Frequently Asked Questions
What is a Distressed Property Consultant?
A “Distressed Home Consultant” (“DHC”) is anyone who solicits or contacts a Distressed Homeowner and makes a representation or offer to perform any service that the person represents will:
1) Save the home from foreclosure;
2) Negotiate with the homeowner’s lender or trustee handling a foreclosure regarding new or existing loans; or
3) Purchase a Distressed Home within 20 days of a foreclosure sale.
What is a Distressed Property?
As of March 2008 the Washington State Legislature passed HB2791 into law. This new law called the “Distressed Property” Law identifies certain properties as “Distressed” if they fall into any of these categories.
1) The homeowner is at risk of losing the home due to nonpayment of taxes.
2) The homeowner is at least 30 days late on a mortgage payment.
3) The homeowner is in default of any mortgage term such that the lender could accelerate the balance owing.
4) The homeowner believes they are likely to default on the mortgage within 4 months.
What is a Short Sale?
A short sale is created when the proceeds of a sale are less than what is needed to pay off the liens/mortgages against the subject property. Banks/lien holders must approve a short sale so regardless if the seller agrees to sell and the buyer agrees to buy, the sale still may not be approved by the bank and if the proceeds exceed their acceptable amount of loss.
How do I determine a homes value?
The value of a home is typically determined by recent home sales of similar homes in the same area. That’s not to say that a similar home can’t sell for more or less. Each seller and buyer enter the real estate market faced with different challenges. A pending foreclosure, divorce, expiration of a lease, multiple offers on the same home, or relocation are some occasions that could influence the sale price of a home. The definition of fair market vale is “The highest price estimated in terms of money which the property will bring when exposed for sale in the open market by a willing seller allowing time to find a willing buyer, neither buyer or seller acting under compulsion, both having full knowledge of all the uses to which the property is adapted and for which the property is capable of being used” So long as there are no extenuating circumstances involved in the recent area sales these comparable sales can be used in the comparison. This type of valuation is known as the Comparable Market Analysis. Homes of similar size and age should be used in this approach since a home with more square footage could have a substantially higher price based on square footage. Example: Two homes sell for $150,000 one home is 2000 square feet, the other home is 2089 square feet. Theoretically, with all other features the same the larger home could sell for $6675.00 more for the additional 89 square feet. Another method of valuating homes is the Replacement Cost Approach. This approach to property valuation is seldom used since most areas of all major cities provide an adequate supply of comparable homes. When an area has no similar homes sales or the home in question is Historical or Monumental in nature then this approach can be used. This approach to valuation can take a very long time to complete since estimates to rebuild the home back to it’s original state could require custom or even hand made materials and craftsmanship. Remember, any market analysis or appraisal regardless of the comparable homes used or the person performing the valuation is an Opinion of Value. How the market data is extrapolated and adjusted could have a profound influence on the list or sale price.
What is Salability?
Whether you are buying or selling a home you will be concerned about salability. This term refers to a homes appeal and readiness for sale. If the home in question needs paint or other cosmetic work it will detract from the salability resulting in lower offers. Buyers don’t want to purchase a home that needs work unless they feel compensated for the work needed. Many times it’s prudent to perform the work prior to listing the home since it will be cheaper for you to do the work or even have it contracted out. Another factor impacting salability are restrictions on showings. Let’s face it, top producing real estate agents are busy bees working with many clients, driving to many cities on the same day working from early morning to late at night. The last thing agents or buyer want to hear is that they can’t show a house when they have scheduled several other showing in the area with the same client, particularly if that client is an out of state buyer looking to buy quickly. Restrictions are necessary in some cases. Flexibility in regards to the buyers schedule should be strongly considered.
Why is advertising incomplete?
Most advertising is designed to “Get The Lead” real estate ads have no price for a reason, they have no square footage for a reason. You have to call the agent listing the home, (which may not even be the listing agent at all). Exploiting a listed home in advertising is a way to Get More Leads not to sell the home. So when you hear, or see an ad saying that he or she spends more money in advertising homes than other agents, look at the ads closely and you’ll find it’s purpose is not to sell the home being advertised. Our team advertises homes for one purpose. To Sell That Home! When you hire us to sell your home that is exactly what we do. We will not exploit your home for personal gain.
Are buyer services free?
Buyers have been provided free services for over a decade. Buyers have no obligation to work with any agent unless they choose to (signed a buyers agency agreement). However, please be courteous to the agent you have been working with since they probably have spent time and money to help you find a home. If you are working with an agent avoid using the listing agent to show you a home unless you plan on using the listing agent to buy the home.
Are CMA’s Free?
CMA’s (comparable market analysis) ARE free.
Can you be held into a service contract or listing agreement?
Yes. Termination of agency can occur by either Acts of Parties, or by Operation of Law. Parties can terminate an “Agency relationship” by (1) Mutual Agreement (2) Revocation by the Principle (seller) or (3) Renunciation by the Agent, but not the legal obligation. Agents and Brokers will terminate an agreement since working with an unhappy client will cause more problems down the road, but the Broker is not required to cancel or terminate prior to the expiration of the listing period. Anyone who promotes an easy out listing type of agreement is preparing you for their failure to maintain your trust. There are two different aspects to consider. One is the Agency relationship and the other is the contractual obligation to fulfill the terms of the contract. For purposes of this question we won’t elaborate on ‘Operation of Law’
How are commissions set?
6%, 7% , as low as 4%. Commissions are negotiable. 4% listing agreements are typically limited service/discount listings where the seller will market the property other than the MLS exposure provided by the agent. the only thing the agent does is help with the purchase and sale agreement without representing the seller. No liability. No responsibility. Commissions should not be added on to the value of a property. Commissions are a cost of doing business much like paying sales tax when making a retail purchase. The amount is usually determined by the list price of the home. Properties under $100,000 are usually listed at 7% sometimes 6% but there are no set commission structures throughout the real estate community since it would be considered a violation of antitrust laws to do so.
Are there different types of listing agreements?
Yes. Exclusive Right To Sell listing agreements are designed to protect the interests of both broker and seller. With an Exclusive Right To Sell listing agreement the broker will be paid the commission no matter who brings the buyer to the property and the listing broker is bound contractually to represent the interests of the seller.
The other type of listing agreement is the Exclusive Agency listing agreement. If after a house is listed under an Exclusive Agency listing the seller finds a buyer the broker is not due a commission provided the broker was not the procuring cause.
What is a open house?
An open house is directed to the general public. When an open house is conducted your home is exposed to everyone who wants to see the home whether they are serious qualified buyers or just looky-loos. Some areas provide a productive atmosphere for open house but most do not. The safety of your family and personal belongings must be considered when your home is open to the public considering several strangers can be in your home at one time making it very difficult for agents to manage them.
What is a “Cloud” on Title?
An actual or apparent outstanding claim on the title to real property. “Clouds” can include an old mortgage or deed of trust with no recording showing the secured debt was paid off, a failure to properly transfer all interests in the real property (such as mineral rights) to a former owner, a previous deed which was improperly written or signed, an unresolved legal debt or levy by a creditor or a taxing authority, or some other doubtful link in the chain of title. Often the “cloud” can be removed by a quiet title action, by finding a person to create or execute a document to prove a debt had been paid or corrected. Title companies will refuse to insure title to be transferred with a “cloud,” or they will insure ownership except for (“insure around”) the “cloud.”
Who represents who in a real estate transaction?
It depends. A buyer could have signed a buyers agency agreement with an agent making that agent their representative. A buyer could purchase a listing listed by their agent and upon approval create a dual agency. A buyer could purchase a listing from an agent from the same office working under the same broker as their buyer representative creating a dual agency with the broker. Dual agency is only allowed with prior written consent and should be explained prior to entering into a purchase and sale. The Law Of Real Estate Agency Pamphlet must be provided prior to entering into any agreement.
Who pays for an inspection? What kind of inspection do I need? What does an inspection cost?
There are no requirements from any jurisdiction for a buyer to have a Home inspection. They are simply for the buyers protection. Lenders may require certain inspections as a condition of FHA or VA financing and the Pierce County Health Department as of January 1, 2003 requires a Report of System Status for any property served by an on-site sewage system (septic). Very few buyers purchase homes today without a Home inspection. They usually consist of a non invasive visual inspection of the structure and it’s mechanical systems. A report is provided by the inspector and you are left with the option of purchasing the home in it’s current condition, terminating the transaction based on the report, or asking the seller to make repairs. This combination of options may vary on your written offer. Remember, a seller does not have to make repairs based on a buyers home inspection.
Pest inspectors must be licensed with the Washington State Department of Agriculture. They will look for conductive elements that create moisture problems and dry rot attracting pests like termites, carpenter ants, and wood destroying beetles. If any issues are not repaired the inspector will not issue the Clear report. There are several other types of inspections that may be required based on your financing. Roof inspections and certifications, chimney inspections, foundation and drainage inspections, just to name a few. Typically the buyer pays for the inspections but when an offer is made on a home anything goes! An offer can consist of anything.
What about offer/counter offer?
When an offer to purchase is written there are some factors to consider, many of which will be handled by a competent Broker. First, the Broker will determine if the party/parties are competent. A person must be Mentally Competent in order to have the capacity to contract. If the party/parties are temporarily incompetent (under the influence of alcohol) the contract could be voidable if he or she takes legal action in a reasonable time after he or she regains competency. The party/parties must also have Capacity. This is the first requirement. The party/parties must be at least 18 years of age. There must also be mutual consent for a contract to be valid and is presumed upon the signing of a contract. There must be “Delivery” of the signed offer/counteroffer within the proper time frame or there is no acceptance. This is very important since an offer/counteroffer can be revoked prior to acceptance. Flexibility in this case will usually prevail between buyer and seller. Sellers or buyers do not need to respond to an offer or counteroffer. If an offer/counteroffer, you may choose to ignore the offer/counteroffer and the time frame for response or acceptance will elapse terminating the offer/counteroffer.
An offer/counter offer can also be rejected either in writing or verbally. When any terms or conditions of an offer are changed and delivered back to the offer or, a counter offer is made. At that point the original offer is void and the new offer can be accepted, rejected, ignored, or countered again. This offer/counteroffer process can continue until mutual acceptance is reached or until either or both parties find no common ground.
The 3rd requirement for a valid contract is a Lawful Objective. Both the purpose and the consideration of the contract must be lawful. The fourth element is Consideration. Consideration is something of value exchanged by the contracting parties (the buyer promises to pay a certain price and the seller agrees to convey title). The fifth element is the Writing Requirement. The Statute of Frauds is a state law that requires some contracts to be in writing. Each state has it’s own Statute of Frauds and can vary from state to state. Washington Statute of Frauds require that any agreement to convey real property, any agreement to assume the dept of another, and any agreement to employ an agent for compensation to sell, buy, lease or exchange real property (listing agreement) must be in writing.
What is a contingency?
A contingency is a condition or a provision in a contract that depends on the occurrence or non occurrence of an event. Just about anything could be a condition. EXAMPLE: This offer is contingent upon the buyers approval of the zoning restrictions that affect this property. This of course is an example of a possible contingency. More common contingencies are, Home Inspection, Financing, House Sale Contingency, Septic Inspection, Homeowners Insurance, Review of Neighborhood CCR&R (covenants, conditions, and restrictions) ect.How much earnest money is standard?
A deposit by a prospective buyer to show good faith. There are many misconceptions regarding earnest money. Typically a check is written during the time a buyer writes an offer. The earnest money is deposited either in a brokers trust account or an escrow companies trust account and will go toward the purchase of the home or be a refund if V.A. financing is used. It is not there for a seller to simply retain if the buyer doesn’t buy the house. It is there for a seller to retain as liquidated damages if the buyer fails to complete the transaction without legal reason. This is a simplistic explanation of earnest money and is not intended to be legal advise. Without a signed rescission, court order, or arbitrated disposition the broker or escrow company will not release the earnest money to either party particularly if there is a dispute. If a seller desires to retain the earnest money you must prove that the buyer is in default. The amount of earnest money usually depends on the price of the home being purchased. The higher the price of the home, the higher the amount of earnest money.
What are closing costs?
Title insurance is a closing cost to a seller for providing clear title to a buyer. It assures the buyer that there are no clouds on the title or liens prior to the transfer of ownership. Title insurance is also provided to the mortgage company from the buyer. Washington is a Title Theory State. In a Title State, the lending institution holds title to the property in the name of the borrower through a Deed of Trust. If a buyer buys with cash then the policy will be provided by the seller only. The Escrow fee is usually split between the buyer and seller. If V.A. is used then the seller will pay the entire fee. This fee is payment to the escrow company for providing the closing services. The escrow company does not represent anyone in a transaction. They are a third party that provides a mutual service. Another closing cost for a seller is the county excise tax. Buyers may have a 1% loan origination, appraisal, credit report, flood determination, processing, and administration fees. All part of doing business.
When does closing occur?
Closing occurs when the money is disbursed to the seller and the recording takes place. Typically a day or two after buyer and seller sign the closing paperwork, and the lender completes there final review process.
What about first time home buyers?
Generally speaking, First Time Homebuyers are no different than any other homebuyer. These programs are rarely, if ever, exclusive to people that have never owned a home.
Obtaining a Mortgage Loan is similar to getting any other loan. How much you receive in financing is always relative to how much you can afford to pay, which is relative to how much you earn. Your ability to pay is only as important as your desire to pay. A check on your credit history is often a good indicator of this desire. Finally, there must be some type of collateral for the loan. Mortgage loans are attached to the home you are buying.
Most mortgage loans do require a Down Payment. 100% financing is available in some cases. You can choose to finance your home with one loan, a combination of two loans or receive a “Gift” or “Grant” for the Down Payment. Each option has advantages and disadvantages.
Who sets interest rates?
The Federal Reserve Board, is a non-partisan entity entrusted to set the nation’s monetary policy. Their efforts are aimed at maximizing economic growth and minimizing threats to the nation’s economy. The most obvious tool at their disposal is setting the interest rate that the Federal Government charges when it loans money from the Federal Reserve. Lowering rates is an incentive to the private sector to borrow more money and invest those dollars in the economy.
Interest rates are currently at 40-year lows. They were lowered 11 times in 2002 in an effort to stimulate economic growth. Growth is good, too much growth can cause runaway inflation.
Can I use V.A.?
The first thing to do is find out if you are eligible to buy a home using VA insured financing. Basically if you served in any branch of the military for 24 months and were not dishonorably discharged, you should be eligible. The length of active duty requirement is less for War Time veterans and veterans that served prior to 1980. Active duty personnel are also eligible. Go to http://www.homeloans.va.gov/eligibility.htm for full details.
VA financing allows for financing 100% of the Purchase Price for your Primary Residence. Your eligibility is only available for one home at a time. You may own other properties, but VA will only allow financing on Primary Residences.
Even though you have V.A eligibility and your loan is zero out of pocket for you, there is still the closing costs to facilitate the transaction on your behalf. Typically, closing cost are from 2.5% – 3% of the sales price for both buyer and seller.
If you think you have eligibility, fill out form VA 26-1880 and include a copy of your DD 214. The process can be handled by your Mortgage Lender and can take 2-3 weeks to complete.
Qualifying for VA financing is similar to other mortgage loan programs; Employment and Income are verified, Credit is checked and the application is sent to the loan underwriter. VA, like most mortgage financing programs, requires a solid credit history for the previous 24 months, it differs however, in that VA does have minimum credit scores. Whether your credit is satisfactory for VA can often be determined only through a complete underwriting of the loan application.
VA is a fair, easy way to finance the purchase of a home.