Wee Doggie!

White wee doggie running through the grassHere’s another funny story going back to my days at Mill Creek. One of the little things I enjoyed was driving across town through Burlington and Haw River on Church St./HWY 70 to work in Mebane.

On this particular day, it was hot so I decided to stop off at the Little General convenience store before turning onto Dodson Rd. to take the back way by Eastern Alamance to Mill Creek. Wearing my coat and tie, I jumped out of the car, got a drink and walked up to the counter to pay. Behind the counter was a young girl sitting in an upholstered rocking chair watching tv, with her mother tending the cash register.

The little girl looked up at me and said Wee Doggie! At that moment, I thought that was a strange thing for her to say but paid for my drink, got in my car, and went on my way. After pulling out of the convenience store parking lot it dawned on me that she was commenting in her own country way about how I was dressed, saying exactly what Jed Clampett would say, Wee Doggie!

Reflecting on the moment, it made me smile and laugh. I still pass by the little General in my travels to Mebane from time to time and still think about that moment, but I haven’t stopped in since. I may stop in again sometime just for the heck of it, but if and when I do, I can assure you I won’t be wearing a coat and tie to attract any unwanted attention.

If you are ready to buy or sell, call Mary Staton or Bert Ward - they’ll be happy to answer any questions.

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What to Look For When Needing Rental Property Insurance

Bright sunshine through the tree branches - Photo by Jeremy Bishop on UnsplashMost anyone who owns a rental house (and there are a lot of people out there who do – more than you would probably think), knows that obtaining insurance coverage at a reasonable price can be challenging. If you are new to the landlord business, thinking about buying a rent house or thinking about switching insurance carriers, this article may be worth your time to read.

The first challenge is finding an insurance agent who will write the insurance policy at a competitive rate. Some insurance companies refuse to even write insurance on rental properties, while others will for a premium, and the remaining ones will write it at a reasonably good rate if the home measures up to their standards. Shopping around for a good insurance carrier is the easy part of the coverage process since there are a lot of insurance agencies in the marketplace to choose from.

The next step is where things can get tricky. In order for most carriers to write it, they will typically require an insurance inspector to make an on-site inspection of the property. If you don’t know what the important things they are looking for, be prepared to be blindsided. Planning and preparation ahead of the on-site inspection are all-important, to ensure that you are not surprised and that everything goes well. If the home is relatively newer in age, there is less to be concerned about than if you own a home that is older in age. Having said this, this article is written in mind for those looking to rent and insure an older home.

Some of the most important things the insurance inspector is looking for and will be taking pictures of to include in their report are; condition of the roof and whether the gutters are clogged or not, and if the gutter downspouts appear to be properly draining rainwater away from the home’s foundation; whether or not there are any big trees overhanging, or located near the home; whether the electrical panel has fuses and are in need of being upgraded to breakers; the condition of the power line connected to the house and whether or not it is in need of upgrading; the age and condition of the HVAC and water heater, and if they appear in need of repair or near the end of their life expectancy; if there are any grills located directly underneath the house soffit vents; and whether or not there is any firewood or wood debris stacked up against the home’s foundation. Of course, there are other things the insurance inspector will make note of in their report, but the aforementioned head to the top of the list.

So in a nutshell, what does all this mean to the person who is looking to obtain rental house insurance at the best rate possible? If you know what the insurance inspector is looking for, then you can plan ahead and address any issues with your home before the inspector comes out. If you fail to prepare in advance, you could run the risk of the insurance carrier refusing to insure your investment property based on the findings of the insurance inspector’s report. If you currently own a rental property that is being insured, but at a rate higher than you feel it should be, you may want to think twice about moving it to another carrier who may be offering a lower rate. Knowing what an insurance inspector looks for is especially important if you are not in a position to make any needed improvements to the home you may be currently renting, thinking about renting, or considering buying to rent.

If you are ready to buy or sell, call Mary Staton or Bert Ward - they’ll be happy to answer any questions.

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Coming Soon

Guy holding a bottle in his hand excited about a new listing A trend you may have noticed over the past couple of years that is becoming more common is the “Coming Soon” home.  Generally speaking, the concept behind this marketing strategy is to build up the anticipation and excitement of a new listing prior to it hitting the market.  The idea is to attract the interest of multiple buyers based on the principle of scarcity by creating an auction effect, in which buyers will want a home more if they believe that other buyers want it too.  A typical example for marketing your home as “Coming Soon” is when another home is listed in your neighborhood, is similar to your home, and you need to do some finishing touches to get your home ready before it is put on the market; but you want prospective buyers who may be considering the other home to see your home, before they make a buying decision on the other home.  

“Coming Soon” listings do have a downside however and that is the listing agent, buyer agents, and homeowners, are not permitted to show the home to any prospective buyers before it’s beginning list date (as stated in the written listing agreement and it is typically the day the home is listed in MLS).  This rule is in place to prevent anyone from gaining an unfair advantage of selling the home before other interested prospective buyers have a chance to see it and make an offer. 

In summary, it is not essential to create buyer excitement by marketing your home as “Coming Soon”.  If a home is priced to sell the day it hits the market, a new listing will have the same effect as “Coming Soon” since other Realtors and buyers will recognize a properly priced listing and will want to quickly see it and submit their offers.  So if your home is ready and priced accordingly, you may want to just go ahead and put it on the market and let the showings begin and offers come in.  If your home is not ready but you want to get a head start marketing it before it goes on the market, then you may want to consider entering into a “Coming Soon” agreement with your Realtor.

 If you are ready to buy or sell, call Mary Staton or Bert Ward - they’ll be happy to answer any questions.

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Preparing Your Home to Sell

Man working on home project of fixing lightIf there is only one thing I recommend anyone do in preparing their home to sell, it would be getting their home inspected and making as many repairs as reasonably possible prior to putting their home on the market. The benefits of doing this are twofold. First, it gives the seller more leverage to negotiate the best price and terms in the sale of their home. Second, it gives the buyer a greater peace of mind that the home is in good condition prior to entering into a contract to purchase the home. Furthermore, the contract is less likely to be renegotiated or fall through during the critical period of the due diligence process. Think of it this way, if you were looking to buy a pre-owned car from a reputable dealer, they will check it out and certify that the vehicle is in good condition before they sell it to you. Makes sense this would be the best way to sell your home for top dollar, right?

Having said this, I recognize that getting your home inspected before putting it on the market may not be the best course of action for every seller. For example, if the seller doesn’t have the money to make needed repairs, the seller should be prepared to expect the unexpected. If a buyer enters into a contract and their home inspector uncovers a lot of issues with the home, they will surely want to renegotiate the contract by amending the purchase price, or even worse, exercise their option to terminate the contract during the due diligence period. An exception to this scenario would be if the home is priced aggressively to sell where most of the issues are observable and obvious, such as noticeable wood rot, an old and worn out roof or HVAC, or foundation cracks. In this case, such deferred maintenance will be factored into the price and what you see is pretty much all there is. In this event both the buyer and seller would have a mutual understanding that the home is being sold “as is”.

If you are ready to buy or sell, call Mary Staton or Bert Ward - they’ll be happy to answer any questions.

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Going the Extra Mile

Mary Staton Ward and Bert Ward Owner/Appraiser/Broker/Realtor/GRI Black Diamond Real EstateGoing the extra mile has to an extent become a common cliché that some people may say and know they should do but seldom put into practice. Napoleon Hill defined Going the Extra Mile as “the habit of rendering more service and better service than one is expected to render (or paid to do) and doing it in a positive mental attitude”. This article illustrates what going the extra mile means to Black Diamond Real Estate.

In the Spring of 2019 an accountant friend referred to me a seasoned women, who was looking to sell and lives alone at Caswell Beach, seldomly leaving her home, and doesn’t have email, internet, nor a cell phone. The only method to communicate with her is by land line phone or paying an in-person visit. As a personal favor to my friend, I spoke with this sweet and kind lady who wanted to sell a one acre lot she owned on Westbrook Avenue, in the Alamance County part of the Gibsonville city limits. She told me about someone who wanted to buy her lot and gave me his name and number. I called the prospective buyer who informed me that he was interested in growing an organic vegetable garden on her lot and was only willing to pay $7,000 since her property did not have access to city sewer, only city water.

Performing my job in accordance to the Realtor Code of Ethics I conveyed the offer in which the seller, understandably, flat out rejected the offer. My next call was then to the Gibsonville Planning Department to take a deeper dive into investigating the peculiars of the lot. They confirmed that city water ran down Westbrook Ave in front of her lot but the city sewer did not. They even emailed me a map showing where the city sewer lines ran throughout the bordering subdivision, and on the adjacent corner across the street on Westbrook Ave. The only options for seller’s property to have access to city sewer was for at least one of the four bordering property owners to grant her an easement, or to tap into the sewer line across the street. Tapping into the sewer line across the street was not only a bureaucratic process involving in-person meetings and hearings, but would be a seller incurred expense and therefore was not economically feasible. In other words, the time and expense involved to connect to the sewer line across the street would not net the seller more money, in fact it would cause her to net less money. The more feasible option seemed to be trying to get one of the four bordering home owners to buy her lot, since there was no incentive for them to grant her a sewer easement without monetary compensation. The last option was to see if the city of Gibsonville would allow a septic system. They shot this final option down saying that if you have access to city water, you are required to connect to city sewer.

Determined not to give up on helping this seller sell her lot, the next thing I did was mail letters to the bordering property owners to see if any of them would be interested in buying her lot, since it seemed to me that it would be great investment opportunity for any one of them. I received a call from one of the letter recipients who expressed some interest and had a plumber come out to give him an estimate of how much it would cost to run a sewer line through his property. When the cost estimate came back at $20,000, his interest in the lot turned luke-warm. I followed up his response with a question by asking if his neighbor would be interested in going in on buying the lot with him? Unfortunately, he said that he didn’t get along with his neighbor, so this wasn’t an option either.

What to do now was the question? After exhausting all my efforts to no avail, I called up the Gibsonville Planning Department again and posed the question, how is this fair to this seller not to allow a permitted septic system when connecting to city water was not a viable option? I explained that if a septic permit was not permissible, then this seller had more or less an unmarketable property, not even worth about half its tax assessed value of $15,000. And, that if her property had city sewer access her property, it should sell for around $40,000+/-. About an hour later after we got off the phone I received an email from the Gibsonville Planning Department with an attached document they found that allowed an exception to allowing a septic system inside the city limits when connecting to city sewer is not “reasonable accessible”.

Finally, good news, but there was still more work to do in order to get this property ready to list and sell on the open market. First, we needed the seller to get a new and current survey of her property so that we could apply for a septic permit. Once the survey was completed, we would need to apply for a four-bedroom septic permit with the Alamance County Environmental Health Department.

After we obtained the new survey and septic permit, we would then need to get the listing agreement signed, since we now had a marketable and saleable property. Emailing or faxing the listing agreement was not an option, so we would need to snail mail it to the seller or drive to Caswell Beach to personally go over the listing agreement with her to sign. Determining it was in the best interest of my seller, I decided to literally and figuratively, Go the Extra Mile, and drove down to Caswell Beach on a Wednesday and returned home the next day. On Friday we listed her lot in MLS for $37,000, and on Sunday, we received two cash offers, both with a two week closing. The seller verbally accepted the best offer and I drove down again the following week for her to sign the contract. Two weeks later, we lined up a public notary and returned to Caswell Beach for my third and final trip for her to sign the deed and her seller documents. That afternoon, my seller arranged a light house tour for my wife and I, and afterwards we went out to dinner and spent the night at Sunset Beach. The next day we drove home and closed on the lot that afternoon.

In conclusion, going the extra mile for our seller paid off in more ways than one. First, in doing the right thing and looking after our seller’s best interest, we were able to sell her lot for top dollar which netted her three times more than she would have received if we had given up on finding a solution to the sewer/septic problem. Second, the satisfaction we received in helping our seller, far outweighed the monetary compensation we received from selling her lot. After factoring in the time value of money and the expenses we incurred, we only netted about $500 in selling her lot. In other words, going the extra mile to Black Diamond Real Estate means doing whatever it takes to lawfully, morally, and ethically serve the best interest of our buyers and sellers. First and foremost we are in the business of helping people, and if we do the best job we are capable in doing that, then we consider it to be a successful outcome, regardless of our bottom line.

Bert Ward
Owner/Appraiser/Broker/Realtor/GRI
Black Diamond Real Estate
BDRE.com

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Jackpot

Hands on pile of moneyBeing in real estate sales you often never know who your next buyer is going to be or where they are going to come from.  As fate would have it, a Chapel Hill Realtor who sold one of my listings in Mebane last year referred a buyer to me looking to buy a home in Burlington.  Not knowing the particulars of the buyer, other than they were a cash buyer, I referred him to Mary Staton since I was busy working another deal.

After accepting the referral, we discovered that our buyer came into a large source of cash by winning the North Carolina lottery.  After showing him several homes, we finally found the perfect one which he bought for his parents. Using the left-over money, he bought a new car for himself and put the rest into savings. When the sale closed, we paid a referral fee to the referring agent and couldn’t help thinking how mysterious this business can sometimes be.   

 If you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.

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Due Diligence Explained

Due Diligence ExplainedDue Diligence is a negotiated period of time in exchange for a negotiated amount of monetary consideration (if any), between buyer and seller.  The due diligence clause of the Residential Offer to Purchase and Contract is the “option” clause of the contract.

The purpose of due diligence is to give the buyer an opportunity to investigate the property (allow time to get the home inspected and appraised, for example), in order to make an informed decision to either move forward with the purchase of the property or terminate the contract.  Although the Offer to Purchase clearly states that the “property is being sold as in in its current condition”, the home inspection may reveal hidden defects or material facts about the property that were not known to either the buyer or seller at the time the contract was executed.  If such concerns arise, the buyer will typically submit a Due Diligence Request and Agreement form to the seller (prior to the expiration of the due diligence period) in order to renegotiate the contract for consideration of repairs or concessions, rather than terminate. The seller then has the option to either renegotiate the contract or not.  If the seller agrees to renegotiate the contract (make repairs, reduce purchase price, or pay closing cost, for example), they will need to sign the Request Agreement before the expiration of the due diligence period. If the seller refuses to make any concessions, then the buyer has the option to proceed with the purchase or terminate the contract (In fact, the buyer has the option to terminate the contract prior to the expiration of the due diligence period, without any reason, and before entering into a written and signed Due Diligence Request Agreement).  In the event the buyer terminates the contract, they will forfeit their due diligence money as it is non-refundable. Their earnest money deposit is refundable however, as long as the buyer terminates prior to expiration of the due diligence period.

When negotiating the due diligence period and amount of money, the buyers typically want a three week examination period with as little money down as possible.  Reasons for this include allowing sufficient time to get the home inspector and appraiser out to the property and complete their reports. Since the buyer incurs these expenses, as others, they are not looking to invest a lot of money that is non-refundable should the home inspection uncover a bunch of issues.

From the seller’s perspective, they are looking to be compensated appropriately for tying their home up under contract during the due diligence period.  Should the buyer decide to terminate the contract, the due diligence money is the seller’s compensation for the inconvenience of having taken their home off the market.  Therefore, it is in the seller’s best interest to get as much due diligence money as reasonably possible. It basically boils down to how much the due diligence time is worth to the buyer and the seller, with consideration of fairness taken into account in regards to their respective interest.  

Since buyer and seller are often at odds over what’s in their best interest, obtaining a reasonable and appropriate amount of compensation can sometimes be challenging for the seller.  For example, if the home has been on the market a while and there is only one interested buyer in the property, the seller may be in a weaker position to negotiate the most favorable terms to them.  However, if the home is a new listing and priced to sell and/or has multiple offers, then the seller is in a stronger position to negotiate the most favorable terms to them.

In a perfect world, all sellers would have a pre-home inspection done on their home and repair all serious/material issues before they list it for sale.  All repairs that were made and any that were not, would then be disclosed to the prospective buyer before entering into a contact. In this situation, both parties would gain a peace of mind knowing what the home’s current condition is while increasing the odds that the sale will close with mutual satisfaction.

However, since we live in the real world, some sellers do not want to spend the money to have their home inspected since they may not have the money nor be interested in spending the money to have any repairs made.  While I understand this position, especially if the seller doesn’t have the money, it can end up costing them more money in the long run having to renegotiate the contract (or cause the buyer to terminate the contract) than if they made repairs prior to listing their home for sale.

At the end of the day, if both buyers and sellers enter into a contract in good faith and feel like they are being treated fairly, then most sales end up closing.  The sales that typically don’t close are usually the result of one or both parties engaging in win-lose negotiating tactics, or from having unreasonable expectations.  If either the buyer or seller (or both) feel that they are being treated unfairly, they will typically try to find a way to respond in kind, causing the sale to implode.

In summary, negotiating the due diligence part of the contract is a function of time in relationship to how much it is worth to the respective buyers and sellers.  In other words, the less time desired should equate to less due diligence money down, whereas the more time desired should equate to more due diligence money down.  

If you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.

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When is a Bedroom a Bedroom?

When is a Bedroom a BedroomThis past spring my wife, Mary Staton, and I showed a condo in Burlington that was listed for sale as having two bedrooms. In preparation for the showing we pulled the original MLS listing when the condo was first sold in 2007, as well as the current active listing, and the public property tax record. All three documents represented this condo as having two bedrooms. So far we have a two-bedroom condo, right?

The showing was going as expected until we went upstairs and saw the second bedroom which was located adjacent to the second full bathroom and bonus room loft area. The first two things we noticed about the room being counted as a bedroom were the skylight in the middle of the ceiling and a double door closet. Was this bedroom really a bedroom? Drawing from my appraisal experience I recalled that a bedroom must have an accessible window or an exterior door for egress access - for safety reasons in case of a fire. This room with a closet and skylight apparently didn’t meet the egress requirement of it being called a bedroom.

Knowing this, Mary Staton and I decided to investigate the matter further since this home was being represented as a two-bedroom condo. Afterall, just because I suspected that this room wasn’t a bedroom doesn't mean it’s not a bedroom, right? Doing what any professional Realtor would do, we contacted the North Carolina Real Estate Commission, the attorney with the North Carolina Association of Realtors (NCAR), The North Carolina Appraisal Board, a local Home Inspector, the City of Burlington Inspections Department, and the City of Burlington Fire Department to get their opinions.

The Appraisal Board said that it was up to the appraiser to determine whether or not they considered it to be a bedroom, but if they did the appraiser should provide detailed comments in their report as to why they were classifying it as a bedroom. In other words, the appraiser could theoretically call it a bedroom, but it would be inadvisable from a professional liability standpoint.

The Burlington Fire Chief referred me to the City of Burlington Inspections Director who said that the second bedroom did not meet egress code which states that upper story windows shall have a total glass area of no less than 5’.7” square feet and be no less than 44” off the floor.

The local home inspector concurred with the City of Burlington Inspections Department that this condo’s second-floor bedroom did not meet egress code, and that they always note in their home inspections that bedrooms without proper egress access are safety concerns. The home inspector said he commonly encounters this situation with rooms in basements, without windows, being used as bedrooms.

After speaking with the attorney with the NCAR, he advised that since this room with the skylight did not meet local egress building code, then it couldn’t be represented as a two-bedroom condo, and that the listing agent of the condo should correct the listing and market the property as a one-bedroom unit or count the loft area as a bedroom.

So, the question is how was the builder, Keystone Homes, able to market and sell this condo as a two-bedroom property in the first place? Mary Staton researched Keystone Homes’ website and found an almost identical floorplan that they were selling where the second-floor loft was an “optional” bedroom. Apparently, when this homeowner bought this condo in question, they decided not to convert the loft to a bedroom. In order for them to make this condo appear as a true functional two-bedroom unit, the owner should sheetrock up the half wall in the loft, install a closet, and put up a bedroom door for privacy.

One last word about bedroom classifications. While many rooms are called and sometimes used as bedrooms, common sense should prevail when in doubt, especially when it comes to functional utility. Contrary to popular belief, a closet is not a requirement for a room to be counted as a bedroom, as long as the room functions appropriately as a bedroom and meets the egress requirement.

To illustrate the point, there’s a home that comes to mind that was being marketed as a four-bedroom property. The second story has a bedroom with its own private and separate bathroom. One of the other two bonus rooms on the second floor was being counted as a bedroom by the listing agent but did not have direct access to a bathroom without having to pass through the bedroom. There is however another full bathroom located on the first floor in the foyer hallway, located adjacent to a first-floor bedroom. If someone were sleeping in the upstairs bedroom (or getting ready at the same time in the morning or evening), the other second-floor bedroom occupant would have to walk downstairs to use the other bathroom. This inconvenience makes this fourth bedroom a functional utility issue, adversely affecting the home’s overall value and marketability. As a result, it would be a stretch to call this additional second-floor bonus room a bedroom. A professional Realtor or Appraiser would not count this as a bedroom and sellers shouldn’t either since most buyers and Realtors will recognize the deficiency and not consider it a true functional bedroom.

If you are ready to buy or sell, call Mary Staton or Bert Ward - they’ll be happy to answer any questions.

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Why Homes Don’t Sell

The primary reasons why a home doesn’t sell are location, condition, financing, marketing, and price.  

Location is the only factor in which no one has any control over since it cannot be changed.  For example, if a home is located on a busy street or near railroad tracks, this detracts from its value (unless zoning permits it for commercial use in which case it’s highest and best use is most likely not residential property).  On the other hand, if a home is located on a golf course or lake, for example, there are always buyers who are willing to pay more for these unique locations. Of all the determining factors of value, location is the most important.

Another factor that determines a home’s ability is its condition.  If a seller wants to get top dollar for their home, it must be in top condition.  If the home is not in good condition and the seller is not in a position to make repairs it should be priced accordingly.  Common examples that adversely affect a home’s condition are an old roof, old HVAC systems, damp crawl spaces, old windows, and exterior and interior deferred maintenance.

Financing involves a buyer’s ability to obtain a mortgage loan.  This is self-explanatory in that a buyer will need to come up with a larger down payment and have more income to buy an executive type home.  In the $200,000 +/- price range the down payment is less of a factor with FHA loans being prevalent and income playing a larger factor in obtaining a mortgage loan.     

About fifteen years or so ago, in order for buyers to find out about homes for sale in the market area they were looking in, they needed to engage a Realtor to find out about them.  Today when a Realtor markets a home for sale, it is inputted in the Multiple Listing Service (MLS) which streams to a service called ListHub that disseminates the listings to a number of real estate websites such as Realtor.com and the like.  So generally speaking, if your Realtor is a member of MLS, then a seller’s home will be exposed on-line for buyers to see without having to contact a Realtor.  If a buyer is interested in finding out more about this property they will either call the listing agent directly or contact a Realtor friend. This is how the majority of homes are bought and sold.  As a result, Realtors who are members of the local MLS are able to market homes to the public at large like never before. A final word about marketing is that all the marketing in the world won’t sell an overpriced listing, it will just let more people know it is overpriced.

Price is another factor in which a seller has control over it since it is not the Realtor’s job to set the listing price.  The Realtor’s job is to help the seller come up with a list price by performing a Broker’s Price Opinion (BPO) but the seller ultimately determines how much to ask for their home.  Only once a home is listed and exposed on the market will a seller find out what their home is worth.  Based on the number of showings, showing feedback, and offers or lack of offers will a seller get a realistic picture of what buyers are willing or not willing to pay for their home.  Price is primarily a function of time. If a seller is in no hurry to move or can’t or won’t move unless they can get a certain price, they will have to wait longer and hope that the market improves.  If a seller has been relocated, chances are they will need to sell their home relatively quickly and they will either price their home to sell from the onset or reduce the price accordingly to sell at market value.  At the end of the day, a home priced properly overcomes all buyer objections.

Of course, there are other conditions that affect the salability of a home such as the number of bedrooms and bathrooms, upgrades/finishes, the functionality of the home, and the seller’s motivation or reason in wanting to sell.  The purpose of this article was to address the primary factors of why some homes don’t end up selling. 

If you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.  

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What is a Hypothetical Appraisal?

A hypothetical condition is an assumption made contrary to fact, but which is assumed for the purpose of forming an opinion of value.  The most common example of a hypothetical assumption is an appraisal for new construction, "subject to completion". In this case, the home’s appraised value is based on the current market value as if complete, even though the home may not be finished for several more months.  The lender uses this appraisal for the purpose of construction lending by allocating installment construction draws to the contractor from the borrower's construction loan. When the home is completed, the lender sends the appraiser back out to certify the home's completion, typically but not always, for the original hypothetical appraised value.

If you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.  

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Quicksand

Before I entered the appraisal profession I was a new home sales agent for Coldwell Banker HPW, Better Homes & Garden, representing John Wieland Homes, First Oakland Properties, and C. Richard Dobson Builders (now part of D.R. Horton) at Mill Creek Golf Club in Mebane.

One day while working in the C. Richard Dobson model home in The Park neighborhood, a middle-aged looking couple dropped in to tour the home.  They seemed impressed with the Mill Creek master-planned community development, and excited about buying a home there.

After touring the home, the husband decided to briskly walk the lot with his wife shadowing him from behind.  I decided to observe from a distance on the back patio giving them personal space to look around and discover the lay of the land on their own.

The husband, meticulously surveying the land, continued walking beyond the grassed backyard and onto the back end of the next door cleared lot, at the end of the cul-de-sac.  The next thing I know, I saw him walk right into a sandy looking quagmire, ankle-deep. Seemingly unfazed, he proceeded to take two more steps and was shin-deep, then another two steps and found himself thigh deep.  In just a matter of seconds be for things had gone from bad to worse. I was stunned and speechless as I looked on in disbelief at what was unfolding before my very own eyes. It was as if I was watching an old western movie where the good guy was being swallowed up in quicksand.  Nothing in real estate school or new agent training had prepared me for what to do in such a situation.

Determined, the man mustered with all his might and strength to somehow slowly trudge through it all and walk his way out of this sinkhole to freedom.  As he made his way back to the house, I made sure he was ok and saw that both pant legs were heavily covered in this quicksand looking slop. Thinking quickly I remembered that the home had a garden hose used for watering bushes that were hooked up to the front side of the house and I sprang into action to hose him down as best I could.

The man and his wife then quietly walked down the driveway, got in their car, and drove off.  I never heard from or saw them again and twenty-two years later I still can’t help but wonder where they ended up settling down.  

If you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.  

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Gross Rent Multiplier

Ever wonder how most real estate investors determine how much to pay for an investment property?  The most common method used is called the Gross Rent Multiplier (GRM).  To determine the GRM, the investor identifies three similar properties in similar neighborhoods that were rented at the time of sale and divides their sales price by the monthly gross rent.  For example, three similar homes recently sold in the same neighborhood. Home A sold for $75,000 with a monthly rent of $600, giving it a multiple of 125. Home B sold for $80,000 with a monthly rent of $650, giving it a multiple of 123.  Home C sold for $90,000 with a monthly rent of $750, giving it a multiple of 120. The investor now has come up with a GRM range of 120 to 125, giving them measurable data to determine how much they should pay for a similar type of investment property.  The tricky part is knowing about or finding other investment properties that were rented at the time of sale.  

If you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.  

 

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690 Hits

Functional Utility

When looking to buy or sell a home an issue that can come into play is a home’s functional utility.  The functional utility is an appraisal term that refers to a home’s ability to adequately provide for its intended use.  The most common example is a home with a pass-through bedroom resulting in a less than ideal traffic pattern. For example, my wife and I recently showed a three-bedroom home to a buyer but the third bedroom had a door off the hallway and one off the kitchen there was a den, functioning as a shortcut to the kitchen and the den for the other two bedrooms.  Although this home had an alternate route to get to the kitchen and den (down the hall, through the living room and through the dining room to the kitchen and den), the quickest and most convenient route was through the third bedroom. Our buyer knew that if she were to buy this home, it would be more functionally convenient to cut through the third bedroom to get to the kitchen and den, especially while getting ready for work in the mornings or going to bed late at night.  If a child was sleeping in the third bedroom, it would be inconvenient to walk around this bedroom to go back and forth to the kitchen and den as needed. In short, the functional utility of this third bedroom did not suit her family’s everyday need of convenience. While other buyers could make this floorplan work for their need of having three bedrooms, it nevertheless has an adverse effect on the home’s marketability and overall value.

If you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.  

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309 Hits

Functional Obsolescence

Functional obsolescence is an adverse functional issue of a property according to current market housing trends and buyer needs, wants, or desires.  It is the result of defects within a property. Whether a property has functional obsolescence or not is ultimately determined by the potential buyer of a property through their personal observations and how much they would be willing to pay for the property.  Functional obsolescence may be caused by a deficiency or a super adequacy. 

Superadequacy is typically associated with the features of a home that are above and beyond (over improvement) what is considered normal for the neighborhood and does not contribute to the overall value in an amount equal to their cost.  An example of super adequacy would be a home that has a two-car detached garage, in addition to the home’s two-car attached garage. Although the additional two car detached garage may have value to some buyers (especially in the county where having a workshop is often beneficial), the cost to build the extra garage typically exceeds contributory value added to the home’s overall value.  In most cases, however, the home with a two-car garage is all that is required or necessary for the majority of buyers and therefore the additional two-car garage represents diminishing returns.  

A deficiency is basically the lack of something that other properties in the subject’s neighborhood have, such as a Cape Cod style home with three bedrooms, one on the first floor with one bathroom and two bedrooms on the second floor with no bathroom.  

Some forms of functional obsolescence are curable while others are incurable.  The key difference between whether it is curable or not is whether the cost to cure/correct results in an incremental increase in value.  If it does it is considered curable. For example, adding a second-floor bathroom by bumping out a section of the roof line on the back of the home is a curable form of functional obsolescence.  This addition would typically result in an increase in the overall value of the house greater than the cost to add the extra bathroom, assuming the bathroom can be accessed by both bedrooms without passing through one of them to access it.  However, if the extra bathroom added is not appropriately functional, the cost to add the bathroom may exceed the incremental value gained by adding it. 

If you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions about the functional obsolescences that may be happening around your neighborhood.

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340 Hits

Willful Seller Omission

My wife and I were representing a buyer to purchase a remodeled home in the county on well and septic.  After our buyer entered into a contract to buy their home, we discovered through a septic inspection that the seller had a non-permitted septic system.  Needless to say, this was a big surprise since we had pulled a copy of a septic permit on file for this home and that the seller represented on the North Carolina Residential Property Disclosure Statement that there were no problems with the septic system.  

After notifying the listing agent of our findings, the seller called us all out to meet about it at his home.  What we learned was that a septic system had been installed in a different location than the permit on file showed, and had not been permitted by the Alamance County Health Department.  The seller said the septic system backed up just over a year ago and that he had it repaired.  It was at this time that we believe he was made aware that his septic system was not permitted (he probably bought the home without getting the septic system inspected and his agent only pulled the original existing permit on file at the time of purchase).  He contacted the Alamance County Health Department about repairing the septic system and getting it permitted. The seller decided to have an unlicensed friend make the septic repairs and bypass obtaining a permit, due to the cost involved in going through the permit process.  We were shocked to find out that this seller had willingly and knowingly failed to disclose to his listing agent and all prospective buyers on the open market, the material fact that his home had a non-permitted septic system.  

Luckily for the seller, our buyer still wanted to buy his home at the time if the seller could get a new permit issued for a three-bedroom septic system, which he agreed to do.  As it turned out, this seller tried to get the Health Department to issue a permit for the existing septic system which they declined to do. As a result, the seller did not obtain the permit, breached his contract, and negotiated a settlement agreement refunding most of the buyer's incurred expenses.  

Fortunately for this seller, our buyer decided not to sue him for breach of contract preventing him from selling his home to any other buyers.  He also could have faced legal problems for failing to disclose on the North Carolina Residential Property Disclosure Statement that his septic system was not permitted, which he knew and was a Material Fact and a Willful Omission.

If you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.  

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437 Hits

Extraordinary Assumption

An extraordinary assumption is an assumption which if found to be false could alter the opinion or conclusion of an appraiser’s opinion of value.  An example of an extraordinary assumption is that a home’s well and septic system are permitted, operational, and not in need of immediate repair.  It is beyond the scope of an appraisal assignment for an appraiser to uncover such hidden defects since they are not home inspectors nor well and septic inspectors.  In other words, the assumption is that all homes are free of material defects unless there are obvious observable issues with the home, such as foundation cracks, holes in the roof, etc.  In this case, the appraiser would make a notation in the appraisal report and make a condition adjustment.
 
As you may recall from my blog post Willful Seller Omission that we found out that a home had a non-permitted septic system after having it inspected.  The appraisal was completed before this material fact was uncovered and was not reflected in the appraiser’s opinion of value.  Had the appraiser been aware of this at the time, it would have adversely impacted their opinion of value since the home was not marketable for owner occupancy without a valid permit. 
 
The seller’s agent argued that since no mention of it was made in the appraisal report that the home was financeable and that they had talked to another lender who said they would make the loan on it.  There are two major problems with this Realtor’s and Seller’s line of thinking.  First, if our buyer would have purchased the home, there was no guarantee that a new permit would be issued leaving our buyer with a financial burden when it came time for her to sell this home at a later date.  Second, if the buyer’s agent knowingly lets a buyer purchase a home when financing is involved, they could be complicit in participating in mortgage loan fraud.  If the buyer were to lose their job, and default on their mortgage, then the lien holder could uncover this defect when they foreclosed on the property and pursue legal action against the Realtor and mortgage lender, if the lender was aware of it too. 
 
Before anyone makes assumptions about your home, if you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions about the Extraordinary Assumptions. 
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357 Hits

Contingent Offers

A common dilemma many buyers face is whether to buy their new home first or sell their existing home first. If you don’t need to sell your home in order to buy your next home, then buying first is the most convenient option. If you sell first you may not be able to find your next home right away and may have to rent an apartment or home before you do. If neither of these two options are appealing to your situation, there is a third option, making a contingent offer to buy your next home.

In this situation, the contingent buyer should have already put their home on the market and identified a new home they would like to buy with the intention of closing on both their existing home and new home simultaneously. This can be tricky because it is risky business for any seller to accept a contingent offer without the buyer at least having their home under contract. If the buyer doesn’t have their home under contract, sellers are not inclined to accept a contingent offer since they don’t know when or if the buyer will get their home under contract. For the purpose of this article, we’ll assume that the contingent buyer has their home under contract.

So what happens next? Once the contingent buyer enters into a contract to purchase their next home, the seller is entitled to receive a copy of the contract on their buyer’s home in which they may or may not share confidential information such as names and purchase price. The reason to provide a copy of the buyer’s contract is to demonstrate that they do indeed have a contract on their home, showing the due diligence expiration date and closing date. Since a buyer can back out of the contract during the due diligence period for any reason, or no reason, it is important for sellers to know how long this period is. The shorter the period, the more attractive the offer, since time is of the essence. Once the due diligence period lapses, the earnest money comes into play and the chances of the contingent buyer backing out are less likely. In other words, the contingent buyer’s contract on their home is more likely to close giving the seller a greater peace of mind. Notice how I said more likely to close. There are still instances where your contingent buyer may not close, such as the buyer losing their job and having no choice but to breach their contract. Generally speaking, the best offers are the ones that are not contingent upon a buyer having to sell their home in order to buy your home. Having said this, if you don’t have any other offers or the contingent offer is substantially higher than the other offers, it may be worth the risk of entering into a contingent contract.

If you are ready to sell and buy but you have questions about the process, call Mary Staton or Bert Ward - they’ll be happy to answer any questions about the Contingent Buying.

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545 Hits

A Home For Large Dogs

This day started off like most any day when I was appraising full time.  I jumped into my Yukon 

XL with my clipboard, file folder, Sony Mavica disk camera, pencil, trusty 100’ tape measure, and drove to Mebane to appraise another home.

When I arrived at the home, the owner greeted me at the front door and invited me to come inside.  As with any homeowner, I advised that I would come inside to do a walkthrough, but the first thing I needed to do was measure the exterior of her home.

So off I went to check out the back of the house and as I turned the corner the first thing that caught my attention was a barking Pit Bull chained to a stake by a small and run down looking dog house.  Startled at first, I relaxed seeing that there was not a single blade of grass around the circumference of the stake, giving me peace of mind that I was out of harm's way from this territorial looking dog.

No sooner than just having turned my back to the dog to hook my tape measure onto the house, I see out of the corner of my eye this large dog charging at me, beyond his well-worn circular dirt path.  

A quick adrenaline rush came over me and in a split second, I dropped my clipboard, raised my tape measure in the right hand and prepared to hopefully strike the dog when he attacked me.  I was thinking, I’ve got one shot and it’s got to count.

Then all of a sudden and out of nowhere the dog, still running in full stride, veered directly off to my left to chase after the neighbor’s dog.

Hearing the loud barking dogs, the owner came out of her home and authoritatively rounded up her dog.  After securing her dog back to the stake she apologized and said that her dog had broken free from his collar again and that she had to buy him a new one about every six weeks.  

Vicious dog attack averted, thank God! 

If you are ready to buy or sell and you are looking for pet-friendly homes, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.

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570 Hits

You Can’t Sell A House If Your Spouse Doesn’t Sign

One morning when I was first getting started in real estate sales, I received a call from an older retired man looking to get his home appraised.  I asked what the purpose of the appraisal was for since there are different types of appraisal assignments that can affect an appraiser’s opinion of value.  He advised that he was interested in an appraisal for sale purpose. I let him know I could help sell his home, but if I did, I would not be able to appraise it since it would be a conflict of interest.  The owner decided that since I was an appraiser, a Comparable Market Analysis (CMA) performed by me would serve his interest just as well as an appraisal since he wanted to sell.  

After pulling and reviewing copies of the tax record and deed, a listing appointment was scheduled and I went out the next day to meet with him.  Upon arriving I covered Working With Agents with him and he proceeded to let me know why he wanted to sell.  As it turned out, he had purchased the home for his son to live in while the son looked after him.  The only problem was his son didn’t want to move back to Burlington so my client was moving to Texas to live with him.  He further explained that he was tired of living alone after his wife took him for half of everything he owned. I listened with empathy and promised I would do everything I could to help him sell his home for the best possible price so he could make the move to Texas and be with his son.  

After the second week his home was on the market, it was placed under contract with a financially qualified young couple.  Approximately four weeks later we met the buyers for the first time at the closing table. The first question out of the attorney’s mouth to my seller was, are you still married?  I was thinking this was just a formality and how could this man be married after explicitly telling me about how he had been taken for half of everything he owned? Then he replied yes he was still married.  

After hearing his answer my jaw dropped and I looked across the table at the young couple and their agent, looking at me as if they had just seen a ghost.  We were all taken aback and speechless, except for the attorney. The attorney asked if his wife was still in town to which the seller replied she was. He then asked if he had her phone number and that if he called her, did he see any reason why she would object to coming in to sign the deed?  To which he replied I don’t think so. As good luck and fate would have it, the attorney was able to reach his wife and fifteen minutes later she came in to sign the deed.  

After the closing successfully ended, I asked the attorney how he knew my seller was still married since the public records showed that my seller was the sole owner of record.  The attorney said that he handled the closing of the home when my seller bought it and knew he was married. My seller assumed that since he bought the home without his wife, that it was his to sell without her.  After hearing my seller’s sad story about being left by his wife and that he was the sole owner of record, It never crossed my mind to ask the magic question of whether or not he was still married. After this close encounter, I no longer assume that someone isn’t married just because they have settled up and parted ways.

If you have any questions about what you will need for a home closing,or if you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.  

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609 Hits

What’s In a Name?

How does one decide what name to choose when going out on their own to start a new business?  After all, it may be the easiest yet one of the most difficult decisions to make when starting a company.  I was faced with such a decision while in my late twenties with my parents supporting my decision to make a move from a career in credit and collections to real estate.  It all started when my wife and I bought our first investment property and formed a company named Black Diamond Capital, LLC. The name was suggested by my father because of my love and passion for snow skiing.  Not giving it a second thought, I agreed that the name was perfect. A few years later I went into the real estate appraisal profession and started my own appraisal company. A name change was in order but I didn’t want to drop the company name that my father came up with.  As a result, the new company was named Alamance Appraisals-Black Diamond Capital, LLC – DBA as Alamance Appraisals. Several years later when I opened up my own real estate firm, another name change was in order so the company was renamed to Alamance Appraisals-Black Diamond Real Estate, LLC. – DBA as Alamance Appraisals, and DBA as Black Diamond Real Estate.  

Now that you know the story behind the name Black Diamond Real Estate, what about my nickname, Bert, where did it come from and how did it stick?  Some forty years ago or so, when I was a kid, my parents hired George DeLoache to teach me how to play tennis and look after me and my brother when they were not home.  George was the best, not only did he teach me a lot about tennis, he even took me to his family’s outlet store, when it was located across the interstate, and gave me a Peter Frampton screen print t-shirt.  Simply put, George was cool and someone I very much looked up to. So being his sidekick, he one day out of the blue just started calling me Bert. I thought how creative and original, I now had my own identity since I was being called everything from Bob, to Rob, to Robert.  I didn’t know any Berts and my father goes by Bob, my cousin goes by Rob, and I felt being called Robert was just too long of a name. Being called Bert was perfect. Next thing I know, my best at the time, Bubba, started calling me Bert along with his parents and grandfather.  From there the nickname stuck and took off by the time I finished middle school. I’ll still answer to any of those names, but my friends call me Bert, and I go by Bert when I meet new people. 

If you are ready to buy or sell, call  Mary Staton or Bert Ward - they’ll be happy to answer any questions.  

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624 Hits