Wednesday, February 8, 2017

How buyers can make the most out of time when their offer to purchase a home includes a contingency for reviewing association documents

Cell:  (301)943-4370

I want to start today's post by saying that it inspired by Ken Harney's recent article in the Saturday Real Estate Section of The Washington Post. He regularly has articles published in their Saturday Real Estate Section.  This article by Ken targets people who may purchase homes in communities that are governed by associations---they have a board and bylaws.   This is most often found in condominium, cooperative and Townhome communities.  There are also communities that have single homes with a homeowner's association, subject to community rules. 

Currently, the sales contract says that buyers have the right and entitlement to receive the association documents. So a seller cannot decline to give them to you.  A buyer must receive the documents no later than 10 business days after a contract is ratified (is fully signed in agreement of terms), otherwise a buyer can back out of the contract by giving the seller notice of voiding the contract prior to receiving the documents. However, make sure it is clear whether or not the sellers or buyers in your jurisdiction customarily pay for buyers to receive a copy of the documents or if this is something that needs to be negotiated in the offer. ask your realtor and or real estate attorney.

Once a home buyer's offer on a home gets accepted, he/she have to take care of a number of matters which may have contingency time periods by which they need to be completed and so buyers prioritize what needs to be accomplished when and if there are things they don't have to worry so much about.  One of the things that a number of buyers make less of a priority is the contingency related to review of association documents/condominium documents/h.o.a. documents (or however they may be called/referred to in your jurisdiction). These documents contain vital information, which a number of people are negligent about reviewing before the purchase is complete.  The question is whether the buyers overlook the documents because they are overwhelmed with everything else that needs to be taken care of during the contract period or they just can't image how 'serious' the documents might be and how they might impact the buyer's decision whether or not to go through with the home purchase.

As Ken points out in the article, the biggest challenge of the association documents is how you thick/dense they are and how short the contingency period is, considering how detailed the documents are and considering everything else you have to take care o during the contract period.
For Washington, DC, the contract states that currently, the review period for association documents is 3 business days --- this is for condominiums, coops and H.O.A.'s.  Business days are defined as M-F, excluding federal holidays.

For Maryland, the review period for association documents is currently 7 days for condominium documents, 3 business days for coop documents and 5 days for H.O.A. documents.

The GCAAR Sales Contract, which is often used in Montgomery County, MD and almost always in Washington, DC (there may be a few exceptions) currently defines days as calendar days, which would include every day, including the weekends and defines business days as Monday through Friday, excluding holidays.

THE MAR Sales Contract, used exclusively in Maryland, currently defines days as including the weekends and holidays, whether state, federal or religious.  It doesn't spell out business days, but one can talk with his or her real estate attorney,agent about that if the regular day contingency period doesn't work for him/her.

In his article, Ken suggests that if you think the contingency period for reviewing the association documents gives you enough time to actually review the documents, then you should consider slashing the number of days for the contingency period and write in a new number, proposing adding a few more days to the contingency, giving you a little more time for due diligence in reviewing the documents.  I think this is a wonderful idea, however, I would only caution against doing this if the home is fairly new to the market and the seller is expecting multiple offers on his/her home.  Altering something in the contract to give the buyer's 'an advantage' could make other buyers' offers look more attractive in a multiple offer situation.  If the home has been on the market for a little while and it seems like there are no other offers being presented, then I would consider asking the seller about additional time for reviewing the association documents.  Every real estate market is different and every jurisdiction has its rules, regulations.  So follow your real estate attorney and realtor's advise.  I defer to them.

Remember, any time you or someone you know is thinking about moving, has a real estate question or wants to talk about the market, I always have time for you referrals.  Thank you.

Life is good!

Licensed in MD & DC
Cell:  (301)943-4370
Office:  (301)921-4500
RE/MAX Realty Group
information deemed to be accurate but not guaranteed

Tuesday, February 7, 2017

Possible ways to keep your interest rate lower when purchasing a new home or investment property

Call:  (301)943-4370

Most every time a person buys a home, one says to him or herself "the numbers have to work" or I can't go through with the purchase. 

Home buyers, whether looking at a place as their potential home or investment property look at the property condition, what work needs to be done, what work they would like to do, can they afford the work and with the help of their realtor, the home is priced correctly based on the property condition or if they need to get a lower price for the purchase to make sense for them.  (Yes, by all means, if you want, by all means try to negotiate on price, terms if the home is priced correctly, but also know the real estate market conditions in your neighborhood. But that is a for a different discussion.). 

When the buyers are investors, if they are looking to purchase the home and keep it as a rental, they also need to calculate whether they will be adding value with the repairs, improvements and be able to rent the property for more money than they would in the property's current condition.  If the property is move-in ready, than they don't have to calculate repairs and improvements.   On the other hand, when buyers are looking to flip houses, they need to make sure after the repairs and renovations that they will be able to sell for a good margin.

The starting point is getting a loan approval for the potential purchase, knowing up to what price range you are approved for, what the interest rate and payment is with a few different loan options, so you know up front your purchasing power and what you potentially need to rent out the property for (if it is to keep the home as a rental and not flip it) in order to have a positive cash flow on the rental.

Interest rates for investment properties tend to be higher than interest rates for primary residences.
There are a couple ways to possibly get a lower rate for a loan on an investment property.  These only apply for people who already own a home.  Use a home equity loan or line of credit.  Since rates on home equity may fluctuate, it might be safer to do this for a flip, because your intention is to repair and renovate the home as fast as possible and then sell it. So, fluctuating rates may not be as relevant to flippers since they, by definition aren't holding on to their homes.  
If you are planning to hold the property as a long term rental, a home equity loan or line of credit is a move to consider if you are planning to refinance at a certain point, which is trying to predict what the future market interest rates will be in the future.  Something else to consider if you are doing a home equity loan or line of credit is that you are using your current home as collateral.  Some people are comfortable with this and others aren't. The right decision for some is the wrong decision for others.

The simple, traditional route, if you don't like risk is simply apply for a mortgage on an investment property, knowing the interest rates may be higher and taking that into account especially if you are looking to purchase a long term investment property (considering your cash flow every month after collecting rent, paying the mortgage, if you pay a property manager, any expenses).

As I am sharing these ideas, I defer to your lender, financial advisor for guidance on what the rates for the different financing options are and what, in their opinion, is the most  are advantageous move for you.

Whether you or someone you know is thinking of buying/selling an investment property, a home, has a question about the real estate market or has a general question about real estate, please feel free to contact me.  I always have time for and greatly appreciate your referrals.

Life is good!

Cell:  (301)943-4370
Office:  (301)921-4500 - ask for Adam
RE/MAX Realty Group

Information deemed to be accurate but not guaranteed