House Buying Tips - getting a good deal
This is buyer’s market though market is heating up from my observation in past month. When there are more than one serious buyer making offers on a house, the successful buyer pays more for the house. The more serious buyers there are, the higher the price paid. Its possible that recent uptick in buying activity is due to seasonal considerations. People like buying houses in time to close in August so kids go to new schools by September. I suspect that this is more the case rather than a bottom on housing prices on Long Island. I note, however, that California has had 3 months of declining inventories and ‘as California goes, so does the nation.’ Declining inventories is better for the market (not to state the obvious) so possibly LI can see bottom into 2010 (let us all hope) which could mean that fall/winter 09 could still be the best time to buy something. However, we don’t have solid forecast on interest rates and they’ve moved up very fast in past month. Figure a point in last month and on a $300K mortgage, that’s $3K a year/ $250/month. Increasing interest rates will hurt residential real estate which is foundation of consumer spending which represents 70% US economy. The govt.’s goal is to keep rates down to prevent this but protecting the dollar / avoiding inflation by necessity could undermine these efforts. Bad news for everyone to extent this becomes real.
Market timing is one consideration for purchasing residential retail. Another way that someone can secure a good deal in any market is buying a house that is distressed. While there are a large amounts of foreclosures on the market, it isn’t necessary to ‘search the foreclosures’ to take advantage of this or to ‘buy on court house steps.’ That can work but most people don’t have the time and interest to go this direction. Please bear in mind that bank owned properties tend to enter the market through real estate agents anyway as banks naturally want as high a price possible. One way to spot distressed property is to pay attention to vacant houses. Buyers have a very tough time visualizing a ‘home’ when looking at an empty house. This by itself means ‘fewer offers’ which means better price for successful buyer. Houses with ‘curb appeal’ get more offers. When someone pulls up to house, they feel ‘I could live there’ and are open to ‘making it work’ as they look at the house. If there is a nice lay out and if someone has an apple pie in the oven and ensuing great smells, that house is going to get more offers. On the other hand, if that house as an unkempt lawn and a nasty yard and otherwise lacks ‘curb appeal’, its not getting a lot of offers. If it needs paint and other updating, there is real potential to get a good deal. You could wind up being only serious offer in a year with a very motivated seller.
What you want to avoid with a house that ‘needs work’ is the proverbial ‘money pit.’ Cosmetic repair is always fine - you are looking for solid structure and to get a realistic budget of what it will cost to get up to speed. I only look at this from a dollar and cents perspective and look to get a 3-5 fold return or more. For instance, if client can pick up house for 300K and put in 20K in repair, I am looking for house to be worth $360-400K at end of spending the 20K. That requires a little bit of speaking with contractors and getting a ‘feel’ for it and possibly living in a house that feels like a construction project for a few months but many people are willing to make sacrifice now to enjoy more financial security later.
Please call/email any time.
Best, Chris
Christopher J. Litrel
Attorney at Law
827 Wantagh Avenue, Wantagh, NY 11793
(516) 342-5880 Wantagh Office
(631) 368-4747 Home Office (516) 429-5937 mobile
(877) 429-5749 toll free (877) 429-8509 facsimile
Real Estate, Business, Estate Planning & Asset Protection
Client Articles @ http://blog.wealthhealthlaw.com
Frequently Asked Questions
Mediation
- What is the difference between Mediation and Legal representation?
- How is this different?
- Does it work?
- How is mediation different than practice of law?
- How do I know if I need a mediator or attorney?
- Can you do both legal representation and mediation for same case?
- If you are paid as an attorney, why would you care about saving your clients legal fees?
What is the difference between Mediation and Legal representation?
As an attorney, I represent one side of a dispute. As a mediator, I represent the dispute itself.
It is very different. The legal process requires one to advocate for one side and use all ethical and legal means to advance the goal and agenda of one side. Through mediation, a trained mediator works towards agreement between both parties so both parties win.
In certain circumstances, it absolutely works. Disputes between people begin as seeds of doubt and mistrust that when allowed to take root can easily grow into a very expensive legal cases.
How is mediation different than practice of law?
Think about the following business dispute. Two sisters are fighting over one orange. Both want the entire orange and both insist that they get the whole orange and not a portion of the orange.
In the legal system, each sister would retain her own attorney and the attorneys would begin a formalized and expensive fight over the orange. At the end of the day, one sister would win but factually both sisters will have lost through increased personal anger towards each other and large legal bills. The financial and personal costs of the legal battle will exceed the value of the orange.
A trained mediator through the mediation process instead would discover that one sister wants the orange because she wants to use the rind to make orange marmalade… and that the other sister wanted the pulp to make orange juice. A trained mediator would prevent hostilities from increasing; address the dispute so both parties win; all at significantly lesser costs.
How do I know if I need a mediator or attorney?
Typically, my clients contact me as an attorney. I will always recommend mediation when it appears that mediation will better serve my client than legal representation.
Can you do both legal representation and mediation for same case?
Sometimes I begin disputes as legal conflicts and work towards settlement through applying mediation skills. Such an approach is risky in that it requires the other attorney and client to be reasonable. Fortunately, the cost of their legal fees and the risk of loss in court often results in even the most recalcitrant opposing side becoming more reasonable. This is often thought of as using a lawsuit to bring the other side to the table when nothing else works.
If you are paid as an attorney, why would you care about saving your clients legal fees?
From a business sense, my clients tend to stay with me over the years plus tend to refer me to other people.
From a personal sense, I have a deep desire to help people succeed and recognize the limitations of the legal system in achieving my client's goals. I also believe in 'voluntary simplicity' which is a lifestyle that minimizes consumption and the pursuit of wealth and material goods in order to attain a simpler but more meaningful life.
Will Drafting For Attorneys
To: Litrel@optonline.net
Dear Chris,
Thanks for your help! My clients are married, early sixties, own their house in Bayport (outright) and have modest (five figures) savings and investments. Additionally, they have a significant collection of model trains and other historical toys that are worth considerably more. They will leave their property to the other (I love you will) and eventually all to their three children in equal shares. In preparing their wills, is their a necessity to address their collection outright or can I simply make it part of the residuary bequest? Also, they have time share in Florida that they are considering gifting to their children who use it more than they do....will a gift tax return be required? Sincerely, JM
Dear JM,
Collections are sometimes valued considerably more by the owner than what the market will eventually pay. As such, we are unclear as to the value of the estate. In your next client conference, you may want to explore valuation and inquire whether certified appraisals exists. This may have estate tax ramifications depending on the value of the house.
As a general matter, you should consider making all personal property a pre-residuary bequest. For instance, when both parents die, and the collection passes to the children, there will a period of estate administration. As you know, the estate is an indpendent taxpayer at moment of decendent's death. The estate will not have a standard deduction - unlike an individual. By making personal property a pre-residuary bequest, the children may avoid taxes that may otherwise be due. Specifically, if during the administration period, the executor pays out part of the residuary estate, this will be taxable to the beneficiary as income. So if a valuable train is given to one of the children that is worth $5,000, that child will owe the tax on the train. By making the train collection a pre-residuary bequest, this can be avoided.
On the time share, the gift tax return will depend on its value. If they are gifting it in equal shares to the children, they can gift (in 2008) $12,000 value to any one person. In this situation, each parent can gift $12,000 to each of the 3 children for a total value of $72,000.00. If the value of the time share is greater, than arguably a gift tax return will be due but taxes will likely not be due as the amount of gift greater than $72,000 can be deducted against the $1,000,000 lifetime exemption for each parent (total $2M). This will be two gift tax returns -[ I recomend Tom Megale, CPA to handle this in Wantagh, NY if your client doesn't have a regular accountant (516) 348-2380 - very good service and fees.]
Don't forget there is an unlimited marital deduction so we are looking ahead on some of these tax issues since both parents are presently alive.
As a practice tip, take a look at the title insurance policy on the time share and give that company a call. Very often they have an easy program to transfer title.
I'm not sure whether time share in Florida will be considered real property or personal property. You'll need to check this out. But you want to avoid probating real property in Florida if you can. Property held in other states/counties will need to be probated there....and Florida can be very expensive...I believe its $1250 just for the probate filing fee....
Be well, Chris
House Prices
The typical law client is either buying a house or selling a house or re-financing an existing house and trying to figure out whether it is a smart move or not. If Mr. Smith buys a house for $200K this year and its worth $225k next year - that's a smart move. If its worth $175K next year, that's not a smart move.
Factually, house prices on national level lost 8.9% in value in 2007. So a $400K house lost $35,600 in value in 2007. Homeowner's equity fell below 50% for the first time since 1945. Clients ask me 'is this a good time to buy?' Will prices continue to go down? Is this the bottom of the market?
If I knew the answers to these questions with absolute certainty, I'd probably be doing something else besides practicing law in New York. I have my opinions, however, and with grateful acknowledgement to persistent clients, I'll put them in writing for their review.
I believe home prices on Long Island will continue to move downward for next several years. The continued tragic devalution of the dollar may mitigate this to some extent so that prices may not move down as quickly in terms of dollar prices but real value of residential real estate will continue its downward move.
"But my real estate agent said now's the time to move up to a bigger house!" As conventional wisdom says, 'never ask a barber whether you need a haircut'....and similarly 'never ask a realtor if you should buy a house."
So for law clients who are renting their homes.....there are many reasons why purchasing in this market makes sense....if you intend to hold long term. If, however, you are thinking about moving up and do not have compelling reasons to do so at this time, my advice is to wait. If your 300K house loses 10% of value in next two years - that's a 30K loss. If you trade up that house at this time and buy a $600K house, that same 10% loss is a $60K loss.
If you are thinking about retirement but don't want to sell at this time because you want to let the market 'come back', you should consider how many years you are willing to wait. The tremendous liquidity of past several years took the form of ridiculous lapses of lender underwriting standards...in other words, if you had a pulse, you could get a loan. The loan programs were such that anyone could buy a home....including people who perhaps should not have been homeowners. More buyers in the market is more demand for houses is higher prices for those houses. This is one reason house prices went up so high and so fast. Now these same people cannot service their mortgages and despite the promises of politicians scrambling to keep (or get) high prestige government jobs, little can be done to cure the prior year's excesses except to let the markets take their natural course and for real prices to come down....perhaps significantly. Look for more foreclosures and prices coming down for the next several years.