Refuge Properties North Idaho

Category: Buying

  • Common Ways to Hold Title

    If you’re purchasing a home in Washington, the Purchase and Sales Agreement has a field defining how you will take title. There are several ways beyond just putting your name(s) down (single man/woman or married couple/community property, the two most common).

    You can also own a home as a married person but as separate property, as a joint tenancy, where each owner owns an equal share. The most common result of this is that the share of the property owned by one of the people (the tenant) will pass to the other(s) upon death instead of to that person’s heir(s).

    Another way is tenancy in common where owners may own unequal shares and their interest passes to their heir(s) upon death instead of to the other owners.

    Finally, you may choose to have the property owned by an LLC or other corporation or a trust. This has the benefit of keeping your ownership private from public record. (People could probably track you down with enough work, but your name won’t be listed in the county title records so it will be much more difficult.) If in a trust, it also makes transfer of the property to your heirs upon your death much simpler, avoiding probate.

    In Idaho, these forms of ownership are not listed on the Purchase and Sales Agreement but they can still be done with a simple addendum which is sent to the title company that eventually records your purchase with the county. Just make sure to make this decision as early in the process as possible as it becomes extra work once the transaction is underway. If you wait until after the transaction is closed, it will require even more paperwork. In the case of wanting your ownership to remain private in county records, if you wait until after it closes, while the new ownership form and name will eventually be recorded, your name will forever be associated with that property.

    Here’s a more detailed description from our friends at First American Title.

    Common Ways to Hold Title – WADownload

  • The Life of an Escrow

    What is escrow and how does it work? When you’re buying a property, you’re exchanging a considerable amount of money for it and the eventual transfer has to go through multiple steps not only to ensure both parties are dealing fairly (remember the old joke about selling the Brooklyn Bridge?) but that all the proper documentation is accounted for and eventually recorded with the county.

    What I’ve found in all the transactions I’ve been a part of is that people aren’t dishonest so much as they are operating off different presumptions about what the other party wants. As a very simple example, take the final state of the home when it’s turned over. It’s very unlikely that the seller will refuse to turn over the house or, worse yet, sign the closing documents and then refuse to leave becoming a squatter (although this does happen), but they may leave a bunch of junk behind or they may have damaged a wall while moving out. This is why it’s important to have a re-inspection or final walk through just before closing. If there’s significant junk lying around or damage, this is where escrow becomes very important. They will hold back the money until the situation is remedied. Furthermore, when a lender is involved, they will be sending their portion of the funds directly to escrow. Finally, when everything has been completed, the escrow or title officer will have the sale recorded with the county recorder’s office. On the seller side, the escrow officer will also be the one to pay off your loan if there is one.

    Here’s a handy breakdown of who does what and when from our friends at First American Title.

    The Life of an Escrow – Detailed (1)Download

  • Rental Investment Properties

    Thinking of buying a rental property? There are few investment that provide a better rate of return and security than rental property. Of course, you’ll have to have enough cash up front, typically 25% plus whatever closing costs and initial upgrades or maintenance you’ll need to perform before renting the property, but if you can swing that (it may even make sense to pull money from another property in the form of HELOC for part of that down payment), you’ll enjoy a steady monthly income and long term appreciation of the asset over time.

    There are some downsides you should be aware of. If something breaks in your rental property, you’ll need to have the cash or credit to fix it ASAP. If one of your tenants fails to pay rent or trashes the place, recovering that money or evicting the tenant can be difficult. Having owned rental properties myself, though, I can tell you it’s worth the minor headaches.

    When looking for a property, it’s best to look at it as objectively as possible. This is not the time to fall in love with a certain aspect of the home. You’re not going to live there. Sure, something about it might be of added benefit in attracting renters, but at the end of the day, a fairly quick market analysis will be able to tell you what it’s going to rent for. Then all you need to do is run the numbers and see if it pencils. Generally, if you’re at least going to break even every month with rents covering your mortgage and expenses, it’s worth it since you’re building equity both by having your renters pay down the mortgage principle and, over time, the property value is likely to increase so you can sell it for a profit when the time comes.

    Here’s a simple rental investment calculator I put together to help you make the decision.

  • The Buyer Love Letter: To Be or Not to Be

    February 6, 2021

    Romeo, Romeo, wherefore art thou my next home? Poor Romeo and Juliet never got the opportunity to buy their first home together but, chances are, if they had, and if their parents hadn’t disowned both of them, they probably would have been able to make an all-cash offer on a nice little villa overlooking the Adige River, such was the wealth they both came from. I’m guessing competition was also not as stiff back then as it is today.

    Buyers today, though, face tough competition for a house, especially here in North Idaho. Multiple offers, often in the double digits; starting bids well above asking; and all-cash offers are typical. So, what are buyers to do to separate themselves from the competition? Usually, it does come down to who can pay the most with quick and easy closing terms also being strong predictors, but sometimes it pays to offer something that numbers can’t buy and that’s where buyer love letters come in.

    They’ve been around a long time but in a hot market like the one we’ve been experiencing for a few years now; they are more popular than ever. They’ve even started being included with offers for commercial properties.

    The fact is, for most people who’ve lived in a house for more than a year or two, that house becomes a part of the family. They formed countless memories under that roof, celebrating birthdays and holidays and witnessing many “firsts”. Their house isn’t just a house, it’s a home, and they do care, even if it’s just a bit, about who is going to live there after they do. Are the new owners going to rip it down or remodel it? Are they going to care for the garden the seller planted? Are the buyers even going to live there? (During the heady days of foreign real estate investment, some buyers even bought houses as cash-shelters, sealed them up, and let them sit, no one to “love” them.)

    Some agents may disagree and plenty of lawyers, afraid of Fair Housing lawsuits, advise buyers and sellers to stay as far away from buyer love letters as possible. They advise sellers not to look at them if received and to only make a decision based on objective criteria. But lawyers are paid to consider worst case scenarios and mitigate certain risks down to as close to zero as possible. (To be sure, real estate is just a very small subset of the law so, as an agent, my job is to do the same to a large extent; it’s why there are so many pages of paperwork to fill out when buying or selling a home.)

    The fact is, though, life is full of risks that have to be balanced and the same is true with buyer love letters. I know of a number of instances where sellers didn’t accept the “highest and best” offer. Perhaps they didn’t want an investor coming in and ripping down the home that their grandfather had built with his own two hands. Perhaps they wanted to know that those prize roses they’d spent so much time tending would receive the same attention. Perhaps the buyer love letter expressed an excitement to be part of the neighborhood, to attend the summer block parties, and exchange more than a curt nod to those living next door. If those sentiments weren’t portrayed in a letter, the sellers may have chosen to go with someone else and that’s the risk to not including one.

    What’s the downside? For the buyer, none really. I suppose there might be sellers and agents so afraid of violating some Fair Housing Law that they decide not to accept any offers that come with a letter, but even if that fear might be real for some, they are likely to just not read the letter and continue on choosing based on objective criteria.

    For sellers, the risk might be slightly greater but it’s still so minimal that it shouldn’t be of great concern as long as the seller is not discriminating based on any Fair Housing criteria. But here’s how it might play out, just for the sake of argument. A seller receives a letter that talks about how much the buyer’s kids will enjoy playing in the backyard and how the vaulted ceiling in the living room is perfect for the family Christmas tree. These two things, which reveal family status and religion (although plenty of non-Christians put up Christmas trees so I’m not sure that’s even accurate) of the buyer, could be possible grounds for a Fair Housing suit, but again, what are the realistic chances of a potential buyer who lost out suing on the off-chance that they think they lost out because they fell into a certain category? Offers are private. Letters don’t get posted on some website for the world to see and listing agents aren’t allowed to show them to anyone other than their sellers.

    All that said, here are some tips when drafting that buyer love letter:

    • First, your agent probably won’t help you draft it nor should they. You know best what you love about the house and your personality will come through better if you write it.
    • Steer clear of details about yourself that could reveal your status in a Fair Housing class (race, color, national origin, religion, sex, family status, and disability; in some jurisdictions, sexual-orientation and identity are also categories). Don’t talk about your kids, your holiday gatherings, or how the oven will be perfect for baking a big pan of your particular culture’s special dessert. (Just say it’ll be perfect for baking.)
    • Do talk about the house and neighborhood! Not only will this allow you to steer clear of those Fair Housing categories; people usually like hearing about themselves more than they like hearing about other people. So, talk about how much you love the roses and how you plan on taking care of them. Talk about how your dream home always included a soaking tub or wainscoting. Talk about the fact that the house is located on a dead end, and you see dead ends as bringing life to a neighborhood. (True story: I was moved by this exact sentiment in a letter when I sold my personal home; objectively, the offer was also the best, but I was still touched by the sentiment in the letter.) Talk about the large basement room and how it will be perfect for movie nights.
    • Bonus: if the seller hasn’t “depersonalized” their home and you see something that you share in common—maybe you graduated from the same college; maybe you both love Harleys—it doesn’t hurt to include that.
    • Do talk about how you plan on living there and not just using it as a rental or fix-and-flip project. Again, people love their homes as if they were another family member and the fact that you are the intended occupant can sometimes sway the seller if a similar competing offer is from an investor.
    • While there are several Fair Housing categories, a buyer’s financial and employment status is not one of them. Typically, an offer comes with a pre-approval letter from the mortgage lender (if your offer doesn’t include one of these—or “proof of funds” if you’re making an all-cash offer—your agent isn’t doing their job), but you may also want to let the seller know you are secure in your employment. While this doesn’t need to go into your letter, a pro-active call from your mortgage lender to the listing agent to assure them that your loan is on track and all your financial statements and employment have been verified, is probably the most important thing you can do beyond making a strong offer. Having your mortgage lender be pro-active also shows the listing agent that they’ll be easy to work with during the transaction since, in most cases, any issues that come up after the inspection has been completed will be mortgage related.
    • Don’t “oversell” yourself. You still want to get the best deal you can and, if something comes up during an inspection and you want to ask for a price reduction or some other concession from the seller, you still want to have some negotiating power, so avoid using language like “I’d do anything to get this house!” or “this is the tenth house we’ve looked at and if we don’t get it I don’t know what I’ll do!”
    • It probably goes without saying, but don’t include anything negative in the letter like “I really love your house but what were you thinking painting the walls green?! That will be the first thing we change when we move in!”
    • Consider handwriting it (then scanning it, if you’re submitting it electronically). The handwritten note is increasingly a thing of a bygone era and will go a long way.
    • Keep it short; one page typed, or two-pages handwritten.
    • Proofread it. A lot of people don’t seem to care much about grammar and spelling these days, but enough do that your attention to detail here will reflect on your attention to detail during the transaction (even if your agent is the one doing most of the work).
    • Include your letter in a sealed envelope separate from the rest of the offer (or as a separate attachment, if sending it electronically) so that sellers who do want to refrain from reading it can easily do so.

    Finally, remember that, while buyer love letters may push your offer over the edge, “highest and best” is almost always the deciding factor, so make your offers objectively strong!

  • Inspections

    You’re about to make what is quite possibly the biggest purchase of your life and there’s a lot you don’t know about it. What’s in the attic and crawlspace? Pests? Mold? Fifty issues of National Geographic from the 1970s that have been there since the last owner moved in? (True story on that last one and a fun find that my client gifted to me.) Is the foundation solid? Do the included appliances work? In most cases, the house you’re buying will have several minor issues that you might want to address after you move in, but none that would cause you to walk away from the transaction or even ask for repairs to be done or a reduction in price. Inspections are still very important though because you never know what they might turn up. They typically cost between $500 and $1000 depending on the size and age of the house and how many things you want inspected (just the house? sewer line? radon test?). Here are some things worth when hiring an inspector.

    • What credentials do you hold and how long have you been an inspector? In Idaho, inspectors aren’t licensed by the state, but they should still be able to point to some sort of certification like the American Society of Home Inspectors (ASHI)
    • What is the cost for the inspection? Are sewer line inspections extra? (They typically are.) How about radon tests?
    • Is there an extra charge for larger homes or homes over a certain age? Homes out of their typical service area?
    • How quickly can your inspector typically make it out to a home once your offer has been accepted and how long will it take them to return their report? If they can’t make it in the allotted time frame, is there another inspector they can recommend who can?
    • Will they do a complimentary re-inspection of any issues that have been fixed by the sellers?
    • In regard to the radon inspection, make sure they are measuring it for 72 hours and that the meter is placed in a habitable room on the lowest habitable room in the house (i.e. a basement office or bedroom, not a utility or laundry room or closet.

    Additionally, before the home inspection occurs, make sure the sellers have address the following potential issues. When it comes time for the appraisal inspection, these may be called out, especially if it’s an FHA loan, and the lender will require them to be fixed and re-inspected with the re-inspection with an added cost of $200 to $400 in some cases.

    • Standing water against the foundation or excessive moisture in the basement.
    • Hazardous materials on site. This is not necessarily asbestos or lead paint, which is common in a lot of homes built prior to 1978, but if there are signs of exposed asbestos (i.e. not painted over), exposed electrical wires, and other potentially life-threatening situations, these will be called out.
    • Evidence of possible pest infestation.
    • Leaking or worn-out roofs. Roofs should have at least five-years of life left in them. If they seem close, hiring a specialty roof inspector or roofer to give you a “five-year certification” is a good way to placate any appraisers/lenders who are in doubt. Of course, realize that even if you get this certification, you’ll need to budget for a new roof in the near future.
    • Faulty mechanical systems, i.e. plumbing, heating, or electrical aren’t working.
    • Evidence of possible structural failure, i.e. unsupported floor joists, cracked or bulging walls or foundations. (Some cracks may not be evidence of structural failure. All houses settle over time and minor cracks can appear. If in doubt, it’s prudent to hire a structural engineer to give a second opinion.
    • Missing handrails both inside and out.
    • Working smoke alarms inside every bedroom (or in a hallway if bedrooms are close together) and on every floor. This is a common one and an easy fix.
    • Carbon monoxide detectors. Required on every floor. Another common issue with an easy fix.
    • Earthquake straps on water heaters. Probably the most overlooked issue with an easy fix.

    If you hire me as your agent, I will take care of all of this and already have existing relationships with home inspectors in the area who I trust.