Dear Doug – March 2012

Dear Doug,
I just wrote a contract on a condo that I really LOVE, but now I am wondering what I need to look out for between now and settlement, since I hear so many horror stories about buying condos? Thank you, Beverly B.

Dear Nervous Bev,
I get this question all the time, but usually before someone makes an offer. My pre-offer speech includes warning buyers about the condo complex as a whole, as well as the particular unit, itself. As for the unit- that is where the home inspection comes in. Have it inspected by a Certified Inspector.(American Society of Home Inspectors, ASHI, is the only one I know that has a certification process). He won’t look at the condo through the rose-colored glasses that you are wearing. He will see the nuts and bolts. If the furnace is old and needs replacing, he will note it. If the windows are single pane and leaking, that will be noted, too. If he see what he thinks is asbestos around the furnace, he will also note that, and recommend further evaluation. He will not be blinded by the emotions that you are currently caught up in. Or, he may find that it is in perfect and impeccable shape, and needs nothing, although that is quite rare. … Continue Reading

Should I Start Flipping?

Dear Doug,

Thanks,
Ben in Loudoun … Continue Reading

Rules for Negligent Renters

Dear Doug;

I think my tenant has abandoned my property. Can I enter my property to see if he is still living there? If he is gone, can I change the locks and proceed to find a new tenant? Help! -Carol

Dear Carol,

Welcome to the unpredictable world of land-lording! It is not always fun. Personally, I have had to evict people, garnish wages, and place furniture on the street. I have been threatened, and I still own rental property. Is it worth it? Only you can answer that….The first step I recommend is to call the local landlord-tenant board and check the rules. Better yet–and if this is your first time–I recommend a real estate attorney who specializes in evictions. There are certain, specific rules you have to follow. In some counties you must first send the tenants a “Five Day Pay or Quit Notice” once the rent is “late,” according to the terms of your lease. Then, they have five days to pay what they owe or they must “quit” (leave) the premises. If they don’t, then you can file another form, and the legal journey begins. The length of time it takes from start to finish is unpredictable. It can depend on how savvy the tenants are about the whole process. I strongly (yes I said strongly) recommend an attorney who is well versed in these matters, since there are a number of steps along the way. … Continue Reading

Raising the Rent

Dear Doug:
I own a townhouse which I have rented out to a nice family on a month to month basis for the last 2 years for a very reasonable price. In recent months, my mortgage payment increased after I locked in to a fixed rate. I would like to raise the rent to help re-coup my higher costs, but I don’t want to risk losing my tenants. I have done some research, and I know I am renting below the market. Are there any rules about how to go about raising the rent? I want to increase the rent from $700 to $800. Is this reasonable? How much notice do I need to give them? … Continue Reading

What is a Quit Claim?

Dear Doug:
I was looking at a house and the realtor said it was a quit claim? What the heck does that mean?

Dear Prospective Buyer:

Beware of the “quit claim” deed. It transfers the ownership interests of the person conveying the quit claim deed to the new buyer. However, that ownership interest could be nothing at all. The property could still have a title with many other people on it, or it could be encumbered by a number of liens and issues. One could buy a property using a quit claim deed, but you would need to make sure that the contract is contingent on the buyer getting a title search with “free, marketable, and unencumbered” title to the property, and having a title insurance company issue a full title policy on it. Only then can the new buyer be sure that the property conveys to them with a truly marketable title. Good luck!

Are More People Renting or Buying?

Dear Doug: Are you seeing a trend toward people renting rather than buying? – Leslie, Purcellville

Dear Leslie,

I am seeing a strong demand for rentals. Why? Well, you have to ask: Where are the people going who are facing foreclosure and short-selling their houses? They can’t buy, since they’ve either nicked their credit or completely destroyed it. No lender will touch them, so they have to rent. In addition, we see recent college grads looking for housing, and relocating buyers attracted to this area by a fairly strong employment base. … Continue Reading

What Are the Pros and Cons of an HOA

Dear Doug: What are the pros and cons (and hidden costs, if any) of buying a home in a subdivision or area that has architectural standards and homeowners dues (versus many older neighborhoods that do not have these)? KR

Dear KR,

I get comments on that question a lot. The “pros” of having an HOA- Home Owner Association- are that it helps keep the neighborhood consistent in appearance. The HOA’s have rules that vary considerably. They also vary in the way they are enforced or not enforced. Some have rules governing exterior paint colors, storm door styles, front fence rules, lawn height rules, flag rules, basketball hoops in driveway rules, no commercial vehicle parking rules, and on and on. This does help keep the neighborhood in good shape and consistent in appearance, which in turn can help the resale of the homes. On the other hand, some people can not stand being told what colors they can paint their doors, or the front of their houses. And, if their favorite team is playing, they want to fly that team’s flag. Can’t do that in a strict HOA. Can’t have the plumbing company truck you drive parked in your driveway, either. So, HOA’s do take away some personal choices,but chances are very good that your neighbor won’t be painting his home pink anytime soon, devaluing your property!

Overall, most people seem to like the HOA idea, when written and enforced in moderation. The rules tend to protect the good of the whole. Of course, when buying a home, you have to ask yourself if you can live by the rules of the HOA of any particular neighborhood that you are considering.

One final point; when you make an offer on a home in an HOA and it is accepted–you have certain rights. Your purchase is contingent on you getting a copy of the HOA rules and regs, and your acceptance, before you complete the purchase. You’lll be delivered the HOA package (same as with a condo doc package), prior to settlement. You then have three days to kill the deal and get your deposit back if you don’t like the rules. You don’t even have to explain why. Good luck!

Dear Doug:I’ve had a rental property for a number of years and have claimed depreciation for taxes. If I sell it, do I have to pay that back? EM

Dear EM,

That depends. The answer, in most cases, is yes.The IRS will “recapture” the depreciation that you took on the rental property when you sell it, and, that will be at a different rate than the capital gains tax which is currently 15 percent. I say “it depends,” because you could sell your rental property using a 1031 Starker Exchange, and take the proceeds, place them with a “qualified intermediary”, and then buy another rental property. You would not have to pay any taxes at that time. You would be basically trading a house for a “like kind” property, and delay paying taxes, and delay paying any recapture of the depreciation that you took. To take it one step further, after a year or more renting it out, you could move in it, convert it to your primary residence, and not pay any capital gains tax for up to a $250,000 gain–or a $500,000 gain, if married. However-the bottom line answer is: I know enough about tax strategies to be dangerous, so consult a tax adviser. Ask me about bricks and mortar, and values and “comps”. I know enough to know that I don’t know enough to advise you. So, please consult a tax adviser..then call me when you need to do that 1031 Tax-deferred exchange, and find a “like kind” replacement property!

Douglas Frank holds a BA degree in English from Rutgers University and is a licensed realtor with over 20 years experience. Doug works with Prudential Carruthers Realtors in Fairfax, Virginia. He also has his Home Improvement License and owns a number of investment properties including houses, townhomes, and condos . Doug and his wife and two sons live in Fairfax, Virginia. (Opinions expressed here are … only opinion!)

Can I back out on a foreclosure property?

Dear Doug;
If I purchase an “as is” foreclosure property and then get an inspector that says the place needs a ton of work, can I back out?-EP

Dear EP,

I get that question a LOT. Foreclosures scare people–it is the Great Unknown.

The answer is “maybe.” That is why you need to read the fine print, and only move forward if you’re able to back out if the property needs too much work. Usually, the bank/lender/owner will allow you to back out. Once they sign your offer, or “ratify” it, they usually give you 10 days (some seven, others 15), to inspect the property, on your dime. Many times, that also means you have to pay to “de-winterize”, or get the systems up and running, since they often have turned off all utilities.(They also require you to return it to a winterized condition if you don’t buy it, so there are expenses to this process!) But, how can you buy unless you really know what you are buying? … Continue Reading

How much house should I buy?

Dear Doug:
In these financial times, is it still good advice to buy “the most house you can afford” with the idea that through time you will have an easier time with payments (as income supposedly increases) and home value increases as well?–CS?

Dear CS:
No. To me, that is bad advice. I would never tell anyone to buy the “most house they could afford”. There are too many unknowns. Who knows what the market will do, or how stable your job is, or if your area is going to get hit with a recession? I always advocate buying what you like and need and can afford, but not pushing your price up, just because you CAN afford it. Sorry, I don’t like that way of thinking. It gets too many people in trouble down the road. Restraint is the word of the day. CS, Put the reigns on, and only buy what you like, what you need, and a home that fits your vision of what you would like in the future – not the most you can afford.

Should I finish my basement?

Dear Doug;
What is the ROI on finishing a basement? Thanks.–Barry B., Fairfax

Dear Barry,
ROI (Return on Investment) questions are complicated and difficult to measure. For example, when you go into a restaurant, and spend $15 on a meal, what is your ROI? Or after spending $10 on a movie? In real estate terms, you’ll find books telling you that finishing a basement is a good thing to do. It pays back 80-90 percent of what you invested when you go to sell, and helps a home sell faster and for more money than one without a finished basement. It also adds to your enjoyment of your house, which is tough to measure in terms of ROI–thus my movie and meal examples. But, would I ever recommend finishing the basement solely for resale purposes? No. Why spend the money on it, and only get 80-90 percent of it back, just so you can sell it faster? However, if you want the extra space, and know that the quality of you and/or your family’s life will improve, that may make it well worth the money spent to complete the job. I hope that helps!

Dear Doug

Dear Doug: What is the “hottest” month for sales? What improvements enhance a property, and which are a waste of time and money?-Kathleen, Hamilton

Dear Kathleen: Springtime is the hottest time to sell your house–when flowers are blooming, trees have greened up, and colorful potted plants greet potential home buyers Contrast that to a bleak, icy day when snow has been pushed aside a narrow path to the front door. See the difference? A home can have a welcoming aura, if presented in the best light. When you plan to meet someone for the first time, do you get dressed up and pay attention to detail, or just go as you are? You get the idea.

And, for the second part of your question:

Paint, Carpet, and Cleaning are the top three improvements that enhance property. If you do nothing else; clean, paint, replace old carpet, then clean again.

Following close behind, is De-cluttering. Get rid of Stuff to give your home a clutter-free appearance which will make your home seem lighter, brighter, and more pleasant.

Another cheap fix is Landscaping. Add colorful flowers to the front walkway or porch. Put a hanging basket of flowers to greet new home buyers. Add new mulch and edge the driveway, but don’t spend thousands on that exotic bush that no one will notice.

When it comes to major improvements, I’ll start with what I wouldn’t do if you’re goal is to sell your home right away:

–I would not redo the entire kitchen. It’s too subjective, and too expensive just to sell a house.You may want to replace appliances if they are too old, but it’s more cost effective to just clean well, then price the house accordingly.

–I wouldn’t add a garage if you lack one.

–No digging a swimming pool.

In short: I wouldn’t add any major projects just to sell a house-. My rule of thumb is to spruce up what you have, spending the least amount for the biggest impact. Occasionally, homeowners facing stiff competition may need to amend this advice a bit, to stay competitive. If you are considering adding granite countertops, for example, look at your neighbors. Do they all have it? Would you really stand out? If your answer is yes, you may want to take the plunge. Likewise, if you have a basement with the plumbing roughed-in for a bath, and the walls and sink are in, I would add the toilet. I would not add a complete bath!

So, good luck with the improvements, Kathleen, and send me any questions you run into as you get your house ready to go!

Dear Glen: You can call a Realtor like myself to provide free info on any foreclosure that you want to know about. Why? So I can educate you on that particular foreclosure, then sell you on why they can be a great deal to buy. Is that “free?” Yes! As a Realtor, if I know you’re working with another Realtor, I would keep it very brief. But, if you’re trying to learn about foreclosures, and I think I can begin a successful business relationship with you, I’ll give you all the “free” info that you desire–and I’ll invite you to bring any friends who want to learn, too. We would review the whole foreclosure process, depending on what you wanted to learn. If you’re just gathering info on foreclosures for a school paper, I would still give it out for free–but with the hopes of educating you and closing future deals with you and your friends. Why? Because people all need a place to live. I find that even if the free advice seeker is not ready to buy something now, he/she will will take notice of a Realtor who takes the time to answer questions. So, get in touch with a Realtor, and I’ll bet you’ll get all the “free” info that you’re looking for. Go ahead, make that call!

Dear Leslie: I am seeing a strong demand for rentals. Why? Well, you have to ask: Where are the people going who are facing foreclosure and short-selling their houses ? They can’t buy, since they’ve either nicked their credit or completely destroyed it. No lender will touch them, so they have to rent. In addition, we see recent college grads looking for housing, and relocating buyers attracted to this area by a fairly strong employment base.

Also, it’s more difficult these days to get mortgages. Banks are being more stringent about qualifying people. Those who would prefer to buy are being forced into the rental market.

With this increased rental demand, landlords like myself are seeing a dramatic increase in rental prices, which I really can’t complain about!

So, who is buying, you may ask? Relocating buyers with relocation packages provided by their companies. Also, long-time renters with steady job who are seeing severe price drops over the past 3 years. Some of them can now buy for less than they can rent in some places. For example, a recent client of mine–a relocating government employee–chose an $1800 townhouse to rent. When I showed her that she could buy the townhouse and save a few hundred dollars per month, she was quite surprised! ( Incidentally, she rented anyway because she wasn’t sure she wanted to live there for the next 5 years.)

Douglas Frank holds a BA degree in English from Rutgers University and is a licensed realtor with over twenty years experience. Doug works with Prudential Carruthers Realtors in Fairfax, Virginia. He also has his Home Improvement License and owns a number of investment properties including houses, townhomes, and condos. Doug and his wife and two sons live in Fairfax, Virginia. Opinions expressed here are … only opinion!

Dear Doug Real Estate Q&A

(Douglas Frank holds a BA degree in English from Rutgers University and is a licensed realtor with over twenty years experience. Doug works with Prudential Carruthers Realtors in Fairfax, Virginia. He also has his Home Improvement License and owns a number of investment properties including houses, townhomes, and condos . Doug and his wife and two sons live in Fairfax, Virginia. (Opinions expressed here are … only opinion!)

Dear Doug: I just passed my real estate exam and I have no idea what my next step is. How do I find a Real Estate Company that will take me on? Is there some sort of training offered for newbies like me? … Continue Reading