This edition of the Cornerstone Report contains a number of short items of interest to those of you who toil daily to make a living in real estate. This is a departure from our typical article covering one subject in great depth. We hope you enjoy this new approach.
· Did you know that 33% of real estate contracts get terminated due to issues discovered during the inspection while only 11% are terminated due to issues with the appraisal? Maybe pre-listing inspections have more value than anyone thought. If you are about to list a property wouldn’t it make sense to know now what you will have to deal with later?
· One of the top 10 reasons lenders reject appraisal reports is due to typos and misspelled words. To fix this all appraisers need to do is slow down, review each report carefully, and use spell check. In other words, do what your 8th grade English teacher told you. PS – remember that spell check won’t help you decide whether to use “there” or “their”.
· Here’s a great tip to avoid claims or lawsuits. Before you take on a new client you should do a Google search on him/her. By searching their name and the words “litigation” or “lawsuit” you can find out if this seemingly perfect client has a history of suing people just for the fun of it. If they are lawsuit happy, go the other way…fast.
· Attorneys love to get free expert witness testimony from real estate professionals. During a deposition or a court appearance, the attorney will ask you for your opinion instead of just asking you to confirm the file is complete and accurate. Once you start offering an opinion you are an unpaid expert witness rather than a fact witness. If you find yourself in this situation, just reply that you did not spend any time reviewing the file or anything else upon which you could reasonably base an opinion…then offer to do so if you get paid for your time.
· Would it surprise you to learn that at least one insurance company offers lower premiums for E&O insurance to home inspectors who take at least 100 pictures during an inspection? Why, you ask? Claims data says both the frequency and severity of claims will go down if the inspector takes lots of photos and especially takes photos of areas where everything looks fine. If a claim is filed a year after the inspection claiming water damage, it’s much easier to defeat if the inspector has a picture showing no evidence of water damage existed on the date of the inspection.
· Do you know when it is legally permissible for a real estate broker or agent to sign documents for a client and so the documents are legally enforceable as if the client had signed personally? If not, you should get legal advice before proceeding. The rules of agency can be very confusing and even if the broker or agent truly believes they can sign for their client, they may not be able to do so in a legally binding fashion.
· Are you as familiar with Property Assessed Clean Energy (PACE) loans as you should be? This growing source of financing for energy related home improvements can cause problems for both buyers and sellers since Fannie Mae and Freddie Mac still will not buy loans on properties with PACE liens. As a real estate professional you need to know the ins and outs of PACE loans since your clients depend on you to know and explain this program to them.
· Would it surprise you to learn that more than 99% of all residential real estate appraisals contain adjustments? If it does, it shouldn’t. Home ownership decisions are based on thousands of variables, many of which cannot (and should not) be valued. However, that leaves perhaps a hundred or more that can impact value and require adjustments by an appraiser. Good appraisers are able to identify which attributes need to be adjusted to arrive at an estimate of fair market value (FMV).
In closing, let us repeat something we overheard a wily, old, veteran of several real estate cycles tell a young, tech savvy, wannabe real estate mogul: “The only thing I know for sure about technology is that it helps you make more mistakes faster”.
Go forth and prosper for these are exciting times indeed.