itrustblog Archives - Investors Trust Realty

Transitioning Between Houses

November 7, 2019 by bzawaski

Transitioning Between Houses

You’ve decided it’s time to buy a new home however, you have a home you need to sell in order to do that, or at the very least want to minimize the carrying costs & uncertainty about locating your next home in the interim…how do you manage transitioning between houses ?

Do you sell your house first, then hopefully find the next one or do you find your next home & hope you can sell your current home quick enough to close simultaneously on your next one ? We’ll discuss everything in between, including the current Portland metro area market & what factors you should consider along the way so, let’s begin…

One of the most important things to understand is that in most cases your probably moving to improve your quality of live to some degree and have envisioned what life will be like in your next home. With that picture in mind, there is no need to distort that vision by creating undue stress thus, remember why your doing it and that it’s a choice & most likely not a necessity. Of course, there are situations that life can dictate to us such as failing health, employment changes or a need to create a multi-generational household but, despite the importance of the need to do so, all the information contained herein is equally applicable to your situation.

Once you’ve decided your going to make the move & have weighed the pro’s & con’s, including how it might effect your situation if you didn’t make the move, your next to step should be to develop a level of comfort as to what’s reasonable to expect as far as making your next purchase. In our current market there is just a mere 1.9 months of inventory available as of September 2015’s Market Action published by RMLS. That may bode well for Seller’s however, it creates challenges for buyer’s thus it’s important to start thinking about things as a buyer does. In many areas in and around the Portland metro we are seeing rapid appreciation & multiple offers however, that is slowing just a bit as winter approaches and where you may be looking may paint an entirely different picture. In addition to preparing your finances for that next move via providing your lender with updated information, it’s important to note that even though you may have purchased just a few short years ago that the landscape is ever changing thus you can never start that process too soon. The most pressing concern buyer’s have is ‘what will my new payment look like’ however, that may not even be a consideration if there is nothing to buy. The comfort level an individual requires varies on many fronts, with no two people being exactly alike. Typically, I would suggest that as part of this process of ‘easing’ into this next phase of life scenario that we spend ample time looking at not only new listings (if they are available) but, sale fails & recently sold properties as well. With so little to choose from it’s crucial that you have a realistic view of the overall market, including what & why certain houses sell, as well as for how much. What we don’t want to do is give away everything that you may have just made on the sale of your house (or will potentially make) by proceeding on emotion rather then with as much knowledge of how the market’s been behaving. We want to have a thorough understanding of the market before entering into it, as hesitation based on a lack of preparedness or spending too much based on pure emotion will produce poor results. How long does this process take ? It obviously depends upon the individual but, when taking into consideration the preparation of a home to sell I’m typically seeing clients starting the conversation anywhere from a month to 6 or more months out. It’s never too soon to start your on line search to help develop that comfort level & no better place to start then here.

Once you’ve determined how much your new mortgage payment will be & whether or not what you hope to find does exist, even if only for sporadic periods, then your most likely looking for anyway possible to avoid having dual mortgages in place, assuming you would qualify to do so. Since you are now wearing two hats, one as a Seller & the other as a buyer, you should be able to better understand where a buyer who is purchasing your house or Seller you are purchasing from are coming from. Again, with just 1.9 months of inventory we are in a Seller’s market, assuming the property is priced correctly and has been prepared for market so as to appeal to buyer’s. The likelihood that you would consider an offer on the sale of your house that is contingent upon a buyer’s home selling i.e., a Contingency Offer, is pretty slim, unless of course you had no other offers but, that would also mean you have an issue that has made your property something other than what could be defined as being a “Seller’s Market Property”. If, as a future buyer, your first choice is to make offers contingent upon the sale of your property you should consider that first, it’s highly likely to not get accepted if the house has any sort of activity on it. Second, most Seller’s, or at least their Broker’s if they are providing good counsel to their Seller’s, would expect a Contingency offer buyer to pay a price premium for coming off the market for the uncertainty of a transaction that may never close. After all, Contingencies are things which may or may not happen, just like in everyday life. Again, as mentioned previously the goal should be to not give away what you may make via the sale of your house. Last, although not always the case you should consider that in a market where most homes are selling fairly rapidly that if a Seller is willing to entertain a Contingency offer you should be diligent in your efforts to understand why and that’s where your Broker can be most helpful in possibly attaining information you might otherwise not be able to gather on your own. There are obviously unlimited terms & conditions that could be added to any offer that could ‘sweeten’ the pot, including those made in concert with a Contingency offer however, that too is most likely subject to your Buyer’s Broker uncovering some pertinent fact and/or being able to articulate a certain need that a Seller appears to have based upon communications with a listing Broker. It’s not a given that a Contingency offer can ever be entirely ruled out as it depends on the individual circumstances surrounding each & every transaction & there are no two that are exactly the same.

The likelihood of a Seller accepting your Contingency offer is fairly slim so, how about negotiating a lease back on your current house while you search or wait for the 2nd house to close ? Just as was the case with individual circumstances surrounding each & every transaction not being exactly the same, as mentioned in regards to Contingency’s, it all depends on being able to understand your current situation well enough so as to not give anything away for the convenience of being able to stay over. Depending upon the amount of activity you may have on the sale of your current home your Broker (and ideally it’s the same Broker who will represent you in the purchase of your next property) may be able to gauge just how far you can push potential buyers in a multiple offer scenario so as to suggest that in addition to price, their getting accepted may hinge upon a limited lease back of the property to the Seller. Unless that buyer is paying cash (actually about 35% of sales are currently all cash) or via a non-owner occupied investors loan that buyer may be limited to do such a rent back for no more than 30 days based upon conditions of their loan. In addition to the aforementioned limitations, specifically those of buyer’s with owner occupied financing (the majority), a Buyer’s Broker who is providing thorough counsel to their buyer clients may convey that a Seller stay over has some potential liability that the buyer should consider thus, it may eliminate some or all of those potential buyers. The current Oregon Sales agreement (O.R.E.F. 054) does address in much greater detail then we would venture into here the terms & conditions under which each party is responsible for certain acts & costs etc., however, despite it’s best intentions over (4) pages there will always remain issues that will require additional deliberation, either by a Court or perhaps an insurance carrier. Point being, any attempt to stay over as a seller in order to easily transition into a purchased property may eliminate potential buyer’s who might bring the best offers thus, another scenario wherein your Broker can advise you.

What about those who would gladly carry (2) mortgages for a brief time but, aren’t able to qualify to do so ? Bridge loans have existed for a long time however, even in the boom market in the late 90’s and into the early 2000’s it was no secret that the costs were prohibitively expensive. With rates in general being lower then in the past the Bridge loan looks less attractive by today’s standards.

Although not practical for everybody hoping to transition from being a seller to a buyer, having a stopping point in between i.e., a rental property, allows for optimal strength on both sides of buying & selling. As a seller you have the flexibility in moving quickly from your property which some times can be looked upon favorably by a buyer who may pay a premium in price for the convenience. In addition, it allows you as a Seller the opportunity to slowly & methodically remove personal possessions from your home to better stage it for sale. From the buyer’s side of the equation you have the flexibility a seller might be looking for when deciding which offer to accept, moving quickly on a vacant house or perhaps a longer escrow where needed. Having your offer accepted is not entirely about price and having some flexibility and a verified down payment waiting makes your offer more attractive to a seller.

With home ownership being at historically low levels it’s created a very competitive rental market thus, it’s not just homes for sale that are in short supply. The vacancy rate in the Portland, OR metro area is 2.5% at this time thus, you might disregard much of what I mentioned in the last paragraph about the possibility of renting in between. Typically, the initial response from clients might be one of dismay at the idea as they see the same difficulties in finding a short term rental as they do in finding their next house. In most cases this because they are looking at traditional rentals wherein the landlords are looking for long term tenants with terms & deposits etc. that are not geared towards shorter stays. With all the rentals that should be available due to record low home ownership why would vacancy rates be as low as they are ? In many cases those investors have ventured into shorter term rentals where regulations allow and have been able to get premium returns as a result. Programs such as VRBO, AirBnB & FlipKey have opened up short term housing in local areas throughout the Nation & Worldwide. There are numerous spin off websites in our area with similar rental opportunities that are priced competitively with local long term rentals, yet without the large deposits & other conditions we would hope to avoid that are common to traditional long term rentals. I sold several properties this year alone that will be used for short term rentals.

As is the case with every Real Estate transaction being different in their own way, the answers to your particular needs & requirements may require a combination of some or all of the ideas put forth in this blog.

Best Regards,

Bob Zawaski G.R.I., e-Pro

Oregon Licensed Principal Broker / Owner

Investors Trust Realty

[email protected]

www.iTrustRealty.com

Negotiation Insights – You Can Take It With You

November 12, 2017 by bzawaski

Laying a solid foundation via effective social media and maximizing use & creativity in preparing the multiple listing can easily be neutralized via poorly handling the negotiation of an offer or multiple offers. Investors Trust Realty provides Seller with the most comprehensive planning from our very first meeting thru closing. No two sales are exactly alike however, with hundreds of sold properties over 23 years we’ve probably been there, and done that. Ultimately the final decision is always yours as a Seller however, having all the resources and knowledge behind you makes that a much easier task.

Just as we listen to your concerns & needs as a Seller, we do likewise when negotiating on your behalf in order to maximize the ‘net’ sales price of your Home. Listening is a skill that has served us well, whether it’s negotiating single or multiple offers. One of the many reasons you hire a Broker to either Buy or Sell is to take the emotion out of a large transaction. At Investors Trust Realty we understand there is a human element to every transaction & Brokers are not exempt from such emotions. The vast majority of Brokers want to do the very best for their clients and as a result, may be willing to share helpful information about their buyer clients in order to put their best foot forward. Listening & creating a comfortable environment from which they can sound off is crucial in helping Sellers get the most useful information. With Buyers experiencing multiple offers & rejections at every turn, it’s not uncommon for their Broker to counsel them in a variety of ways that will ‘sweeten’ their offer to a Seller. Conveying this information to the Seller based upon similar scenarios we’ve dealt with previously gives you the opportunity to make the most informed decision possible. Again, as a Seller the final decisions are always yours to make but, one would hope you have all the information required.

It’s certainly okay in a multiple-offer scenario to set a deadline for offers and ask everyone to provide their highest & best. In fact, we have that form in our files for just those occasions. In many situations, it appears that the playing field has been leveled by doing so but, at whose expense? It may be that the buyer who has been previously rejected many times is so beaten down that they simply don’t feel comfortable offering in what seems to be another failed attempt. It could also be that the prevailing offer was made by someone who simply wanted to ‘win’ out of desperation and either has buyer’s remorse shortly thereafter or attempts to gain it back during inspection negotiations. In either case, it could leave a Seller back at square one with their Broker explaining away a recent sale failure. Of course, this may not be the outcome in a majority of those types of offer situations however, at least knowing about options can be helpful to your bottom line.

On more occasions than I can recall, I’ve encountered Listing Broker who are overwhelmed in a multiple offer scenario and are doing little to covey any counsel to their Seller, other than sending them offers and pointing out where to locate the sales price on page 1. When inquiring about what needs their Sellers may have it’s not uncommon to hear “You know I can’t tell you anything, it wouldn’t be fair”. In reality, it’s the Listing Broker’s Fiduciary responsibility to the Seller to get as much for your property as possible thus, you may choose to deal with a particular offer that may have some terms & conditions to your liking. Whether or not a Seller decides to rely on an experienced Broker’s insight or simply let the chips fall where they may, having that choice is only possible with the guidance of an experienced Broker such as Investors Trust Realty.

Cooperation between Brokers should always be sought after as it benefits a Buyer in purchasing and the Seller in selling. This can certainly be accomplished in a way that benefits both parties in meeting their goals thus, cooperation with verification of facts is the preference. The number of multiple & single offer scenarios wherein buyers has walked away or been outright rejected, only to find they would have paid at least that much or more, is much higher than one might think. Marketing your Home to ensure it not only stands out but, has a desirability factor that creates buyer excitement is key. It’s our goal at Investors Trust Realty to make certain you never wonder whether or not you’ve left anything ‘on the table’.

Bob Zawaski

Principal Broker / Owner

Investors Trust Realty

Selling Your Home and Buying Another

November 10, 2017 by bzawaski

Selling your Home and buying another can be a challenge, especially in a market with an inventory of just 2.3 months (the amount of time it would take to deplete all listings if no new listings were added) as is the case here in the Portland, OR metro area. Inventory below 6 months is indicative of an appreciating market thus, 2.3 would suggest it’s a Seller’s market. Despite very little change in inventory from the last time I blogged on this issue (September of 2015 when it was 1.9 months) in Transitioning Between Houses we’ve come a long way in bringing back the simultaneous closing of one house to another that was commonplace a decade ago.

Transitioning Between Houses

As is the case with the Stock market where sentiment towards the events of the day shapes its ups & downs, Real Estate is not solely reliant upon Buyers & sellers simply taking statistical market data at face value. The slight gain in inventory we’ve seen in September of 2017 versus that of 2015 would suggest we should be going at roughly the same level of appreciation yet, we’re clearly not. The typical slowing down of the market that we see mid-summer seemingly came as no secret to buyers this past year thus, their sentiment was heard loud & clear. Price reductions, discounts, and repair negotiations became more commonplace than in the last two years. That’s not to say that we’re headed in a rapid decline but, perhaps a correction of sorts after a couple of years that saw Portland as one of the leading major metropolitan areas in appreciation. Does this mean the Seller will be more receptive to Contingent offers? Perhaps in some cases, they will but, there have been some changes on the lending side of the equation that may give hope to those who have little or no reservations about selling their home but, wonder if they can find a replacement home when they become buyers themselves.

The stumbling blocks to bridging the gap have typically included expensive Bridge loans or a refinance with all the costs & fees in order to rid the borrower of the ‘temporary’ financing utilized in order to circumvent buying in a Seller’s market. Whether we are still in a Seller’s market or witnessing a correction remains to be seen but, certain lenders have created products in response to the needs of today’s borrowers. According to the National Association of REALTORS, 68% of buyers are buying a home at least for the second time thus, one would assume many of them have a home to sell. Although much more than a stop-gap measure, Guild Mortgage lender John Bruce has successfully linked several of my clients with the Guild 1% Down program as an alternative to those who might be cash-strapped yet, want to purchase their next home in advance of selling their own. With market rates and competitive Mortgage Insurance the borrower truly has an option that includes keeping this loan in place as opposed to viewing it as an expensive temporary measure such as a bridge loan or traditional refinance. In addition, a recast or virtually cost-free version of a traditional refinance after purchase allows those whose qualifying numbers might be too tight, and/or whose cash for a down payment is problematic, without selling first. Of course, flexibility in underwriting has also created opportunities for borrowers where none may have existed just a couple of years prior.

Having the resources available from the lending side, as well as a thumb on the pulse of the market from the Broker’s side are what we bring to our clients at Investors Trust Realty.

When is Cash no longer King ?

February 8, 2017 by bzawaski

When is cash no longer King for Oregon home buyers & sellers? It’s not likely sellers will ever lose an affinity for accepting an all-cash offer on their property. It’s equally true that buyer’s with the financial resources to make an all-cash offer will continue to do so with the knowledge that their offers will be accepted more readily. That eagerness by a seller to accept cash in lieu of a financed offer is due in part to the elimination of concerns over the buyer’s qualifications becoming an issue as underwriting examines their file in greater depth. In addition, an appraisal value shortfall can result in going back on the market with all the most interested buyers long since gone.

Potentially compounding an appraisal issue based on value and/or conditions is the wait…Oregon is ranked 50th in regard to appraisal turn time. In a market with as little inventory as we currently have, waiting 30 + days for an appraisal turn can make a once highly sought-after listing old news. There certainly are enough considerations from the buyer’s qualifications coming into question during a transaction to issues related to appraisals that would make any rational seller seek out the easiest path to the closing table. What about those sellers who don’t necessarily consider being separated from those issues to be ‘priceless’? Would sellers entertain the possibility of accepting a financed offer over cash, if the price were right? It all depends on a seller’s comfort level with their knowledge of how financed offers work. In most cases that knowledge is going to come in a crash course from their Broker as it may be the first transaction the seller has dealt with recently, or ever. Most likely, the difference between cash & financed offers isn’t something a seller will have considered until the very moment it’s presented to them.

What due diligence should a listing Broker employ when analyzing a buyer’s offer with a seller? Regardless of whether it’s to make a determination about weighing the merits of financed versus cash, it should be standard practice to contact the lender directly to get as much insight about the buyer & lender as both. Unfortunately, the percentage of listing Brokers who contacts the buyer’s lender directly in order to verify information already stated on a Pre-approval letter, or gather additional insight about the buyer, is a mere fraction of what it should be. I would venture to say that when I’m representing a buyer whose offer is being seriously considered that our lender is contacted by the listing Broker less than 10% of the time. That may in part be due to my making a good case for my buyer clients & the listing Broker feeling all the issues have been satisfactorily addressed but, there are always pieces to the puzzle that can only be solved with the lender’s input.

Having a pre-approval in hand gives us a head start in dissecting the appraisal process and possibly putting to rest some of the concerns that might cause a seller to dismiss a financed offer in lieu of cash. Knowing the difference between Mortgage Brokers, Mortgage Bankers & Commercial lenders will be the very first consideration for the seller to take into account when presented with a financed offer. This not only gives the listing Broker the opportunity to educate the seller on differences that can truly separate one from the other but, it also should be the first subject to the table with the lender. Commercial lenders, or the big Banks that You and I may have our checking and savings accounts with, are required to use an appraiser from the Statewide pool on a first come first serve basis. In Oregon, we’re just shy of 1,500 appraisers Statewide thus, the first challenge is hopefully getting someone who is somewhat familiar with the neighborhood in which they are being asked to make a value judgment. Secondarily, the sheer volume of appraisals being ordered by large commercial banks creates a backlog that is compounded by an antiquated compensation system that many times hinders the capabilities of those appraisers in making adjustments when the value has come into question. Appraisers are exceedingly well-educated in their field thus, the vast majority of challenges they face are due to regulatory & industry demands that simply haven’t kept pace with the times. On the flip side of the coin are Mortgage brokers & bankers who may work under local Company names you’re familiar with, some being rooted here in Oregon while others have a National presence. This would be the opportunity for a listing Broker to inquire as to the working relationship the lender has with its much smaller pool of appraisers. Better yet, would be to leave open the opportunity for that lender to boast about the excellent relationship they have with their appraisers and the quick turns they are accustomed to. Obviously, the lender feeling a sense of pride in their working relationship with their appraisal pool and offering evidence of results without being prompted to do so may go a long way toward a more favorable view of a financed offer. Of course, this requires the listing Broker to exercise due diligence on behalf of their seller clients above & beyond the listing and marketing of their property that resulted in a multiple offer scenario. Utilizing Social Media to gain optimal exposure, as well as marketing to cooperating Brokers via Maximizing Multiple Listings are critical components to getting a seller to a position where multiple offers are a factor. The value derived from those first two steps is unfortunately the final ‘resting place’ for some listing Brokers who may feel their duties to the seller have been satisfied by having multiple offers on the table. It’s at this point that a Broker truly can determine his or her own value to the seller by providing Negotiation insights that outline options and considerations far above & beyond simply being presented with an offer(s) and directed to the location on the first page that states the offered sales price.

In order to provide a seller with as much pertinent information to make an informed decision, be it which offer to accept or whether a financed offer should be given more weight in comparison to cash, it’s important to know something about the makeup of that particular buyer. In addition, creating a scenario of some common traits that cash buyers sometimes exhibit can be helpful to a seller. As was mentioned earlier, buyers with cash resources do have certain expectations that go along with their offers. In addition to the knowledge that their offer has a greater likelihood of being accepted there is also a realization that their capability to close sooner & avoid financing issues is looked upon favorably by most sellers. Each & every cash buyer places a different value on his/her ability to put to rest some of the seller’s concerns. Exercising due diligence above & beyond simply reviewing the buyer’s proof of funds statement can be a crucial part of the decision as to whether or not cash is truly king in all cases. On numerous occasions, I’ve had Buyer’s Broker’s casually stated that their cash buyers had just terminated a transaction prior to this one and it was ‘easy to do because it was cash’. In reality, it really isn’t any easier to do but, that mindset is the key component here for the seller to consider, once it’s conveyed by the listing Broker. Of course, all this wouldn’t take place if it were simply left to telling all the buyer’s Brokers to bring their ‘Highest & Best Offers’ and have no conversations above & beyond that. Unfortunately, that is all too often what takes place.

Having an understanding of how an appraiser views a home & subsequently makes a value determination is vitally important information to convey to a seller. Deciding between taking the seemingly easier road with cash versus a financed offer that may ‘net’ tens of thousands more to a seller requires serious discussion based upon revisiting comparable sales. In addition to the due diligence required to make this call, it may also bring into question the listing Broker’s original comparable sales. Unfortunately, as is all too often the practice of some Brokers to ‘shut it down once offers have been received, there may also be a reluctance to revisit comparable sales for a variety of reasons, none of which benefits the seller.

Cash certainly has its advantages however, its uses are determined by the holder of those funds, Determining what other motivations they may have for purchasing this property, whether have they purchased others with cash, whether have they been successful, etc. Creating a profile of a cash buyer can be vitally important information in helping the seller predict how they might act in a transaction.

Ultimately the choice as to whether a seller should accept a financed offer when a cash offer is also on the table has much more to do with merely a difference in price. An understanding of the market, appraisal of common practices, and an ability to ask questions to gain helpful insight about parties to the transaction are vitally important factors. With over two decades in the industry, I pride myself on having developed a knowledge base of issues and an ability to act in a beneficial way on behalf of my clients. If your looking for superior representation in your next purchase or sale I would be glad to meet with you to see how we might work together.

Bob Zawaski G.R.I.

Oregon Licensed Principal Broker

Investors Trust Realty

Repair it all Home Inspections

January 23, 2017 by bzawaski

Repair it all Home Inspections are typically the product of a buyer seeking to get a fresh start in life in their new home. In some instances, that long wish list of repairs may be a part of a strategy employed by a buyer in order to regain some of what they may feel they lost when their offer was accepted. Whatever that reason may be, it’s crucial in negotiating repairs that any emotions a Seller may have as a result of being presented with an endless laundry list of repairs be dealt with tactfully.

Unfortunately, communicating in person isn’t always an option in this age of technology thus, we’ll employ a real life example via email. Effectively conveying that you’ve heard what the buyer has said and demonstrating it by responding in a thorough & thoughtful manner is critical to keeping everyone’s hopes alive when it seems your miles apart.

In many instances a Listing Broker representing a Seller will send back a reply reminding the Buyer and their Broker that this is not a new house but, one of a certain age with all the issues that go along with it. Of course, this may well be correct but, the effort a Listing Broker makes to first address the buyer’s efforts and appreciation for making their offer can go a long way towards allowing them to understand how things are viewed from the Seller’s perspective. The following narrative is from an email response I recently made in regards to a buyer’s repair request. That request included virtually every item noted by the Home Inspector, be it those requiring immediate attention to points for future reference and everything in between, here’s that reply:

“Sorry for the delay in getting back to you. Both the Seller’s and I appreciate the effort & due diligence put forth by the buyer in highlighting his concerns thus, wanted to spend as much time as necessary to provide a response commensurate with that effort.

Please note that although I’m just going to address a few of those issues herein that each & everyone has been considered. Before I address a sampling of those issues I wanted to say that we felt the Home Inspector did a good job of pointing out areas of concerns, as well as typical home owner deferred maintenance issues, all while doing so in a professional & non-alarmist manner. In addition, we certainly appreciate his identifying the frozen water supply line issue before it thawed. I’ll be meeting a plumber tomorrow to have that replaced and have him check for any additional leaks as well.

What we did in our evaluation of the buyers concerns was prioritize what was noted into repairs needing immediate attention, items that could be categorized as deferred maintenance or as we noted in several cases, just those requiring further explanation. Examples of some, but not all, of the noted issues that require further explanation are: Water heater over flow pan does in fact have a drain tube that runs from it out thru the garage. The furnace was recently serviced just a few months ago (no sticker left on it which leaves the inspector no choice but to suggest that) & a circuit board was replaced a few years back. All the parts for the T.V. cabinet are there but, need to be adjusted…the old parts are the ones laying in the back of the cabinet. Secondarily, there are a number of issues that any buyer would be well advised to take care of once inside their new home such as vegetation, moss growth, caulking & sealing etc. In regards to a tree mentioned, if it’s the one the Seller is thinking of, it may border in part onto another property thus, that might fall into question but, can very likely be dealt with.

None the less, we took it to mean that by spending the amount of time he did in compiling this list these items held some importance to the buyer thus we wanted to afford him the opportunity to continue to prioritize just how important each one was. After much reflection the Seller’s have agreed they would credit the buyer up to $3,000 to use as he see’s fit for the essential repairs or, would be O.K. with increasing the sales price as much as an additional $5,000 to $422,000 with an $8,000 credit.

Just as I’m sure all concerned are well aware this is a 16 year old house and no longer brand new as it was when the Seller purchased it, we are also sensitive to the fact that the buyer would like every opportunity to remedy any & everything possible in order to get a ‘fresh’ start. We feel we’ve adequately covered essential issues while giving the buyer the option to take on as much or little of the typical home owner issues your likely to encounter with any 16 year old Home.

Thank You again for your thoughtful insights and we look forward to your addendum.”

I typically try to put myself in the shoes of both the Buyer and Broker when responding thus, words mean things whether your on the Buyer or Seller side of the equation. Here’s a breakdown of my email response and what wording was employed in the context of a Real Estate transaction to convey a clear & concise response. First, I would note that the response was only a few hours after it was promised however, starting off by suggesting that any delay in getting back to them shows that their requests are ever-present in our minds thus, they should expect a thoughtful response as they continue reading. Secondarily, I wanted to convey that any perceived delay was due only to our wanting to dignify their efforts on an equal footing.

In the second paragraph I’m touching on two primary points, one being that a later attempt to categorize and condense a list of 20 something items into 3 categories is being done with everything taken into consideration and not a skimming exercise & second paying respect to their Home Inspector. All too often Broker’s use the opportunity to dismantle an inspection addendum by laying blame on an over zealous Home Inspector. It’s important, as long as the Listing Broker truly feels it to be the case, that how you viewed their inspection report was also considered, assuming of course you’ve been provided with one. Note that just as I was laying a foundation for condensing their list of issues into smaller groupings, I’ve also taken the opportunity to highlight that the Inspector not only did a good job of pointing out areas of concern but, also noted in a subtle way that we recognize there was a place for items that might be considered home owner deferred issues. Ideally I want to convey here and elsewhere that their own Inspectors report has a varying degree of comments & notations…sounds much better than actually pointing out that something like suggested might have a different meaning then recommended. It’s sounds like a very minor difference but, it’s important that we first agree that the Inspector they choose did a good job and second, we noted his varying degree of comments & notations without any cloud over us from having just implied the Inspector was over zealous in preparing the inspection report. In this particular case, I also took the opportunity to once again thank them for the thoroughness of the inspector in catching a potentially damaging issue and hopefully drove that home by letting them know a professional would be not only repairing that issue but, would look for other issues as well.

The third paragraph recognizes the effort put forth by the Buyer in compiling his issues and related ancillary information. We also ‘suggest’ that we are in essence affording the buyer additional time to continue to prioritize those issues. After all, we initially got a list of 20 plus issues with no degree of separation as to their importance. We’ve already implied that there is in fact a difference in how things should be viewed and that all started with their Inspector, someone we already agreed upon as being competent & reasonable. The second part of that paragraph is where we finally condense the subject matter so as to avoid discussion of 20 something different issues thus, we’ve suggested a credit that covers essential repairs. In addition, and again treating all the buyers concerns as important, we’ve extended an opportunity for the buyer to potentially do all those items with a majority of the overall credit being offset by a price increase. Many times we’ll find the buyer no longer see’s these items as necessary if they are being asked to contribute. Of course, offering an increase in sales price is subject the ability of the property to appraise…something we were comfortable with in this case.

Last paragraph states the obvious in regards to the homes age but, includes the Seller and I in that statement as well. This is a much better time to state what is often bluntly stated in one simple sentence during such negotiations, it’s creating a foundation for what we hope to convey. We further address the fact that the buyer’s request is really only what virtually everyone else wants in their purchase, a fresh start in a Home that is ‘new’ to them. By that statement we are again giving just due to the importance of what the buyer is requesting. We finish off by revisiting the idea that there are different types of issues with varying degrees of importance and place our Home on equal footing with other Homes of its age, no better & no worse. Finally, we commend their thoughtful insights and move to our intended goal of getting the buyer’s Broker to put there list to writing.

Will the efforts put forth have a ‘net’ positive effect for the Seller ? Stay tuned to my Blog to see how this works out.

Bob Zawaski P.C.

Oregon Licensed Principal Broker

Investors Trust Realty

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Does Lifetime Really Mean Lifetime For Your Roof ?

January 15, 2017 by bzawaski

I think you can get into semantics over a wide variety of definitions as to what a lifetime roof really means. Here are some things to think about and perhaps it creates more questions than it answers but, here goes. First, everything seemingly has to wear out at some point in time, even a metal roof loses its protective coating after a while. Increasingly popular Presidential style material comes in single (30-year life), double (40-year life), and triple (50-year life span). I have no doubt that even the triple-thickness material will wear out eventually depending on the conditions around it. These high-quality roofs come with algae blockers built in but, that’s really only a guarantee for maybe the first 5-7 years. If someone doesn’t start treating every other year after that I’m sure the moss will take over and create adverse conditions thus, shortening the lifespan.

The manufacturer’s lifetime warranty is going to be subject to certain conditions, you can almost bet. For example but not limited to, it may or may not be transferable. Looking a bit deeper into possibilities, in order to protect themselves from ever having to replace a 50-year-old roof there are certain maintenance items that must have been adhered to & documented along the way. Examples might be you could have some responsibility for not allowing it to grow a coat of moss or maybe they say it must be installed under workmanship standards that exist currently. In regards to the latter, requirements for venting and installation are almost constantly changing for the better. It wasn’t that long ago that you started seeing typical metal roof vents that allowed a roof to ‘breath’ being replaced with a single long ridge vent that looks almost like they forgot to fasten down those shingles along the ridge. Of course, every manufacturer’s lifetime’ warranty may be structured to suit their own needs so the possibilities could be endless.

The reason I mention all those things is very few people ever get to the point where they recall they have such material on their roofs, see it on packaging left over from a previous owner, or perhaps more importantly have read all the fine print and can document the ‘life’ of the roof. Another factor is whether that manufacturer is still in business. It also may be that if they are in business, a roofer can get some reimbursement from the manufacturer. It’s also possible that replacing with the same material no longer makes sense or the improvements are so vast that seeking out ‘old’ styles may not be practical. Roofing material is constantly changing therefore it could be that manufacturers know full well that having to ever replace material they sold 20 + years ago is very slight.

Part of the equation in getting reimbursement for so-called ‘lifetime’ roofing will hinge on whether it was installed to their specifications originally. Having the very best Roofing Contractor install your roof is critical to preserving any claim you may have in the future. Of course, in addition to a warranty on materials from the manufacturer, there is a warranty for the much larger part of the job, the labor to install your roof. In some cases you’re looking at just several months to perhaps a lifetime so, that becomes more important with that cost being maybe 2/3 of the overall expense of replacing your roof. We can’t predict who & who won’t be around a long time from now but, certainly selecting a Roofing Contractor who has the best track record for installations and will hopefully be in business decades from now are a consideration.

What Buyer’s should know about Broker referrals

December 29, 2016 by bzawaski

What buyers should know about Broker referrals…

Ask any Broker about referring Lenders, Home Inspectors, or Contractors to their buyer clients and you’ll get a wide range of answers from referring several for each trade, referring just their most trusted individual to not referring anyone at all. The one common thread among those three points of view is the Broker’s concern for his/her liability. Of course, the buyer simply wants to hire someone with expertise to help them obtain a loan, inspect a house or make repairs so, should the Broker’s issues with liability be a concern for the buyer? Unfortunately, the answer is yes but, how your Broker deals with walking the fine line between being a resource for all your needs and protecting his/her liability will determine whether you’ll have a good working relationship and be able to accomplish your goals. This is certainly a question you can pose to any Broker you may be considering to work as your Buyer’s Agent before hiring them.

Why should a Buyer be concerned with the Broker’s potential liability…the short answer is that in an Agency relationship your Broker’s liability could become your liability. You’ve hired someone to represent you thus, what they say and do in that capacity may have unintended consequences for you. Regardless of which point of view a Broker takes in regards to providing referrals or not, if they’ve made that decision with the intent to protect all involved from the harm of potential liability then they have served their clients well. Of course, there still is that fine line between potential liability and providing a buyer with high-quality service.

In 20 + years I’ve observed Broker not only practice one of the three above-referenced points of view in regards to referrals but, some pretty unique defenses of those positions as well. It’s commonplace to hear Brokers say they always refer to “3” of every trade but, all too often it’s followed with some sort of disclaimer that they’ve now cleansed themselves of any liability by doing so. There is also a saying that goes “your only as good as the last name on that list” thus, the client still got the names from the Broker so, if one goes bad then who is to blame, the buyer for making a bad selection or the Broker for providing the names? In many cases the buyers are glad to have three names from which to choose and things go just fine, however, there are the buyers who require more pinpoint direction and that means being guided to the sole individual expert who’ll solve their issue. To this type of buyer, 3 names may be looked upon like handing them the yellow pages and wishing them good luck & which leads us to a Broker who proudly states their “no referrals” policy. I try to put myself in my client’s shoes whenever possible and I can’t imagine how stressful it would be to be left on your own to trust a total stranger to take you thru a crucial point in a transaction. Needless to say, I’m not in the camp with either of those Brokers who would provide multiple names or leave you on your own. I just closed a transaction wherein my buyers & I encountered a seller who had just gone thru a sale fail that included making repairs to his roof which were improperly done…it factored in that deal terminating, as well as being an issue when our inspector called out the improper repairs a second time. This was a situation wherein the seller simply searched on his own to locate a roofer & unfortunately, it didn’t fare well. Having had the rare opportunity to meet the seller in person, I was taken aback by his obvious embarrassment for what had happened previously. It’s a situation such as this that confirms my belief that I will continue to provide only the most trusted individual lenders, inspectors & contractors to my clients. Brokers are only permitted to share referral fees with other Brokers, not lenders, Home inspectors, or contractors thus there are no financial incentives, other than providing a valuable resource to the client. I constantly review records & information on all trade referrals to ensure that anyone I refer to a client would be the same individual I would trust in my own home.

Although most Real Estate brokers are not experts on home inspections or construction we do have an obligation to our clients to have sufficient knowledge to address issues related to buying & selling property, including providing information that may require more advanced expertise from Attorneys, CPAs Contractors, etc. It would be very difficult, if not impossible, to understand when those ‘next steps are required if a Broker essentially removes him/herself from a transaction by not taking part in all the issues that affect a client, such as when & who to hire in addition to the Broker

Bob Zawaski G.R.I.

Oregon Licensed Principal Broker

Investors Trust Realty

Multifamily Conversion

February 10, 2015 by bzawaski

Multifamily Conversion

When one thinks of the term conversion as it’s used in Real Estate, one of the first thoughts that may come to mind is that of converting multifamily apartments to condos. As prices continued to appreciate during the years prior to 2007, there were numerous conversions that yielded far better returns ‘by the piece’ than as a ‘whole part’. When values soon thereafter began their rapid downward descent many of those property owners were faced with making mortgage payments on a property whose value was far less than what they now owed and/or paying monthly Homeowners Association dues. The combination of weakened buyers coupled with fractured Associations is just one of several components that have contributed to home ownership being at its lowest level since 1995. As a result of decreased home ownership (64.8% in 2014) the rental market has seen increased rents throughout most of its segments. In the Portland, OR metro area rents have increased by 5% in the last 6 months with Downtown rents typically going for $1.82 per sq. ft. & NW Portland rents spiking to $1.61 per sq. ft.

The overall market is certainly stable & it appears that we’ve been out of that downward spiral long enough that we can now look to the future with some degree of confidence. In most areas, we’ve made it back from the ‘bottom of the market but, depending upon location the gain may be very slight. It would be easy to simply suggest that location has almost everything to do with the recovery or lack thereof…after all Real Estate is all about location. Some of the causes & fixes to those issues still linger and can either hinder or help investors in the current market. It’s some of the residual effects of that down market that we can reflect on to examine strategy going forward & incorporate some ideas that may have been ‘shelved’ along the way.

Although not a new concept by any means the conversion of a Condo Association back to rental apartments & potentially being marketed as such has never gone entirely off the landscape. Frankly, in addition to such conversions being done for a very long time, it wasn’t until I had the opportunity to weigh the needs of two entirely different clients that I decided to investigate not only why certain market factors affected values but, how & when it might be appropriate to think slightly contrary to what the market is doing. The client who initially inquired about values within his small condo complex being somewhat lower than similar neighboring complexes understood that having lost FHA certification when the ‘do over’ button was hit and everyone had to re-apply & subsequently not being able to qualify again was a factor, as was a self-imposed limitation placed on selling to investors. With values still slightly below 2007 levels, this client has purchased a 2nd unit with an eye towards slow & steady appreciation, as well as the possibility of gaining enough control in the Association with future purchases that might allow changes that will make the units more marketable, such as allowing a limited number of rentals. Certainly, a long-term outlook at what appears to be the ‘bottom’ of the market for this complex seems to be a good strategy. In the event, this client’s goals are met in regards to owning a majority of units and making positive changes I wondered how that picture might look if this particular complex were converted to a Multifamily rental property under his ownership. Of course, by the time he might own enough units, the market could have an entirely different landscape than it has now but, I couldn’t help wondering how my Multifamily buyers, who are experiencing a severe shortage of inventory, might view this property today & how that use compares to its present use.

At their current market values, owners are typically seeing sale prices around $70,000 throughout this 11-unit complex thus, an aggregate total of $770,000. Based on current market rents @ $895 each this property would gross $118,140. With a 5% vacancy factor (our area at present is ranging from 2.2% to 3.4%) plus 40% in expenses ($44,893 Proforma) we would have a net operating income of $67,340. At present, the Portland, OR metro area is seeing CAP rates of 6.7 for properties in this category thus, it would be marketed at $1,000,000.

Obviously, it’s not a simple task to dissolve an Association nor should it be done without the guidance of an Attorney & C.P.A., both with HOA experience. Having an understanding of By-Laws and how to navigate the process smoothly, especially dealing with remaining owners, is something that should be taken into consideration long before the situation presents itself…again something your Attorney can guide you with. Disbursal of Reserve funds and all the detailed accounting, including compliance with I.R.S. regulations are issues best left to your C.P.A. Like most other financial ventures you should be long on both education & the execution of those ideas, it’s my goal to act as a resource for my clients and give them a foundation upon which to carry forward their own investment strategy. As I mentioned previously, it’s difficult to tell what the market may look like several years from now but, there has always been room for successful investments in up or down markets.

Having the resources of seasoned professionals at the ready, in addition to over 20 years of assisting investors to exceed their financial goals are just a few reasons to contact me today!

Bob Zawaski G.R.I.

Oregon Licensed Principal Broker / Owner

Investors Trust Realty

www.iTrustRealty.com

Real Estate Investors Pitfalls

November 12, 2014 by bzawaski

Avoid the journey down Investment Properties Pitfall Street

As my Seller and I near the long-awaited closing of his 11-unit apartment complex in the NE section of Portland, OR it was not without a few major obstacles along the way. Despite 20 + years of assisting buyers & sellers with similar commercial transactions no two have been exactly the same thus, this was no different in that respect. Many of the commonplace issues were still there i.e., inspections & appraisals, etc. however, changes to our market, while exciting for the future, are not without a few pitfalls that Real Estate Investors should take into account.

Find the strategy first then the property, not the other way around. Sounds simple enough but a sizable percentage of potential buyers who inquired about this property were working backward in that they liked the potential that existed but, wasn’t certain about a strategy that would help them reach whatever their goals might be. Unlike purchasing a home in which to live with your family where your emotions may set the stage for a transaction, an investment property requires an investment strategy…all together different from viewing it simply as a transaction.

Understand the process first, don’t let the process control you. Education is the key as it’s human nature for many who have been successful in their professional lives to believe that what worked in the past will translate into successfully purchasing & owning an investment property. Although there are exceptions to every rule, allowing yourself to ‘skip’ a few steps up front and play catch up, later on, can result in an irreversible setback. One of our potential buyers, although well qualified from an asset & income standpoint, didn’t grasp the concept that their being ‘ first-time investors’ would not be looked upon favorably as it would in the residential world. Again, simply carrying over what they knew of residential transactions didn’t bode well where an investment strategy was required.

Exercising due diligence, not ducking it. The most obvious are issues that are easiest to see such as deferred maintenance. Needless to say, the lender is concerned about a buyer potentially draining their personal savings due to extensive repairs thus, funds in reserve are a critical component to obtaining financing & can vary widely based on the buyer and the condition of the property. What things to consider knowing about as a part of the due diligence before & during a purchase may come from a checklist your trusted Broker uses however, nobody knows your financial situation as well as you do. A visit to your C.P.A., lender & perhaps someone who is an experienced investment property owner will serve you well in creating a list of issues important to you. Again, this falls back on educating yourself in advance. It’s always a good idea to ‘bring something to the table before meeting with any professional assisting you as it’s unlikely they will be able to lay out every scenario that may present itself in the process.

Even the Lone Ranger had Tonto. Amazingly enough, many potential buyers I spoke with over the term of this listing were not simply unrepresented in regards to having a buyer’s Broker working on their behalf but, had little or no ancillary support to fall back on in the way of contractors, inspectors or other legal specialists. Just as in the case of conducting thorough due diligence, it’s always wise to have all the pieces in place before you actually need them.

Get rich quick, misjudging cash flow. Although the multiple listing sheet available to the public & Broker allows for a considerable amount of information to be shared, it’s never meant to cover all the pertinent information that will be essential to a buyer of investment property. Amazingly enough, the lack of due diligence in asking for information upfront was not limited to just buyers calling on their own but, seasoned Brokers as well. There were several instances of offers written without any information gathering prior to simply sending an offer along, only to find out that a simple upfront question would have avoided the extra effort. If simply left to whatever financial information can be squeezed onto a multiple listing sheet or any place you choose to look on the web, chances are you would still be a far cry from being able to make an informed decision. Taking only some financial information without the remaining pieces to the puzzle is short-sighted, to say the least, and a recipe for those looking to get rich quickly to become cash-flow-poor in a hurry.

Bob Zawaski G.R.I.

Oregon Licensed Principal Broker / Owner

Investors Trust Realty

The Voices Behind You

October 16, 2014 by bzawaski

Be it the Seller who lingers just long enough for a ‘meet & greet’ with your clients or the disgruntled tenant who needs to air a laundry list of perceived code violations you’re going to run into someone willing to voice an opinion just when you thought you were alone i.e., the voices behind you. Being aware of your surroundings should always be a priority for safety’s sake thus, being prepared to respond to a friendly “excuse me” or an empty beer can coming your way should come naturally…I’ve dealt with both. How you deal with an impromptu situation may be your client’s first opportunity to see firsthand how you treat a total stranger or whether your ability to ‘think on your feet might translate well into negotiating a good deal. It’s an opportunity to practice both good citizenships & let your clients know who you are.

Today’s encounter was not unexpected thus, I knew the well-meaning property manager on my multifamily listing was going to open more than just a few doors for the commercial appraisers and me. Again, unlike the disgruntled tenant, she had no real intention of sabotaging a listing that now spans over 15 months and is just a few weeks from closing…if only these two seasoned appraisers don’t take issue with something said today. Of course, once the interior inspections were completed and a Q & A was about to commence they suggested that the property manager stick around as well, just in case she had some ‘additional insight’. Of course, in order to get me in the right frame of mind the voice in my head said “That’s a great idea”.

It didn’t take long for a few questions regarding some deferred maintenance issues to go off the rails a bit with that ‘additional insight’ they were originally looking for when they asked the manager to stay. I’m pretty certain that both appraisers knew exactly what they were getting themselves in for by inviting the property manager in for the Q & answer session. What better opportunity to quickly decipher what conditions might exist than to have the property manager serve up an outlandish tale to explain a hole in the wall and gauge my response to it? I will admit that the prolonged laughter the property manager exhibited when she described squirrels running circles inside one of the units almost reached an ‘uncomfortable moment’ however, it also allowed me the opportunity to answer a few questions that were waiting for answers, as well as posing one to the manager about landlord/squirrel law.

Having worked for years in the Health Care industry prior to my 28 + years in Real Estate I found that recognizing & allowing someone an opportunity to take center stage, however brief that moment may be, may be more important to them than you’ll ever know. As I answered the appraiser’s questions about financials & condition issues, I made a point to address everyone in the room equally. I could sense by her silence that some of this ‘financial stuff’ was either getting by her a bit or perhaps she was just taking it all in, either way, it seemed to have slowed the additional voices in the room.

As the appraisers and I parted ways one of them couldn’t help mentioning that “It appeared you had some help today ?”. I knew from their eye contact with one another that they not only planned for such a scenario but, were entertained as well so, hopefully, we’ll come in at value with no conditions being required. I got a follow-up e-mail from the appraisers later that day simply stating they enjoyed their visit, not something that happens very often. I may not know ‘Jack’ but, those voices do come up with some great ideas from time to time.

Transitioning Between Houses

Negotiation Insights – You Can Take It With You

Selling Your Home and Buying Another

When is Cash no longer King ?

Repair it all Home Inspections

Does Lifetime Really Mean Lifetime For Your Roof ?

What Buyer’s should know about Broker referrals

Multifamily Conversion

Real Estate Investors Pitfalls

The Voices Behind You

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