Owner’s title insurance is purchased when you buy a home, and it protects your right to your home for as long as you or your heirs own your property. It protects the homeowner, and the lender, after settlement from any losses that may result from issues or title defects that were unknown before they purchased the home. Many buyers ask, do I need to get title insurance?
Without title insurance buyers would have no way of knowing if the seller’s actions may have caused future problems for the next homeowner. For example, the seller may have:
avoided disclosure of using the property as collateral for an unpaid loan
frauduelently claimed to be the sole owner
failed to pay real estate taxes
even a simple mistake in the recording of legal documents
Owner’s Title Insurance Protects Your Rights
If ownership of the property is ever challenged, the insurer defends your possession of the property. If a challenge to your property title is ever legitimate the insurer will pay for your losses, as your title insurance policy specifies.
It protects you against false title claims by previous owners or lien holders.
It protects you as long as you have an interest in the property.
It insures against events that occured before the policy is issued, unlike other forms of insurance.
How Title Insurance Works
As property changes hands, mistakes and irregularities can place your ownership of the home in dispute. The mistakes are often made long before you made the purchase.
The title company searches the public records for documents associated with the property and provides the buyer with an expert, interpretive view of the impact of all recorded matters on the property’s title. If the search reveals recorded defects, liens or encumbrances on the title, such as unpaid taxes, unsatisfied morgages, easements, or restrictions, etc., these are reported prior to purchase, and solutions are put in place to resolve the impediments.
Even when the title search is extensive, problems can still arise after the home is purchased. This is when title insurance prtects the new owner from hidden defects, and protects the owners interest in the property.
29 Issues Where Title Insurance Saved the Day
Owner’s title insurance protects you as well as your heirs from financial loss caused by title trouble. Compared to the damage any of these troubles can cause, the one-time premium is small. Here are 29 title troubles that really do occur:
False impersonation of the true owner of the land
Forged deeds, releases, etc.
Instruments executed under fabricated or expired power of attorney.
Deeds delivered after the death of the grantor or gratee, or without the consent of the grantor.
Deeds to or from defunct corporations.
Undisclosed or missing heirs.
Misinterpretation of wills.
Deeds by peoplee of unsound mind, or by minors, or by aliens.
Deeds by people secretly married.
Birth or adoption of children after the date of the will.
Surviving children who were omitted from a will.
Mistakes in recording legal documents. (human error, it happens)
Errors in indexing.
Falsification of records.
Claims of creditors against property sold by heirs or devisees.
Deed in lieu of foreclosure given under duress.
Easements by prescription not discovered by a survey.
Deed of community property recited to be separate property.
Errors in tax records. (for example, listing a payment against the wrong property)
Deed from a bigamous couple.
Federal condemnation without filing of notice.
Descriptions apparently, but not actually, adequate.
Corporation franchise taxes, a lien on all corporate assets.
Erroneous reports furnished by tax officials.
Administration of estates of persons absent but not deceased.
Undisclosed divorce of spouse who conveys as the heir.
Marital rights of spouse purportedly, but not legally divorced.
Duress in execution of intruments.
The Cost of Title Insurance
Many home buyers question whether the purchase of title insurance is really worth the cost. The costs and details of who pays for the owner’s title insurance policy differs from state to state, depending on state laws, local customs and agreements made in the real estate contract.
There are title insurance calculators on most title company websites; you can get a rough estimate of what title insurance costs will be. To get a general idea, as a very rough estimate, for a home in Frederick Md with the average price of $300,000, basic title insurance will be in the neighborhood of $1400 to $1600, depending on details. An enhanced title ensurance package will be About 10% more. [these are not quotes, but rough estimates]
Even when the title company does a careful search of the public records, title troubles which weren’t disclosed, or mistakes in public records – called hidden hazards – are all possible. Even if your abstract is perfect, your title could be worthless because of any and more of these common issues. Your title attorney’s examination may be the absolute best, but your title may still be fatally flawed. The best remedy is title insurance.
Thanks to Salisbury, McLister and Foley, LLP for the information above. We’ve been happy to refer Pat McLister for 24 years, and are never disappointed in the settlement company’s service. They’ve never been late, and always go a step above to provide our clients steller service.
If you’re relocating to Frederick Maryland within a few months, you’ll need a plan. Most likely, you’re looking on the real estate websites to see what the market is like, what the neighborhoods and communities have to offer.
Information Tip: Our website, YouTube Channel and community blog, 365 Frederick, are great virtual resources. No doubt, you’ll be planning a trip to the area to check it out.
We recently had the pleasure of assisting an armed services family to relocate from Pennsylvania to Frederick. As is often the case in the military, one spouse came to scout out the area. The husband was still in Afghanistan, and the wife found the home. From their internet search, to the closing, it took about 5 months.
Relocating to Frederick in 6 Months, Have A Plan
The first step you’ll take is to connect with an experienced local agent. You’d be amazed how a phone call can help you connect and establish a good rapport. We can learn a lot about you and what type of home you’re looking for, including your family’s needs and wants in the initial conversation.
In that first converstion, we can refer you to a reputable local lender who will have the loan product that will best meet your needs, whether it’s a VA loan, FHA, or Conventional. We also have lenders who provide USDA loans, FHA 203K loans for fixer-uppers, or any other product you need. You’ll want to know how much you can afford and what your estimated monthly payments might be before you start looking in earnest.
Home Search Tip: Megan found that our mobile app, HomeSnap, was a super tool to use. She found it easy to use and more accurate than many other mobile apps. While we were home shopping, she was snapping from the passenger seat as we drove through neighborhoods, getting information on the spot!
Our desktop home search site is also a great tool. It works beautifully on a mobile phone or tablet as well. To search for homes remotely, you can set up any number of personalized searches with many different parameters, including price points, number of rooms, neighborhoods, zip codes, cities, subdivisions, and a lot more.
Planning Your Visit
Secondly, it would be helpful for you to start to plan the agenda for that first actual trip to the Frederick area. You may want to visit for a day or a weekend before you start looking for a home in earnest, to familiarize yourself with the community. When you’re shopping for a home, we realize that you’re shopping for a lifestyle as much as you are bricks and sticks. You’ll need to see firsthand the neighborhoods, the amenities, schools, shopping, parks and entertainment, etc.
Once you start shopping for a home with us, you’ll want to visit about 3 to 4 months before D-day, at the latest. You’ll need a minimum of 30 days to find a home…in our experience, it usually takes about that long. Once you found it, about 60 days to settle and move. As of October 3, the new Closing Disclosure laws will extend the time from contract to close from one to three weeks, depending on the details of the transaction. If you visit too far away from your move, in this present seller’s market, nothing you see will be available when you are ready to purchase.
While you will find a lot of useful information available on the internet, there’s nothing like seeing the neighborhoods and local life in person. An experienced local agent can narrow down the search time for you. By carefully listening to your needs, wants and interests, we know the local neighborhoods after selling real estate in central Maryland for 23+ years, and we can provide you with the information you need to make your best decision.
When we take someone on a tour of Frederick County, we do what we like to call “the four corners tour“. We show people the lay of the land in the county, talk about the schools and types of neighborhoods and home styles, and we show how people get around for work and shopping. All the while, we’re listening to what you’re looking for. We’ve been enjoying life in Frederick County for 25 years and have raised our 4 children here, as well as some fur kids along the way!
Diligence with the Paperwork
Depending on the market we’re currently experiencing, a buyer’s strategy will vary. If it’s a seller’s market, you’ll want to be ready to make an offer quickly, depending on the demand for the type of home and the neighborhood. During your preparation, you’ll want to get all the necessary paperwork to your lender as soon as you can. The process of loan application and qualification has gotten more complicated and lengthy in the recent years.
When you find your dream home, if you’ve taken the step of getting qualified for the loan, you’ll be in a much stronger negotiating position. The difference between being pre-qualified and actually being qualified can make your offer much more attractive in a multiple-offer scenario.
The Best Strategy Wins
Having a strategy is an important part of making an offer. Having an agent who is a trusted adviser is the first step in a winning strategy. A skilled negotiator with a thorough knowledge of how to best approach sellers in various situations will be an advantage. An experienced, skilled agent can help you get the home that is right for you, at a price and at terms that are a good value for the market.
If you’re relocating to Frederick or Central Maryland in 6 months, have a plan! Call or email for superior relocation service. We’ve got a great list of preferred local lenders, and use our free MLS property search, both mobile app and home search. Chris Highland: call/text 301-401-5119. .
The question of whether to get a home inspection or not pops up regularly in conversations about real estate. Rewind the RE memory a decade ago, when the market was hot; buyers dared not ask for a home inspection. When they were in competition with 5 other offers, they had better offer more than the list price, and forego as many contingencies as they could feel comfortable with. In some markets today, the same conditions are causing buyers to ask the question again: Should I get a home inspection?
A home inspection is your right, and is almost always a good idea, even in new construction. Most real estate agents will encourage buyers to get a home inspection. Let me relay a couple of stories to illustrate why:
The buyer’s had ratified an offer on a newly constructed townhouse, with the help of a buyer’s agent. Fortunately the buyer’s listened to the agent’s advice and had a home inspection contingency written in the offer. The afternoon of the inspection, the buyers were sitting in the living room with the inspector as he was finishing up with the last details of the report. They were jolted out of their metal folding chairs with the sound of a series of loud crashes and clangs from the garage. They all rushed into the garage to see the jacuzzi tub from the master bath sitting amongst the wet drywall rubble. With mouths gaping open, they raised their wondering gaze to the huge hole in the ceiling.
As it turned out, the plumber had neglected to attach the drainage pipe from the tub to the main in the wall. When the inspector filled the tub, then unplugged it, all that water drained into the floor and drywall. One hour later, the floor gave way. Who would have suspected it in a brand new house? There is always the possibility of Human Error.
B. Fixing the Fix of the Fix
I recently spent 2 hours with a first-time buyer and a home inspector in an historic home, one of my favorite inspection opportunities…I learn so much. The home had over $50,000 in renovations, all beautifully done. When examining the electric system, we discovered, because a series of fixes had been done by different electricians over the years, that the electrical wiring wasn’t even grounded. Keep in mind, all the electrical work was done by a licensed contractor. He had just missed the fix of a previous fix which altered what had originally been a grounding line. Who would have suspected a licensed electrician would have missed it? Again, Human Error.
The cost of a home inspection can be anywhere between $400 and $500 on the average house. It is soworth it when you find something major. If you discover something that you just can’t live with, ie. a cracked foundation, the inspection is the contingency that gets you out of having to buy the home…off the hook, and gets your deposit back. If you still want the house, the inspection is the contingency that you can use to get the seller to address it.
It’s Just Good To Know
I would also argue that it’s worth it even when you don’t find something major. It is worth the peace of mind. It is worth having a licensed professional going over your future home with a fine-toothed comb, teaching you all about the inward workings of your number one investment. Understanding the systems and physical aspects of your home is important for a homeowner. At the very least, you’ll get an idea of what will need future expenditures.
The home inspection is your safety net. If at all possible, write that contingency in to the purchase offer. At worst, you’ll give yourself an out. At best, you’ll give yourself peace of mind.
Don’t Just Take My Word For It…
In his article Tips for Buying A New Construction Home, Cincinatti real estate agent Paul Sian gives an excellent tip to new home buyers: “Many builders will give a one year warranty on new construction homes, so it is a good idea during the 11th month after moving into your new home to have a home inspector come out and look over the home again.” If the home inspection reveals anything that needs attention, it will most likely be under the builder’s warranty.
In this Realtor.com article, Seven Things Your Home Inspector Wishes You Knew, author Jamie Wiebe wisely points out to buyers that anything can be fixed. Some things sound scary, especially after so many news reports, but there is a solution for every problem. All can be negotiated after the home inspection report, if that’s what a buyer chooses. The only issue that might be worth stressing about is a water issue, and the only stress should be that the issue is dealt with before settling on the house..
Bill Gassett, Metrowest Mass real estate agent, gives some sound advice that I heartily agree with: “…the purpose of the home inspection contingency is not to get a better price on a home because of minor issues found during the home inspection…this is one of the biggest things a buyer can do that real estate agents hate” (btw, sellers don’t like it much either). Depending on the type of financing and terms of the contract, major deficiencies found during the home inspection may be used as a reason for a reduction in the price or a concession from the seller towards closing costs, if the buyer decides that course of action. Be sure to check out Bill’s extensive article: How to Negotiate a Home Inspection. .
Seven Important Things to Look for When Viewing a Home is a great resource for home buyers. Kyle Hiscock, Rochester Real Estate Agent, lists the seven most costly system fixes in a home, the items that buyers need to watch out for when they are considering a home for purchase. .
And finally, here is some Real Home Inspection Advice from a Real Home Inspector. Mike Chamberlain, owner of MC2 Home Inspections LLC, explains in great detail what a home inspector is ACTUALLY required to do during a home inspection. This is according to the standards of practice from the largest home inspection organization in the world, InterNACHI (International Association of Certified Home Inspectors). This will be an excellent resource if you’re a buyer asking the question, Should I Get A Home Inspection?
If you’re in the market, give us a call to get buyer representation and sound advice about today’s Central Maryland real estate market. Feel free to contact us for our pick of superior local home inspectors.
The mortgage industry has become a little more tricky to navigate in the recent years, but getting qualified and getting the loan is still attainable… just don’t make these rookie mistakes before or during the loan process:
5 Mortgage Mishaps…to Avoid
1. I have always paid cash for everything, so I don’t have any late payments. I should be good credit-wise, right?
Usually, your credit history is the most important factor in a mortgage qualification process. If you don’t have any credit, you may find it difficult to qualify; you have to have some credit to have a credit history. You have to get credit, even if it starts with a secured or high interest rate card, and make the payments on time.
If you have no credit, it may take a year or two to establish credit. If you check your credit and find that your credit score is under 640, you will want to take some steps to increase your credit score. Aiming for a score over 700 is a good strategy. The higher the credit score, the lower the interest rate…the lower the monthly payment.
2. I have been able to get credit whenever I apply, so I don’t need to check my credit report, do I?
A mortgage is different from other types of credit, especially when lenders are being more picky than they used to. You should check your report in advance of applying for a mortgage to make sure there are no errors.
You need to check all three reporting agencies, Equifax, Experian and TransUnion, to see if there are any omissions or inaccuracies, check to see if balances were cleared after pay-off, and if there has been any fraud.
3. I need to raise my credit score, so I’m going to close some credit lines.
No! Don’t do it! I will most likely hurt, not help. Part of your score is based on your history, in which case the longer the better. Part of your score is based on the ratio of credit available to credit used, so if you close some of your credit lines, you inadvertently lower your ratio, which will hurt your score. If you feel you have too many credit cards, you can close some of them after you settle on your home.
4. Our mortgage has been approved, but we haven’t closed yet. We can go ahead with plans to buy new furniture and a car, right?
You don’t want to do that yet. The lender will run your credit one last time right before settlement, and this new spending will more than likely lower your credit score… best to wait until after settlement.
5. I just got offered a new job closer to our new house!
Again, wait until after you settle on your new house. Lenders double-check loan applications right before settlement to verify that you are still employed at the job on your application. Best to wait until after closing. Then you can move, buy, get that new job… just be sure to pay that new mortgage every month on time!
Sometimes, we need to look at the market from a historical perspective in order to understand where we really are today. Real Estate markets are constantly changing, prices and trends can be, and often are, different that they were as little as 3 to 6 months ago. But overall, we usually find ourselves in either a buyers’ market, or a sellers’ market, and of course, that tricky “transitional” market between.
The basics of markets have everything to do with supply and demand. And what’s true in one market is not necessarily true in another market. Remember: All Real Estate Is Local…so buyers and sellers need to rely on a local market expert, rather than national news, to get the real story.
Let’s look at the Frederick real estate market and the recent history:
We’ve just come through what many called a buyer’s market. From 2007-ish through 2012-ish we had a large inventory (as high as 2400 homes on the market – a normal market is 1200) with little demand. We saw values declining as much as 40% from the high of 2006.
It was a hot sellers market between 2000 and 2005, with many more buyers than there were listings, and with an average of 400 listings at any given time. We had multiple offers on most listings; buyers had to offer more than list price, and forego home inspections sometimes to win the listing. Values were increasing at 20% a year, year-over-year, mostly due to the low interest rates and ease of financing, and simply, the high demand.
The market from December 2005 to today has seen dramatic changes, with lots of transistions between a buyer’s market and a seller’s market. The lending industry has been in transition as well, with the sometimes drastic tightening of lending standards, and with new lending programs coming and going.
We are now in what many are calling a sellers’ market. With an inventory of 1200 homes on the market in Frederick County, what we would consider a normal number, the increase in demand makes it a tight inventory. Add to that the fact that the majority of homes on the market are not “move-in-ready”…they require a little elbow grease or TLC. Today’s buyers find that they have fewer homes to choose from, and they are facing competing offers on the best homes.
With interest rates still at historical lows, buyers can expect competition. As long as they have good credit scores, the downpayment required for their loan program, and are ready to act when they see the house they like, they should have success. A competitive market is not the time to linger over decisions.
When the competition is high, it’s a good idea to go ahead and get pre-approved by a local lender, rather than just get a pre-qualification letter. The difference is that you’ve been through the approval process before you put an offer on a home. It takes a little paperwork upfront, but it can be worth it when you are in a competing offer situation and you are already approved, vs. the other guy who just has a pre-qualification letter. You will already look like more of a sure thing.
As lending has tightened up over the last decade, it’s still important to monitor your credit score. The better the credit score, the better your interest rate. There are loan programs for those with lower credit scores, yes, but the higher you can get your score, the better for you in the long run.
So, as in the days of old, (before 2000), we all need to keep vigilant about our credit scores, clean up our tarnished credit, and keep our good scores good. Common sense lending practices are in effect, with more lending programs opening up for today’s buyers.
As usual, we recommend using a local lender. Having a relationship with local lenders gives us accountability and helps us help our buyers. We like the 36″ rule…keep our lender close enough to reach out and strangle them if the loan process breaks down! Contact the Highland Group for referrals on a great local lender, and for a personal tour of Frederick Homes for sale.
What About Your Market? Are you seeing a hot 2015 market … or a simmering summer?
Multiple Offers in the Frederick Real Estate Market
The real estate market has transitioned to a seller’s market over the last two years. The lack of inventory and the healthy demand has created an environment where we’re seeing a good number of multiple offers in the Frederick real estate market. Homes that are in great condition and that are well-priced for the market are in demand. In certain price ranges, those high demand homes are getting multiple offers.
Local Frederick Market Conditions
While first time home buyers are entering the market, and the first tier of move-up buyers are seeking homes, homes in these categories are in high demand. Buyers should expect the possibility of facing a multiple offer scenario. There is a portion of the market that is seeing a longer time on market for the lack of demand: the price ranges above $500,000. In certain neighborhoods in the smaller, outlying cities in Frederick County, the market is also slow. Read more about a buyer’s or seller’s market.
Tips for Buyers in a Multiple Offer Scenario
A few years ago, if a buyer missed out on a home, they could just wait for another comparable home to come on the market soon afterward. In today’s market, they can’t count on that happening. With the lack of inventory, if a buyer misses out, they can’t be so sure a similar home will appear any time soon.
Although interest rates are still low, home prices are starting to rise. Buyers will want to take advantage of these low rates instead of waiting. To win out in a multiple-offer scenario:
Taking the time up front to get qualified by your lender is great advice in a hot seller’s market. When you submit an offer, the fact that you have been qualified, rather than just “checked-out” by a lender will add weight to your offer. It certainly increse the seller’s confidence in your ability to follow through on a contract.
When you see a home that you like, don’t hesitate too long to see it. You have to be flexible and make time to see a house as soon as possible. Unfortunately, we’ve had situations where our buyers scheduled showings a week out, only to find the home under contract before they got a chance to even tour it. Even though some people prefer to take their time and not be pushed, they find that they often miss out in a bustling seller’s market.
When you find the home that you want to buy, make an offer. Don’t hesitate to pull the trigger. You want to be the first offer, in doing so, you just might get the home.
Buyers should strongly consider offering more in a competitive situation, rather than insisting that they get a steal. The days of those kinds of deals are behind us, especially in a high-demand market. Your insistence on getting a bargain will most likely leave you out in the cold.
If you find that you are in a competitive situation, you may get the chance to change your offer if a seller asks for the “highest and best”. You may want to increase your offer, or you may want to edit your contingencies, or increase your deposit, or a combination of all of these. It really depends on the situation. This is not the time to equivocate if you really want the house.
Your buyer’s agent should be a good source of advice in a multiple-offer situation. Be sure to choose an agent who knows the neighborhoods, the values and the current market trends. Negotiation should be one of your agent’s strongest points. Understand that your buyer’s agent’s advice is based on past experience and is not a guarantee of any particular outcome.
If you are selling your home and buying…it may be scary but in a competitive offer situation, you will most likely need to have your home already sold. You will be in competition with other buyers, most of whom won’t have a home to sell. Plan to put your best foot forward. Anticipate the competition and make your best plan.
Tips for Sellers in a Multiple Offer Scenario
Although it is a seller’s market here in Frederick Md, as in more and more areas of the country, sellers can’t assume that they can get an unreasonable amount for their home. Even if there are multiple offers, there is a limiting factor to those escalating offers. The house must appraise for the amount it sells for. The appraisal is sometimes referred to as “The Second Sale.”
The appraisal is based on the most recent sales, usually 3 to 6 months, so those sales are likely going to be less than yours in an appreciating market. Although appraisals can ‘stretch’ to higher values, so-to-speak, to expect a price that is a large leap from the previous sold homes is unrealistic.
When a seller considers all offers, they’ll want to consider more than just price. Although of course the ideal scenario would be to get the highest price, there are other issues to think about. Your negotiating strategy will need to be reviewed with each potential buyer. Other important considerations are:
The buyer’s down payment. Sometimes a higher down-payment signals a more serious buyer.
The buyer’s contingencies. If you have multiple buyers, you should compare the details of the contingencies. Time frames, inspections, and other negotiating items should be considered.
The buyer’s financing situation. Your agent should be able to fairly vet their financing, including the lender and the loan program. We have advised sellers to choose one offer over another based on the veracity of the buyer’s financing, as well as the reputation of their lender.
The buyer’s ability to deal with the situation of an appraisal that comes in low. It can and does happen in an appreciating market. If you want to try to get the highest price possible, make sure you know the risks of not getting an appraisal to corroborate that high price, and make a plan with your agent to deal with that scenario.
As with a buyer’s agent, your listing agent has advice for you based on their past experience and can’t guarantee a particular outcome.
Whether a buyer or a seller, you should expect fair and honest treatment throughout the offer and negotiation process, coupled with prompt, ongoing and open communication. Always remember to keep your eye on the goal: buying or selling your home. No real estate transaction will ever be perfect.
Make sure your Realtor has experience in transitioning real estate markets, or if they are new to the industry, that they work on a team with other seasoned agents. A skilled, local real estate agent can help you tremendously as you navigate the transitional market today.
Contact the Highland’s for real estate representation in a seller’s market. 301-401-5119.
Why Realtors® Dispise Have Strong Feelings About Zestimates
Zillow is a great site for consumers to see homes for sale, no question. It has a lot of great information for buyers or sellers, like demographics and statistics on an area, maps and neighborhood information. It’s a great place to connect with professionals, and to ask questions. But, as the meme points out below, Realtors have strong feelings about Zillow.
There are two aspects of the Zillow website that I don’t find value in: their ‘Zestimates’, and their lack of accuracy in listing information. The listings many times can be out of date as to their status, and the Zestimates are very often off by a significant percentage.
Zestimates have been wrong more than they’ve been right. The reason they are is because they use an algorithm to formulate values all across the country. The same computations in every location. It’s not even remotely feasible that a “one-size-fits-all” mathematical equation could get it right, when determining a home’s value is dependent on so many local and subjective variables.
A complicated formula can come up with a uniform value, but the problem with that is that all real estate is not uniform, it is local. ‘Bricks and sticks’ in one neighborhood can have a different value than the ‘bricks and sticks’ in another location, due to all kinds of subjective factors. Proximity to highways, power lines, and unsightly commercial areas are an example of things that affect a home’s values in a subjective way.
All real estate is local, even micro-local. Values for similar homes in one neighborhood can be completely different in a neighborhood only blocks away. Zillow can’t get inside a home and see the differences in amenities…like an updated kitchen with pristine hardwoods, granite countertops, custom maple cabinets and top-of-the-line appliances; compared to a similar home with basic builder grade finishes and 15-year-old carpet.
Local Realtors Know Values
Only a local Realtor who knows the area can provide a realistic estimate. He or she knows the local neighborhoods and values based on everything that is objective as well as subjective. A local Realtor knows what the trends are in the neighborhood. Some areas hold their value better than others, due to a lot of factors: Type of construction, age of home, added amenities, and what’s going on in the neighborhood or area.
Our recent experience is that some neighborhoods are more effected by the downward drag of foreclosures and short sales on the market than other neighborhoods are. Two particular neighborhoods here in Frederick were primarily built during the years from 2003 – 2006, and the majority of the homes were financed with ARM’s…Adjustable Rate Mortgages. Unfortunately, when the rates adjusted after the values had fallen…these neighborhoods were filled with short sales. Comparable home sales were really difficult to calculate with a generic mathematical equation. It takes a local Realtor who understands the trends.
To many consumers, the aspect of listing accuracy doesn’t cross their mind when they are looking online for homes for sale. Zillow is by far, the most trafficked website in the real estate sphere, with 70 million views a month! There is obviously a wealth of good information that consumers find valuable.
However…consumers regularly find inaccuracies. We get contacted regularly about homes that are listed on Zillow as active, but have either been under contract for days or even weeks, and many times have sold weeks or months ago. The inaccuracies include a lot more than status; consumers often find many details wrong, including the number of bedrooms and baths, the square footage, and even the information from the tax records. Among the different categories of “potential listings”, the pre-foreclosure category is very misleading.
As Bill Gassett points out in his article, Some Zillow Listings Are Not For Sale, the data Zillow collects on these homes comes from Realty Trac, a site that collects data on distressed housing, these homes are most often, not even on the market.
Data can be faulty. It happens. Sometimes it’s no one’s fault, it’s an imperfect system that data engineers are still perfecting. But sometimes it’s by design. The longer homes are listed as available, the more traffic the website gets. The more homes listed, like preforeclosures, the more “eye candy” on the website to attract visitors. Add to that more push notifications that people get on the Zillow app as they search neighborhoods.
Zillow is, afterall, a marketing site that makes money from advertising. It is not a site designed or monitored by licensed real estate professionals. They aren’t bound by the Realtor Code of Ethics, which requires that any information the we publish be accurate, to the best of our ability.
Why Does It Matter?
“If I just want to see houses, who cares?” Fair question. Let’s consider the Zestimate…
When a seller contacts an agent to list their home for sale, the agent conducts a Comparable Market Analysis, or CMA, to get a close estimate of what the home will likely sell for, based on comparable home sales, local trends and market analysis. Experienced Realtors who have local knowledge have been helping buyers and sellers in the local market and have been active in your neighborhoods. They’ve probably even seen firsthand many of the comparable homes in their market as they’ve worked with buyers and sellers.
Damage to the Seller
So imagine when the agent presents their hard-earned knowledge about the home’s value in the CMA (comparable market analysis), only to hear from the seller: “But Zillow says my house is worth $50,000 more?!” That seller is already set up for failure because of the inaccuracy of that Zestimate, sometimes a gross inaccuracy. First of all, it puts doubt in their mind about the Realtor, Secondly, if they disregard the agent’s advice and they overprice their home, they will do damage to their prospects of actually selling the home for the highest amount in the shortest time.
[In a recent Washington Post article, a Washington D.C. brokerage was quoted for documenting that Zestimates are getting worse. Of 500 estimates, the values ranged from 62% under, to 150% over the actual sold figures.]
Damage to the Buyer
It’s easy to see that the expectations of the buyer will also be skewed when they see an inaccurate Zestimate. Right below the list price you can see the Zestimate, so at the very outset of seeing the home, a buyer will have it in their mind that the seller is asking too much, or too little.
If the list price is lower than the Zestimate, imagine the buyer’s disappointment when they get to the home and realize it’s not the bargain they thought it was. The expectations that Zestimates give buyers can be damaging, and can result in a lot of wasted time.
If they believe the list price is high, it will be hard for them to take the Realtor’s advice about what price to offer. We’ve seen our share of lowball offers from buyers who just didn’t take their buyer’s agent’s advice. We’ve seen just as many offended sellers rejecting those lowball offers!
Lousy Expectations Caused by Inaccuracy
Because of inaccuracies, we regularly see missed opportunities, discouraged buyers who show up at a home that’s already sold, and lots of wasted time looking at homes that are nothing like the buyers thought they would be. We’ve seen wasted time on the market for sellers, and we’ve seen these sellers fire very good agents for things that are not their fault.
In my opinion, that is the real damage of inaccuracies…Lousy Expectations. Zillow discloses the percentages of their inaccuracies…way over on the page that you can barely see for the small print. It’s there. But most buyers and sellers never see it. They are unfortunately, subject to the disappointments of lousy expectations.
So contact a local realtor to find local values. And use Zillow for other useful information. Take Zestimates with a grain of salt…if you even look at them at all.
More Great Explanations of Zestimates
But don’t take my word for it…here are several articles from some excellent real estate bloggers that have much to say about the topic of Zestimates and Zillow:
The VA loan is truly one of the best benefits offered to our Veterans, and I’m happy they’re available to men and women who have served us by protecting our freedoms. VA mortgage loans have many benefits besides the no-down payment feature, making them truly 100% home loans for Veterans.
Although VA guaranteed loans do not have a maximum dollar amount, lenders must limit the size of those loans to the maximums prescribed by GNMA (Ginnie Mae) if they plan to sell those VA loans in the secondary market.
Explaining VA Loan Limits
Federal law was passed in 2008 which temporarily boosted the VA’s limits to help spur economic recovery. That law expired at the end of 2014, and there’s currently no indication that it’ll be renewed.
The VA’s 2015 loan limits are now tied to the conforming loan limits set by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. Today’s loan limits for VA loans is $625,500.00, nationwide. For Frederick County and Montgomery County Maryland, the VA limit is $625,500. The limit is $517,500 in Carroll and Howard Counties, and the Washington County limit is $417,000. You can check your county’s loan limits on the FHFA.gov website.
The VA loan limits are a bit different than what most people understand about loan limits. The VA limits represent how much you can borrow before having to factor in a down payment. Qualified borrowers in Frederick County can obtain up to $625,500 without having to make a down payment. Down payments aren’t required on VA loans unless you seek a loan amount above the county loan limit. With the median single-family home price of $325,000, in Frederick County, most VA borrowers have no need for a down payment.
The VA borrower must still qualify for the loan amount they are seeking. The VA limit allows buyers great freedom in choosing their home in Frederick County. Other features of the VA loan include:
VA home loans are easier to qualify for than most conventional loans.
These loans are guaranteed by the Department of Veterans Affairs. Only active duty and military veterans can use this loan.
VA loans permit borrowers to devote approximately 30-35% of their gross monthly income to housing. These loan limits change from time to time.
They don’t require private mortgage insurance, reducing the monthly payment by a sizable amount.
Sellers can contribute up to 6% towards the buyer’s closing costs, helping the buyer with little cash
They don’t have a pre-payment penalty, giving the homeowner more freedom
VA home loans are assumable, meaning the next buyer of the home can assume the mortgage, if qualified. This aspect of a loan is often overlooked, but it will be valuable when the homeowner wants to put the home on the market in the future. Rates are most likely to be higher in the near future, making an assumable mortgage more desirable when the rates are 1, 2 or 3% higher in a future real estate market.
As BRAC, the Defense Base Closure and Realignment Commission, is moving home buyers to Military bases in Maryland, the Highland Group is ready to help our military personnel, Army, Navy, Marine, Coast Guard Service members find their home of choice in Maryland. The local base in Frederick, Fort Detrick, is expanding, and military personel are moving to central Maryland, and Frederick County in specific. 100% home loans for Veterans are offered in Frederick County.
Contact us for a list of preferred VA Lenders for 100% loans for Veterans.
Facts About Buying and Selling A Home That (really) Aren’t True
How can something be a fact, but not be true? In the internet age, it’s very possible to find many so-called facts that don’t really hold true in real life…especially regarding real estate. So many people have so much to say, but don’t really know what they’re talking about. Yep. I said it. BS Facts abound on the world-wide-web.
Two reasons why non-facts linger: Old news lasts a long time on the internet. The problem is that any local real estate market can change on a dime. As well as market changes, its also true that markets are very local. All Real Estate is Local. What is fact in one market may not be in another.
Here are some of those so-called facts that I’ve run into lately…and along with them, some truth. I’ve brought in some of my favorite real estate bloggers to help me expose and dispel the BS:
BS Fact #1: “Homes are way overvalued today, there is nothing I can afford.”
In 2013, most recovering markets saw large gains in home prices, many as much as 11-12%. That market correction hasn’t continued in 2014, and isn’t expected in 2015, either. With the combination of low interest rates, home affordability is still a reality for middle-income Americans. Although affordability is bound to decrease, compared to historic values and interest rates, home affordability is still very good. Consider:
“At today’s house prices and income levels, mortgage rates would have to be nearly 7 percent before the U.S. median priced home would be unaffordable to a family making the median income in most parts of the country.” ~ Frank Nothaft, Freddie Mac VP and chief economist
BS Fact #2:“New homes are not being constructed. I’m just going to wait until builders start building again.”
Builders are building. Builders are targeting different demographics, including first-time home buyers. Many are prepared to make up for lost ground of the last decade by building homes that people actually want. D.R. Horton is one such builder, with a focus on the entry-level market, launching “Express Homes”, which are priced between $120,000 and $150,000, much lower than the national median new-home price of $290,000.
BS Fact #3:“My house is worth much more than the neighbor’s house because…[insert any of 2 dozen reasons].”
Sellers don’t determine how much their house is worth. a) Buyers do, and b) Appraisals do. Lenders must have appraisals to establish a value that the bank uses to decide if they want to loan the money or not. Buyers make an offer based on what they are willing to pay for the home in the present market. These two factors determine a home’s value. [Not to say that improvements aren’t taken into account, but the process of determining value is far more entailed than many sellers realize.]
BS Fact #4: “We’re headed for another housing bubble!”
It seems like any time there is positive movement on home values, even if it’s a measly one percent, we have cries for the next housing bubble. Our collective psyche will never be the same after the previous decade of housing woes. Although we have sites like The Housing Bubble Blog, and Trulia’s “Bubble Watch”, the preponderance of economic reports are saying “No to another housing bubble”, Trulia, Forbes, Inman, and Kiplinger are just a few.
Here’s another thought…with so many eyes on the potential of a real estate bubble, and so much intervention by the Fed, do we really need to worry about bubbles so much? Can we enjoy a little real estate recovery without so much angst? Tweet That!
Now, this is a housing bubble I can dig! From 1972:
BS Fact #5:“I’m waiting for mortgage rates to fall.”
All indications are that mortgage rates are on the rise. Since the Fed stopped buying up government securities (Quantitative Easing) they are predicting rising rates. By waiting around for 3% rates, a potential buyer is taking a great risk that the cost of a home is only going up, and they may well be priced out of the market in the near future.
BS Fact #6:“I was told it’s a bad time to buy (or sell) real estate.”
We’ve been hearing similar statements for years. It fascinates me how a single negative factor, among thousands, can overshadow the entire subject of real estate for some people. They draw large conclusions from one anecdote.
An example: Your neighbor refinanced several times during the boom and is now underwater on his mortgage because the house isn’t worth that amount anymore…and probably won’t be for a few years. So he concludes for you that “it’s a bad time to sell.” Well, yes, for him it is, but that’s not the case for everyone.
BS Fact #7:“I can’t buy a house yet, I don’t have 20% to put down.”
Some of the well-known advice columns lead people to believe that they must have enough cash saved to put 20% down on a home purchase. While that might be the ideal situation, and certainly the best case scenario, that is not the only option. Very few have that amount, especially first-time buyers. There are many loan programs available that require less than 20% for a down-payment.
FHA loans require 3.5%. Fannie and Freddie Mac are now backing loans with 3% down.
VA requires 0 down, zero, nada. A wonderful benefit for those who have served us and kept our freedom.
There are Conventional loans for 20%, 10% and as little as 5% down. Add to them gifts from parents or other down payment assistance and they can be as little as 3% down.
Speaking of down payment assistance programs, there are many. Consult a local lender to find them.
BS Fact #8:“But the online Valuation of my house was more than you’re telling me?!”
Zestimates are more than 10% off about 1/3 of the time. Tweet That! On the Eastern Shore in Maryland, they are a whopping 42% off! If any Realtor was that far off, they would not be in business for very long! All I have to say is this emphatic statement:
Online valuations can never take the place of a local professional CMA, comparative market analysis.
BS Fact #9:“All mortgage lenders are the same. I’ll just choose the one with better rates, lower fees, brightest smile… etc.” At the risk of bringing down the positive vibe…all lenders are NOT the same. If you’ve ever had to make the phone call to your seller a week before settlement, and tell them that the buyer’s financing fell through because of a lender’s incompetence, you know that the facts say otherwise. Although rates are very competitive, all lenders have varying experience. From our perspective, the most important thing is that there are no surprises. There may be challenges, but we can overcome challenges. As Realtors, we’re interested in the entire team you’re working with, and the more we can count on the other real estate professionals involved, we find that the bumps in the road are hardly noticeable.
BS Fact #9.5: “All Realtors are the same.” See BS Fact #9, only replace Realtor for Lender.
BS Fact #10: “There are too many foreclosures dragging prices down, I’ll never get what I want for my house.” According to Daren Blomquist, VP of RealtyTrac, foreclosure filings have been falling every month in 2014, and there’s no reason why they won’t continue to fall throughout 2015. “Foreclosures will likely fall to pre-crisis levels in 2015.” The drag on home values from foreclosures is virtually non-existent.
BS Fact #11: “Staging my home should bring me a higher sale price.” Although staging a home is advisable, and will serve to present the home in it’s most positive light, there is no evidence that the favorable presentation will net a higher price. There is evidence that the home may sell more quickly, and may win out over other homes in a competitive market, so staging is often well worth the effort. Remember, whatever the offer on a home, unless the buyer is paying cash, the home must appraise for the buyer’s loan to get funded. (See BS Fact #3)
BS Fact #12:“A real estate agent will try to make me pay more so they can make more money.” This is a statement that I see often in online forums…from people who have no idea how a real estate agent works. Many people make the mistake of comparing real estate agents to other, more…er…pushy more pushy or aggressive salespeople. Here is (one of) the differences: We want to be your Realtor for life! We want you to be so ecstatic with our service that you tell everyone you know about us. We don’t get that result by doing anything but serving your best interests.
Let’s just say that we could push you to a higher price point, given that you qualify. If you spend $10,000 more on a home than you thought you wanted to…your Realtor might make $300 more.
Who in the world would risk their reputation, further business and recommendations, and their integrity, for $300? Not me. If a buyer will refer me to someone else, I stand to make thousands, not just $300. As real estate professionals, we are local business people. We have to live in our communities, see past clients at the grocery store, the hardware store and the little league games. We care about so much more than a few more dollars on our commission.
BS Fact #13: “A real estate agent will underprice my home just to make a quick sale.” See BS Fact #12. Reverse it to $300 less.
BS Fact #14: “I’ll need to spend a fortune to update my house, I can’t possibly sell it and break even.” I call this problem: Too much HGTV! While home sellers need to make sure their home has the right updates to compete in their market, it doesn’t have to be costly. There are updates that are necessary, but if they cost so much that you can’t get the home sold and break even, then you don’t need to do them. Much has been written on this subject by experienced real estate agents:
And the mother-of-all BS Facts…#15: “Who needs a Realtor anyway? I’ll do it myself!” Well, that is true, anyone could sell their own home. Anyone could also cut their own hair, make their own shoes and put a new roof on their own house…I’m just not sure I would advise it. We each have our skills, training and talents.
Realtors negotiate and buy and sell 24-7, 365 days a year. Realtors are professionals with experience in marketing, contracts, negotiation, contingencies, time-frames, loan programs, and a number of other elements. Not to mention, they bring a team of professionals to the process…lenders, title attorneys, home improvement, stagers, painters, and many more.
The average homeowner buys, sells, negotiates and maneuvers through the process once every 7 to 9 years. Find a Realtor you can trust and let them do the heavy lifting. How to find that real estate professional?