real estate Archives - Investors Trust Realty FL

Buyer’s Representation – 2024

April 12, 2024 by bzawaski

Having settled, subject to final court approval on or around July 1, 2024, Burnett vs. NAR (National Association of Realtors) the proposed changes, as outlined on pages 95-98, will undoubtedly hurt buyers who can’t pay for representation that has always been, in most cases, paid by the seller. I say in most cases because it’s never been mandatory that a seller pay a cooperative commission to a buyer’s agent for bringing a ready, willing & able buyer. Somehow the Plaintiff’s allegation that a “conspiracy to inflate or stabilize broker commissions by NAR’s mandatory offer of compensation rule” has taken a cooperative commission offer to a whole new level, suggesting that commission rates have been fixed. Commission rates have always been negotiable and anyone who interviewed multiple brokers to list their home for sale knows that only too well.

With that said, there’s a certain amount of irony in the fact that the Plaintiffs’ Motion for Attorneys’ Fees is almost as long as the settlement itself and comprised of fixed rate calculations utilizing the Lodestar Method. The case law that brought about the change to how attorneys calculate fees is predicated on a $14,000,000 fee attached to a $37,000,000 judgment. I think most would agree that 37.8% is a bit excessive but what about 33-36%, that’s where they’re at. In addition to several structured hourly rate graphs and charts included in their Motion for fees, the Plaintiff’s attorneys have drafted page after page highlighting the skill of their adversaries, the time away from their lucrative practices and god forbid, the possibility they should not prevail and not make any money.

The latter sounds like something every buyer’s agent knows only too well, losing a buyer to another agent or the buyer not qualifying and not being paid. We’ll certainly see many more buyers unable to achieve the dream of home ownership and in some instances, be forced to work directly with the Listing Broker. Although perfectly legal to do so in many States, this scenario is ripe for allegations of conflict of interest but, I’m sure our attorney friends, at somewhere between 33-36% of any settlement, will be glad to step in and make things right.

Buyers who require sellers’ assistance with allowable closing costs, basically anyone with less than 20% down or certainly FHA or VA purchasers will be faced with a mandatory buyer representation agreement that, in most cases, obligates them to agree to pay the buyer’s agent’s fee. Needless to say, a USDA or VA buyer who is utilizing a no-downpayment loan program is doing so out of necessity and therefore cannot agree to pay a buyer’s agent. Adding this cost to the sales price and taking it out of the seller’s proceeds has potential shortcomings concerning the home appraising at its newly inflated price.

In this high-interest environment, buyers may need all the allowable closing costs they can get, not only to get to a reasonable cash-to-close figure but, to buy-down interest rates as well. Building in a buyer agent commission limits the assistance a buyer in need can seek, in many cases 6% of the sales price. Of course, even if agreeable, building in a commission of any amount and adding it to the borrower’s loan will stay with them at current interest rates for as long as they have that loan.

Sellers have always been able to recognize the value of as many buyers as possible viewing & potentially making an offer on their home. With a much smaller buyer pool sellers will have no choice but to negotiate commissions, not just with their listing Broker but with a buyer’s Broker as well. At Investors Trust Realty we’ll be gearing our buyer’s representation agreement to the benefit of our buyers thus seeking commissions directly from the seller first. Regarding listings, we’ll continue the practice of representing only the seller thus avoiding any conflict amongst our valued clients.

Bob Zawaski, G.R.I.

Principal Broker

Investors Trust Realty

Water, Water Everywhere

December 12, 2022 by bzawaski

“Water, Water Everywhere, and all the boards did shrink. Water, Water, everywhere, nor any drop to drink” from ‘The Rime of the Ancient Mariner’ by 18th Century Poet Samual Taylor Coleridge. Although the Ancient Mariners of the 18th Century clearly understood that much of the earth’s surface was covered by water they quickly learned that a supply of life-sustaining freshwater was a scarce commodity. 70% of the earth’s surface is covered by water but, a mere 2.5% is freshwater with less than 1% easily accessible. The World’s population currently uses 30% of the available freshwater supply and according to the United Nations, water usage could run as high as 70% by 2050. It’s further said that by 2025, 1.8 billion people worldwide will live in areas plagued by water scarcity.

When demand for Real Estate exceeds available inventory it can be managed by building new homes. When demand for freshwater exceeds its capacity the solutions may not be as simple or cost-effective. If pressed to make a life-or-death decision, many would be quick to prioritize the need for life-sustaining water over the shelter of a home. What Real Estate & water flowing through it share in common is both are considered ‘Real Property. Often times the ‘Rights’ that go with a parcel of land, or property that includes a home, are taken for granted and the potential value remains just that, potential.

Water Rights that can provide fresh Springwater for consumption, as well as the ability to irrigate crops, can rival or exceed the value of the adjoining land in many cases. In Oregon, a water Right is authorized by the State Water Resources Department (OWRD). Requirements for issuance of a ‘Water Right’ before using surface water have been in place since 1909 and groundwater permits were first issued in 1955. The doctrine of “Prior Appropriation” is a system wherein it’s basically one of first come, first served. In times of shortage, the “Senior” water right holder is entitled to take all the water needed before the next “Junior” water right holder is served. With only a few exceptions, Oregon law provides that all water is publicly owned. Water Rights with a “Priority Date” that predates any “Junior” water rights holders can add additional value under our “Prior Appropriation” doctrine.

Real Estate has remained an excellent long-term investment, however, it’s not immune to cyclical changes in the market. Hedging one’s investment by utilizing valuable resources such as water can be just the right solution. Water and its importance to our survival have been referred to as a ‘Human Right’ thus, it will always be in demand. If you’ve wondered what one of the few prognosticators who saw the housing collapse of 2008 coming is doing today, after making $2,690,000,000 for his clients by ‘shorting’ the housing market, Dr. Michael Burry is focusing all of his tradings on one commodity: Water.

Bob Zawaski G.R.I.

Oregon Licensed Principal Broker

Investors Trust Realty

When Your Buying & Selling As-Is

December 23, 2019 by bzawaski

When you Buying or Selling a home the term ‘as-is’ will probably come up. What exactly it means will depend on who is making that interpretation and how that benefits them. Sellers who are steadfast about not doing repairs or multiple offer situations can be determining factors. In either case, it’s important that neither party feels compelled by those factors to do what they ordinarily wouldn’t.

Sellers may want to make it clear in writing that they won’t be participating in making repairs or providing credit allowances. Most sales agreements include as-is provisions & inspection clauses that may already be pre-printed. It’s important to carefully address your desire to sell as-is without eliminating the buyer’s rights to any written representations. State-required Property Disclosures or Federally mandated lead disclosures, in the case of pre-1978 homes, are required. Whether or not a Buyer fully inspects the property or waives that right is something both parties should cautiously approach. It would serve the Sellers’ best interests to allow any potential Buyer the opportunity to fully inspect their property.

In the event, a Buyer chooses to waive that right it should be in writing. Waivers should be based upon the buyer knowingly and voluntarily electing to waive that right. Private parties should seek legal counsel when preparing a sales agreement. Licensed Brokers should avoid altering any pre-printed language to suit Sellers’ wishes to drive home a point without first consulting legal counsel. It’s easier to simply stay within your lane and not make changes to legal terminology already in place.

It’s not always a clear path despite one party or another laying the ground rules. As-is means different things to different people. It’s not uncommon for a Buyer who discovers a “big-ticket item” to take pause. Sewer lines & underground fuel tanks are often met with “I didn’t mean to include that in my as-is offer”. Of course, the Seller is not obligated to change the terms & conditions as originally agreed to. On the other hand, not coming to an agreement may mean the sale won’t close. Sellers should consider their potential liability for dealing with certain issues, despite any previous no repairs stance.

In the case of an abandoned underground fuel tank, there is no statute of limitations. I’ve had this conversation with many Buyers & Sellers over the years and there is plenty of potential liability to go around for passing along this issue. In Oregon, a DEQ (Department of Environmental Quality) Certified contractor is required to report leakage within 48 hours. Sellers must take responsibility but, what about a situation where both parties agree to sell without further testing? The Seller may feel it’s the Buyer’s responsibility going forward. What if the Buyer were to lose the house to foreclosure and disappear? With no statute of limitations, the Government can bypass owners to the next in line, the Seller. The Government will pull out all the stops to locate past owners. Banks who foreclosure are exempt & can sell without the tank being decommissioned thus, truly as-is.

There are lesser issues dollar-wise that a Seller should also consider despite any previous ‘no repair’ stances. Where CO & Smoke alarms are required saying I won’t do it or simply handing them over and saying “You do it” is short-sighted. If that potential buyer simply didn’t get around to installing them and is injured or perishes in a fire there is something to be said for that Sellers’s liability. Even a somewhat minor issue could have negative ramifications down the road thus, counsel from your Broker should always be sought before simply saying no.

In a recent condo sale, we were advised that a dryer duct had dislodged from the roof vent. It may have subsequently contributed to the fungi growth on the sheathing. Ducting from the interior space had been accidentally cut, which too may have been a contributing factor. Might the Association consider the latter as a contributing factor to their fungi issue? Despite the duct being within the Association’s domain consideration was given to simply replacing the entire duct.

In a hot market, Buyers will oftentimes want their offer to stand out. In order to stand out, some will opt to waive their inspection rights. It’s important they’re not given the impression or feel compelled to do so by the Seller or their Broker. As the cost of repairs & maintenance takes its toll Buyers may second guess waiving an inspection. In a Real Estate transaction, all things must be in writing but, they’re only as good as the parties involved. Good verbal communication along with the appropriate written language will protect both parties interests.

Bob Zawaski G.R.I.

Oregon Licensed Principal Broker

Investors Trust Realty

Social Media

July 31, 2018 by bzawaski

The internet is the starting point for over 90% of today’s buyers thus, it’s never been more important to be on the cutting edge of technology. At Investors Trust Realty we’ve built a foundation that provides Sellers with top placement & exposure for their homes. We’ve done this by employing old-fashioned hard work and providing content that keeps us high in search rankings. In addition, we strategically purchase ads that place your Home ahead of thousands of others on sites such as Zillow, Realtor.com & RMLS, to name a few. A typical listing will derive multiple times the viewings of most other listed properties which in turn results in either multiple offer scenarios or a strong accepted offer coming early on. Below are some of the Social Media sites we utilize to provide our Sellers with top placement.

Zillow and recently acquired Trulia are ranked # 1 & # 2 respectively among Real Estate sites buyers visit. Our Zillow Profile includes detailed information regarding hundreds of past sales throughout the greater Portland metro area, as well as a number of Certifications obtained to better serve our clients over the past 24 years.

Google sites remain the top multi-platform property with over 240 million unique visitors across desktop & mobile. As a foundation to all other forms of Social Media, Investors Trust Realty Google + and Bob Zawaski Google + add daily content, including sharing our Seller’s listings from our WordPress site. In addition, we utilize Google Ad Words in order to provide your Home with maximum exposure and priority placement over thousands of other Homes on the market. By providing Sellers listings, as well as helpful resource content on a daily basis from both our Investors Trust Realty Google + and Bob Zawaski Google + sites we’ve effectively doubled our presence on the largest multi-platform property.

Coupled with our ‘doubling down on Google + we’ve effectively employed the same strategy with our Investors Trust Realty Youtube Channel and Bob Zawaski P.C. Youtube Channel thus providing an ever-increasing presence in the world of video. Providing consistent content of the highest quality in the fastest-growing segment is critical to gaining the maximum exposure for your Home. Buyers are 60% more likely to view and subsequently look at Homes with Professional still and video photography.

Our website at itrustrealty.com is part of the Word Press platform, 28th Nationally, and 3 places ahead of the Zillow Group at # 31. From our site, we’re able to share content regarding your Home with the widest audience in the shortest period of time. With our ability to reach paid sites, as well as gain a following from organic sources, we’ve been able to amass viewings exceeding 1,000 on a daily basis just on our site alone. Views from other sources such as Google, YouTube, & RMLS.com regularly take our listed properties well in excess of 100,000 overall views.

Bob Zawaski G.R.I.

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

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.

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.

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The Voices Behind You

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