When we were selling REOs, the bank clerks objected to reports that their properties had mold in them. Why? Because we weren’t mold experts, so how did we know for sure? Out of that, a new description was created, ‘biological discoloration’, which we shortened to BioDisco.
We still run into the discoloration, and it’s usually a hot topic for buyers – and a big ticket for the mold-remediation companies. But how bad is it? From the U-T:
One must know what kind of mold it is. Mold consultants and injury attorneys often describe some molds as worse than others. Their star is Stachybotrys chartarum, a black mold reported to produce infinitesimal quantities of a toxin. It sounds frightening, but the scientific community long ago debunked the myth that this or any mold was poisonous to breathe. For example, read the National Institute of Health Fact Sheet on Mold, found at www.niehs.nih.gov, or visit the Center for Disease Control site at cdc.gov/mold/faqs.htm. Nevertheless, the mold industry continues to call mold “toxic.”
Always start with a mold test. The Environmental Protection Agency recommends against mold testing. As confirmed by the DPH, there is no standard as to how much of a given airborne mold is “unhealthy.” Furthermore, indoor air sampling tests are extremely vulnerable to recent events in the home. For example, a recent shower, window opening, or carpet cleaning can completely change the test results. So, mold tests mainly unnecessarily frighten the home’s occupants with disembodied meaningless spore counts. There is rarely a legitimate reason to spend money on a mold test.
I spoke to a seller of a home in Texas that isn’t moving, and offered these tips:
My Pricing Rules-of-Thumb
1. Pricing Gauge for Anywhere, Any Time, Any Market:
If you are getting offers, then your list price is about right.
If you are getting lookers but no offers, your list price is about 5% to 10% too high.
If you don’t have any buyers looking at the home, it’s more than 10% wrong on price.
2. Buyers are watching the days-on-market statistic, which is out in the open, and they are seeing other listings pop into escrow quickly (the median days-on-market today for those NSDCC homes in escrow under $2M is 16 days). Buyers are subtracting about 1% from your original list price for every week the house is on the market. You can ‘refresh’ your listing every month, but you’re not fooling the serious buyers.
3. As a result, sellers should lower their price by 5% every 2-4 weeks until they start getting offers. Mondays and Thursdays are the best days to lower your price.
4. An exciting price creates urgency and enthusiasm among both buyers and agents. Without it, your listing goes stale quickly, usually after two weeks – and then lookers dwindle down to just those occasional stops by agents to help them sell the better-priced house down the street.
5. Buyers are using their online tools to make decisions, which aren’t the same as visiting a home in person – but they only want to venture out if it’s an obvious contender. Can you blame them? As a result, the online video presentation needs to be spectacular.
6. Rotate the photo gallery and change up the description regularly to highlight different features.
7. Make the home easier to show. It’s best if you move out in advance, and use staging.
8. Tune up the home before listing, and keep improving while on the market if necessary – and get new pro photos of the changes.
9. Donna’s hot tip – clean sells! Wash the windows, and replace the flooring.
10. If you don’t want to do the extras, then your price needs to be adjusted to reflect – and it needs to be low enough to solve all the problems.
11. Get Good Help. Your agent’s ability to operate successfully during the coronavirus can be determined by their sales on Zillow. Those who have closed sales with buyers and sellers over the last three months have what it takes to get you through!
We’ve touched on two differences that the coronavirus is causing in residential real estate sales; the cumbersome arrangements now required just to see a house for sale, and how wearing masks will help buyers hide their interest in a home.
What else is changing?
The real estate flyers are gone now, and public open houses are heading for extinction too – and the 3D tours are being heralded as a worthy substitute. It’s too bad too, because the industry never fully grasped the biggest benefit of open houses – helping to create urgency in the buyers, especially when the home is fresh on the market.
The 3D tours are very crafty, and buyers should love them for offering maximum convenience within minutes – or seconds. Sellers don’t have to leave their house every Sunday afternoon, and agents won’t have to work weekends any more.
What’s wrong with that?
Have you ever seen a perfect house? Me neither.
The 3D tour allows the viewer to scroll around the home at their own pace, which is a plus. But it’s too easy for viewers to give up when they see something unusual or have trouble navigating.
You gotta give the house a chance.
Rather than relying on a thorough walk-around with an agent who is explaining every nuance, the home-buying decisions will be based on fancy imagery on a computer screen.
Won’t the interested parties pursue an in-home visit? Yes, and they are the most likely real buyers.
But it’s the internet viewers who click out too quickly who will miss out – and fewer buyers relying on less information isn’t a positive for home sales. Instead, the sales process gets dumbed down further, and those who support the 3D tours as an adequate substitute for agent advice are contributing to the downfall.
It’s all going that way anyway, but at least you can say you saw it coming!
Generally, the cost of homeownership is under-stated. Let’s figure this to be around 0.175% of purchase price:
For many Americans, their expected mortgage payment may not be all that different from their current monthly rent. But even if you have a down payment saved up, you still may fall short when it comes to paying for all the monthly expenses of owning a home.
When you buy a home, you have to pay property taxes, insurance and maintenance costs on top of your mortgage payment, Suzy Orman says. Plus, if you put less than 20% of the home’s purchase price as the down payment, you’ll also have to pay private mortgage insurance, or PMI, to offset the risk your lender is taking in approving you for a home loan.
Those costs add up. Orman estimates that these extra, but necessary expenses, will cost you an additional 45% over your mortgage, just to keep your home.
In order to figure out if you can afford to buy, Orman says first-time homebuyers should test their finances. “I want you to play house,” says Orman.
Let’s assume you pay $1,000 in rent and estimate that your mortgage will cost about the same.
Over the next six to eight months, take $450 a month and put it in a savings account on the first of every month. That’s in addition to the eight-month emergency fund and the 20% down payment that Orman recommends having in place before you even start to look at local real estate ads.
“If in six to eight months from now, you are able to do it on time every single month, you can afford that home,” Orman says. Plus, after eight months, you’ll have almost $4,000 to put toward your closing costs.
Everything seems like “If” these days, but if we had a market comeback, the dates of a modified and compressed selling season would be fairly predictable, looking at it logically.
The actual results will be a matter of compression and intensity.
If there isn’t much of a market rebound, then we might only have a couple of hot weeks in July, and a lot of standing around, relatively. If things get cooking, then we could have a solid 4-6 weeks before school starts (in red above) when the most sales will be made.
The dates in green is when buyers will be looking hard – and might be when the best deals are made.
Two to four weeks in October will be a lost cause, due to the election. In December, buyers and sellers will both pack it in early for the holidays, and prepare to GET ‘ER DONE IN ’21!
Next year’s selling season is 11-12 months away – we gotta be ok by then, right?
There is no reason to transfer your house to your kids – use a family trust instead. If you need dough, then get a reverse mortgage. Hat tip to just some guy!
Adding an adult child to your house deed, or giving them the home outright, might seem like a smart thing to do. It usually isn’t.
Transferring your house to your kids while you’re alive may avoid probate, the court process that otherwise follows death. But gifting a home also can result in a big, unnecessary tax bill and put your house at risk if your kids get sued or file for bankruptcy. You also could be making a big mistake if you hope it will help keep the house from being consumed by nursing home bills.
There are better ways to transfer a house to your kids, as well as a little-known potential fix that may help even if the giver has since died.
WHY YOU SHOULDN’T GIFT A HOUSE
If you bequeath a house to your kids — which means they get it after your death — they also get what’s known as a “step-up in tax basis.” All the appreciation that happened while you owned the house is never taxed.
Certified financial planner Kenneth Robinson of Rocky River, Ohio, says last year he advised a client not to let his mom give him her house. The mother paid $16,000 for her home in 1976, while the current market value is close to $200,000. None of that gain would be taxable if the son inherited the house, Robinson told his client.
The mother signed a quit claim to give her son the house anyway and died shortly afterward. That potentially meant a tax bill of about $32,000 for Robinson’s client.
Families who realize the mistake in time can undo the damage by gifting the house back to the parent, says Jennifer Sawday, a partner at TLD Law in Long Beach, California.
“We do last-minute deeds to get that house back in place when we know someone is dying,” Sawday says.
OTHER REASONS NOT TO GIFT A HOUSE
Sometimes people transfer a home to try to qualify for Medicaid, the government program that pays health care and nursing home bills for the indigent. But gifts or transfers made within five years of applying for Medicaid can lead to a penalty period, when seniors are disqualified from receiving benefits.
Transferring your home to someone else also can expose you to their financial problems. Their creditors could file liens on your home and, depending on state law, get some or most of its value. In a divorce, the house could become an asset that must be divided.
A POTENTIAL ‘HAIL MARY’ FIX
Robinson consulted a certified public accountant and an estate planning attorney. Both said what Robinson feared was true: The client was stuck paying taxes on the $184,000 gain in value since his mother bought the property.
“They were as discouraged as I was,” Robinson says.
But then Robinson hired a tax research firm and learned of a workaround. Section 2036 of the Internal Revenue Code says that if the mother retained a “life interest” in the property, which includes the right to continue living there, the home would remain in her estate rather than be considered a completed gift.
“Many people do not know about this and are therefore losing out on the step-up and the lower taxes they would be entitled to,” says Michael Eisenberg, CPA financial planner with the American Institute of CPAs’ Financial Literacy Commission.
There are specific rules for what constitutes a life interest, including the power to determine what happens to the property and liability for its bills. To ensure that outcome, the son, as executor of his mother’s estate, filed a gift tax return on her behalf to show that he was given a “remainder interest,” or the right to inherit when his mother’s life interest expired at her death, Robinson says.
THERE ARE BETTER WAYS TO TRANSFER A HOUSE
There are other ways around probate. Many states and the District of Columbia allow “transfer on death” deeds that allow people to leave their beneficiaries their houses without having to go through probate. Another option is a living trust, which typically costs $1,500 to $3,000 to set up but can ensure all a person’s assets avoid probate.
And probate in many states is nothing to fear. Most states have simplified probate procedures for smaller estates. Only in a few, such as California and Florida, is probate so expensive and time-consuming that most people should try to avoid it.
“We see avoidance of probate as a big issue in people’s minds, sometimes bigger than it has to be,” Robinson says.
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