Real Estate Investing

It’s already impossible for my husband to agree to allow someone in to feed the dogs or cat although we have lots of friends who would be willing.  Instead, we have to board them at $30 a pop p/day for a week.  It would take nothing short of a miracle to get my husband to trade a home for a week for vacation… something people from across the world have done which saves them thousands of dollars.  At Bargain Babe’s site, there are links to home exchange platforms where would-be vacationers can find each other.

Recently, the swaps have become more permanent in nature.  MSNBC.com did a story recently about two homewners who were finding it impossible to sell.  One listing agent, however, recalled touring a home for another client and she suggested her new customer check it out and that maybe the sellers would consider a swap (one was moving to a bigger home and the other was downsizing).

Sergei Naumov, founder of GoSwap.org, is currently hoping to swap his own home,

“… sellers in this market have nothing to lose by trying one, and that real estate agents or individuals working with lawyers can easily steer the transaction process.

“The worst that can happen is that you get an offer you don’t want,” he says.

And as some sellers are learning, such an offer may be better than no offer at all.

When homeowners decide to swap, they are not relieved from the process of clarifying that there is clear title to the property they are selling. Further, if the homes being swapped permanently are worth different amounts, the lesser of the two will either have to bring cash to the table or be prepared to get a home loan to make the purchase.  But this would be required anyway in a regular purchase transaction so shouldn’t alarm anyone.

Trading homes is a miniscule part of today’s real estate picture, but it could trend into something more interesting and definitely bigger.  It seems like a completely way to look at trading spaces.

Photo by The Independent of London.

A recent article printed in U.S. News & World Report discussed How to avoid the common pitfalls of online real estate searching which told the newest numbers of how many people go online to find their homes:  “According to the 2008 National Association of Realtors Profile of Home Buyers and Sellers, 87 percent of home buyers used the Internet to search for homes in the past year.”

Blunder number one when buying - especially online - is assuming you can do it all yourself.  The challenge in my opinion is understanding the contract you’ve entered into and making sure you have an “escape clause” if you will.  Most contracts offer three contingencies for the buyer which enables them to walk away legally if conditions aren’t met:  inspection contingency, appraisal contingency, and financial contingency.

An agent in my office recently told me about a family who entered a lease-purchase agreement directly with a builder.  The builder required $7000 up-front, non-refundable.  Typical lease-purchase buyers are those who have cash to put down, but their credit score is shaky so they can’t purchase immediately. 

This was the case with these buyers who never received a copy of the lease-purchase contract from the builder,  so they had no way to know what their contractual rights were.  After living in the home for several months, things began to fall apart … the stove went on the fritz and the builder replaced it with a banged up old Goodwill-store-type variety.  The refrigerator failed and the builder brought a new one as far as the driveway where he laid it sideways for the lease-purchasers to find in the rain when they came home from work that evening.

There were other home maintenance problems which would’ve been found with a home inspection, but the buyers were working alone so no was there to tell them to get the inspection done.  They couldn’t get a home loan right away due to their credit problems, but in an immediate buying situation, that would’ve been enough to walk away from the contract with their $7000 intact.

Finally the appraisal contingency is vital because who would want to buy a home for more than it’s worth?

Working alone can be blunderful - just as working with the agent who’s wrong for you can pose problems.  Again, don’t be afraid to interview your agent.  Ask questions, expect answers that are informed, professional, and complete (or an agent who will find the answers).

Go ahead and read the full article in US News & World Report.  It’s full of other good advice like identifying fake listings and the online home valuation pitfalls.  Go in with your eyes wide open!

I typed the heading so I could feature a very well-written post by California agent Janet Guilbaul, but we’ll come back to her words shortly.  When I read the headline a thought struck me - because of the sheer number from the last two years in America, is a former homeowner still stigmatized for having a foreclosure in their history?

The answer depends on who’s looking at a person’s financial history.  Of course a lender would naturally steer clear of a borrower who has proven in the past that he or she will not pay on a house note - at least until a certain amount of time has passed and they’ve had years to recover enough financially to qualify.

People who lose their homes are still embarrassed and mortified, but honestly I don’t believe their friends, family, and neighbors look down on them like they might have 10 or 20 years ago.  It’s because we all recognize that this economy is a raging maniac - when unemployment is up to 7 percent nationwide and is expected to increase in 2009 - well then it’s no wonder people lose their homes.  If you don’t have the money, you can’t make the payment.

Meanwhile (and we’re getting back to Janet’s thoughts), not everyone is desperate to sell.  Even with my own listings, I’ve had to tell numerous agents, “This is not a distress sale.”  We’ve had so many homes hit the short-sale mode that we find people crawling out of the woodwork trying to get a bargain. As a result, prices have come down all over the place.  Realtors and their sellers  already account for this when they analyze the current market value and agree on the price.  Janet says,

Buyers should ask themselves this: Am I willing to risk losing the house I love because I am addicted to scoring an extreme bargain?Isn’t getting the BEST HOUSE in your LOCATION OF CHOICE at a hugely deflated price enough of a high?  Or has extreme bargain shopping become like a drug addiction? You will sacrifice your long term well-being and logical thinking for that 10 minute high of feeling ever so smart because you “stole” the house?

Frankly, I don’t like working with a buyer who has among his/her goals to “stick it to the seller” as Janet says.  However like one commenter said, there’s been so much media coverage of how cheaply people can buy homes, there are the foreclosure buses, there are foreclosure shows on TV… it’s no wonder buyers will *always* make a drastically low offer.  The upside is that sometimes the fish bites.  The downside is that sometimes that dream home gets away. The commenter named Ellen works around it,

As Listing Agents we need to tell our Sellers point blank that no matter what price we list at, we will get much lower offers and we have to master the art of negotiation.  Someone who really WANTS the house will buy it at a fair price.  It just means MORE WORK.

As Buyers Agents, we need to explain everything and then let them lowball.  Hey, a low offer is an OFFER.  In some of our markets with NOBODY even trying to make offers, these crazy low offers would be welcome!

The comments on Janet’s post vary wildly, but the bottom line seems to be work harder, be grateful for any offer and work hard to find the price both seller and buyer agree on, and work harder.