Please review the blog posts for answers to other relevant real estate questions.
 
What is market value?
How does having a licensed agent benefit the seller?
How does having a licensed agent benefit the buyer?
What is the purpose and scope of a home inspection?
How are mobile homes treated in a real estate transaction?
What is a buyers market? a sellers market?
What is a land contract?

What is market value?

There are many variations on the definition of market value. Fannie Mae and Freddie Mac, the biggest players in the mortgage resale market use the following definition relative to appraisals of real property securing a mortgage intended for resale.

“The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus”.

Note that market value can and will change over time. And this definition assume that a valid marketable title is being conveyed and that both buyer and seller are typically motivate, well informed and acting in their own interest. Finally, the market value definition does not account for creative financing or seller concessions.

How does having a licensed agent benefit the seller?

Under most listing agreements, the seller is required to pay a commission to the agent’s brokerage if the agent produces buyer for the property. A fair question from the seller’s perspective is does the benefits of having the agent’s services justify the price to be paid.

In most cases, sellers find it difficult to property price and prepare their property for market. Agents have tools to assist sellers such as a Comparative Market Analysis which is of considerable benefit to coming up with an asking price that is realistic and will bring in offers. Many sellers overvalue their property which will reduce the attractiveness of the property to buyers.

It is normally the seller’s responsibility to select the closing agent – title company or attorney. Agents are familiar with the various title agents and can make recommendations as to who would best handle the subject property.

Preparing the property for sale is another area in which an agent’s perspective is of value. An agent will know what kinds of things will please buyers and what kinds of things that will discourage them. Increasing a property’s “curb appeal” and “staging” the interior to best showcase the property are two important aspects.

Listed properties are placed in the Multiple Listing Service using a consistent set of information and format. This enables potential buyers to make a fair comparison of each property’s characteristics. The MLS also has the most current information as agents who are members are required to add new listings, update listings, and remove listing when sold. The MLS data are the primary source of other Internet resources like Zillow and Trulia although the data in these secondary sources is not updated in real time as the MLS itself is. Agents will also be able to develop and implement pinpoint marketing strategies for listed properties. For example, vacation properties can be marketed directly to areas from which people typically purchase vacation homes.

As offers come in and contracts are being written, the agent is of significant value in helping to evaluate them. A purchase contract can have many dimensions and it helps to have an agent with experience to evaluate the pros and cons of an offer. The agent can also help in developing counter-offers in the case where an initial offer is not acceptable as it stands.

Once a contract is in place, the agent helps with the management of the various inspections and the results of them. In some cases, inspections reveal items that the seller needs to address which, in other cases, inspection results may include minor items that a sophisticated buyer should expect.

The agent’s work extends through closing and beyond as required.

How does having a licensed agent benefit the buyer?

Many buyers misunderstand the relationship of a licensed agent. That relationship can differ from one state to another and, in Florida, has changed over time. Under current Florida law, although the agent working with the buyer is typically compensated by receiving a share of the commission earned for selling the property, the agent does not owe a higher allegiance to the property seller. This relationship, termed transaction broker, applies to all licensed Florida real estate agents unless a different relationship is agreed to by the customer in writing.

An agent is also able to provide specific guidance on similar properties to those the buyer has expressed interest in. Buyers relying on advertisements and/or Internet websites are likely not aware of the full range of similar properties that may be available.

An analysis of “comps” – comparable properties in the area that are currently on for sale as well as properties in the area that have sold in the last several months, can help the buyer is determining a fair offering price for the selected property. The comparable analysis is similar to the CMA done for sellers – it is an attempt to quantify the likely market value of the property under current conditions.

The assistance of an agent is also of considerable value in preparing the contract, presenting it, addressing possible counter-offers and carrying through until a ratified contract is reached. There are many moving parts in a real estate contract and even simple contracts run up to 10 pages these days although some of the content may not be relevant to a specific transaction.

Arranging for inspections including recommendations on qualified inspectors as well as addressing the results is another critical areas for a buyer. If deficiencies are noted, how should they be addressed? Again, the experience of the agent in dealing with similar situations in the past makes it more likely to result in a solution that is fair to all sides.

Finally, an agent can help with the logistics of the closing itself, whether it takes place locally or is conducted via mail.

What is the purpose and scope of a home inspection?

The primary purpose of a home inspection is to identify potential issues with the property that are not readily observable by a typical buyer.  The typical inspection covers the structure of the building as well as the major systems, e.g., exterior surface and components, structure, roof, plumbing, electrical, heating and air conditioning, laundry, kitchen, and other areas.

Results need to be analyzed within the context of the property being purchased. For example, an older property is not likely to have certain electrical features that would be required for a newer property. Also, although an HVAC system may be old, as long as it is operating properly, that is considered to be acceptable for a home inspection. Presence of older equipment and/or an obvious older roof should be factored into the price of the contract not brought up as an inspection issue.

How are mobile homes treated in a real estate transactions?

How mobile homes are treated varies from state to state depending upon the laws of the state. In this discussion, Florida law is assumed to apply.

Some mobile homes are located in mobile home parks in which a monthly lot rent is paid. The lot rent may include services such as grounds maintenance, water and sewer, etc. but the only interest a mobile home owner has in the lot his mobile occupies is as a tenant. The mobile home is treated as personal property. Sale of such a mobile home is not considered a real estate transaction as no real property (land) is involved. Most sales of mobile homes in parks are either done by individuals or through the management of the mobile home park. Each part of a mobile home has a title issued by the Florida Department of Highway Safety and Motor Vehicles. A double-wide mobile, for example, would have two separate titles.

Mobile homes located on individual lots are typically conveyed along with the real property. The deed itself conveys the land and permanent improvements, e.g., wells, septic tanks and fields, etc. while ownership of the mobile home itself is done by transferring the title or titles to the mobile, the same as would be done with any other motor vehicle. Purchasers of a mobile home should make sure that they get the title or titles for the mobile home.

For tax purposes, the value of the mobile home on a property is assigned a taxable value by the Property Appraiser and ad valorem real estate taxes are applied to that amount. The mobiles are given RP (real property) identifications but still have titles.

It is important to note that, if the titles of a mobile home are not properly transferred, it will make resale of the property more difficult in the future. In addition, a homestead exemption will not be issued unless both the mobile home and lot are in the same names.

What is a buyers market? a sellers market?

A buyer’s market occurs when there are a larger number of properties on the market than normal which results in a downward pressure on prices as well as a longer than typical length of time between a property being listed and it being sold. On the other hand, a seller’s market exists when properties sell more quickly at prices close to or in some cases about the asking price.

In a typical market, at any given time, there are about 6 months of properties available in the market. That means that, if no new listings are added, the rate of selling will exhaust the available properties in about six months.

There are many factors that affect the market for real estate; the national economy, local economy, availability and cost of financing, seasonal conditions, popularity of a particular neighborhood, etc. In Citrus county, one of the facts that affect the real estate market is the strength of the Canadian dollar compared to the US dollar since many properties here are owned by Canadians.

The market tends to have some built-in adjustments as well. For example, during a buyer’s market, downward pressure on prices, fewer properties will enter the market for sale and some older properties may be torn down. During a seller’s market, more properties will enter the market and new construction will also become more of a factor.

What is a land contract?

A land contract, also called a contract for deed is a sale in which the deed to the property sold is not conveyed at closing but only after all of the terms of the purchase contract are fulfilled.

A land contract is considered to be risky for the buyer for a number of reasons. First, since the deed is not delivered until all of the contract conditions are strictly met, the buyer can inadvertently lose his or her entire investment for a single late payments. Another factor is that, as the seller retains the title, an unethical seller can encumber the property by taking out a loan. While the seller would be contractually obligated to provide title at the end of the contract, if that is not possible, the buyer would have limited options.