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 days of paying administrative fees to real estate companies may be skidding to an end after a federal court ruled against them, according to the Boston Herald.

The decision targets one of the most commonplace practices adopted by brokerage firms in recent years: charging consumers “admin,” “processing,” “ABC” and other mystery fees ranging from $150 to as much as $500 per transaction.

My firm has never charged this administrative fee and it frosts my backside when my buyers or sellers are asked to pay them for other companies.   I have felt that sometimes they can be justified… when a buyer has you drive them around forever and then doesn’t buy, an administrative fee can offset the cost of gas you’ve spent.

The first time I saw one, I was caught off-guard when a buyer’s agent had sneaked it into a contract with the rest of the closing costs.  I was appalled and embarrassed at closing when it showed up on the settlement statement.  After that, I was always on guard against that company and against those fees.  When I see “administrative fee” anywhere in a contract, my buyers and sellers specifically state that we/they will NOT pay this junk fee.  I’m not alone in my thoughts, either.  Zac Bissonnette at WalletPop says,

The point is that the fees are garbage — absolute unfiltered, unmitigated, bullcrap. What exactly is the fee for? Inman says they are sometimes referred to as “administrative fees,” “technology fees,” “transaction fees,” “flat fees,” and administrative brokerage commission (ABC) fees.”

The real estate brokers and agents involved in a transaction already collect a hefty commission for bringing together buyers and sellers. Inman reports that “Some who defend the fees say real estate brokerages need to recoup rising overhead expenses and investments in technology.”

Amen to that.  My vote is to get rid of them, too. We are already paid well when we do a good job.  Why bite the hand that feeds you?

Photo by Three Pounds of Real Estate.

It seems like the purchase and sales contract sanctioned by our state’s real estate commission changes every year.  The 2009 contract has one change that agents should pay extra attention to.

In most contracts, buyers have three options to get out of the contract:

1. Financial Contingency - If buyer is unable to get financing to purchase the house (no loan because of credit, debt to income, or other issues), clearly the contract is voided because it’s not enforceable without the funds to buy.
2. Appraisal Contingency - If the home is worth less than the contract price, the lender is highly unlikely to provide funding for a home in excess of the actual value.
3. Inspection Contingency - The buyer will want to have the home professional inspected to insure against a major malfunction or problem.

It’s in this inspection contingency  that a major change has been made to our state contracts.  Previously a line was provided for the buyer and seller to negotiate how much money could be spent on potential repairs should problems be identified.  The amount line is now absent which means that unless the seller’s agent thinks to add a limit, the buyer could ask for *all* repairs no matter the cost.

Having an amount is also a tool for an agent to review what repairs a seller could be expected to make, while also confirming that cosmetic concerns are not considered a part of the repair costs.  However when no amount is specified, it does open up the negotiation process for both the buyer and seller.  In this case, it’s urgently important for agents to have experience in making the contract work for whichever client they represent.

Photo by Jeff Crist via Flickr Creative Commons.