Variables that skew public record
Monday, June 25, 2007By Dian HymerInman News
Misrepresenting square footage can get a seller into big trouble. If a buyer relies on a seller's disclosure about the living square feet in his home and the buyer later finds out that the representation was overly ambitious, a lawsuit could ensue.
Sellers have a tendency to round up the number of square feet in their home. The more cautious approach would be to round down. The safest approach would be to make no representation about square feet at all. In an ideal world, this would be the perfect solution. In the real world, however, buyers want to know how many square feet are included.
It's easy to understand why. Most buyers are busy and don't want to waste time looking at homes that won't work for them. Describing a listing by the number of bedrooms and bathrooms, without any reference to square feet, is a safe approach. But, it tells buyers little about the actual size of a listing.
In the diverse housing stock in many older neighborhoods, such as the desirable Rockridge area in Oakland, Calif., three-bedroom homes range in size from about 1,300 square feet to more than 3,000 square feet. To say a house has three bedrooms tells a buyer little about the usable space.
When the number of livable square feet -- square feet excluding such things as decks, terraces, garages, basements and storage rooms -- is not provided in the listing information, buyers often search on their own for this information.
It's not that hard to come up with a figure. Simply go to Zillow.com and type in an address. The square-footage figure that pops up is presumably from the public record. Unfortunately, the "public record" often doesn't reflect reality. It may be accurate for new homes that haven't been modified since the original building permits were approved. The figure is far more subject to error for older homes that have been remodeled over the years.
Remodels are often done without building permits, which wouldn't be reflected in the public record. However, even when add-ons are done with permits, the public record is not always changed to reflect the increase in square feet.
HOUSE HUNTING TIP:
It's a good idea for buyers to visit the local building or planning department to find out what documents are on record regarding a listing they're considering buying. This should be done during the inspection contingency time period. If possible, ask for copies of all the permits that were taken out on the property, starting with the original building permit.
If permits for obvious modifications to the property are missing, this could indicate the seller, or a previous owner, took shortcuts. Or, it could reflect a shortcoming in the planning department records. For example, fires in the City of Oakland Planning Department partially destroyed the permit archives.
Buyers often like to compare listings they're considering based on the price per square foot. This is a far-from-accurate way to figure out if you're paying a fair price for a property, unless you're looking at homes in a new housing development where there is little variability.
Also, if the figures you're using are from the public record, which is often wrong, the reliability is even more in question. The most accurate source of square footage is the information from the local permitting agency. If that information is not available, a licensed appraiser can measure the house to provide square-footage calculations.
THE CLOSING:
Keep in mind that an appraiser might call a room a bedroom -- even though it wasn't permitted as such by the building department -- if the work was done by licensed professionals and complies with building-code requirements.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
***
Friday, June 29, 2007
Friday, June 22, 2007
"Televator" Makes Atic Access A Cinch
Say goodbye to traditional folding stairs
Friday, June 22, 2007 By Paul BianchinaInman News
When you're standing there, surrounded by Christmas ornaments, Halloween decorations and other boxes representing a plethora of seldom-used items, your eyes can't help but wander up toward the ceiling. Hmmm … all that space up there in the attic, just waiting to be filled. But can you use it safely? And how do you get up there, without having to drag out the big ladder every time?
Whether or not an attic can be safely used for storage depends on the framing that supports the ceiling, the size and span of the lumber, the weight of the items being stored, and other variables that are unique to each home. The typical trussed or stick-framed attic is capable of supporting light loads evenly spaced, such as boxes of decorations or clothes. They are typically not suitable for heavy, concentrated loads such as boxes of paper or files.
Also, you should never cut any components in the ceiling or roof framing in order to accommodate storage -- or for any other reason -- unless you fully understand how the framing supports its loads, and how to transfer those loads during and after the reframing process. In short, never attempt to alter framing or use the attic for heavy storage purposes without first consulting with an experienced contractor, architect or structural engineer.
GAINING ACCESS
If you've determined that the attic is safe for storage, the next question is how to get up there safely and conveniently. For that one, Werner Ladders has come up with an innovative solution in the form of their "Televator" Telescoping Attic Ladder. The Televator is a fully retractable aluminum ladder that stores up in the attic behind a door, and that telescopes down into the room when needed.
Unlike traditional folding attic access stairs, the Televator requires very little effort to use, and very little room in which to open and set up, making it a great solution for confined areas such as bedroom closets where existing attic access hatches are typically located. An included metal pole is used to open the ceiling door and then telescope the ladder down, and the same pole is used to reverse the process to store the ladder back in the attic. The ladder sections are spring-loaded, and require only minimal strength to pull down or retract. The Televator comes complete in one box, and is easy to install for the average do-it-yourselfer. You will need to supply your own plywood for constructing the door, but all of the necessary door hardware is included with the kit.
The first step in the installation of a Televator is to determine if it will work for your particular attic access situation. The Televator is available in two sizes -- one for ceilings between 7 feet 4 inches and 8 feet 4 inches in height, the other for ceilings up to 10 feet 3 inches. Both require a ceiling opening that is a minimum of 22 inches by 22 inches (it can be larger than that in either or both directions, but not smaller).
When the ladder is closed, it requires 13 horizontal inches from the back of the attic opening to any obstructions, and when it's open it requires 30 vertical inches of clearance from the top of the attic framing. In its fully extended position, the 8-foot ladder requires 35 inches of clear space horizontally from the back of the attic opening to the front of the ladder's feet where they rest on the floor; the 10-foot version requires 41 inches.
Once you have the hole in the ceiling ready, installation is pretty straightforward. The ladder unit is completely assembled, and requires only the installation of a couple of corner support brackets and a header plate. You'll need a drill and a wrench for putting in the lag bolts.
Next, the length of the ladder is adjusted for your specific ceiling height. Here again, the Televator's unique design makes this process a simple matter of removing and then reinstalling a couple of screws in the adjustment brackets -- no cutting is required.
The final installation step of the ladder itself is to lift the unit into the opening and hang it on the support bracket. Two locking plates are then bolted into place and the two support struts are attached, and that's it. Complete installation, not including making the door or doing anything with the ceiling opening, should take less than an hour.
Making and installing the door is a matter of cutting a piece of 1/2-inch plywood to size, then installing the hinges, support brackets, latch and weather stripping. Everything you need (except the plywood) is supplied, and there are complete instructions and templates for every phase of the installation.
The Televator ladder carries a load rating of 250 pounds, and retails for $199 for the 8-foot version. You can visit www.wernerladder.com for more information, including a dealer locator.
Remodeling and repair questions? E-mail Paul at paul2887@ykwc.net.
***
Friday, June 22, 2007 By Paul BianchinaInman News
When you're standing there, surrounded by Christmas ornaments, Halloween decorations and other boxes representing a plethora of seldom-used items, your eyes can't help but wander up toward the ceiling. Hmmm … all that space up there in the attic, just waiting to be filled. But can you use it safely? And how do you get up there, without having to drag out the big ladder every time?
Whether or not an attic can be safely used for storage depends on the framing that supports the ceiling, the size and span of the lumber, the weight of the items being stored, and other variables that are unique to each home. The typical trussed or stick-framed attic is capable of supporting light loads evenly spaced, such as boxes of decorations or clothes. They are typically not suitable for heavy, concentrated loads such as boxes of paper or files.
Also, you should never cut any components in the ceiling or roof framing in order to accommodate storage -- or for any other reason -- unless you fully understand how the framing supports its loads, and how to transfer those loads during and after the reframing process. In short, never attempt to alter framing or use the attic for heavy storage purposes without first consulting with an experienced contractor, architect or structural engineer.
GAINING ACCESS
If you've determined that the attic is safe for storage, the next question is how to get up there safely and conveniently. For that one, Werner Ladders has come up with an innovative solution in the form of their "Televator" Telescoping Attic Ladder. The Televator is a fully retractable aluminum ladder that stores up in the attic behind a door, and that telescopes down into the room when needed.
Unlike traditional folding attic access stairs, the Televator requires very little effort to use, and very little room in which to open and set up, making it a great solution for confined areas such as bedroom closets where existing attic access hatches are typically located. An included metal pole is used to open the ceiling door and then telescope the ladder down, and the same pole is used to reverse the process to store the ladder back in the attic. The ladder sections are spring-loaded, and require only minimal strength to pull down or retract. The Televator comes complete in one box, and is easy to install for the average do-it-yourselfer. You will need to supply your own plywood for constructing the door, but all of the necessary door hardware is included with the kit.
The first step in the installation of a Televator is to determine if it will work for your particular attic access situation. The Televator is available in two sizes -- one for ceilings between 7 feet 4 inches and 8 feet 4 inches in height, the other for ceilings up to 10 feet 3 inches. Both require a ceiling opening that is a minimum of 22 inches by 22 inches (it can be larger than that in either or both directions, but not smaller).
When the ladder is closed, it requires 13 horizontal inches from the back of the attic opening to any obstructions, and when it's open it requires 30 vertical inches of clearance from the top of the attic framing. In its fully extended position, the 8-foot ladder requires 35 inches of clear space horizontally from the back of the attic opening to the front of the ladder's feet where they rest on the floor; the 10-foot version requires 41 inches.
Once you have the hole in the ceiling ready, installation is pretty straightforward. The ladder unit is completely assembled, and requires only the installation of a couple of corner support brackets and a header plate. You'll need a drill and a wrench for putting in the lag bolts.
Next, the length of the ladder is adjusted for your specific ceiling height. Here again, the Televator's unique design makes this process a simple matter of removing and then reinstalling a couple of screws in the adjustment brackets -- no cutting is required.
The final installation step of the ladder itself is to lift the unit into the opening and hang it on the support bracket. Two locking plates are then bolted into place and the two support struts are attached, and that's it. Complete installation, not including making the door or doing anything with the ceiling opening, should take less than an hour.
Making and installing the door is a matter of cutting a piece of 1/2-inch plywood to size, then installing the hinges, support brackets, latch and weather stripping. Everything you need (except the plywood) is supplied, and there are complete instructions and templates for every phase of the installation.
The Televator ladder carries a load rating of 250 pounds, and retails for $199 for the 8-foot version. You can visit www.wernerladder.com for more information, including a dealer locator.
Remodeling and repair questions? E-mail Paul at paul2887@ykwc.net.
***
Thursday, June 14, 2007
Smart Home Buyers Stay For The Long Haul
Part 1 of 2: Making a wise purchase offer
Thursday, June 14, 2007By Ilyce R. GlinkInman News
In this two-part series, Ilyce Glink tackles some questions every home buyer should ask.
These days, life looks pretty good if you're on the buying side of a real estate transaction.
The number of homes for sale is at an all-time high and continuing to rise, according to the National Association of Realtors. The number of vacant homes is also at an all-time high. Developers are so desperate to unload houses that they're cutting prices in addition to offering free extras and upgrades.
But before you whip out a pen and fill in your offer to purchase, there are five questions every home buyer should ask:
1. How long do I plan to stay in this home?
This is the most critical question you can ask when going through the home-buying process because the answer can change what you buy, how much you pay for the property, and how you finance it.
Most home buyers tend to stay in their primary residences for five to 10 years. In the past few years, as the price of real estate was soaring and homeowners sought to capitalize on that, many people began treating their primary residences more like a piece of investment property. They'd buy, renovate (or not), and flip for big profits. Often, they'd plow their profits into a bigger, more expensive property.
With the real estate market slowing in many parts of the country, it makes sense to ask how long you plan to stay because short-term purchases will likely be money-losing propositions. It takes a savvy buyer to find a fixer-upper that can be renovated and flipped for a substantial profit in two to three years.
Once you figure out how long you plan to stay, ask yourself what would happen if you had to turn around and sell the property in a year. If you had to pay a 5 percent commission, plus other costs of sales including moving expenses, and the property didn't appreciate at all, would that change what you'd pay for the property today? Of course. You'd probably make a lower offer.
Be sure to take the length of time you plan to stay into account, but then account for a surprise move when calculating the price you offer the seller.
2. How desperate or anxious is the seller?
Sellers used to go to great lengths to avoid letting buyers know why they're moving. In most cases, people move because they accept a job offer in another location; they don't feel the local schools meet the needs of their children; or they aren't a good fit with the neighborhood.
But sometimes sellers move because of a death in the family, job loss (the property becomes unaffordable) or a divorce.
Finding out exactly why the seller is selling should be a top priority for all buyers and their agents. You also need to find out what kind of timeframe the seller is working under -- in other words, how desperate and anxious they are to sell and move.
The current buyer's market has produced record numbers of desperate and anxious sellers. In some cases, you have sellers who have already purchased and moved into their new homes. For them, every day that their property sits on the market translates simply into less cash back at the closing (assuming there is cash to be had).
You might also find sellers who are barely (or not) keeping up with their mortgages, and who are overextended financially.
If you find a desperate and anxious seller, you'll want to use that knowledge when constructing the offer. Desperate and anxious sellers are much more likely to accept a lower bid than sellers who feel they have all the time in the world to sell.
Next week: Three additional questions you should ask before constructing an offer to purchase
Thursday, June 14, 2007By Ilyce R. GlinkInman News
In this two-part series, Ilyce Glink tackles some questions every home buyer should ask.
These days, life looks pretty good if you're on the buying side of a real estate transaction.
The number of homes for sale is at an all-time high and continuing to rise, according to the National Association of Realtors. The number of vacant homes is also at an all-time high. Developers are so desperate to unload houses that they're cutting prices in addition to offering free extras and upgrades.
But before you whip out a pen and fill in your offer to purchase, there are five questions every home buyer should ask:
1. How long do I plan to stay in this home?
This is the most critical question you can ask when going through the home-buying process because the answer can change what you buy, how much you pay for the property, and how you finance it.
Most home buyers tend to stay in their primary residences for five to 10 years. In the past few years, as the price of real estate was soaring and homeowners sought to capitalize on that, many people began treating their primary residences more like a piece of investment property. They'd buy, renovate (or not), and flip for big profits. Often, they'd plow their profits into a bigger, more expensive property.
With the real estate market slowing in many parts of the country, it makes sense to ask how long you plan to stay because short-term purchases will likely be money-losing propositions. It takes a savvy buyer to find a fixer-upper that can be renovated and flipped for a substantial profit in two to three years.
Once you figure out how long you plan to stay, ask yourself what would happen if you had to turn around and sell the property in a year. If you had to pay a 5 percent commission, plus other costs of sales including moving expenses, and the property didn't appreciate at all, would that change what you'd pay for the property today? Of course. You'd probably make a lower offer.
Be sure to take the length of time you plan to stay into account, but then account for a surprise move when calculating the price you offer the seller.
2. How desperate or anxious is the seller?
Sellers used to go to great lengths to avoid letting buyers know why they're moving. In most cases, people move because they accept a job offer in another location; they don't feel the local schools meet the needs of their children; or they aren't a good fit with the neighborhood.
But sometimes sellers move because of a death in the family, job loss (the property becomes unaffordable) or a divorce.
Finding out exactly why the seller is selling should be a top priority for all buyers and their agents. You also need to find out what kind of timeframe the seller is working under -- in other words, how desperate and anxious they are to sell and move.
The current buyer's market has produced record numbers of desperate and anxious sellers. In some cases, you have sellers who have already purchased and moved into their new homes. For them, every day that their property sits on the market translates simply into less cash back at the closing (assuming there is cash to be had).
You might also find sellers who are barely (or not) keeping up with their mortgages, and who are overextended financially.
If you find a desperate and anxious seller, you'll want to use that knowledge when constructing the offer. Desperate and anxious sellers are much more likely to accept a lower bid than sellers who feel they have all the time in the world to sell.
Next week: Three additional questions you should ask before constructing an offer to purchase
Tuesday, June 12, 2007
Smoke Detectors Have Come A Long Way, Baby
But humans still play key role in preventing disasters
Dear Barry,
The smoke alarm in my townhome is wired to the electrical system and is presently inoperative. The fire insurance for the building is paid by the homeowners association. Does this make the association responsible for repairing the alarm? Electricians are very expensive, and I think that whoever pays the fire insurance should pay for smoke alarm repair. And while we're on the subject, what are the current requirements for smoke alarms? --
In collectively owned properties such as townhomes and condominiums, individual owners are responsible for interior conditions, while owners associations maintain all or part of the exterior and common areas. Because smoke alarms are interior fixtures, their maintenance and repair would most likely be the responsibility of resident owners. Exceptions, if any exist, should be specified in the CC&Rs (covenants, codes and restrictions) that set forth the rules for your association.
Smoke alarm requirements have gradually increased in number and complexity since the mid-1970s. The first smoke alarms were battery-powered units and were required near the doorways to all bedrooms. Unfortunately, homeowners and renters often failed to replace dead batteries, sometimes with tragic consequences. This problem was revealed by fire department investigators in the aftermath of major fires. To address this concern, it became mandatory to wire alarms to the electrical system.
The problem with hard-wired alarms was that power failures often occurred during electrical fires, rendering smoke alarms inoperative. Thus, by the early 1990s, hard-wired alarms were required to have battery backup. The new requirements of the 90s also mandated a smoke alarm in each bedroom, at each story of a home, and in basements and cellars.
By the recent turn of the century, code requirements increased again, calling for the interconnection of smoke alarms in homes with more than one alarm. If one alarm were to be activated by smoke, all other alarms within the dwelling would respond. If occupants were sleeping in a bedroom with the door closed, smoke at the opposite end of the home would trigger the bedroom alarm, thereby awakening the sleepers.
In homes that predate current building codes, there is no requirement to upgrade to current smoke alarm standards unless a permit is taken to alter the interior or construct an addition. In situations where there is no access area above the ceiling, where it would be difficult to upgrade to hard-wired alarms, battery-powered alarms are approved. However, some municipalities have enacted smoke alarm requirements that exceed the standards in the building code. Therefore, the local building official or fire department should be consulted for the latest applicable standards in your area.
Home inspectors often discover inoperative smoke alarms, much to the surprise of homeowners. Therefore, periodic testing of smoke alarms is strongly recommended.
As for your concern about the high cost of an electrician, smoke alarm replacement, in most cases, is a simple repair for a competent handyman.
Published by Barry Stone, Inman News
Dear Barry,
The smoke alarm in my townhome is wired to the electrical system and is presently inoperative. The fire insurance for the building is paid by the homeowners association. Does this make the association responsible for repairing the alarm? Electricians are very expensive, and I think that whoever pays the fire insurance should pay for smoke alarm repair. And while we're on the subject, what are the current requirements for smoke alarms? --
In collectively owned properties such as townhomes and condominiums, individual owners are responsible for interior conditions, while owners associations maintain all or part of the exterior and common areas. Because smoke alarms are interior fixtures, their maintenance and repair would most likely be the responsibility of resident owners. Exceptions, if any exist, should be specified in the CC&Rs (covenants, codes and restrictions) that set forth the rules for your association.
Smoke alarm requirements have gradually increased in number and complexity since the mid-1970s. The first smoke alarms were battery-powered units and were required near the doorways to all bedrooms. Unfortunately, homeowners and renters often failed to replace dead batteries, sometimes with tragic consequences. This problem was revealed by fire department investigators in the aftermath of major fires. To address this concern, it became mandatory to wire alarms to the electrical system.
The problem with hard-wired alarms was that power failures often occurred during electrical fires, rendering smoke alarms inoperative. Thus, by the early 1990s, hard-wired alarms were required to have battery backup. The new requirements of the 90s also mandated a smoke alarm in each bedroom, at each story of a home, and in basements and cellars.
By the recent turn of the century, code requirements increased again, calling for the interconnection of smoke alarms in homes with more than one alarm. If one alarm were to be activated by smoke, all other alarms within the dwelling would respond. If occupants were sleeping in a bedroom with the door closed, smoke at the opposite end of the home would trigger the bedroom alarm, thereby awakening the sleepers.
In homes that predate current building codes, there is no requirement to upgrade to current smoke alarm standards unless a permit is taken to alter the interior or construct an addition. In situations where there is no access area above the ceiling, where it would be difficult to upgrade to hard-wired alarms, battery-powered alarms are approved. However, some municipalities have enacted smoke alarm requirements that exceed the standards in the building code. Therefore, the local building official or fire department should be consulted for the latest applicable standards in your area.
Home inspectors often discover inoperative smoke alarms, much to the surprise of homeowners. Therefore, periodic testing of smoke alarms is strongly recommended.
As for your concern about the high cost of an electrician, smoke alarm replacement, in most cases, is a simple repair for a competent handyman.
Published by Barry Stone, Inman News
Friday, June 8, 2007
Best Way To Buy A Home That Needs Repairs
Recently buyers who were in contract to purchase a home in Oakland, Calif., asked the seller to credit them money in escrow. The money was to be applied toward repairs that were recommended in the course of the buyers' inspections.
The sellers were offended. They had agreed to sell for significantly less than their asking price. They weren't inclined to make any further concessions. So they turned down the buyers' request and told their agent to put the house back on the market. The buyers, realizing that they were buying the house at a fair price, removed their inspection contingency and the sale went through.
Most residential home purchase contracts include an inspection contingency for the buyers to inspect the property. It's not uncommon for items to surface during the inspections that were previously unknown to both the buyer and seller.
Depending on how the contract is written, the buyers may be able to simply withdraw from the contract without penalty if they no longer want to buy the property. But if the buyers want to pursue the sale even in light of the inspection findings, there are several options.
If the defects are minor, they might simply remove their inspection contingency without asking the sellers to repair or pay for the defects. Or they could ask for a price reduction and agree to purchase the property "as is" with respect to the defects. Or they could ask the sellers to repair the problems. Or they could ask for a monetary credit at closing to offset some or all of the repair costs.
There are pros and cons to the various options, depending on the situation. Before making a request of the sellers, it's wise to assess your chance of a success. For example, if there is a backup offer for more than the price you agreed to pay, the seller might be just as happy to see you move on to another house, which would free him up to sell at a higher price.
Sellers who are willing to negotiate on inspection issues might be more receptive to a price reduction or a credit at closing, rather than having to make repairs, particularly if they are moving out of the area.
HOUSE HUNTING TIP: From the buyers' perspective, it's usually better to ask for a lower price than a credit, especially if your property taxes will be based on the purchase price and if you have plenty of cash to pay for the repairs. A credit works well for buyers who are cash-strapped. The credit offsets some of the buyers' closing costs and thereby frees up cash for repairs.
Before you ask for either a price reduction or a credit -- particularly if the amount is large -- be sure to talk with your mortgage broker or loan agent. A large price reduction could be a red flag to a lender who might want to see inspection reports. This could cause the terms of the transaction to be modified if the lender then required that work be done before closing. In this case, the close of escrow might have to be delayed, which could raise problems for both the buyer and seller.
Lenders also have limits on how much money a seller can credit a buyer at closing. On a mortgage for 100 percent of the purchase price, lenders usually limit the amount of a credit to 3 percent of the purchase price. On loans for 90 percent or less of the purchase price, the limit is often increased to 6 percent.
THE CLOSING: However, in either case, the amount of the credit cannot be more than the actual amount of the buyer's nonrecurring closing costs -- those costs paid by the buyer one time only at closing.
Published by Dian Hymer
The sellers were offended. They had agreed to sell for significantly less than their asking price. They weren't inclined to make any further concessions. So they turned down the buyers' request and told their agent to put the house back on the market. The buyers, realizing that they were buying the house at a fair price, removed their inspection contingency and the sale went through.
Most residential home purchase contracts include an inspection contingency for the buyers to inspect the property. It's not uncommon for items to surface during the inspections that were previously unknown to both the buyer and seller.
Depending on how the contract is written, the buyers may be able to simply withdraw from the contract without penalty if they no longer want to buy the property. But if the buyers want to pursue the sale even in light of the inspection findings, there are several options.
If the defects are minor, they might simply remove their inspection contingency without asking the sellers to repair or pay for the defects. Or they could ask for a price reduction and agree to purchase the property "as is" with respect to the defects. Or they could ask the sellers to repair the problems. Or they could ask for a monetary credit at closing to offset some or all of the repair costs.
There are pros and cons to the various options, depending on the situation. Before making a request of the sellers, it's wise to assess your chance of a success. For example, if there is a backup offer for more than the price you agreed to pay, the seller might be just as happy to see you move on to another house, which would free him up to sell at a higher price.
Sellers who are willing to negotiate on inspection issues might be more receptive to a price reduction or a credit at closing, rather than having to make repairs, particularly if they are moving out of the area.
HOUSE HUNTING TIP: From the buyers' perspective, it's usually better to ask for a lower price than a credit, especially if your property taxes will be based on the purchase price and if you have plenty of cash to pay for the repairs. A credit works well for buyers who are cash-strapped. The credit offsets some of the buyers' closing costs and thereby frees up cash for repairs.
Before you ask for either a price reduction or a credit -- particularly if the amount is large -- be sure to talk with your mortgage broker or loan agent. A large price reduction could be a red flag to a lender who might want to see inspection reports. This could cause the terms of the transaction to be modified if the lender then required that work be done before closing. In this case, the close of escrow might have to be delayed, which could raise problems for both the buyer and seller.
Lenders also have limits on how much money a seller can credit a buyer at closing. On a mortgage for 100 percent of the purchase price, lenders usually limit the amount of a credit to 3 percent of the purchase price. On loans for 90 percent or less of the purchase price, the limit is often increased to 6 percent.
THE CLOSING: However, in either case, the amount of the credit cannot be more than the actual amount of the buyer's nonrecurring closing costs -- those costs paid by the buyer one time only at closing.
Published by Dian Hymer
Monday, June 4, 2007
The Power of Permits
May 29, 2007
Dealing with a city's building department can be a nuisance, depending on where you live. The cost of obtaining permits ups the overall cost of a project. However, skipping the permit process can potentially cost you much more.
One homeowner jeopardized a profitable home sale because a significant remodel to the house was done without required building permits. In this case, the renovations added about 1,000 square feet to the building. The buyer's appraiser searched the public record for the recorded square footage of the house.
The public record indicated square footage for the building that was far less than the measured square footage. The appraiser refused to give full credit for the additional square footage unless the seller could substantiate that the work was permitted by the local building department.
Without full credit for the additional square footage, the house would appraise for much less than the contract purchase price. The buyer wouldn't pay the price he'd offered if the house didn't appraise for that price.
To remedy the situation, the seller went to the city building department and took out permits. Penalties were assessed so the permit fees were higher than they would have been if he'd taken permits out to begin with. This seller actually got off easy. The city building inspector could have required that walls be opened up to check the electrical and plumbing installations, which would have cost even more.
HOME SELLER TIP: It doesn't make good financial sense to spend a lot of money on a major renovation without obtaining the building permits that are required by law. The value of the work can be diminished if required permits aren't obtained. In some places, you might be required to undo work that was done without permits. And, you could be stopped from completing a job until you obtain the necessary permits.
To make sure that you don't get into trouble when you sell you home, check with your local city or county building department to find out what, if any, permits are required before you start a home renovation project. Not all projects require permits, and this will vary somewhat from one place to the next.
Generally, permits are required for work that might impact the health and safety of a building occupant, like running a new gas line so that you can relocate your furnace. Structural modifications or additions also usually require permits. You may need several permits for such things as foundation, electrical and mechanical.
Permits can be obtained by homeowners or their contractor. You may be able to save money if you take out the permits yourself and agree to be present for inspections. Some contractors have been known to talk homeowners out of the permit process because it saves the contractor time.
Make sure if you do ask your contractor to take out permits that he actually does it. Some unsuspecting homeowners have discovered after a job was complete that the permits were never obtained. Keep copies of permits and make copies available to buyers when you sell your home.
Sometimes permits for work are obtained, but the final approval is never received. This can have implications for the next person who tries to take out a permit to do work on the house. A San Francisco Bay Area home buyer discovered after closing that a permit to change the furnace had never received the final approval.
She hired a contractor to do termite work, which required a permit. When the contractor went to the city to obtain a permit, he was denied. The outstanding permit needed final approval before a new building permit would be issued.
THE CLOSING: Sellers who do work without required permits, or who don't have permitted work signed off, should disclose this to the buyers before closing to avoid legal problems with the buyers after the closeing.
Published by Dian Hymer
Dealing with a city's building department can be a nuisance, depending on where you live. The cost of obtaining permits ups the overall cost of a project. However, skipping the permit process can potentially cost you much more.
One homeowner jeopardized a profitable home sale because a significant remodel to the house was done without required building permits. In this case, the renovations added about 1,000 square feet to the building. The buyer's appraiser searched the public record for the recorded square footage of the house.
The public record indicated square footage for the building that was far less than the measured square footage. The appraiser refused to give full credit for the additional square footage unless the seller could substantiate that the work was permitted by the local building department.
Without full credit for the additional square footage, the house would appraise for much less than the contract purchase price. The buyer wouldn't pay the price he'd offered if the house didn't appraise for that price.
To remedy the situation, the seller went to the city building department and took out permits. Penalties were assessed so the permit fees were higher than they would have been if he'd taken permits out to begin with. This seller actually got off easy. The city building inspector could have required that walls be opened up to check the electrical and plumbing installations, which would have cost even more.
HOME SELLER TIP: It doesn't make good financial sense to spend a lot of money on a major renovation without obtaining the building permits that are required by law. The value of the work can be diminished if required permits aren't obtained. In some places, you might be required to undo work that was done without permits. And, you could be stopped from completing a job until you obtain the necessary permits.
To make sure that you don't get into trouble when you sell you home, check with your local city or county building department to find out what, if any, permits are required before you start a home renovation project. Not all projects require permits, and this will vary somewhat from one place to the next.
Generally, permits are required for work that might impact the health and safety of a building occupant, like running a new gas line so that you can relocate your furnace. Structural modifications or additions also usually require permits. You may need several permits for such things as foundation, electrical and mechanical.
Permits can be obtained by homeowners or their contractor. You may be able to save money if you take out the permits yourself and agree to be present for inspections. Some contractors have been known to talk homeowners out of the permit process because it saves the contractor time.
Make sure if you do ask your contractor to take out permits that he actually does it. Some unsuspecting homeowners have discovered after a job was complete that the permits were never obtained. Keep copies of permits and make copies available to buyers when you sell your home.
Sometimes permits for work are obtained, but the final approval is never received. This can have implications for the next person who tries to take out a permit to do work on the house. A San Francisco Bay Area home buyer discovered after closing that a permit to change the furnace had never received the final approval.
She hired a contractor to do termite work, which required a permit. When the contractor went to the city to obtain a permit, he was denied. The outstanding permit needed final approval before a new building permit would be issued.
THE CLOSING: Sellers who do work without required permits, or who don't have permitted work signed off, should disclose this to the buyers before closing to avoid legal problems with the buyers after the closeing.
Published by Dian Hymer
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