Author: Doug Quance (page 1 of 4)

by Doug Quance

Associate Broker

Author website

Even Those Financial Gurus You Know And Trust Can Be Wrong

This weekend, I caught part of a nationally syndicated financial talk show on the radio. While I appreciate and agree with much of what the host usually has to say – this was one of those times that I found myself yelling at the radio.

A home buyer called into the program with an issue where she felt that she was going to lose her earnest money because her 21-day financing contingency had expired – and she was unable to get a mortgage.

The host thought the 21-day financing contingency was too short… and told the caller that she should have had an attorney negotiate the terms of the contract – and at this point in time, she should renegotiate the terms of the financing contingency.

Well I’ve got some news for you, sunshine.

Unless your attorney is offering to pay top dollar for one of my listings – you won’t see a financing contingency from my clients that exceeds 21 days… and it will be highly unlikely that you will see my clients sign away their liquidated damages by extending that contingency.

Years ago, it was common to see financing contingencies that continued right up until the closing date… but that was then – and this is now. Back then, if the buyer could fog a mirror – they could get bought. Not so these days.

As a consultant to my home selling clients, I find it my duty to protect their interests to the best of my ability… and that includes negotiating the financing contingency in such a way as to provide liquidated damages of having a property removed from the market by a buyer who can not complete the transaction.

Just because you hire an attorney to negotiate on your behalf doesn’t mean that the other team is going to lay down and let you run them over.

by Doug Quance

Associate Broker

Author website

An Extrapolation Of Epic Government Involvement

At this moment, the President and Democrats in both Houses of Congress are finalizing a health care reform bill that not only no one understands – it won’t  even be read by any of them prior to its passage.

The stated reason for this takeover is the spiraling cost of health care in this country. But health care costs are not the single largest expense that Americans pay for their existence. The single largest expense is housing.

While a majority of Americans are satisfied with their health care, the Democrats are in high gear to eliminate the health care system we currently enjoy – ostensibly to implement a system like Canada, the United Kingdom – or even Massachusetts. Many of these Americans are standing up against the Democrats in town hall meetings across the country.

But how many of  these Americans would stand up if the government chose to take over the real estate industry? After all, doctors and nurses are ranked in the top ten most prestigious careers in this country – while real estate agents and brokers are at the bottom of the list.

Think about it – an argument to nationalize housing could easily be more acceptable than the argument to nationalize health care. What would the cost of housing be if you could eliminate profit from the equation?

The largest single expense when selling a home is the brokerage fee, followed by the costs to obtain a  mortgage. What if these functions were performed by government employees with no profit motive?

Far fetched? The two largest purchases that most Americans make are houses and cars. And we all know who is now making the cars.

by Doug Quance

Associate Broker

Author website

Another “Don’t Ya Just Love Working For Free” Story

In the minefield of residential real estate lies the ubiquitous short sale. Fundamentally, all  short sales have a commonality – the market value of the property does not exceed the disposition costs plus mortgage liens and other encumbrances. A short sale requires a successful negotiation with the lien holders – and the operative word here, boys and girls, is successful.

It was the summer of 2007, I found a nice big lake lot for my clients. After many years struggling to advance in their careers, they finally reached the point where they could build their dream home. Their kids were now adults, and it was time for them to begin to enjoy the fruits of their labor.

With a builder in mind, they set out to acquire this lot and begin construction on a 3500 sf 5 bedroom 4.5 bath home. The bank had many requirements, including a set of plans and specifications, as well as a variety of documents from the builder.

The bank – that shall remain unnamed – would only finance 70% of the appraised estimated value of the completed property. Not an uncommon practice – as it gave the bank a level of protection in the event that the future wouldn’t turn out as planned… and we all now know what happened to the residential real estate market since the summer of 2007.

The house was slated to be completed in April of 2008 – a goal that seemed more than attainable. Eight months to build a  home like this would be considered child’s play for any builder. Unfortunately for all the parties involved – that wasn’t the case.

The builder was having problems with his other projects – so much so that he was having great difficulty even getting started on this project. The owners threatened to pull  him off of the project if he didn’t get started – so after several months with nothing taking place on site, the construction began.

Although the house was making progress – and the builder assured the owners that the house would  be complete by the one-year Read more

by Doug Quance

Associate Broker

Author website

Some Well-Maintained & Updated Homes Are Better Values Than Foreclosures

When all of the comparable homes in an area are foreclosures and short sales, you could get a really good deal on the nicer, well-maintained and updated homes.

A broker recently called me regarding one of her listings. It’s a super nice property that’s been upgraded to the hilt – but every single comp within five miles that has sold in the last twelve months has been a foreclosure or short sale. Her problem was not that her listing wouldn’t sell – but that it might not appraise.

In certain areas, finding good comps for nice homes has become quite difficult – and depending upon the appraiser, you might not get the appraised value that is specified in the contract. Obviously, this is more of a problem for the sellers than for buyers.

When home prices are rising, homes that are not in good condition often sell for more than they should – and will appraise for more than they should, as well. The nicer homes tend to pull the values up. But in a declining market, homes that are in need of repair – or a quick sale – tend to pull the values down… therefore the sellers of nicer homes find it difficult to obtain top dollar – or a higher appraised value – for their properties.

So while you’re out trying to find the best foreclosure or short sale for your clients – take a look at some of the nicer listings. If you find a motivated seller, the best deal just might not involve a foreclosing lender.

by Doug Quance

Associate Broker

Author website

Yesterday’s Unrealistic Sellers Are Today’s Unrealistic Landlords

Just when we thought we had finally convinced all potential sellers that the real estate market was in a crisis – and that realistic pricing was the only way that a sale could be consummated – we now must deal with the unrealistic landlord.

I’m not talking about the professional Leona Helmsley kind of landlord – they’ve always been around. No, I’m talking about the unrealistic sellers who are instructing their agents to continue to market their properties for sale… AFTER they have rented them out to unwary tenants.

Don’t get ahead of me, now. I know that this concept is not new. Home managers have been around for years… and they provide a great service to home sellers by furnishing the home – keeping it in showing condition – paying the utilities – maintaining the yard – all while being prepared to move out with 30 days notice.

Of course, home managers enjoy deeply discounted rents.

And therein lies the rub. The unrealistic seller wants market rent – while marching prospects through the home. A few days ago, I wrote a quick post about our new GAR lease, more specifically about Section 20 which reads:

Upon 24 hours advance notice to Tenant, Landlord shall have the right Monday through Saturday for 9:00AM to 8:00PM to access Premises of Property to inspect, repair, maintain the same and/or to show the Property to prospective buyers. In the case of emergency, Landlord may enter Premises or Property at any time to protect life and prevent damage to Premises and Property. In addition, during the last ___ days of the term of the Lease, and during any period when Premises is being leased from month to month, Landlord may also place a “for rent” or “for sale” sign in the yard or on the exterior of any dwellling on Property, may install a lockbox and may show Premises to prospective tenants or buyers. In the event a lockbox is installed, Tenant shall secure jeweelry and other valuables and agrees to hold Landlord harmless for any loss thereof. For each occasion where the access Read more

by Doug Quance

Associate Broker

Author website

Looking At Rental Properties With A Whole Different Perspective

The more things change… well, the more they change.

In the past, when you represented a tenant in the lease of a property, it was understood that the tenant would provide authorization for the landlord to perform a credit check, if desired. This authorization, however, was a one-way street.

That was then… and this is now.

In the current real estate climate we find ourselves in – it would behoove you to inquire as to the financial stability of the landlord before allowing your client to sign a lease. It is becoming a more frequent occurrence to hear about another instance of a landlord losing a property to foreclosure during a lease.

While requesting the credit report of a potential landlord is an uncommon occurence – perhaps it should be as normal as the landlord requesting the credit report of the prospective tenant. After all – if the landlord defaults and loses the property to foreclosure, it will be the tenant who suffers.

If the landlord refuses to provide authorization to pull their credit file – perhaps they are hiding the fact that they have not been paying their mortgage… as is the case in many short sale situations I have seen. Yes, it happens. In the past two weeks, I have spoken with two three landlords who are defaulting with tenants in place.

Whether or not you insist on the landlord providing a credit report – you should make your client aware of the repercussions of a default on the part of the landlord according to the laws in your state.

by Doug Quance

Associate Broker

Author website

Cost Of Building Materials Likely To Rise Due To Hurricane Ike

Builders of new homes have been dealing with sluggish sales from lack of buyer demand, and with the potential of nearly $20 billion in damage due to Hurricane Ike – the cost of building materials could easily make a bad situation much worse.

Builders have not seen a reduction in material prices in spite of the slowing of construction over the last two years, due in part to reconstruction of the damage from Hurricanes Katrina and Rita. While some material costs have gone down, most have not – and this latest giant hurricane striking a major population center is undoubtedly going to push material costs up.

In the last year, spikes in the price oil have not only driven up the cost of many materials – it has also driven up the cost of subcontract labor for which builders rely. As energy costs go up – so do the manufacturing and transportation costs associated with the materials builders need.

To make it a trifecta, the number of recently-built home foreclosures is at an all-time high – thus giving new construction some serious competition, as home buyers can find some very nice, nearly new homes for much less than most new construction.

When you bring all of these factors to bear, you can rest assured that new home builders are in for some rough waters ahead. Rising costs will raise their “break-even” point, thus making their efforts less profitable without a retail price increase – which the current market will not bear. Since profitability is already impossible for many builders – more of them are likely to fail.

“It ain’t over ’til it’s over,” Yogi Berra once said. Once again, Yogi is right.

by Doug Quance

Associate Broker

Author website

This Idea Is Submitted With Tongue Buried Deep In Cheek

Sometimes I can only shake my head as I look at some of the listings in the MLS. Most good agents won’t take a listing that is overpriced… and if so, it’s usually not overpriced by much.

When studying recent sales, I notice that the trend for a home to sell within a few percentage points of its current list price continues. Ultimately, it all comes down to supply and demand. If we can’t increase the demand – maybe we should restrict the supply… especially of overpriced listings.

Well I came up with an idea. What would happen if a property tax reassessment could  be made when a seller put their property on the market?

As my good friend Jeff Brown would say, ‘Now don’t jump the gun, locomotive breath.’ This knife would cut both ways. For those who are paying low property taxes – they would see a tax hike. But for foreclosures and other distressed properties – they would see a tax reduction.

The benefit of using this system is that sellers would be much more reluctant to put their property on the market for some ridiculous price. The tax assessor would be able to say – Hey, you’re the one who said your property was worth that much – quitcherbitchin.

On the other hand, buyers like some of my current clients would get a break on the purchase of their next homes. For example, on one property we are considering, the current taxes are nearly $7000 a year – but those taxes will be reduced by at least 40% after the purchase and subsequent reassessment. Having that reassessment right now would reduce the upfront costs of the purchase – not to mention that more buyers could qualify to purchase a property like this.

There you go. I’ve tossed a grenade out there for you. Anyone feelin’ froggy?