The neighbors have enjoyed an enclosed patio on their home for the last 10 years. They are moving and putting the house on the market and have listed the home to include that patio as a fourth room. Now it is time to face the music. Was the work done to expand the patio into living space permitted work?
Permits to do work on your home are required by cities or counties if you are doing an addition, an alteration, enclosing a carport, putting in a pool or spa or building a fence to name a few. A permit guarantees that the work will be done to code, and each phase of the construction will be inspected to assure that the job is done right and the home is safe.
But why do it right when you can save a few bucks? Do the work yourself! Have your handyman pal do it! Don’t tell the county about the added square feet, your taxes will go up! Plus the county will make you wait forever while they schedule their inspections. So easy to just fly under the radar and let it slide. Until you sell the house.
The seller is required to disclose to the prospective buyer if they are aware of anything that materially affects the value of the property, and unpermitted work can impact the value of the home in many ways. In addition, if the seller knowingly does not disclose the unpermitted work, even after closing the buyer can seek damages.
So what are the potential financial ramifications of buying/selling a home with an unpermited addition?
- Homeowner’s insurance may not cover any liability due to faulty construction, or cover the repair or replacement if needed.
- The county may seek back taxes and fines and the new buyer is on the hook.
- The discrepancy in square footage may be discovered by the appraiser, and the home may not appraise if square feet and number of rooms does not jibe with county records.
So what are the clues that work may not be permitted?
- The square feet indicated in county records does not match the actual measurements.
- You notice changes in grade when entering a room, such as a slight step-down when a garage was turned into an extra room.
- A wall air conditioner when existing duct work could not be added.
- Funky electrical or plumbing connections.
- The listing states that the buyer is to verify the square footage.
- The listing boasts that the county is unaware of the extra square feet and thus tax savings!
Sometimes the work is of high quality, and the seller may have unknowingly purchased the house with the unpermitted work and they never knew about the problem. They may have paid cash for the home, thus it was never appraised and the square feet error was never found. Inspectors may suspect something is amiss, appraisers will notice size discrepancies, but the Title Company and the Real Estate Agent could be totally unaware. If the unpermitted work is an alteration such as a big kitchen re-model, the square feet would not be altered, so it would be part of the buyer’s due diligence to ask the seller to provide receipts and invoices to verify who did the work. Once a buyer suspects there may be a problem, time to dig deeper.
How you live in your home is not always how you sell your home. We hear more and more about how home staging can help sell your home faster and for more money. The National Association of Realtors study has found that 77% of buyers find it easier to visualize a property as a future home if it is staged, and 40% of those who see a staged home online would be more willing to go to a showing of that home. 31% of Agents felt that staged homes sold for 1%-5% more.
So should you stage your home when you sell it? Where do you start? What is most important? Be aware up front that staging is the icing on the cake. It is not the cake. Before you consider staging, make sure you take care of needed or deferred repairs to the home, clean the home and de-clutter the home. You are selling the house, not your stuff! Also know that staging is not a license to make up for a big pricing error.
Here are some guidelines:
- Clean and repair first. Windows, carpet and grout, wood rot, cracks and leaky faucets that a buyer will see first need to be addressed.
- Create warm living areas, and return rooms to their original use. Having a desk/office area in the master bedroom is a big mistake that I often see. This tells the buyer there is no area in your house to have an office, and it crowds out the space in the bedroom that should be a retreat from the computer and phone.
- Don’t forget, it is all about the buyer. Consider the demographic of the buyer who will be looking at your house, and appeal to that buyer.
- Bright and light! Remove sunscreens that make a room dark, and make sure there is adequate light. Consider paint colors that would make the room look brighter.
- Create the illusion of space. Removal of big heavy furniture pieces in a small room, or pull furniture away from the walls in an area you want to make into a cozy living area. Balance the furniture placement in the room. Don’t have all the furniture on one side of the room.
- Find a focal point in your home, and make sure you feature it! You want the buyer to emotionally connect to your home.
- Open the flow so the buyer will want to walk into and through the space. No furniture maze to negotiate!
- Living rooms, kitchen and master bedrooms are the most important to stage.
- Keep to the cosmetic, know when to STOP.
Here is an example of a before and after:
The focal point of the room is the french doors that open out to the garden. The goal is to create an open visual path to that focal point, and make the room look like one big room. Consistent flooring all the way through, the desk area on the end pulled out of the way, removal of excess furniture and furniture placement opens up the room. Now the buyer will walk across the room to check out the view without dodging and weaving. Cost: the carpet. Money well spent.
So how do you manage your decision to stage? First think about a budget. What are you willing to spend? What I do with a client who is interested in staging is to bring in a colleague of mine in my office who is a professional stager to provide a consultation. Once we have a list of options, we can prioritize and make a decision on how to go forward. Like I said before, repairs, cleaning and pricing have to be right before we can begin.
Many consumers and real estate junkies are turning to the website Zillow and their proprietary home value estimate feature Zestimate to arm themselves with real estate market knowledge. Many Realtors face clients with a Zillow listing firmly clasped in their hand as they meet to discuss a possible transaction. So how does Zillow get their real estate information? How do they come up with the Zestimate? Understanding how Zillow works and their business plan can shed a new light on the use of Zillow in the home value process.
One hundred million homes nationwide have a Zestimate on the Zillow website. Zillow is a slick, well presented website that has brought Real Estate listing information to the consumer. The Zestimate is a feature of the website that gives an estimate of the value of a property. This information is used by some home owners to track the value of their home, and can impact decisions about selling. It is important to know that Zillow never claimed to provide this information as a substitute for a professional appraisal, and is now defending itself in a class action lawsuit in Illinois that the Zestimate is being viewed as an appraisal by the public. Zillow has always stated that the information provided is a “starting point” for determining value. Don’t forget that Zestimate rhymes with estimate.
So how does Zillow calculate the Zestimate? Zillow uses an algorithm that takes public record information to crunch the numbers. Public records include a recent sale of the subject property, tax records, permits pulled to renovate the property (change in square footage or number of rooms) and sales of other similar properties. The algorithm is not perfect, is being updated constantly. Zillow is offering a $1 million bonus to anyone who can offer the best solution to make it better.
Zestimate quick highlights:
- They do not use foreclosure properties to estimate value. Appraisers do the same as they do not represent market value.
- The more transactions on a property, the more accurate the Zestimate.
- The algorithm is a neutral unbiased model, so homeowner comments and updates are not always taken into consideration.
- Zestimates cannot be used to get a loan.
- The algorithm does not always understand nuances of a neighborhood or area. The size of the data area pulled to find the value of a home can be as large as an entire county, or intermingle newer/older construction phases in a subdivision.
- MLS does not syndicate information to non-members such as Zillow. Zillow uses a third party such as ListHub to get the listing information you see on their website. That can create a time lag with accuracy of the status of a listed property.
- Tax appraisal information used in the Zestimate algorithm may not be accurate, and can be off by a significant amount.
- Zillow accuracy is within 5% of the actual market sale value 54.4% of the time. They are within 10% of value 74.5% of the time, and within 20% of the value 86.9% of the time. The Phoenix market has better accuracy within 5% of value 67.3% of the time.
- More information is available on the Zillow website.
The top take-away is this: Zillow’s business plan is to sell ads on their website. A Realtor’s business plan is to sell Real Estate. There is no substitute for the “boots on the ground” work of a licensed Realtor. To find the market value of your property, contact a Realtor to have a comparative market analysis run on your home or hire a professional appraiser. If you want to know the latest up-to-date information on a listing, contact a local Realtor who subscribes to MLS. Realtors use MLS for a reason.
During the process of purchasing a home the residential purchase contract allows for the buyer to have a period after the terms of the contract has been accepted to go into the house to have the home inspected. In Arizona, it is normally 10 days, although it may be extended as an additional term of the contract. This is the only time that the buyer may “peek under the tent flap” and take a free look at the property. It is now that the buyer will use these inspections to determine if the condition and value of the property meet expectations set forth in the contract.
This inspection period may pass quickly, so management of the time and order of inspections is imperative. The first person to inspect should be a good reliable home inspector licensed to do this type of work. They will do a complete overview inspection of plumbing, electrical, structural, drainage, roof condition, mechanical and appliances. If qualified they can also inspect for termites and inspect pools and spas. One thing to be aware of: they cannot pull apart, cut open or dig down to inspect the home. For example: if there is evidence of a possible leak in a wall they are not allowed to cut open the wall to make sure. In addition to the general inspector, a termite inspector and a roof inspector need to follow up, or any additional inspections to follow up anything unusual found in the general inspection. These inspections are to confirm the condition of the property.
If the buyer is purchasing the home with cash, they may want an appraisal done to verify the price/value of the property. The lender for the buyer using financing will order an appraisal, but this appraisal is part of the loan process and doesn’t fall in the inspection timeline. The inspection period is the time for a cash buyer to go forward with an appraisal if needed to confirm the value of the property.
Once this information has been gathered by the buyer, the buyer decides which items found in the inspection are troubling enough to be brought to the seller’s attention, and to request the seller repair those items as a condition of going forward with the contract. This can be a delicate negotiation and both Realtors need to balance being an advocate for their clients and a mediator as well. Buyers need to realize that when they viewed the property before putting in their offer they likely built into the offer the age and general condition of the property, and the seller may have taken the condition and age into consideration when they priced the property in the first place. Sellers need to realize that an unknown expensive hidden repair (such as the condition of an air conditioner on the roof) now brought to their attention needs to be addressed. I have counseled buyer clients that a low-ball offer accepted by a seller will have little tolerance for repairs. On the other hand, a buyer’s offer close to asking will produce a buyer expecting repairs to bring the home value up to the offer price.
There are many different tools and considerations in setting the price of a home to sell. It is a fact that the seller or a real estate agent eager to obtain a listing may believe they get to set the price of a home for sale based on their needs. The truth is that the buyer gets to set the price. Anything for sale will only sell for what a buyer will pay, a seller will accept, and what a bank will loan.
To set the market price for a property agents will gather information about comparable properties in the neighborhood, evaluate the condition of the property, and consider the market conditions (supply and demand). When the lender sends an appraiser out to appraise the property, they do the same thing. Price is what you pay for a property.
How does the price impact the marketing? How does marketing a property impact the sale? Marketing needs to do two things. First, drive traffic to the property. Second, showcase the features that add value to a buyer. Once the buyer gets into the home to view the property, price and value take over. This is when the house “sells itself” or fails to deliver market value and sends the buyer to another property.
But what about value? What is the difference between value and price? If price is what you pay, value is what you get. Value is based on the buyer’s opinion of the functionality of the property. This is where the seller and the buyer may drift off the same page. What the seller values, the buyer may not. An example is a seller putting a new roof on the property last year. He thinks this has added value, while the buyer may view having a good roof as expected maintenance, and sees no additional value. The size of the lot can be another example of the seller finding value and the buyer maybe not so much. An appraiser will give $1 a square foot in value for a bigger lot, yet the buyer may be more interested in the views, location or how the home sits on the lot, not the additional square feet.
In a sellers market, when supply is low and demand is high prices will rise and value will contribute to that rise. When the buyer is paying a higher price, they will be willing to pay for value and expect it! In a buyer’s market, where supply is high and demand low, prices will decrease. Getting a great price trumps value for the buyer in this case.
So your house is going on the market. What can you do to make your home “pop”, and move to the top of buyer’s wish lists? There are lots of good ideas to help make your house attractive: Continue reading
Selling your home may not be as easy as you would like! When weeks turn into months and months turn into….perish the thought. The home seller needs to pull out all the stops to get that house sold. Some sellers will even turn to home selling superstitions. It can’t hurt, can it?
Superstition is defined as “a credulous belief or notion, not based on reason or knowledge”. But that won’t stop the motivated seller. While sitting in bed awake at night staring at the ceiling, it is easy to second guess what could have gone wrong when you moved in. Did you move into the house on a Friday, Saturday or on a rainy day? Did you bring the broom from the old house into the new house? Did you put your shoes on a table at some point in the years you lived here? How can you turn around the bad karma and get your house sold?
Perhaps you can undo the bad luck by using the popular superstition of burying a Saint Joesph Statue in the front yard, facing the street, upside down. That should do it, right? Or someone told you if you see a pure white horse, your house would sell. But in England and Germany, if you dream of a white horse it is a death omen. Death.
Maybe time to bust out a little Feng Shui. Flowering plants along your walkway is said to boost wealth. And they look so nice for the curb appeal. Now you’re onto something! This actually makes sense. In the Chinese culture the number 8 is considered to be lucky. You may consider putting the number 8 somewhere in the price. But…the number 4 is unlucky. What if your house is priced in the $400,000s? Or your house number is 1444! Now what can you do?
Probably best to stick to the good old common sense formula. A clean, well-kept home in a desirable location priced to sell will move to the head of the class! My next blog we will lay out some little tricks to help sell that house, and the two different “comps” in selling Real Estate.
Informal dining outdoors doesn’t have to be uncomfortable
Staging your home for sale? In the Verdes our outdoor space needs to be staged as well. We are fortunate to have comfortable low humidity and bug free evenings, so outdoor living areas are a vital part of your property. Buyers moving here want to see themselves not only in your house, but on your back patio as well!
You don’t have to have a knockout view or a pool to have an inviting outdoor space:
- Have a plan to set up areas in your outdoor space to feature your landscaping or a water feature such as a fountain or spa (how relaxing is the sound of running water….).
- Set up separate areas for outdoor dining, informal or not. Patio furniture can accommodate any level of sophistication, depending on your taste and budget.
- Comfortable conversation areas with an outdoor fire pit or tables to rest the beverage and appetizers for the after dinner conversations with family and friends long into the night. The winter months can get chilly, so an overhead propane space heater is a welcome addition to the patio.
- A grilling or cooking area with bar seating nearby for your grilling coaches.
- Use of outdoor/landscape lighting can make the space inviting as well. The buyer on a showing during the day will probably not see this feature, but you will enjoy the area all the more when softly lit.
- Don’t forget the basic area to enjoy the sun during the day with nice reclining lounge chairs. An umbrella is a nice touch of color, especially when your skin has a touch of color.
I know many buyers looking at properties in Arizona can be smitten with a great outdoor area. Don’t neglect to stage this area as well!