This Agreement is conditioned on Buyer's subjective satisfaction with inspections of the Property and improvements on the Property. Buyers inspections may include, at Buyer's option and without limitation, the structural, mechanical, and general condition of the improvements to the Property, compliance with building and zoning codes, an inspection of the Property for hazardous materials, a pest inspection, and a soils/stability inspection.

The onus is on you, the Buyer, to line up and proceed with an investigation of the property to the extent you choose. A broker working on your behalf will have good suggestions for you, such as a list of licensed inspectors, a number of companies that do sewer scoping, and where and how to test for lead paint, asbestos and other hazardous materials. Plan to take two to five hours off from work and attend the inspection. You will learn a lot more about the property from accompanying the inspector than just reading the report later. Expect that an inspection for the average house will cost around $400 and a sewer scope another $200. This is all money well spent.

There is a neighborhood review clause in the inspection. You may take the opportunity to investigate crime statistics with the local law enforcement agency, determine the time required for your commute to work, check noise levels at different times of the day, and anything else that may affect your quiet enjoyment of the property.

I learned from a client years ago that the best neighborhood review process was to take a couple of hours and go knock on neighboring doors. Ask they people there how they like the neighborhood and what kind of problems might be anticipated. She was exactly right and I've been recommending that process ever since.

Your attitude and that of your broker are very important in the approach to the inspection and how you handle the results. There are three options open to you as you near the inspection deadline:

1. Perhaps you just want to walk away and that is within the bounds of your allowed choices.
2. There is also an option to negotiate with the seller, and minding the timelines is of utmost importance. Sellers in the recession market are already feeling put upon and will likely dig their heels in with requests for repairs. Work through this with your Broker respecting that, but still with a goal of getting the property at a fair price.
3. No house in perfect, and in spite of its flaws you may still love the house and elect to purchase it as it is. Some buyers forget that the original goal was to own a home.

Remember that the inspector is not there to pass or fail the house. The inspector is there to give you an idea of the condition of the house and its elements. You, the Buyer, make the decision to proceed or not.

On July 1, 2010 the State of Washington enacted a number of laws concerning the real estate industry and one of them: WAC 308-408C is all about what an inspector is required to do and what an inspector is not required to do. For a PDF summary of the law as put out by The Washington Realtors®, drop me an email and I'll send it to you.

The Seattle Police department has come out with an interesting crime mapping tool that will certainly be interesting to buyers and also to sellers, homeowners and renters. Part of crime prevention is being aware of it and then taking proactive steps to correct problems by cooperating with your local law enforcement agencies.

Here is a link to the what's called My Neighborhood Map. In conjunction with Bing Maps the Seattle Police Department has put together a wide variety of information besides crime and crime statistics on this site. One can find listings for Art and Recreation, Community Services, Education, Parks, Permits, Public Safety, Transportation and Utilities. This is a bookmark link for anyone who wants quick information for in and around Seattle.

It takes a little orientation to figure out everything that is available on the map but I can see many uses for it besides giving a buyer a link to check out crime statistics in the neighborhood where they are considering purchasing a home.

David Fletcher of Inman News reports that on June 1, 2010 Fannie Mae rolled out a new set of guildelines for lenders to follow. The Loan Quality Initiative (LQI) provides that a borrower's credit score will be "refreshed" one day prior to closing.

What does this mean? Well, chances are, before you found the home you want to purchase you met with a lender and were preapproved for a loan package. Your credit score played in integral part in determining your interest rate and whether or not you would even get the loan. That may have been 60-90 days before your closing. Your credit score was probably refreshed the day your loan officer received the sale from your real estate broker. Now, besides the long wait to get into your new home, what have you got to do? Buy a new car? Shop for furniture? Don't do it. Something even as mundane as applying for a new credit card can lower your credit score. That would be considered an undisclosed liability. 

Fletcher states:

Under the LQI, the lender could delay the closing, increase the interest rate, ask for a larger down payment, or cancel the closing. In some states, Buyer A could lose his deposit.

Brokers need to have this discussion with their buyer clients...and with their seller clients. There are so many ways in the post recession environment for a closing to be delayed.

Buyers need to make sure that they are talking to their loan officer about these issues. It's hard to do with an online lender. Get someone local, someone you can look in the eye and feel confident that they will be there to help you, your agent, and escrow get your purchased closed on time.   

Recently it was announced that the FHA loan program will be reducing allowable Seller contributions from 6% to 3%.   What is a Seller contribution?  A Seller contribution is when the seller of home agrees to contribute funds towards a Buyer's closing costs (or loan costs).  This can include discount points, appraisal fees, loan originations fees, etc.

There is also growing pressure to raise the minimum down payment from 3.5% to 5%.

Even with the coming changes, FHA will still be a fantastic loan option for first time buyers.   The program still allows gift funds from family, friend and/or employers.  The program also allows for state homebuyer assistance programs.

 If you are a first time homebuyer that was thinking of using the FHA program, now may be a good time to talk to a knowledgeable real estate professional or local lender.

What Do You Do If The Appraisal Is Low?

I had a client call the other day, after the sale was negotiated, before the appraiser had been to the house. These were first time buyers, for the most part very nervous as the details of the transaction flow chart moved along.

First, the decision of which house to buy was difficult. I think these young professionals were testing their engagement promises for the first time. Once they had their goals in sync, finding the right house became easier. There were three offers on the property and they really didn't go above the asking price, but they had the best credentials. Still, they worried that they paid too much.

Next there were some worries about a few details of the inspection. Do you ask the Seller and risk losing the house if they won't do the minor repairs? What kind of a job will they do?

Once the offer was negotiated, they were worried about loosing the earnest money. "Not going to happen unless you no longer want to buy the house," I told them. "Oh, We do. We do," they said.

A few days later the phone rang again. "What happens if the house doesn't appraise? We were looking on Zillow and it will probably come in low."  "Well," I told them. "That's not something to worry about until it happens."  I went on to explain that there is wording the contract that says, for one thing, you don't have to buy it if the appraisal is low, but you can still buy it if you can come up with the difference, or you can negotiate with the seller for a price adjustment. Hardly anything bad can happen for the buyer if the appraisal comes in low. And this house has a large groomed yard and a new kitchen and new windows all around.

A quick check of the neighborhood solds presented a picture of fixer homes that had sold recently. Zillow has a hard time knowing much about the windows, kitchens and quality of the landscaping, as they never go to the locations. I predicted the appraisal would come in at value, and it actually was $5,000 over the contracted price. Nothing but blue skies up above.

 For some reason, this young couple was not worried at all as they signed documents. And since closing they've called twice with thanks for the help they received with purchasing this great home.  

In 1990, King County, Washington realizing that the ever-burgeoning population would need a larger more efficient sewage treatment system instituted a Sewer Capacity Charge for all new construction.

As Realtors, we get a lot of questions about the charge and who is supposed to pay for it. The reason  the charge was put only on new homes was because it was the new growth in the county that caused the need for the larger sewer system.  A case of government and good sense going hand in hand.

A home owner could pay the fee at one time, or have it amortized over fifteen years and have the amount added to their normal sewer bill.  Because it was a part of the monthly bill it was often forgotten as a separate charge. Sellers of homes built since 1990 often did not disclose that there was this extra charge attached to the property. A few years ago the NWMLS Forms Committee added a clause to the Purchase and Sale Agreement specifying that:

Charges and Assessments Due After Closing would either be assumed by the buyer , or would be prepaid in full by the seller at closing.

That calls attention to the Sewer Capacity Charge, as it is an assessment that is due after closing and escrow companies will handle the matter according to the choice of the parties to the agreement.

Ask your Realtor to research the sewer capacity charge on a property you might be interested in if it is less than 15 years old. Getting the seller to pay for it may save you a few thousand dollars.  The charge is $49.07 per month if paid over the 15 year term.  There is a discount if you can pay the Sewer Capacity Charge off early.  There is an online method to do so. Just follow the link above.

If you have any other questions any Lake and Company agent will be happy to help you. Just give one of us a call.

At the last Lake and Company office meeting, Ken Steiner of Home Street Bank was the guest speaker and delivered a terrific summary of the 203K loan program and the new Streamlined 203K program.

The Streamlined version is limited to cosmetic repairs and up to $35,000 worth of work. The standard version of the 203K plan covers foundation and structural work as well.

The major benefit of this type of loan is that the seller has no work order worries, and the buyer will have no after purchase expenses. Any work that needs to be done will be paid for by the proceeds from the buyer's loan, so long as the end product appraised value equals or exceeds the loan amount. The work is all done after closing. The buyer is then in possession.

So, you didn't want to buy a fixer, but the location of one is perfect for you. Go the 203K route. Or maybe you want a fixer. Contact a Lake and Company agent for further information. There are a lot of details but with our help and the help of a professional like Ken Steiner, you will find the process easy and rewarding.

Time is running out for those of you looking to take advantage of the government's Homebuyer Tax Credit.  Of course a tax credit is not a reason to run out and buy a house.  However, if you have been planning on buying and now is the right time in your life to do so, you better hurry.   A binding sales contract must be signed by April 30, 2010, and the purchase completed by June 30, 2010 to qualify.

* A tax credit of up to $8,000 is available for First-Time Homebuyers.  

* A tax credit of up to $6,500 is available for Repeat Homebuyers who have owned a home for five consecutive years out of the prior eight years. 

* Homes priced above $800,000 are not eligible for either the first-time homebuyer tax credit or the repeat homebuyer tax credit. 

* Home purchases in 2010 may be claimed on an amended 2009 income tax return.  

Not sure about something?  Have further questions about the market, the tax credit or just home buying in general?  Reach out.  We are here to help.