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Active. Home is fully available. Seller may be negotiating a contract with a buyer, but seller can still consider another offer. Contract – No Kickout. Seller cannot accept another contract. Basic buyer contingencies (home inspection) outstanding. Contract. Buyer and Seller are locked-in to a contract. Buyer financial contingencies could still be outstanding. Sold. Title has been transferred from seller to buyer.

Contract with  Kickout.  Seller can accept a  ‘backup’ contract and can ‘kick-out’ existing contract.  Typically used with a home sale contingency.

Contact us anytime with questions about homes in Montgomery County.

The Potomac River.  Yes, I know, you don’t plan on paddling a kayak to work, but the Potomac River shapes the basic road system in Montgomery County.  Glancing at a map you’ll see that Montgomery County shares a border of over 30 miles with Fairfax County in Virginia.  Yet with only one bridge crossing the Potomac River – the American Legion Memorial Bridge on the Beltway – Northern Virginia can be quite a daily drive.  Closer-in locations in Potomac and Bethesda are the most commuter-friendly locations into Northern Virginia.

The Capital Beltway I-495.  One can live ‘Inside the Beltway’ and not be a politician or lobbyist.  Large employers like NIH, the Federal Government, Marriott and others pull commuters in from the suburbs every day.  So if you work inside the Beltway, living inside the Beltway in Bethesda, Chevy Chase, Silver Spring, Takoma Park or Kensington will result in a much quicker commute.  Your challenge:  find a home here you can afford.  As a rule, homes ‘closer in’ are generally smaller, older and more expensive.  What’s more important to your quality of life: a larger home and a longer commute, or visa-versa?

I-270.  I-270 runs parallel to the Potomac River through the center of Montgomery County.  This is the only interstate in Montgomery County going into Washington D.C. and the closer-in suburbs, so it’s packed during rush hour.  If you drive into D.C. or Bethesda, then your proximity to I270 – and your entry point onto I-270 -  determine how quick you’ll get to work.  As a rule, the farther out you are, the more affordable housing becomes.  Here’s the areas closest to I-270 generally going from more-expensive to less-expensive: Rockville, Gaithersburg, Germantown and Clarksburg.

Metro Red Line.  “Hey! I thought that Metro D.C. commuters were all enlightened subway riders?”  Most of us drive to work, but we do have an awesome subway system called The Metro.  Both end-points of the Red Line of The Metro are located in Montgomery County.  Homes in Bethesda, Chevy Chase, Kensington, Rockville, Derwood, Aspen Hill, Silver Spring and Takoma Park have easy access to stops along the Red Line.

Metrobus and Ride-on Bus.  So you’re loving the idea of riding the subway into work, but you can’t find a home that’s walking distance to a station.  Don’t despair.  Check out the Metrobus which is managed by Washington Metro Transit Authority (which also manages The Metro), and Montgomery County’s Ride-on Bus.  Many neighborhoods have bus stops that can quickly deliver you to a subway station.

The Intercounty Connector.  The interstate system here is like a giant wagon wheel with all main roads radiating out of Washington D.C. into Maryland and Virginia with the Beltway circling D.C.  A drive across the County currently requires a drive down to the Beltway, across the Beltway, then an exit to go north.  Trust me – this is horrible.  That will all change with the opening of the ICC.  The first sections of this toll road are opening in 2011.  Eventually, it will connect I-270 to I-95 in Prince George’s County.  Depending on where you work, this could make many neighborhoods a quick commute.  See details and the progress of the ICC on their website.

If you are relocating to the area, contact us and we’ll help guide you to the best commuter friendly neighborhoods that match your job location and budget.

The internet has revolutionized the home buying process.  In the past, real estate agents were gatekeepers of critical real estate data:  homes available for sale, past sales in a neighborhood and more.  No more.  Consumers can access information from a countless number of sites without the need of an agent.  This is definitely good for buyers, sellers and the real estate industry.  Unfortunately, consumers now have a new challenge when navigating a tidal wave of home sites — there’s a lot of bad information out there.  To help find the good and avoid the bad, I’ll explain the basics of web home searches and review some of the popular home search sites for Montgomery County and the Metro Washington D.C. area.

The basics – Multiple List Systems (MLS)

The very best, most complete and most accurate database of home sale data is a “Multiple List System”.  This is the database managed by real estate agents to enter new listings, record price and status changes and to record home sales information.  It’s the gold-standard for an area’s home sale information.  There isn’t a single MLS in the U.S., rather MLSs are managed throughout the U.S. by local professional real estate boards.  MRIS (Metropolitan Regional Information Systems) is the MLS for the Metro D.C. area covering D.C., much of Maryland and Northern Virginia.  Only real estate agents can access an MLS directly — home buyers and sellers cannot.

The basics – How home information gets to public websites

Don’t scroll down to skip this section! Yes, I know.  Few things in the universe are less exciting than understanding how home information travels on the web, but it’s important when evaluating a home search site.  Many sites obtain their data from an IDX (Internet Data Exchange) data file from an MLS and follow the MLS’s specific rules for presenting home data.  When an agent updates an MLS entry, IDX-supported sites are updated automatically.  These sites tend to have the most complete and accurate home search data.

An agent can take an extra step to syndicate listing information to other sites.  Listing syndication is relatively new, there isn’t a single repository for syndicated listings and agents aren’t required to syndicate listings.  Most important – this process is not managed by an area’s MLS.  Sites that rely on syndication tend to have incomplete and inaccurate listing data.

Great Home Search Sites

MoCoRealEstate.com.  I have to admit, I was a little nervous about how our site would do.  I was relieved to find that all 72 listings were present except for three listings.  No extra listings were included.  The three missing listings were located in one new condo development.  These three listings were missing in other sites (below), so MRIS must have an issue with these three particular records.  Our site is updated via an IDX feed.

Realtor.com.  This site has a special “IDX-like” update from MRIS.  It had all 72 active listings except for the same 3 missing on our site.  This site also shows all homes under contract, so the search indicated 99 listings.  What I don’t like – you really have to look to see the home status.  Most buyers will think that all homes are available for purchase when many aren’t.  It’s accurate, but not as consumer friendly as it could be.

HomesDatabase.com.  This is maintained by MRIS, so one would think this would be the very best website for local listings.  Like my site and Realtor.com, it had every listing except for the same 3 missing on the others.  It also includes homes under contract.  Like Realtor.com, it’s very hard to see the status misleading buyers.

Long&Foster.  L&F has a nice search site supported by IDX.  The site reported 84 active homes for zip 20814 which was too high.  The difference – several lots and two commercial listing were included which is OK.  There were two listings with MRIS numbers that simply don’t exist.  This site also includes homes under contract which is useful.  And, unlike Realtor.com and HomesDatabase, the status is prominently displayed.

Good Home Search Sites

Remax.com.  Re/Max indicated 182 active homes.  This count was inflated since rentals were included.  Take out the rentals and I got 99 homes.  This included active homes, commercial properties and homes under contract.  All active homes where here except for the 3 missing on other sites.  All homes under contract were shown as ‘active’ which is clearly misleading to home buyers.

Redfin.com.  Redfin has very nice search functionality.  The quality of the data isn’t as high as others, however.  Several other zips were included in the 20814 search.  Take out the extra listings, and 67 homes were listed for 20814.  Interestingly, they captured the “mystery 3″ that other sites missed; however, 5 other listings were absent.  This surprised me given that Redfin is very tech savy company.

Horrible Sites to Find Homes

Zillow.com.  Zillow relies on listing syndication to populate its database, not an IDX feed.  95 listings were shown as available in zip 20814.  This didn’t seem too bad until I looked at the data.  Only 36 of these were legitimate, active home sales.  None of the rest were active listings.  So, they only had 50% of the available listings and 59 other homes that aren’t available to home buyers.  Zillow has other interesting home sale information, but I wouldn’t look for available homes here.

Trulia.com.    Like Zillow, Trulia’s database is populated from listing syndication.  Data quality is rotten here as well.  Trulia showed 106 available homes, yet only 45 of these are really available; the other 61 homes are not.  I’ve seen listings that sold two years ago indicated as “active” on this site.  Like Zillow, you may find good real estate information here, but this is a terrible place to search for available homes.

RealtyTrac.  ReatlyTrac lists foreclosures and distress sales.  If you pay to access property addresses, you’ll see notifications of homes with foreclosure notices, auctions and properties owned by banks.  This site is problematic for two main reasons.

#1 – Consumers are led to believe they can buy a home that is in distress or has received a foreclosure notice.  You cannot.  You can only buy from a homeowner if they want to sell.  So the best way to see all homes for sale – distress or not – is to go to regular home search sites listed above.

#2 – Data quality is beyond horrible on this site.  I’ve seen many properties listed as ‘bank-owned’ that have sold months before.

Find your next home

Any agent in the Metro D.C. area can setup tailored, timely and accurate home alerts using MRIS.  Contact us anytime to be notified of homes that meet your specific needs.  You can also search on one of the better home search sites listed here to find homes for yourself.  Do you have comments or wonder about the quality of other sites not listed here?  Make a comment and let us know!

The typical home inspection contingency allows a buyer to either negotiate home inspection items or void the contract and have his escrow deposit returned within a negotiated time frame (usually 7 to 14 days).  Absolutely no reason has to be given for voiding the contract:  none, nada, zip.  Is that fair to buyer and seller?  Absolutely.  Ultimately, only the buyer’s opinion of the property matters.  Imagine what would happen if the buyer had to provide a “legitimate” reason to void the contract.  A buyer’s and seller’s definition of “legitimate” would rarely line-up.  Since the buyer is the one taking possession, his opinion is the only one that matters.  Is this a way for a buyer to back out of a contract for no reason?  Yes, it is.  It does happen, but not that often.

A buyer has only one opportunity to inspect a home

Typically a buyer will have only one inspection from a licensed home inspector, but a buyer could have several at his discretion provided they are completed within the agreed-to time limit.  The best strategy is to have the primary home inspection completed as early as possible.  If that inspector discovers evidence that requires more specialized inspections (e.g., evidence of potential structural issues, mold, etc), then a buyer has time for follow-up inspections.  I’ve also had a general contractor come through a home to review specific issues to help estimate the cost of repairs.

A seller isn’t required to fix anything from an inspection — everything is negotiable

Not true.  Both standard contracts used in Maryland (the Regional Contract and MAR Contract) have a “Property Condition” paragraph that states that the “Seller warrants that, except as otherwise provided, the existing
appliances, heating, cooling, plumbing, electrical systems and equipment will be in normal working order as of the Possession Date.” If the buyer’s inspection reveals that the garbage disposal and two GFCI outlets aren’t working, then the buyer only has to give the seller notice to repair these at the seller’s expense – no negotiation required.  Same for a leaky faucet or any other item that falls under the Property Condition paragraph.  What about the crack in the drive and the roof leak?  These repairs must be negotiated between buyer and seller.

Update December 2011 – standard contract language for the Regional Contract is changing removing this ‘property condition language’!  Contact us for the current language.

A seller must resolve any issues discovered at final walk-through before settlement

This one depends on the item.  The seller is required to deliver the home in the same condition as of the Contract Date.  As a common example, a buyer may only notice that hardwood flooring is much darker under area rugs removed by the seller after he has moved out.  The seller is not required to remediate since the flooring hadn’t changed since the contract was written (hint – always look under rugs before you present your contract!).   If the furnace or clothes dryer isn’t working properly at walkthrough, then the seller must address these items regardless if they were working during the home inspection.  Again, the Property Condition statement is the guide — electrical, systems and plumbing must be in normal working order as of Possession Date.

A seller is responsible for existing issues discovered after settlement

In most cases – no.  When a buyer takes possession of a property, there is no warranty provided by the seller.  After settlement, the home — and all of its issues — are the buyer’s responsibility.  A buyer can buy a home warranty from a third party for around $400 to help protect them from problems with systems, appliances and plumbing; but a buyer rarely can go back to seller to repair defects that were present in the home before the purchase.  This re-iterates the importance of a rigorous home inspection before possession transfers.

Here’s the exception.  What if the seller knew about material issues with the home that an inspector couldn’t readily observe and didn’t disclose to the buyer?  This is a latent defect, and the seller is required to disclose all known latent defects to the buyer.  Pin hole leaks in the plumbing or a basement that leaks water in certain circumstances could be good examples.  The difficulty for the buyer is to prove that the seller knew about these problems and did not inform the buyer.  If the buyer can prove the seller had this knowledge (from speaking to neighbors, previous owners, etc.), then they would need to get lawyers involved and then work this through the legal system.

Set your expectations properly before your contract is ratified

A sales contract specifies all responsibilities for the buyer and seller for a particular sale, so these guidelines will not apply to all contracts.  The key lesson here:  understand the contract language when you are negotiating a sale.  Don’t zip through the paperwork and assume that you know who’s responsible for what. If you are a seller and you know that certain appliances or systems have issues, either fix them, or make sure they are sold “as-is” in your property inclusions.  The bottom line:  don’t wait until after your contract is ratified to think about how you will handle issues that are inevitably revealed by a home inspection.

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Having experienced, expert guidance to ratify a contract and get it to closing is imperative for a smooth sales process.  Contact us when you need representation to buy or sell a home in Montgomery County, Maryland.

• A ratified contract must be in place by April 30th, 2010 and close by June 30th
• Home purchases over $800,000 do not qualify
• A buyer must be in their current home 5 of the last 8 years
• The buyer’s income must be below $125,000 or $225,000 for married couples
• The credit can be claimed on your 2008 or 2009 return

Unfortunately, there’s quite a bit of fine print with this credit.  The National Association of Home Builders and IRS have FAQs to review.  You should also talk to your accountant to make sure you qualify.

Contact us if you are planning a move in the coming months and we can help you get started.

Steps Tied to the Ratification Date

• Your contract is ‘Ratified’ when the buyer and seller agree to the sales price and all terms. It typically takes 30 to 45 days for a contract to settle.
• Several activities are tied to the ‘ratification’ date. Don’t confuse this with the ‘Contract’ date which is the date the buyer submits the offer to the seller. It can take three hours to three weeks or more to finalize negotiation to obtain a ratified contract.
• The typical contract specifies that the seller will insure that all existing appliances, heating, cooling, plumbing, electrical systems & equipment will be in normal working order as of Possession Date. A typical home inspection contingency gives the buyer time to have one or more professional inspections. If the buyer’s inspection discovers any of these types of issues, they can provide notice to the seller to make repairs at the seller’s expense — no negotiation is required. The buyer can negotiate other items for the seller to repair or to provide a credit. Or, the seller can simply void the contract and have his escrow deposit returned.
• Once the home inspection contingency expires, a buyer cannot void a contract based on the home inspection contingency.
• In Maryland, a home buyer also has five days to review the community’s HOA documents. If the buyer doesn’t like the HOA’s restrictions, he can void the contract within this review period and have his escrow deposit returned. This contingency starts once the HOA documents are delivered which is typically soon after ratification date.

Typical Financial-Related Contingencies

• The buyer’s escrow is deposited immediately after ratification. This deposit is applied to the downpayment at settlement.
• The buyer is typically required to apply for financing within 7 days or less of ratification. Although the contract gives the buyer time, they really should have applied before the Contract Date. By selecting a loan officer and providing all information up front, they’re ready to go once a contract is ratified.
• A typical contract specifies the days allowed to get final loan approval for this loan. The loan’s underwriter will have reviewed the contract and verified the buyer’s income, debt, cash and credit scores. At this point, the loan is fully approved with a couple of conditions (proof of homeowner’s insurance, termite report, etc).
• If the buyer doesn’t obtain financing within the deadline, the contingency doesn’t automatically expire.  This contingency will continues all the way to settlement. However, after this contingency expires, the seller can give the buyer notice to remove the contingency, or he will void the contract.
• The typical appraisal contingency works the same way.  It will continue unless the seller gives the buyer notice to remove it, or the contract becomes void.
• If the appraisal comes in below the negotiated price, the buyer can proceed as is, or negotiate with the seller to accept a price no lower than the appraised value. The seller is not required to accept a lower price. If the buyer and seller can’t agree, the contract becomes void and the escrow is returned.

Steps Before Settlement

• The typical contract requires an inspection to verify the property is free of active termites or wood-destroying insects within 30 days of settlement. The property is also to be free of damage from insects. If these are discovered, the seller typically repairs this at the seller’s expense.
• If the property is on private well and septic, these inspections are also conducted within 30 days. The seller is required to deliver potable water and a working septic to the buyer and must make any repairs at this expense if needed.
• Although not specified in the contract, the buyer and seller notify the utilities of the upcoming change in ownership.
• Lastly, just before settlement – that day or the day before – the buyer takes a final walkthrough of the property. The main purpose of this walkthrough is to insure the property is in the same condition as it was on ratification. If any of the systems, electrical, etc aren’t operational, this is the last opportunity for the buyer to have the seller resolve the problem.

These are the steps in a typical contract, but the process can be more or less complicated given the specific terms negotiated.  For example, a seller could rent-back from the buyer after settlement, there could be additional inspections, the buyer could have a home to sell, etc.  Buyers and Sellers benefit from experienced representation to insure that their contract protects their interests and needs.

Contact us anytime with questions on structuring a contract or the real estate market in Montgomery County.

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Closing Costs Estimates for Buyers

Here’s the top four expenses for home buyers in Montgomery County, Maryland:

1. Transfer and Recordation Taxes.  The state of Maryland and Montgomery County collect taxes that total between 2.2% and 2.5% of the total purchase price.  This is typically split between buyer and seller, so estimate this at 1.2% of the purchase price.
2. Title Insurance.  This insurance protects you and your mortgage provider from any defects in title which crop up after settlement.  The details of a title insurance is an article on it’s own.  I find that 0.4% of the purchase price is a good estimate.
3. Prepaids and Escrow.  Escrow accounts to pay for future property taxes and insurance will be setup.  The amount of property tax that you’ll pay at settlement depends on the timing of settlement.
4. Loan Charges.  I typically see around $700 for an appraisal and $600 for underwriting and document preparation.  However, this can vary widely by mortgage providers.  When comparing different loan programs, don’t simply compare the total closing costs estimated.  Item’s 1 – 3 are calculated by the settlement attorney and will be the same regardless of the mortgage provider.  Details of this item will be covered in a separate article.

A buyer will have other charges at settlement that often total between $1,000 and $2,000.

Closing Costs for Home Sellers

Costs for home sellers are more straight forward:

1. Brokerage Fees. This is the fee that compensates the listing and buyer agent to market, service and eventually close a sale.  The amount of the commission is negotiated between the broker and homeseller and is typically between 5 and 6% of the sales price.
2. Transfer and Recordation Taxes.  Assume this is split between the buyer and seller, so estimate 1.1 to 1.2% of the sales price .
3. Mortgage Payoffs.  All loans secured by the home’s title – including all home equity loans – are paid off at settlement.

Understanding costs associated with buying and selling in Montgomery County is essential when planning a sale.  Contact us anytime when planning your next move.