Tuesday, June 17, 2008

Comparing 2 VA Townhomes with different HOA Dues.

Recently I got this deep within an email:
"We don't want to consider homes with an HOA fee over $100."

To that, my reply is:
Instead of completely deleting them from the running, try making some adjustments to compensate for the HOA fees (or Condo fees), so that you are better comparing Apples or Apples.

For example, if two Alexandria Townhouses are $300k. And one has an HOA of $100 and another has an HOA or $200, then ask your lender what $100 a month in buying power gets you at your current rate.

Let's say it is 6%, the extra $100 per month, is $1,200 per year or about $20,000 in buying power ($20,000 at 6% is $1200 a year or $100 a month).

So that the townhouse with the $100 more expensive HOA, should be $20,000 less (assuming all else is equal, which is never the case). Also note that HOA fees are far more likely to increase then a 30 year fixed loan, so if you wanted to dock it another $5,000, that would make sense too.

So if you find a $275k place with $200/mo HOA and a nearly identical $300k place with $100/mo HOA, you should consider them equally in terms of monthly payments.

Written by Frank Borges LL0sa Broker FranklyRealty.com

Friday, June 6, 2008

Designated Agency, Can They Share My Info?

This is a longer question , so I thought I would answer it along the way in purple font. I have added bold emphasis to her question for easier reading.

Frank,
I was recently the victim of some very bad business practices and was hoping for some of your expertise on it. Don't worry, not looking for legal advice or filing a suit against anyone but I haven't been able to find the information I am seeking, just tidbits here and there.
[BACKGROUND STORY]
I was trying to buy a home through the company that listed it,

> You might not have known better, but I frequently rant and rave about NOT doing this. Here is a mini post on why you should NOT CALL THE LISTING AGENT (soon this will be a longer blog post). Now I can also link to your example as evidence.

The company designated and signed with me a representative separate from the sellers agent [listing agent]. They of course worked together in the same office along with the broker owner, but don't the confidentiality rules still apply?

I corrected above. A little pet peeve of mine. In Virginia a "Seller's agent" is actually the buyer's agent. The terminology is confusing so I exclusively use :"Listing agent" and "buyer's agent."

One problem with above hand off is the "referral fee" system in real estate. The listing agent most likely received anywhere from 25%-$50% referral fee from the agent that they "assigned/gave " the deal to. Can you say, "wink wink, make sure this deal goes through so a) I get the listing side plus 1/3rd the buy side commission and b) make this happen and I will give you more future deals." It is just one step up (better) vs Dual Agency.

Yes confidentiality applies. But this is called Designated Agency in Virginia (different in each state). Which means both agents work under 1 supervising broker. This isn't ideal, but sometimes is inevitable. This is MUCH better than the "Dual Agency" system (illegal in some states) where 1 agent does both sides of the deal. Regardless of either. Yes your info should be confidential while you are a client (the rules get tricky AFTER you no longer are a client). If the supervising broker knows some insider scoop, they are not supposed to share it with the other side. Also the agents shouldn't share it with each other. IE: "I think they will pay $10,000 more."


What is the difference between a buyers agent and a buyers representative?

I don't know that there is a difference. I could be wrong. (I won't BS you if I'm not sure)
Either way, they are supposed to be representing you and doing what is in YOUR best interest.

That being said, there is the law and there is reality. (I am not a lawyer) Whether your agent says side comments like "Sure she is qualified" vs "She is very qualified" vs the most appropriate: "Read the lender letter, beyond that I can not add additional information," gets down to the nitty gritty nuances of what is confidential.

In Virginia there is a paragraph where you have to check off whether the Buyer Agent is allowed to reveal financial information on the buyer. My clients check NO, but many check yes (which can be fine too) and yes means "I want to buy the house, feel free to give information to the seller, so that the will be more comfortable and more willing to sell to me." Heck in DC it is customary to fill out a full financial report and even faxing copies of your bank statements or a screen shot of your bank's assets online.

What were the broker/owners legal duties/responsibilities in this situation?

Make sure we don't confuse broker and agent. In Virginia think of an agent as a brown belt and a broker as a black belt, or the "boss." The broker, unless otherwise authorized, should be available to help both agents (one on each side) but they are not supposed to reveal any confidential information. Instead trying to only answer procedural questions.

Wouldn't they still have to uphold the Realtor oath to treat all
parties fairly, honesty?

Yes of course.

I ask this because during the time we were under contract with our accepted offer our requests for water and septic inspections were ignored.

Yes and no. It depends if your initial contract called for those inspections up front. If it did not, and your agent messed up and left it off, then technically after being under contract you might have lost your rights to ask for these other inspections (or contingencies). (some state laws might kick in and require you to have certain inspections regardless of what the contract says).

If you had in the contract that you were supposed to be given these inspections, and you weren't, that is very bad. If something went bad with those systems, and you have in writing that you asked for them to be tested, you might be able to make the agent/broker pay for the problems.

No inspections were shown on the day of closing (other than lead based paint) they were requested again on the day of closing and we were told that they did not have to provide them.

Now if they did the inspection, but weren't required to, and they found information that was bad, AND if the initial contract did NOT call for them, the listing agent and seller do not have to request that an inspection be done (unless state law says so, like the lead based paint disclosure in VA)., then that opens another can of worms that only a lawyer can address.

The home had a spring fed water system and private septic tank. To the best of my knowledge in the state of Virginia (and most other states) the seller is obligated to provide those inspections if the home is not connected to city water/sewer.

Oh, I didn't realize you were in Va. Ok, I hear you. I barely ever do septic. If that is true, then you might be allowed to walk all the way up to the closing date (or until they produced the inspection). Also some lenders would require this as well.

I ask about the confidentiality because during the process of trying to acquire a mortgage for the property

Don't tell me you used their "in house" lender?

(which we were unable to do because of the water system) our credit, which was good enough at the time, was hit so many times that it ended up showing too many inquiry's.

Usually when buying a place, your credit shouldn't be effected that much (or at all) if all the hits were from one source type (home loans). I can have somebody chime in about this later.

After telling our designated representative about the credit issue and our desire to wait a few months before trying again for a mortgage on that particular property, we received a phone call
from the sellers themselves offering us credit counseling advice.
Shouldn't our rep have kept the part about our credit to herself since we did not authorize the release of that information?

You might have authorized this in the contract without knowing it. Otherwise, you are right. That shouldn't have happened. But it would be a common mistake for the agent to say in passing "yeah, they have a credit issue and are tied up" but technically they shouldn't say anything. I don't think this has much to do with them being in the same brokerage.

I also ask about the fair and honest treatment of all parties because I came home to a message on my machine from the company that resulted in their firing. In the message the broker (who was returning my call) didn't not realize she had not hung up the phone but put it on speaker
instead.

Wow, this is getting good!

I have her, her husband (who is not even employed there) the sellers agent and our rep (who was still under contract with us) talking about my family and I, laughing at us calling us names and saying that if they had to come over to the house they would break our knees and throw us in the waterfall.

WTF! No way. Do you still have the audio? Email it to me. Or we can set up a call and I can record it and post it here for all to hear (removing names). Or give it to the press. As you can assume, this is very bad and could be grounds for serious removal of a license.

Would that constitute as a breach of contract?

That is a legal question, whether they breached your contract, but they seem to have no longer stuck to their Fiduciary Duty as your representative (google that).

From all the information I have been able to find this was a conversation they shouldn't have even partaken in, especially with outside parties who have no contractual dealings with us.
Wouldn't it prove that our Rep was not protecting nor promoting the best interests of their client?

Yes, it appears that way.

And being only our Rep wouldn't that still make us that agents client?

Yes. (but technically depends how your contract with your rep reads)

I very much thank you in advance for any of your knowledge on this matter, Samantha

No problem, hope I was somewhat helpful. Please post your reply in the comments section.

The parts in purple were :
Written by Frank Borges LL0sa - Broker FranklyRealty.com

Tuesday, June 3, 2008

Clarendon 1021 Great Deal. 2BDR for $450k? NOT

Question:

Frank, I saw a listing for a 2 bedroom/2 bath condo in 1021 (unit #XYZ). Do you have any more details about this condo? If yes, I'd like to see anything you have. Thank you, Tammy

Answer:

Hey Tammy
Sorry but that is a fake listing or a short sale. I wrote a detailed blog on Short Sales that was featured in Business Week
I do love the building, so if you have any questions, don't hesitate to ask. There is a unit XYZ (directly below me) that is a real listing, but it is $100k more. We can probably get the down some, but they are already taking a loss.
The average seller is now taking a $25k loss in order to sell.
Did you see my blog and video blog on Clarendon 1021? There is a link to it on www.1021Clarendon.com
Also when searching try www.Franklymls.com for 4x larger photos and keyword searching.
Thanks, Frank

Written by Frank Borges LL0SA- Broker FranklyRealty.com
(please report typos)

My Agent Can't Sell My Arlington Condo. Can you?

Question:
(via Chat) Sorry, I'm not an experienced chat user. My name is Doug and I'm the owner of unit 9XX in (Arlington Condo). We are looking for a replacement Realtor who is willing to aggressively sell our property. Interested?

Answer:
Hello Doug,
I was on the phone and I missed your Blog chat.
I see your home is still active on the MLS. Realtors aren't allowed to engage in conversations with people that are currently represented. (if you find an agent that does, they shouldn't be!)

What I can tell you is that XYZ is a very well respected agent.
Thanks,
Frank

Reply:
Thanks for responding, Frank.

... We're just not seeing, in our opinion, the desire on her part to get this sold. We need some movement here.
Doug

Reply Reply
No problem.
The Arlington condo market is really tough now. You have some VERY stiff competition from builders that are unloading units left and right (and bank owned properties). I also looked at unit #XYZ for sale in your building and from first glance, it looks more upgraded and larger, for less.
What I suggest is that you ask for a report "what has sold in this zip code in the last 60 days from $400k to $465k" and that way you can see exactly what IS selling and what you need to do to sell your place.
Are you getting showings? If not, it might be overpriced.
If you are getting showings, ask for feedback, if they say it is overpriced, they aren't negotiating, they are just telling you it is overpriced (and yes feedback DOES come in that says "priced well").
In my building, Clarendon 1021, I get approached all the time to sell listings. But my first questions is "are you prepared to take a serious loss from your purchase price in 2005?" If they say no, I can't help them.
And I just looked up unit XYZ that sold for $475k. Each floor is about $3k, so that makes it $15k higher, and it has two spots... what $15k-$20k more? That alone, without looking into detail tells me you are at least $30k overpriced (possibly much more). But again, I didn't look closely and pricing can take me a few hours.
My guess is you aren't listening to your Realtor. And what really stinks is many new or inexperienced (or bad) agents might take on the deal and then just try and beat you down in price after signing you up, ala "we tried." So the first agent spends a ton of time, the client doesn't listen, and they finally listen to the 2nd agent.
(don't go with an agent that will tell you they can get you $515k. Read my Buying a Listing post)
So if she is telling you to drop the price, she is probably not pulling your leg.
- Written by Frank Borges LL0SA- Broker FranklyRealty.com (please report typos)
(some details have been altered to keep the email details private)

Monday, June 2, 2008

Multi-Unit Property in North Arlington

Question:
Hi Frank,
I've followed your blog on and off for several months and like your approach. I'm interested in buying a multi-unit property in N. Arlington where I can be an owner occupant. Do you or one of your associates have experience in this type of investment purchase? I have met with my lender and know my financial parameters and would like to find someone creative in helping me find a property where the numbers will work (rental income numbers are critical). I'm open to unofficial duplexes where extra units may not be listed under multi-family listings.
Thanks for your time and look forward to speaking with you.
Paul

My Answer:
Hey Paul,

Thanks for emailing me.

I have to tell you that my first instinct is that if I helped you, I'd likely end up talking you out of it.... And talking me out of a commission. But oh well, you have friends right?

As for multi family, I own a part of a 400 unit multifamily apartment complex in Richmond, so I know more than a thing or two. As for smaller duplexes, I haven't don't that, but the math should still apply.

The problem is that a ton of people, I mean even a guy at the pool today, wants to dabble in real estate investing. Dabbling doesn't work in my opinion.

Also the financials probably aren't there, and may never be. For the most part in Northern Arlington, any place you buy won't cover the mortgage. So with a monthly loss, you then are just speculating on the market rebounding .

Many, maybe not you, have a plan to live for free and let a tenant pay all, part or most of their mortgage. But it isn't that easy.

Sure you might do ok in 7 years, but it isn't a no brainer investment.

Do you have a particular place in mind? Did you try searching for Arlington duplex on franklymls.com ?


- Frank Borges LL0SA Broker Owner FranklyRealty.com