Caveat emptor: The pros and cons of the housing market
The last few years have been tough on realtors. After the recession hit in 2008, houses declined significantly in value. The foreclosure crisis flooded the market with low-priced abandoned homes. Now it’s spring, a time when many think about buying a home. What follows are a few things to consider when looking into making that big investment.
First up are the possibilities. Traditionally, one would contract with a realtor to assist in finding a suitable property. I believe that is still the best way – realtors are licensed professionals who understand the market and know the ins, outs and possible pitfalls of real estate issues. They get a percentage commission as payment for their service, which is worth the price for the protections and advice a realtor can offer. Non-traditionally, however, one may venture into sheriff auctions, short sales or working directly with a seller.
Sheriff sales come about from properties that are foreclosed on for failure to pay a mortgage or other lien on the property. The owner of the debt sues the property owner in court and after proving the debt, the court grants permission to sell the property through the sheriff. The sheriff conducts these sales on a periodic basis depending on where you live. Check with your local sheriff or look for ads in your local paper to find the time and place for the sale which is conducted as an auction.
The good part of a sheriff’s sale is that there are often bargains. The bad part is that there can still be title and tax issues that aren’t resolved by the lawsuit. Make sure before you buy a property at a sheriff’s sale that you have actually looked at the property and have had an attorney review the court action and the title to be certain of what you’re getting into.
With the decline in property values, there are many homes that now have mortgages on them that exceed the value of the property. Some banks will allow a property owner to sell their property at the market value and forgive the loan balance. This could be a good deal for a purchaser, since both the property owner and the bank are motivated to sell. This is called a short sale. When you enter into a short sale, be sure the lender is fully on board – in writing – with the sale and the price. Make certain that you also know what liens might be on the property other than the mortgage.
Many banks now have an inventory of foreclosed properties available for sale. Your best bet if you purchase one of these properties is to obtain title insurance to be sure that any issues of lingering liens or improper court procedures don’t get in the way of obtaining a clear title to the property. Remember that title insurance purchased on behalf of the bank or lender is not the same as title insurance purchased by you as a buyer. If there are later title issues, you cannot make a claim against the bank’s policy – only your insurance policy will protect you.
In the purchase of any property, you should look for as many assurances as you can get that a title is clear and that the property is in sound condition. A realtor can be very helpful here, as can an attorney. Have your contracts reviewed by an attorney to make sure everything is covered. Require inspections. Make certain of the property’s zoning and any deed restrictions which may limit your use of the property. Ask for a Residential Property Disclosure Form and a lead paint disclosure.
Make sure you know what personal items go with the property, such as ovens, refrigerators, carpets, washers and dryers. Have a provision in the contract that assures all utilities have been paid up to the closing or move out date. Be clear about who pays the assessments or taxes. As noted above, consider buying title insurance. Make sure all the terms of payment are spelled out and you get a proper deed according to your needs. Know when you get possession and who is responsible for any damage to the property while the sale is pending.
Talk to a bank ahead of time to understand the different kinds of financing you can get. It is very helpful to be pre-qualified for a loan, but don’t just talk to one bank. Do some shopping. Interest rates and closing costs can vary widely. Paying a half percent more in interest can add thousands of dollars over the thirty-year life of many mortgages. Know if the mortgage can be paid off without penalty.
After you move in to your new property, invite the neighbors over for a housewarming. New friendships will add significantly to the true value of your new investment.
Disclaimer: The content herein is for entertainment and information only. Do not use this as a legal consultation. Every situation has different nuances that can affect the outcome and laws change without notice. If you’re in a situation that calls for legal advice, get a lawyer. You represent yourself at your own risk. The author, the Dayton City Paper and its affiliates shall have no liability stemming from your use of the information contained herein.
A.J. Wagner is an attorney with the law firm of Flanagan, Lieberman, Hoffman and Swaim at 15 W. Fourth Street in Dayton. A.J. and his firm would be glad to help you with all of your legal needs. You can reach A.J. at (937) 223-5200 or at AJWagner@DaytonCityPaper.com.