Own and Live in Downtown Madison–Forgivable Loans Available

Follow the money around downtown Madison. You can see where developers are investing with new commercial buildings and quality apartments. These people know the same thing you know…people want to live and work in the authentic Madison neighborhoods.  Greenbush, Mansion Hill, James Madison Park Neighborhoods have the classic early Madison homes people are tripping over themselves to own. Or they would be if they could afford the renovations.

Community Development Division of the City of Madison has $80,000 to $100,000 forgivable loans available for purchase and renovation of these properties. Commit to live in the building for 10 years (and a few other requirements). Live a downtown Madison lifestyle.

This program ends December 31, 2017

Time is of the essence. The “little details” matter.

This is a portion of an actual text from a Wisconsin real estate licensee’s response to a licensee who is trying to get an amendment accepted to extend a contract deadline: I think keeping in focus we are doing the work and we are set to close should be the focus. The little details always solve themselves. Well then, all you attorneys and real estate licensees may as well find another profession. Little details don’t need your attention.

Isn’t it the little details the Supreme Court hears and decides on to settle constitutional rights?  Does “Time is Of The Essence” in the Offer to Purchase contract mean something different for the “little” contingencies? I see 7 court cases sited on page 7-35 of the Wisconsin Real Estate Law, 2017 Edition which make it clear, the little details do matter.

The Wisconsin Offer to Purchase WB-11, is a nine page form filled with little details.  Those little details make or break transactions. Licensees who initiate compliance with the little details are doing the job they are licensed to do. Intentional disregard to the little details is setting the parties up for a dispute. Compliments to the buyer agent licensee who took the initiative to protect the customer (the Seller) and the client (the buyer) in spite of the haughty attitude of the listing agent licensee who could not be bothered with the little details.

 

Letters to the Seller. What’s the intent?

Google will give you 1,040,000 results for “Dear Seller Letter”. From upstart real estate agents to the biggest players in the field, including Realtor.com, love letters to sellers are promoted as the key to success for buyers negotiating in Seller Markets.   A lot is being written about something that has nothing of real evidence to prove its value. There is no scientific evidence to support the notion that the love letter makes a difference. Oh, there are incidents where people believe it made a difference, even THE difference. But those incidents do not qualify as a scientific study.  On the other hand, substantial evidence supports the fact that people who submit offers with the most favorable price and/or terms for the Seller, provide the most definite assurance that they are capable of closing on time, and are committed to honoring the terms of the contract, are highly likely to have their offer accepted.

In spite of the lack of evidence, advice from people in the real estate industry encouraging buyers to write Dear Seller letters continues to pour in.  I scanned a dozen web site stories and saw  versions of this  suggestion often encouraged:  “…always include a photo…” of your family.  Apparently the “family” photo makes your Offer stand out. It shows the Seller who you are. It shows the seller you might have something in common. It tells the Seller you will be good stewards of the home they love.

Could those reasons be faint cover for communicating another message? What is the intent of these letters?  If the intent is to persuade the Seller to look favorably upon the Offer because of the appearance of the buyer, arguably a line has been crossed.  The Wisconsin law says a licensee is subject to disciplinary action “…if it is found that the licensee treated any person unequally solely because of sex, race, color, handicap, national origin, ancestry, marital status, lawful source of income, or status a a victim off domestic abuse, sexual assault or stalking.”   

There is a better way to make a Buyer’s Offer stand out, and we are all capable. The licensee who improves their ability to craft Offers to purchase with terms more favorable to the Seller, while providing the protection the individual buyer desires, is safe and worth their fee and then some. It takes more work. It requires thinking. You will be challenged. And it’s what we are licensed to do.

Are we more than drifting toward Fair Housing violation accusations? Is it time for  a national dialogue on the practice? I think we are, and it’s time to talk. What do you think?

 

 

Private Mortgage Insurance is An Acquisition Cost

Private Mortgage Insurance (PMI) has a negative connotation and that’s too bad. The existence of PMI permits more people to participate in the personal and financial benefits of owning real estate.  I absolutely agree it is wise to have my own cash invested in the real estate I purchase with a mortgage. If you had to have 20% of the purchase price to acquire a primary residence would you be a home owner?  I wouldn’t have been.

PMI is a cost of acquiring a property. There are variety of costs associated with purchasing property and two of them are insurance related; homeowners and Title Insurance. PMI is just one more insurance closing cost.  But this one has benefits and it doesn’t have to be forever.  PMI is inexpensive for the power it produces.  A purchase price of $200,000 with 10% down and PMI of .41% of the loan requires and monthly payment of $61.50.  In a market where home values increase by 2.0% per years, that $200,000 house you were able to buy could be worth $204,000 next year. Your $738.00 PMI investment contributed to the appreciation of that property going onto the plus side of your financial statement.  Lenders tell me a PMI loan may qualify for a lower interest rate than a 20% down loan. Apparently the insurance could just about pay for itself in interest savings.

Given the choice of owning the house everyone wants by paying PMI for a relatively short period of time, or refusing to buy unless the house appraises for at least 100% of the purchase price, the long term smart choice might be to embrace PMI.  And that’s another reason to leave the appraisal contingency out of your Offer.

This is Our Contract. A perspective of collaboration.

“I gave my Offer to you. You didn’t accept it. You  sent a counter offer.  I accepted your Offer. Now you owe me something.” 

Whether we admit it or not, that’s a fundamental mindset of the buying and selling process. What if we changed the perspective from yours, and mine to ours? The Offer is mine, the counter offer is yours, but this Contract is Ours. It’s possible confrontation would dissipate and leave more room for collaboration.  Rather than debating who conceded last we would be looking at terms to discover the answers to “What did we agree to?”

Collaboration is a high level of negotiating where each party takes time to see the transaction from the perspective of the other side. With the view from the other angle, buyers and sellers can decide where they will give a little to get more of what matters instead of tallying wins on inconsequential matters and leaving the other side looking for a win of any kind just to get even.

Begin with the end in mind. Work with clients to craft contracts of collaboration.  Seek the collaborators and pass on the competitors.

Wisconsin Condominium Ownership

Condominium ownership is a unique real estate transaction and a relatively new one. The first registered condominium project was built in Salt Lake City, Utah in 1960.  While people have been buying, selling, and taking real  estate from each other since forever, the condominium ownership idea is in its infancy in Wisconsin.  For more information please see these links: http://www.kerkmandunn.com/files/WisconsinCondominiumLaw.pdf and

Wisconsin Lawyer Article on Condo Act changes

Real estate contracts are intended to be specific and unambiguous. That’s helpful so one party can hold the other party accountable.  The lawyers tell us that terms which are subject to one party’s approval on subjective terms or no conditions does not a valid contract make.  Well, the Wisconsin Condominium Offer to Purchase has a full page of ambiguity. Page 4 of the Offer is one enormous escape hatch. Change of heart, cold feet, found something better, decided not to own, regardless of the reason, the buyer of a Wisconsin condominium can rescind the Offer within 5 business days of receipt of the condominium disclosure materials (all or some).

Disclosure Materials. More Required Than Meets the Eye

At first glance we see a list of items A through H to be provided. Eight items appear to be required. Start reading the itemized list and you see 8 increases exponentially.  I  stopped counting at 20 and that doesn’t include additional docs if the condo is a conversion project.

And the Important Stuff is Not Required

Records of Association meetings, financial statements, statement of reserve account, certificate of insurance, budget, unpaid special assessments… are a few of the items you’d think a buyer should see to know what kind of club their joining.  You have to ask for these.  Cool thing about the Wisconsin real estate contracts is that they creators wrote in suggestions on how to fill out the forms. In this case they tell you to write the additional items the buyer wants on the lines for additional provisions. Brilliant.

Seller Should Know What Exists Before They Commit

The owner who takes the time to gather the disclosure materials before buyers come to see the property will know what they can promise to provide. Because the Offer assumes the seller knows what exists the contract does not provide a solution for the Seller to turn to if they accept the Offer and can’t provide some of the items they agreed to provide. The Buyer has a solution, they can rescind the Offer or make a request for documents they did not receive. The exit door is obviously wide open when Sellers make promises they can’t keep.

Safe Course

  1. Before the property goes on the market, use the Offer to Purchase form, page 4 of 9  as your checklist guide. Gather everything on that list. Check off each items to make sure nothing is missed. Create an electronic file of the Condominium Disclosure Materials.  Create a Disclosure for the Buyer to include in the Offer which states they have received these documents on the date they submitted the Offer, or a statement which lists the documents they have not received.
  2. Review all Offers to make sure there are no changes to the standard offer terms of the disclosure material contingency on page 4.
  3. Find out if any of the suggested Additional Condo Issue materials are requested by scouring the Offer.
  4. If the Offer includes an addendum modifying the standard offer disclosure document contingency, discuss the merits of deleting that addendum from the Offer.
  5. Notice the delivery to buyer requires Actual Receipt. Make sure the Offer has a buyer delivery method, and delivery to agent or lawyer is NOT actual receipt by Buyer.
  6. Make it easier for Seller to comply with the requirements. Make sure the Buyer gets what they want and ideally they get everything at once.

 

 

Everyone Is Not Equal…but the Offer to Purchase tries to make them so

Ten offers to purchase will be on the table in front of a home seller this weekend. These Offers will look remarkably similar. The Offer to Purchase form is the Great Equalizer in that it is loaded with common buyer protections. Not all buyers need or want common security. There are uncommon Buyers who have greater Sincerity, Commitment, Tolerance for Risk. These are the Buyers who Sellers are looking for. Our job is make sure the Offers we draft tell the unique story of our client. Checking the common boxes and filling in the blanks, leaving untouched the unnecessary protections is one way of doing business. It’s not good enough and we can do better.

In the hands of a skilled Realtor® or attorney, a unique Buyer story can be told. The story is one of  competence, confidence, security, commitment, sincerity, and ability. When the true image of the Buyer is presented to the Seller the decision to go into business with the safest person is easy for the Seller. When the right Buyer and Seller are in a contract the outcome is almost assured.

Before a home Buyer can decide what they are willing and able to do, they have to know their options and the implications of their choices. Today let’s see if we can do more to uncover a person’s true story and then get started sharing that story by writing unique Offers for our unique clients so they stand out as one of the people who aren’t like the others.