The Real Estate Process, Home Buying and Selling Tips

Lake Norman Real Estate: What is the new “Due Dilligence” clause mean?

Lake Norman real estate kitten

So here I am about to write about an extremely significant change to our North Carolina real estate contract wondering how in the world I would get you all to read about  this important, albeit boring, subject.  Enter the photo of a cute little kitten.  Did she catch your attention?  Mission accomplished!  Here we go:

Major revisions to the standard Offer to Purchase and Contract form designated for use in residential real estate contracts by the North Carolina Association of Realtors and the North Carolina Bar association became effective January 1, 2011.  So, if you are buying or selling Lake Norman real estate, here are the key elements:

  • Removal of the entire section and deadlines related to physical inspections and repairs
  • Removal of  the separate deadline and conditions for the buyer’s loan, survey, insurance appraisals etc.
  • New Due Diligence Period and Due Diligence Fee/Buyers right to terminate for ANY reason
  • Distinction made between the “Settlement Date and the Closing Date

Per the new contract:  “Buyer shall have the right to terminate this Contract for any reason or no reason, by delivering to Seller written notice of termination during the Due Diligence Period (or any agreed-upon written extension of the Due Diligence Period), TIME BEING OF THE ESSENCE.  If buyer timely delivers the Termination Notice, this Contract shall be terminated and the Earnest Money Deposit shall be refunded to Buyer.

The bottom line is that the buyer no longer has separate deadlines for their inspections and loan approval AND the seller is no longer obligated to make any repairs.  In an effort to lessen or remove the contentious repair negotiations, the buyer now has one “Due Diligence” deadline, time being of the essence, in which to make all property investigations,surveys, insurance AND obtain their financing.  The appraisal should also be included during the Due Diligence period.  (The contract goes in to more detail as to what the buyer could and should investigate and accomplish during this period.)  Any time during or by the deadline date of this period, the buyer can either terminate the contract or go forward.  After the Due Diligence date, if the buyer defaults (can’t get their loan etc.) in most cases the seller now has the right to retain the Earnest Money Deposit.

The length of the Due Diligence period is completely negotiable between buyer and seller.  In most cases, the current market climate will help dictate how long this period will be. During today’s buyer’s market, the Due Diligence period seems to average about 30 days.  When I was selling real estate in California in the hot seller’s market of the early 2000’s (we had a similar contract clause then) the inspection/loan deadlines were extremely short or removed entirely.

The greatest challenge with this new Due Diligence Period is to make it long enough to allow the buyer to get formal loan approval yet not so long that the seller won’t agree to the date because they will be too vulnerable for too long.  It is hard for a seller to know that the buyer can walk at any time for any reason.  It is also hard for the buyer to set a shorter deadline knowing that their loan may fall through at the last moment and they will then loose their earnest money deposit.

The authors of this new contract feel that this balances the risks equally between buyer and seller.  While I don’t have a problem with the concept since this is how our California contracts worked, I don’t like the fact that they combined the inspections and the loan into one deadline unlike in California where we had one deadline for the inspections and one for the loans.  That enabled us to make much shorter deadlines for the inspection period and longer for the loans.  Here, we really need 30 days for most loans yet really only need a week or so for inspections but will now have one deadline for both.

It is very important to undertand that this is a Time is of the Essence deadline so there is no wiggle room  After the end of the Due Dilgence Period, the buyer should  expect to loose  their earnest money if they default on the contract and fail to close.  If the seller defaults, the buyer does get their earnest money back.

There are many additional revisions to the Offer to Purchase and Contract but these are the most significant. Please feel free to email me with questions.

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The Real Estate Process, Home Buying and Selling Tips

Lake Norman Real Estate: A Real Life Glimpse into Some Lake Norman Foreclosure Transactions

 

  There are myriad sites online dedicated to detailed explanations about foreclosures. This is not going to be another “how to” guide.  Instead, I am going to try to provide you with some insight and examples of  real hurdles encountered during my recent experiences representing Lake Norman buyers through the process of purchasing foreclosures or bank-owned properties (REOs).  In my next post I will do the same for shortsales. If you take only one thing away from reading this post, it should be that no two sales transactions are alike.  Be prepared for the unexpected.  That said, 

REOs (Real Estate Owned) or Bank Owned properties are MUCH easier to purchase than ShortSales 

When a bank owns a property, you can usually count on the fact that as a seller they are going to care about one thing and one thing only:  their bottom line.  They have been through the long foreclosure process, they own this property along with many others and they want it off of their books.  It’s about as unemotional a transaction from their perspective as is possible.

Most of the time the listing agents of REO properties do nothing but REOs.  They have been hired by a bank because they are good at processing paperwork and working with the bank’s systems and staff.  They want a quick, easy sale.  It is all about numbers to them as well.  This is a business transaction, it is not about relationships or empathy.  In the case of several of my buyer’s REO purchases the listing agents had never even seen the property and their offices were located far from the listing.  In most cases I have found that these agents really don’t want to be contacted unless it is really important.  They want the buyer to fill out the paperwork to the satisfaction of their sellers including each banks’ own addenda protecting them from just about everything.  They don’t want to hear about repairs or problems related to the inspections or even having utilities turned on or the property de-winterized for inspections. (But they will when prodded).  Take it or leave it and the sooner the better. The only thing they worry about, and rightfully so these days, is the buyer’s loan. Always be pre-approved and have your loan pretty much in place before writing an offer.

REO’s come in many different states of condition.  In some cases, especially if they are new construction, they will be in excellent condition.  There are some beautiful new construction foreclosures that I have shown in communities like The Point, The Farms, Bay Crossing and Northington Woods.  Our Lake Norman home builders have been hit particularly hard these past two years; many have gone under leaving an inventory of spec homes some of which are still active listings.

However, many homes, especially those that were lived in and abandoned by the homeowners, can be in various states of disrepair.  I have seen houses that have been stripped of everything including cabinets, toilets, appliances and light fixtures. Some have been trashed by their angry owners before leaving.  I’ve seen holes in walls, shattered doors and the like.  Others are truly “fixers” in every sense of the word.  Some new construction homes, especially close to the lake, were abandoned by the builders before completion so the buyer will have to finish the work and get the permits signed off before moving in. It is especially important to look for signs of moisture problems. (From broken pipes to drainage issues.  When homes sit vacant many things can happen and go unaddressed.) It is important to be diligent about inspections of bank-owned properties!

One of the homes I sold several months ago had had mold as a result of some moisture issues which had been such a detriment that the bank actually had the mold remediated.  My buyer was willing to take on the moisture issues (after numerous inspections and estimates by mold and moisture experts) and the other repairs related in most part to the house having been vacant for 2 years.  The result?  My buyers purchased a 7000 sq. ft. $1 Million+ waterfront home with a dock in the$600,000’s.

Banks do negotiate.  They get really tired of low-ball offers by investors.  In my experiences, the banks came down in price more than the listing agents expected.  (About 8% in one case).  Banks tend to use pricing systems that dictate price reductions on a schedule.  But, they also want these properties off of their books.  I had one offer accepted on a Friday afternoon after the listing agent had told me there was no way it would be accepted.  Perhaps on that Friday afternoon the bank looked at their numbers and decided they needed to get more properties off of their books.  Don’t give up!

Know the recent comparable sales and determine ahead of time what price you are willing to pay based upon those comps and the amount of out-of pocket expenses for repairs.  As long as your inspections and loan goes smoothly, you should be able to close the sale within a short period of time with little drama.  (Of course, your own loan and the inspections could add a bit of hard work).

If you are willing to take on a house that has issues and no disclosures or warranties then an REO may be for you.  Inspect the property thoroughly with experts in their fields so you know what you are buying.

Stay tuned for Part 2 of this series which will share some of my experiences with short sales.

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The Real Estate Process, Home Buying and Selling Tips

Lake Norman Real Estate: What Home Buyers Should Know Right Now!

Lake Norman future home buyers

Every time I go out with my buyers in our Lake Norman area I gain some knowledge about the dynamics of our market that can’t be acquired merely by looking at our Lake Norman housing statistics and reading the myriad real estate articles in the news.  Now more than ever real estate is very very local.  My insights about the Lake Norman real estate market may not even apply to Charlotte!

If you are serious about buying a home in Lake Norman this spring here are my recommendations:

Get pre-approved for a loan AND then keep in touch with your lender on a weekly basis.  Right now the lending market is so erratic that you can not count on last month’s pre-approval.  I had buyers completely pre-approved but when they finally were ready to write up their offer the lender told them they could no longer get a loan, period.  The rules changed, not their excellent credit or down payment.

Know your priorities and goals and stick to them.  There are so many homes for sale in the Lake Norman area that buyers have almost too many to choose from.  It is easy to get side tracked which leads to more confusion and frustration.  Stay focused!

Look at homes that are priced 10% or more above your intended purchase price.  I can’t tell you how many sellers, including my own, are afraid to lower their prices but keep asking why they haven’t gotten any offers and insisting that if they had an offer they would work with the buyers.  They might ultimately reduce their price lower than you might expect.  You may miss your perfect home that is simply overpriced if you don’t stretch your price-range.

Don’t be afraid to make a low offer!  This goes along with the idea of looking at higher-priced homes.  As a buyer you probably know the market better than the sellers since you are out there looking at active listings.  While there are times the seller will simply not respond, if they have a good agent they will counter with something just to keep the dialog going.

Before making your final decision/offer, ask your agent to provide you with:

  • An MLS archive search of your favorite homes:  This will tell you exactly how long the property has actually been on the market as well as how many times it has been reduced and/or expired and re-listed.  The most recent MLS data might say 100 days on the market when in fact it has listed for well over a year.
  • Tax records:  When did the sellers purchase their home and for how much.  Right now in many Lake Norman neighborhoods prices are back down to 2004/2005 prices so if the home was purchased more recently chances are the sellers are going to have to take a loss.
  • A comparative market analysis:  Learn everything you can about the recent sales and current active listings that an appraiser will use to help you decide your purchase price.  If there are one or two low sales or active listings these will greatly impact the value of the other homes in the neighborhood.  Lenders are so conservative right now that they are even doing second appraisals just before closing.  Our prices are trending downward.  Lenders are very difficult to work with under the best of circumstances but if your purchase price is a bit high it is most likely that you won’t be able to get the loan.

Finally, keep up with the financial news.  The newly passed Stimulis Bill includes an $8,000 tax credit (that does NOT have to be repaid) for first-time home buyers.  There are discussions about further efforts to bring mortgage interest rates down and other tools to revive our lagging national housing market.

Be smart and you will be successful!

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lake norman real estate, The Real Estate Process, Home Buying and Selling Tips

Lake Norman Real Estate: What are “Seasonal Views”?

One of the first things you will discover as you begin your search for a home on or near Lake Norman is that there are myriad variations of “waterfront” and “waterview” homes.

Our Charlotte Regional Multiple Listing Service provides Lake Norman real estate professionals and home buyers and sellers with specific search catagories entitled “waterfront” and “waterview” but it is truly up to the listing agents to properly describe the type of waterfront (wide, main channel or cove) and the type of waterviews the property actually has.

The most common term you will find when looking for Lake Norman waterveiw homes is “seasonal”. So, what are seasonal waterviews?

Here are pictures of the view from my own waterview home taken in Spring, Summer, Fall and Winter: Continue reading

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The Real Estate Process, Home Buying and Selling Tips

How to sell your Lake Norman home in 18 days!

Real Estate Success

On May 5th, 2008 I listed a lovely two-story Colonial in a waterfront community on Lake Norman NC. The house next door as well as many others in the same subdivision had been on the market for well over a year.

Lake Norman home sold in 18 Days!

The ultimate buyer of my listing saw it on May 6th (thanks to the photos on the Internet) and intended to write an offer that day but they wanted to write a contingency in for a pool which my clients and I would not accept. On May 23, just a day after getting confirmation from the county that they could build a pool, they presented an offer. On May 25, the final details of the offer were accepted by all. We closed the sale successfully on June 30th.

So how did we do it during such a tough real estate market here in Lake Norman? There was no magic involved but rather a lot of hard work, a savvy seller and just a little bit of luck:

Planning and Preparation is critical!

  • I first met with my sellers in May of 2007 and walked the property giving them feedback on how to prepare for their sale and move.
  • Over the course of the next 11 months my sellers focused on the huge task of downsizing their belongings as well as having their home painted inside and out and other repairs and improvements.
  • About a month before they wanted to actually list the property they interviewed me and several other agents. Once I had the listing we concentrated on the final staging for the property including New granite counter-tops, re-arranging of furniture, adding staging touches to the interior and sprucing up the garden and porches with lots of flowers.
  • At the same time I hired a professional to do a floorplan and hired a photographer to do the photos and virtual tour.
  • I then designed the two-sided full-color flyers for the street (printed on glossy paper), and the Buyers Book which included about 20 pages of photos, the floorplan, survey, disclosures, information about schools and anything else I felt every buyer that came to view the property should have to take home with them.
  • Late in the day on May 5th, I uploaded the listing on to our MLS including multiple photos, virtual tour and interactive floorplan.
  • As soon as I had the MLS number I designed and created their own website: www.137Mussellane.com, and uploaded their Internet flyer to myriad websites including CraigsList, Trulia, Yahoo and Zillow. I also upgraded their Realtor.com listing with multiple photos, virtual tours, and all the bells and whistles included in being a “Showcase House”.
  • On May 6th the sign went up along with the brochure box with our full-color brochures including multiple interior photos. We had our first showings!

On the very first day this listing appeared on the MLS every single detail was complete. The property was staged and ready to show, all of the marketing was in place. When the potential buyers were notified of this new listing through the MLS systems they got to see multiple photos, virtual tours, floorplans not a blank box. When the first buyers arrived to view the home it looked great and they had Buyer’s Books waiting for them.

Approach the sales process with an aggressive attitude (both myself and my wonderful sellers!)

  • We priced the property where the market dictated NOT based upon hopes and what ifs.
  • My sellers did everything they could to prepare their home for sale while never insisting on rushing the process.
  • I staged the property with my own props and flowers.
  • I prepared the marketing blitz for the first day of the listing knowing that the best chance we had at a quick sale was in the first two weeks of the listing.
  • The quality of the marketing was excellent: I hired a team of professionals who provided me great photos, floorplans and virtual tours to work with.
  • My sellers helped me to define the special features of their home that I could focus on in the marketing.

Negotiate with realistic expectations and open-mindedness

  • While the first offer was low and had some unrealistic terms, my seller was committed from the outset to make a sale. (See a great article: Home Sellers Who Understand Market Prosper by Diane Hymer). Their willingness to be realistic and compromise was critical to the process and resulted in a very successful sale.

On June 30th, we successfully closed. It took a total of 52 days from the day it was listed to the day it closed in a market where their price range is very very slow. The house next door has just been re-listed with their 4th Realtor. It has been reduce almost 20% in price and is now vacant.

I just got the greatest gift a Realtor can get; a thank you card from my sellers. It said simply: “You Are Awesome…And by awesome, I mean totally awesome”. How cool was that?

But, you know what, my sellers were awesome too. Without their willingness to work so hard, to be open-minded and to be smart negotiators all of my guidance, preparation and marketing wouldn’t have made any difference. It truly was a team effort!

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The Real Estate Process, Home Buying and Selling Tips

Lake Norman Real Estate: What Does the Closing Attorney Do?

Scales of Law, Closing Attorneys in Lake Norman

When my husband and I bought our Lake Norman home in 2005 we knew nothing about the closing process in North Carolina let alone what the attorney’s role was in the process.

Yesterday I received an email from someone moving here who had read this blog but couldn’t find anything specifically explaining the role of the closing attorney. She too is moving here from CA where we used escrow and title companies for closings so I can understand her confusion.

Here is an outline of the most common closing practices and the role of our closing attorneys here in Lake Norman and throughout North Carolina:

Once the buyer and seller have finalized the Offer to Purchase and Contract, the buyer’s agent, on behalf of the buyer(s),contacts a real estate attorney to schedule and handle the closing. The closing attorney is hired and paid for by the buyer however they do assist in the closing paperwork for the seller as well. “The most common practice is for the closing attorney to represent the purchaser and lender while performing limited functions for the seller (such as the preparation of the deed).”

The Closing Attorney in North Carolina real estate sales acts much as an escrow company does in other states:

  • They receive a copy of the sales contract soon after the day of acceptance usually from the buyer’s real estate agent
  • They do the title search and arrange for title insurance for both the buyer and the buyer’s lender
  • They work with the lender to get the loan documents in time for the closing
  • They will process the Property Insurance Policy, the Wood Destroying Insect Inspection Report and the Property Survey if required
  • They get the information from the seller about the payoff of their loans, their deed and proof of repairs
  • They prepare the new Grant Deed
  • They will notify the buyers the day or so before closing as to the exact amount of money they need to bring to the closing. This now must be wired funds to the attorney
  • They preside over a meeting on the day of closing attended by the buyers, the sellers and their real estate agents.
  • They process the closing documents and file all with the county
  • They handle the disbursement of funds

On the actual day of the closing agreed upon in the sales contract, the buyers, sellers, and their real estate agents meet with the closing attorney at an appointed time together to sign all of the necessary documents:

  • First, the attorney will explain the U.S. Department of Housing and Urban Development (HUD) Settlement Statement which is a statement of the actual settlement costs. All parties, including the real estate agents, go through the HUD Settlement Statement line by line to make sure all of the costs/credits are correct and paid by the appropriate party. It is not uncommon for mistakes to be found. The attorney merely has a corrected Settlement Statement printed for all parties to sign during this meeting.
  • Once the HUD Settlement Statement is approved, all parties sign multiple copies so that everyone has original signatures on their own copy to take with them.
  • At this point usually the sellers are excused
  • The attorney then goes through and explains all of the loan documents to the buyers and has them sign all including the Grant Deed
  • As soon as possible, preferably the same day as the closing meeting, the attorney will “update” their earlier title search, record the deed and the deed of trust and disburse funds as indicated in the closing statement

Attorney’s fees vary but to give you an example, at my last closing of a $410,000 home the costs related directly to the attorney were:

Buyer:

  • Title Search: $100
  • Attorney’s Fees $425
  • Title Insurance: $519
  • Recording of Deed: $112
  • Misc Fees: $130 (couriers, wiring fees)

Seller:

  • Document Preparation Fee: $175
  • Release Fee: $60
  • Courier Fee: $50

“In 2003, the North Carolina State Bar ruled in an ethics opinion that attorneys do not have to be physically present at closing meetings in residential real estate closings. A non-lawyer assistant who is under the direct supervision of an active member of the North Carolina Bar may attend the closing without the attorney being present.”

If you have any further questions regarding attorney closings don’t hesitate to email me or leave a comment!

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The Real Estate Process, Home Buying and Selling Tips

Lake Norman Real Estate: What is a “Perc” test?

Digging a hole to do a Perc Test for Lake Norman homeOne of THE most confusing terms I heard when I first moved to Lake Norman and re-established my real estate business was the term “perc” . I would hear agents ask such questions as: Did the land perc? How many bedrooms did it perc for? When I visited a new housing subdivision in Mooresville the agent on duty told me they were delaying construction because only 20 lots ˜perced.

So what in the world does perc mean? Technically, it is short for the term: Percolation. And, very simply, a perk test measures the ability of the soil to absorb water.

“The percolation tests are designed to simulate conditions in a septic system. The percolation test consists of a hole 6-12 inches in diameter dug in the area of the proposed septic system. The depth of this hole varies depending on the soils encountered but it is generally not greater than 24 inches. The hole is initially filled with water (presoak) in an attempt to saturate the soil, allowed to drain away and than refilled with approximately 12 inches of water. The rate at which the water drops in the hole is measured at intervals over a period of time ranging from 30-60 minutes. The uniform slowest rate of drop of the water level over a measured time interval is converted to minutes per inch and used as a basis of design in determining the septic system size”.

Any unimproved lot will require a perk test to determine if it can qualify for a septic tank and if so, how big a house will the septic system handle. The size of the house is actually the number of bedrooms so, if a lot perks for three bedrooms, the maximum number of bedrooms that a house on that lot can have is three.

When buying raw land that is not in the town limits and thus does not have sewers, it is critical to know whether it will perk as this will determine not just how large a home you can build but IF you can build a home at all. Sometimes in subdivisions you will find oddly shaped lots which many times are bigger than the average. This is probably due to the septic system requirements.

Each county around Lake Norman has their own requirements for septic systems. The process usually goes like this:

  • You/your builder string off where the home and driveway will be placed on the lot itself
  • Apply for a septic permit from the county health department
  • Draw an initial site sketch
  • The county will come out to the site and perform a perk test
  • If the soil does not perk, then you will not get a permit
  • If it does perk, you will be given the limitations by number of bedrooms

Another important step in any plans for expansion of an existing home is to pull the septic permit to find out how many bedrooms it allows. You would not be allowed to add a fifth bedroom to a home that perked for four!

To learn more about this process go to the website: Percolation Test or contact your county health department.

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