Real Estate Investing

When I bought my first and second homes, I wanted to know what the square footage was.  Is it 1400 square feet or 2400?  Do you measure the outside of the house and add, or measure rooms and add them up to get the square footage?  According to an attorney who visited our office today, none of the above.

His advice to agents?  YOU should never measure a house yourself.  While it seems straightforward, figuring out the square footage of a dwelling can be tricky business.  There is no standard methodology for measuring - in fact three different appraisers, a professional measurer (is that a word?), an appraiser, and an agent could quite possibly ALL come up with a different number.

His next bit of advice?   If you publish the square footage of a home, always attribute where you got the number.  If it’s from the tax records, say that’s where you found it.  Additionally, agents would be wise to state in the MLS listing, “Information here not warranted or guaranteed” and add, “If square footage is important to you, you need to measure it yourself.”

Interestingly, in Texas - and perhaps other states - state law prohibits real estate agents from revealing the square footage according to the attorney today.  While I was unable to find evidence of that via my friend Google, I did see that square footage has not been listed for years in California.

Here’s an interesting discussion about the subject with points of views from many states.

Photo by Aussie Gall via Flickr Creative Commons.

The adage, “When in doubt, throw it out.” can certainly be applied not just to questionable food in the refrigerator, but also many times to real estate.  For agents and sellers our mantra could be, “When in doubt, throw it out there.”  In other words, disclose disclose disclose.

By disclosing known defects or problems with a home or property IN WRITING, you are protecting yourself, the seller, and the buyers of potential court proceedings.  If there is a sink hole, tell about it. If there had been termites in the past but they were treated and repairs made, disclose it.  If there is a cemetery under the house, disclose it.  Of course, how unlikely is that?  Just ask anyone who’s ever watched the movie Poltergeist.

So the question about a house being used as a meth lab inevitably came up.  Do we disclose if a home for sale had been used for the production of meth?  According to Cookeville, Tennessee’s Herald-Citizen, yes it should be disclosed if the agent is aware of it.

… real estate agents can only disclose that information if they are aware of the problem. It is the property owner’s responsibility to make agents aware of all property defects including the house having been used in the manufacturing of meth. Putnam County Sheriff David K. Andrews said anytime a property is quarantined due to a meth lab the law enforcement agency quarantining that property will file paperwork with the register of deeds stating that the property has been quarantined.

When in doubt, disclose.  Disclose disclose disclose.

Photo by Maveric 2003 via Flickr Creative Commons.

Any contract written after July 30, 2009 will have a whole new set of rules to follow - primarily the Mortgage Disclosure Improvement Act which included amendments to the Truth-in-Lending Act.  The new rule amends disclosure requirements, sets waiting periods, and institutes fee disclosure requirements.  All are important measures to protect the consumer.

Here’s a link to the detailed information about Regulation Z.

First, lenders must now disclose if there is a rate change - or extension of credit.  If the annual percentage rate (APR) changes by more than 1/8 of a percent, a new good faith estimate must be SENT no later than three business days prior to the closing.   These same disclosures must now say, “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”

The waiting period is the funkiest part of the new regs, though.  A creditor may not close a home loan until SEVEN business days following the MAILING or delivery of the initial disclosures.  Saturdays count as business days, but Sundays and holidays do not.  If there are any changes, yet another seven-day waiting period is required.

What does this mean for buyers, sellers, and their agents?  Count on a longer period of time to close a house.  Where we might’ve before been able to close in 30 days, it MIGHT now take 45 days.  In any case, for a home loan there is a minimum 7-day wait until closing.  Of course, a CASH deal is always an option.