclosure crisis and credit meltdown. No longer can lenders get away with steering borrowers into loans they cannot possibly afford, and neither can banks make “no documentation” loans or exotic mortgages with toxic components such as negative amortization. Thanks to the new rules consumers will have a better understanding of their loans and their borrower obligations and will be less vulnerable to unscrupulous lending.

What they Require of Lenders
With the passage of the new package of rules the CFPB also introduced a new category of loans called the Qualified Mortgage or “QM.” In order for a mortgage to be included within this category it must meet special requirements that demand more stringent underwriting and closer examination of a borrower’s ability to repay the loan. In exchange for taking the steps necessary to meet these much higher standards, banks and other lenders will be granted a promise that they will not be held legally responsible if the borrower defaults on the loan. That’s a huge incentive to lenders, because they do not want to be embroiled in legal proceedings and lawsuits or have to pay stiff fines for a lack of regulatory compliance. As a result, almost all major lenders have already instituted new guidelines that require that all of their residential mortgages meet the QM standard.

What Lenders Will Require of Borrowers
That’s great news in terms of keeping the consumer informed and out of trouble, and the new QM underwriting will definitely save many people in the future from experiencing a tragic and financially devastating foreclosure. But if you intend to buy a home in 2014, for example, you need to be aware that your ability to borrow is going to be judged and evaluated at a tougher standard. To meet the threshold of a Qualified Mortgage you will have to prove that you have sufficient income to repay your loan. Lenders will also dig around in your credit files looking for confirmation of the fact that you do not have a burdensome level of debt compared to your income. The debt-to-income ratio will be critical to getting loan approval. Those who are self-employed and used to rely on low-documentation or no-documentation loans will now have much more limited options, because those kinds of loans have become essentially extinct.

Safe Loans But Fewer Choices
It is now illegal to do no-documentation loans or to qualify a borrower based on low introductory interest rates or “teaser” rates that will later expire, causing the remaining monthly payments on the loan to be much higher. Similarly, banks are no longer allowed to qualify you based on a 40-year amortization schedule. Those longer repayment periods shrink the amount of each monthly payment, which helps borrowers. But it also can disguise the fact that the borrower doesn’t really make enough money to handle a loan of that size. So those are also off the table, leaving borrowers with safer loans but fewer options in terms of flexibly-priced mortgage products.

The Bottom Line

What does this mean for potential home buyers? You should consult an experienced and well-qualified loan officer, mortgage broker, or Realtor who can help guide you through the process to gain loan approval. You’ll want to start reducing your debt by paying it off and you’ll also want to check your credit files to ensure that they do not contain errors that could lower your credit score or credit profile. With bolstered credit you can then shop for a reasonably priced home within your price range, confident that you will be eligible for one of the newly classified QM mortgages.

February Home Maintenance: Avoiding frozen water pipes.

Filed under: Home Maintenance — Chuck @ 1:14 pm

February is usually the coldest month of the year, and in the middle of a deep freeze you do not want to have to go outside and conduct home maintenance repairs. You also don’t want to wake up to find that your pipes have frozen and that there is no longer any running water in your home for bathing, cleaning, cooking, or flushing toilets. But plenty of homeowners will have that dreaded experience this month because they neglected to do rather simple and easy do-it-yourself home maintenance to keep those pipes warm and fully functional.

Here are some tips to help you with this kind of project so that your water keeps flowing no matter how low the temperatures go this winter.

Locate and Examine the Pipes
First you want to find and follow your plumbing pipes. Oftentimes they will be diverted along the inside of an exterior wall as they go to rooms like the kitchen, for example. But the closer they are to the outdoors the greater the chance is that they can get cold enough to freeze. That is especially true if they are not insulated and are not within a protected space. Of course the worst situation is when a water pipe is directly exposed to the weather. That can happen to taps outside in the yard which need to be well protected during winter, and it can also occur when pipes enclosed within the building structure are left vulnerable because they are in an unheated area like a basement or crawl space.

Evaluate their Environment
Even in those unheated spaces pipes may be safe as long as they are insulated and are also keep within an enclosed space. But if you have a water pipe in an unheated basement and a broken window in that basement, for instance, that small opening can be enough to plunge the temperature. That is why is it critical that spaces under the house where pipes are laid need to be maintained with no gaps, holes, broken windows, or doors that blow open during a windstorm. Otherwise – especially when wind chill factors magnify the threat of frozen pipes – even a small opening that lets outside air in can be enough to freeze your pipes and potentially cause them to burst.

Make Needed Repairs / Insulation Installations
The key is to get these updates like insulation, repairs to windows in your basement, or gaping holes leading to the crawlspace done ASAP. Wrapping insulation around water pipes can take as little as one afternoon as a do-it-yourself job. Procrastinate until a pipe breaks, though, and you will have a domino effect of terrible things to deal with during the worst, coldest time of year. Your family won’t have running water so you might be reduced to melting snow to flush toilets. You may have a burst pipe inside a wall or in a basement but you may only realize it burst when the temperatures warm back up again and suddenly you have a geyser in your home. If you’re away at work when that happens it could cause extensive flood damage, electrical hazards, and burn up your water pump if you have one. Plus you will still need to repair your plumbing. Don’t risk a disaster that can cause you tens of thousands of dollars in damage and take weeks or months to fix just to save on a few dollars worth of pipe insulation and a little time devoted to upkeep. Do it now, feel proud, and sleep peacefully when the arctic weather comes.