Monthly Archives: March 2016

Tips for Selling a Home in an Estate and planning to Sell a Home in an Estate

Selling a home in an estate is always a difficult thing and just one of the many experiences most people go through. However, there are some ways to make it easier to sell a home in an estate that you can do now and later to ensure that your heirs have an easier time selling a home in an estate and planning to sell a home in an Estate.

As a Realtor, I have dealt with many people selling a home in an estate from both the listing agent end and the selling agent end. It can be difficult and complicated and can be a real turn off to buyers, or at the least delay the closing or get you in trouble. Here are a few dos and don’t for selling a home in an estate.

1. Speak with one voice. There is a lot of communication and decisions in selling a home. The listing agent needs to have one person to speak for the estate and/or heirs. Delays in negotiations and arguments and misunderstandings among varied heirs who have hidden or past agendas and varied knowledge of the market in the area or the circumstances, etc. can prolong and complicate negotiations and information to the point where buyers bail on the deal. Making decisions by committee all over the world does not work.

2. Make sure your title is correct. Very often during the arrangements after a death in the family, attorneys change over the deed, etc. It is important that this is done properly. A closing can be held up or even cancelled if the proper person in the estate has the right to sell and is on deed properly, etc. Get an attorney involved immediately when you decide to sell a home in an estate and have them look into the title and deed to get ahead of any problems before closing, even before contract.

3. Disclosure is required in Illinois. However, there are circumstances where you need to understand when it will or will not apply to you. If you have knowledge of any deficiencies in the house, to protect yourself, it is a good idea to disclose. If it is fixed, you do not have to disclose past problems, only current.

4. Be realistic. Very often heirs either have the get rid of it or $$$$ attitude towards sales. Selling a home in an estate just like any other sale need to be marketable, priced right and appealing. It is a commodity, just like anything else. Personal feelings about the home, how it was built or cared for, should not enter into it. Market value is what someone is willing to pay for it. And remember – markets are different everywhere – so if you are in California or Texas, etc. doesn’t mean it is the same in the local market. A Realtor can tell you the realistic prices and what the costs are to sell a home.

5. Advertise as Estate – pro or con? I usually say no. Sometimes buyer perceptions of selling a home in an estate are not going to get you the fastest sale at the best price. The word “estate” sometimes evokes buyer fears that someone has died in the home. While you do not have to disclose that and while it is not relevant, some people have an issue with that. Don’t ask, don’t tell. Other buyers see “estate” and see “fire” sale. Let the home stand on its own merits.

6. Fix up or leave it. This is a question of all people selling a home. But for estates, I would say, look at your budget. Clean the place up, get rid of dated furniture, personal possessions, lace curtains and just like any other home, ask yourself if this will appeal to your target market. If not, either get a budget to change some or all things or price accordingly to sell. But keep in mind, any repairs should be done to improve sale ability and avoid lending condition issues.

You can avoid these problems ahead of time when you are planning your estate. Here are some simple and inexpensive planning tips from Attorney Joseph A. Macaluso on how to make preparations for your heirs to sell a home in an estate.

By taking advantage of a Transfer on Death Instrument (in Illinois and some other states), you can arrange to have your home transferred to your children on your death without the expense or time delays of Probate Court.

If you or you and your spouse own your home, you can record a Transfer on Death Instrument with your local Recorder of Deeds, which will automatically transfer the home to your children on the death of the last to die of you and your spouse. During the lifetime of either, you or your spouse are free to sell or mortgage your home.

The legal fees to prepare and record the Transfer on Death Instrument are far less expensive and less time consuming than Probating your Estate or some of the other procedures your children would have to follow in order to sell your home after your demise.

You should contact an Estate Planning Attorney to take advantage of this opportunity to both save legal fees and make the process of transferring your home to your children at your death less stressful for your children.

If you have inherited real estate, hopefully your benefactors have followed the advice in the above five paragraphs. If they have recorded a Transfer on Death Instrument, you are now the owner and can easily sell the property if that is your desire.

On the other hand, if there is no such instrument recorded, your course of action depends on how title had been held, and by what method you inherited the property. Some of the possibilities are:

1) Your parent made you a joint tenant on the property by recording a joint tenancy deed. If that is the case, you and any other surviving joint tenants can sell or otherwise deal with the real estate upon presentation of a death certificate and a joint tenancy affidavit.

2) Your parents owned the real estate as beneficiaries of an Illinois (or a few other states) Land Trust. Once again, transfer of the property would not be difficult and would be handled similarly to 1) above. The disadvantage of a Land Trust is that there are yearly fees to the Trustee, and additional fees to transfer the property.

3) Your parent or parents had entered into a Living Trust and have transferred title to the real estate to the Trust. In that event, the successor Trustee under the Living Trust would be able to transfer the property with a copy of the death certificate.

4) Your parents left you the real estate pursuant to the terms of a Last Will and Testament, or they had no will and you are the statutory heir. This is where it becomes more difficult to sell the real estate. In that event, your obvious choices are to a) hire an attorney to open a probate estate with its attendant legal fees and delays, or b) ask the Title Company to accept a bond in lieu of probate. There are additional costs involved in acquiring the bond, depending on how long ago the death occurred.

At any rate, whether your parents did advance planning or not, upon the death of your last parent, you should definitely consult with an attorney so that when and if you decide to sell the property, you will be able to transfer the property to the Buyer with as few problems as possible.

The RIGHT way to look at closing costs when selling a home or buying a home

Closing costs when selling a home or buying a home seem to always be a tug of war between buyers and sellers. Buyers think that sellers should include closing costs for them. A lot of times when I show younger people their parents or grandparents always tell them “they (the seller) should include closing costs.” Sellers often oppose the idea of including closing costs for buyers, often sellers say. “Why should I pay their closing costs. If they can’t afford closing costs, maybe they shouldn’t be buying a home.” The truth is both parties are wrong. When selling a home or buying a home, closing costs become just part of the equation to make the deal happen. However, the way to look at it is not seller concessions or seller paying the closing costs…it should be seller allowing the buyer to finance their closing costs by making it part of the deal.

Many buyers need the closing costs to make the deal happen. There are a lot of people who just are not savers any more. They may good money but the down payment is about as much as they can do. But buyers need to realize that the seller doesn’t owe them anything. And while every thousand dollars costs a buyer $5 dollars a month in monthly payment, $1,000 dollars is a $1,000 to the seller.

Sellers need to realize that they don’t get to decide who gets to buy a home or who does not get to buy a home. Sellers should not care who is buying and what their financial situation is, as long as they are approved to buy the home and will get the loan and offer an agreeable price.

When buying a home, you should consider financing your closing costs. It can help you get into a home and use your savings for down payment or improvements to the home, moving, etc. it all takes money and if you can finance the closing costs, it can cost you only a few dollars more each month.

When selling a home, you should consider the request to “pay” buyer closing costs as allowing the buyer to finance their closing costs. It does not affect your net. As long as you are getting the amount you want, what do you care if they include the closing costs in their mortgage?

I often negotiate my deals based on the net to the seller. Don’t include closing costs in the initial negotiation, but let the other party know you intend to add the closing costs to the deal once a net to the seller price can be agreed upon. That way it is not an emotional or adversarial issue for the buyer or the seller. It is a non issue and you can focus on the price – bottom line to the seller.

The only time this becomes an issue is when the appraisal does not meet value. Then it becomes a little sticky. Appraisers are supposed to consider the closing costs paid on the contract, but sometimes they don’t and the closing costs become a pawn in the renegotiation.

When buying a home, buyers need to understand that sellers are entitled to get at least the value of the home, as appraised. Remember, appraisals are not always true to the real value of the home. It is based on the recent comparables, so sometimes the home’s value is more, but it is suffering from lack of comparables or neighbors who are giving away homes to get out.

Home Sellers need to understand that appraisals may or may not be indicative of the true value of the home, but the current market value depends on the comparables, nothing else. And while sometimes, the buyer can come to the table with money above the appraisal, sometimes they don’t have that extra money. And often it is difficult to get a buyer to pay above the appraisal price.

Closing costs need to be considered by both parties as a part of the deal and means to the end to make negotiations go smoother.

Buying Foreclosure Homes Reality vs Myth

You know the old saying, if it seems to good to be true – it probably is. This is very appropriate in buying foreclosure homes. I get calls all the time from people who are searching on the internet who are looking to buy foreclosure homes for very low cost $1, $10k, $20k. Too good to be true right? Usually RIGHT. I don’t blame people, if you look online sometimes it looks that way and if you watch tv either with the news or advertisements, there are all kinds of myths about buying foreclosure homes with no money or at far below market cost, to make lots of money with no money down, no experience, etc. These are merely myths or half truths and rarely if ever are correct. Here are some realities of buying foreclosure homes or buying distressed properties.

Classified online sites: Unfortunately, there are a lot of classified online sites which advertising buying foreclosure homes have become a hot bed of misinformation, scams, etc. Because there are very few requirements or filters, the scam artists have played on the misinformation about buying foreclosure homes to prey on people. Scammers repeatedly try to sell properties they don’t own by pricing them for far below market in online ads and try to get people to give them earnest money. Particularly buying foreclosure homes are often targeted because they are vacant and they can get pictures and information from legitimate online sources. If people do a little homework, they can figure out the scam or misinformation. Look on other internet sites to see if the home is listed and call the information number to double check the price you have. Look on mls feeds, which many realtors have free use of on their websites. And if all else fails, go by the house and see if there is a sign in the yard or window and call. Also, check out the recorder of deeds, public record or ask the person who you talk to for proof of ownership. If they balk, it is probably a scam.

Realtytrac
This company tracks statistics and public records of foreclosure homes put into foreclosure by bank court filings. It lists homes that are in foreclosure or preforeclosure on consumer real estate sites. They also allow subscription on their website to lists of foreclosure homes. These foreclosure homes are usually not on the for sale market at the time listed. Sometimes they will not show the address, just street and city/state and a google earth or similar aerial or other street picture. The price they show is not the market value or list price. It is the price owed on the home from the public record or taxes due. Can you buy these foreclosure homes? Many times no. But most of the time, banks must wait at least 9 months to legally get deed to these homes and then it may be longer for them to put them up for sale. Banks often hold foreclosed properties so the market is not flooded, which reduces prices. But make no mistake, when these homes are put on the market, they will reflect market value or slightly less. They are NOT given away for cents on the dollar.

Auctions
There are some foreclosure or short sale homes that can be offered for sale on auction sites that are legitimate. BUT you need to know what you are getting. First, on the listing, auction properties have a very low opening bid price, somettimes 0 or $1. Will they sell for this even if you are the high bidder – NO. This is an opening bid price, which is usually 15-20% lower than the bank reserve on the property. These are auctioned by reserve only. Banks are not going to take any risk. If the high bid does not meet their reserve, they can reject it or negotiate with you. One clue what they want is to find out the former mls list price of the home or the market value. That will give you a good idea.

Also, auction properties are not traditional sales and are not often for traditional buyers. They usually do not allow any contingencies. So no inspections. No utilities on – so you do not know what is exactly wrong with the home. Many things you can see on a visit to the home, but busted pipes, non functioning heat or ac, electric? Unknown. And with no utilities – it will eliminate most if not all of the possible loans. FHA and VA are out – they require working heat and hot and cold running water. Some conventional loans with 20% or more down allow no utilities, but most conventional loans under 20% require at least running water. And there is no mortgage contingency, which means if you don’t get the loan, you lose your earnest money, which is usually $2500 (more than most traditional sale properties). Finally, the times to close are typically hard and fast 30 day close, which is possible but not typical for most lenders.

Finally, some auctioned properties are NOT vacant. It does indicate but you need to be careful. Some properties will have the former owners or tenants still living there. If you buy it, it would be up to you to legally remove them. Which means you won’t even be able to get into the home to see it. And it also means that loan possibilities will not likely be available unless you are doing 20-25% down.

Not all auction properties require a total gut though and can be a good deal. However, many auction properties have been on the mls and did not sell. That should be a question – why didn’t it sell?

The biggest benefit of auction properties are transparency of the deal. You know the other bids, there are less manipulation and “monkey business” as there can be with buying foreclosure homes during the offer and negotiation stage. Many foreclosure homes go into blind multiple offers or are awarded to people who were not the highest bidder or even have false multiple offers to try to get you to pay more money without negotiation.

Auctions on foreclosure homes can be online or in person. Online is very easy. If you win the bid, they ask you to put down $2,500 or sometimes 3% of the bid as non refundaable earnest money. You will sign an online contract. You can use an attorney and a Realtor, but their is no attorney review contingency and they will not change their contract or make any modifications. You also will pay a buyer’s premium or fees which can be as much as 5% of the high bid. So, you should consider those when you bid.

You can do a buy it now sometimes for the requested amount to purchase the property prebid. The closing is very similar to a traditonal sale. They will usually give a title (not always so check the fine print), they will transfer deed, etc.

Sheriff’s sales on foreclosure homes are where you can buy foreclosure homes for the taxes do on the property or for the lien owed to the bank. This will be far below market. First, buying these foreclosure homes are cash only. You have to be present at the sale to bid and sometimes there are many properties in the same session, so it can take several auctions. Sheriff’s sales are cut and dry. No title, usually no prior visit of the property. There is a transfer of deed (after redemption periods), but no closing. You pay right there and sign the papers plus any transfer fees. You can get your own title and title insurance from a title company. But if you do not, you will not get a clear title and could adopt any open liens on the property. You would need to resolve those (usually pay them off) before you can sell or loan on the property. If they are sold for taxes due, you do not usually take possession or ownership of the property until after the 2 year right of redemption. Or in the case of a loan, for the statutory redemption period. But you need to pay upfront. And again, you may need to eventually legally evict the occupants.

foreclosure homes
What can you expect from buying a foreclosure home?
First, these are AS IS. You can still do an inspection, AND YOU SHOULD, but the only option you will have is either buy it lumps and all or walk away. Banks and government entities USUALLY will not make repairs to foreclosure homes. SOMETIMES they will, so it is worth an ask, but usually it is rare and only done when it is a matter of loanability. So, you can’t get a loan if this is not done.

Some foreclosure homes will not be loanable by FHA due to condition, some can do conventional and some will not be loanable period. You need to know that before you put an offer it. Consult your loan office and Realtor to see what are the pitfalls.

people with cash – what can you do?
You can buy cash and fix up and do whatever you want with the home, within village code. But be advised that the mass foreclosure and short sale barrage of the last few years has prompted some villages to require point of sale and point of occupancy inspections that require the homes be brought up to code. BUT HERE IS THE KICKER…in these towns you will NOT be able to move into the homes until they are complete, up to code, safe and livable. So you may not be able to live in it and fix up until it is at least in move in ready condition per the village.

resale sites
There are also resale sites that offer foreclosure or other properties. These can be good deals but are never prime properties. Prime properties are always sold traditionally on the open market. First, this scenario is ripe with scams. You need to check out the companies to ensure they are legitimate. You need to wire them money so you need to know it is legitimate by the better business bureau or calling the attorney general. You also can look out on the internet to see if there is anything posted good or bad about the company. There are a couple of legitimate companies. And you need to ensure they have some authority to sell. Again, they should be able to produce Sometimes you can tour them, sometimes you can’t. Sometimes they will have occupants that need to be legally removed by you – the new buyer. Again, everything is done online. Some deals can be financed through them. Sometimes this can be an option for people who do not have the best credit or who want to fix up a home while they live there. Interest rates are usually high. Again, no clear title, so unless you pay for a title, you do not know about liens. AND sometimes, even the legitimate companies do not have clear deed. They will give you back your earnest if they can not get, but that can take several months.