Wednesday, August 31, 2016

Q: Each time my wife and I come in to talk to you about real estate, you keep telling us to get preapproved for a loan.

You seem reluctant to keep showing us any more houses until we tell you that we’ve filled out all that paperwork with our loan officer.  It feels like you’re being pushy.  We can get all of that done once we find a house. No sense spending the time and money (credit reports cost money) until we find something we want.

A:  Even in a slower market, which this is not, you would be well advised to get your preapproval completed.  In a fast market like this, you may not have a day to spare in making an offer; much less the several days or weeks it takes to get fully approved for a loan.  You are also working in the dark when it comes to price range. I know you feel comfortable with a particular mortgage payment, but you don’t know how much you actually qualify for until the lender does all of their research. 

In slower times we could get by with a quick prequalification letter from a lender.  It basically says, “If everything you tell us is true and checks out, you are qualified to buy a home up to this price.”  That won’t cut it in a competitive market.  Sellers and their brokers want full preapproval.  They want to know that if they chose your offer over others, you will be able to close on the sale.

I often have clients who choose not to spend their last dime on a house.  I applaud that thinking.  They may be qualified to buy a home for $600,000 but don’t want to be burdened with a large mortgage payment, so they decide to only spend $475,000 on a home.  But they can’t make that decision until they know what they are qualified for.

Once we find a home that works for you I want you to be able to actually buy it.  Without the preapproval in your hands, that becomes difficult to impossible. 

Tuesday, August 30, 2016

Q: We’ve been in our home here on Vashon for a little over six months.

We love it here but we are having a real problem with a neighbor.  He says he has some kind of easement on our property and can build a roadway across the back of our acreage.  We never heard anything about this when we bought the property.  Can he really do this?

A:  The answer will have to come from your title company.  If your neighbor has a legal easement then you’re stuck.  You should have read the title report before buying to be sure you understood any restrictions on the property.  If you didn’t understand something, your title officer would have been happy to explain it to you.

Generally real estate professionals are not supposed to interpret title reports or advise their clients about issues on title.  I have taken many classes on title and speak to title officers often so that I can try to warn clients if there is anything on title that could cause problems for them down the road.  I may be stepping out of my role as a Realtor, but I feel it’s too important to ignore.

Your Realtor may be a careful broker who also studies title and tries to have a full understanding of any restrictions or potential problems on any property he sells, but he’s not obligated to.  I try to always include a title addendum with my offers to be sure that my buyers have time to review the title documents and get their questions answered.  The seller is obligated to disclose any defect or restriction on the property, so you may have some recourse against the seller if this will cause some real hardship. 

It’s important to read everything having to do with the purchase of land or a house carefully.  There really is no such thing as “boiler plate” language.  Forms and agreements are changed all of the time so it’s vital to read and understand everything before you sign something. Don’t be afraid to ask questions.  After all, it’s your money.

Tuesday, August 16, 2016

Q: I was so surprised to see the maps you gave my daughter when you showed her that waterfront cottage.

I’ve never seen these before.   One was marked flood map and one was marked landslide hazard areas. Where did you get those?  It looks like the flood area goes completely over the house!  She didn’t like the place anyway, but the maps really shocked us.

A:  Those are some of the newest maps available to the public via King County IMap.  Go to King County on your browser and put in IMAP and you can navigate through many maps and property information.  I give folks these maps so that they are aware of issues with the property, but also so that they realize they may have to get FEMA flood insurance.  That’s very costly and pays only up to $250,000 if the house burns down or is severely damaged.

Just because the map shows the flood line above the house doesn’t mean there has been a flood there.  It’s just an indicator of potential.  Many of the low lying cottages and cabins in the Puget Sound region have experienced flooding, but not all.  I think buyers should be fully aware of what they are getting into.  They still may want to buy but it’s with full knowledge of the risks.

Another issue with these homes is that they are all in what the County calls Critical Areas that could not be built on today.  That may mean that if the house is destroyed or damaged, the County will not let you rebuild.  Again, this doesn’t apply to every cabin but could apply to many so it’s important to check that out.

Our funky old cottages and cabins close to the water have become very expensive in the last few years.  Of course some of these places have been standing for over 100 years without major incident but people should be aware of all of the risks.  The King County site has a great deal of information available for the public.  You should carefully check out any property before you buy. 

Tuesday, August 09, 2016

Q: Our son is thinking about buying a business and we want to help out with that.

We don’t know where to start.  What information should we ask a seller?

A:  There are three things that you should look at when considering buying a business.  The first is a list of the fixtures and inventory.  The sellers should provide you with a list of equipment and fixtures that they own and will pass on to the new owner.  That would include things such as shelving, desks, computers, etc. For a food business you would expect that list to include the serving items, dishware, stoves, cooking containers, etc. For retail you’d expect to see a current list of the inventory.  That would be the items for sale.  If you’re lucky that list should include wholesale cost and retail mark up. 
The second thing you should ask for is the lease.  The lease is critical.  It should state the rent, how many years are left on the lease, a provision that the business owner can extend or renew the lease and a schedule of rent increases anticipated.  Without this you could spend a lot of money to buy a business and end up losing the space or spending more on rent than you budgeted.

The third item to look for is the most important.  The real estate industry calls it “the goodwill of the business.”  It means the money.  You should be provided with three or more years of tax returns or a summary from whomever is doing the taxes for the business.  It should be very detailed so that you know all of the costs involved and can easily see what net income the business produces.  You might have ideas that will increase business, but for a start you need to know that you can pay all of your expenses and still have a little for yourself.
I’ve bought and sold businesses of my own and sold a few businesses as a real estate broker.  You need to look very carefully before you jump.  Good luck to you and your son.