Connecticut Real Estate Blog - Real Real Estate in CT

I just had to tell someone that their agent lied to them.  I didn’t want to do it but it was true.  Here’s the story…

I get a call from a guy who is a friend of a friend.  He just put in an offer on a house but he doesn’t trust his agent, for many valid reasons.  Our friend referred him to me and we spoke.  He told me that he didn’t have an exclusive buyer agency contract so I was free to talk with him. 

I gave some advice on the house he put an offer in on - like how to check the town’s records to verify square footage, taxes, etc.  I asked if the agent had run comps - no.  Had the agent asked about the status of the leases (it’s a rental) - no.

His offer on the property was rejected and so we made plans to work together.  I started to send him listings and there were two properties that he really wanted to see.  I set up showings for the weekend.

I get a call the day before the showings and the buyer leaves me a message telling me that he found his exclusive buyer agency agreement - he didn’t remember signing it - and it’s good until August.  He’s not sure what to do. 

I call him back and the story gets better.  The buyer called his agent about the two properties I had sent him and the agent claims the properties are no longer on the market.  I say to the buyer, “That’s odd.  Normally I get a call from the agent saying the properties are under deposit if I have a showing scheduled.”  The buyer says to me, “Could he be lying?”  I say, “Well, let me check on the properties and get back to you.” (Note: Legally, one agent cannot interfere with another agent’s client, so I have to be very careful about what I say.)

I call both listing agents - two different companies.  According to both agents, both properties are still on the market and neither one has received any offers. 

I call the buyer back and tell him this.  We talk for a little while and I recommend that he confront his agent about the situation, while still giving him the benefit of the doubt.  When I finally heard back from the buyer, he said that he went to see one of the properties, liked it, and put in an offer.  He told me that the agent claimed that one of the properties was originally listed in another town and that’s why he couldn’t find it, but he didn’t address why he hadn’t found the other property.  Either the buyer believed him, wanted to believe him or didn’t want to deal with having to fire his agent. 

So, I had to tell the buyer that their agent lied to them.  Why would an agent lie to their client? 

• The agent practices dual agency and really is working for the seller.
• The agent is primarily a listing agent and wants to work mostly with listings - buyers are too much work.
• The agent wants to sell the buyer one of his properties and will steer buyers to his listings or in-house listings.
• The agent doesn’t think the buyer is serious and so doesn’t want to spend that much time with them.
• The agent is incompetent - and yes, agents who have been around for 30 years can still be incompetent.
• The agent is in it for themselves.

Now that the buyer is faced with picking an agent who will actually represent their interests, show them all properties on the market, and fight to get them the best deal possible, and an agent who is a warm body and who lies to them, the buyer picks the lying warm body. 

I’ll never understand…why would someone entrust the largest purchase of their lifetime to a weasel? 

Needless to say, I am disappointed but mostly for the buyer.  He will get a bad deal and will have a bad experience.  And I will hear all about if from our mutual friend.  I can do nothing but sit back and give guidance from afar, knowing that I would have done a much better job. 

This is a great Buy Vs. Rent Calculator, courtesy of the New York Times.

This post on fair housing is appropriate for the month of April for a few reasons:

• April is Fair Housing Month
• The Department of Housing and Urban Development (HUD) recently released its 2006 annual report called “The State of Fair Housing.”
• I just began reading Susan Eaton’s book, “The Children in Room E4.”  The book is primarily about the state of public school education, focusing on a particular child at Simpson-Waverly school in Hartford, CT.  However, Susan Eaton does a great job of laying the foundation for and explaining the reasons why a city like Hartford is so segregated - including pointing to the housing steering and redlining which drove many whites out of the city and kept blacks and Hispanics in the city.  I thought her book would give some historical context to the topic of fair housing.

According to the HUD report, there were over 10,000 reports of housing discrimination in 2006, an increase over last year by 1,000 and almost a doubling of complaints since 1998 which had 5,880. 

The two largest reasons for complaints were discrimination based on disability and race - 40% and 39% respectively.  The complaints mostly had to do with different “terms, conditions, privileges, services, and facilities in the rental or sale of property.”  This category includes things like different deposit amounts being required to rent or charging higher rent. 

I have attended the required fair housing training and I’ll admit that fair housing is complicated.  For example, there are different rules for owner-occupied rental housing versus non-owner-occupied.  There is also a great deal of confusion about treatment of people with disabilities such as what is a disability and what steps landlords must take to make reasonable modifications or allow tenants to make modifications at their own cost. 

Part of me is not surprised that renters face the kinds of challenges they do for fair housing because many landlords are novices when it comes to fair housing -they own a couple of properties and aren’t tied into a national group which requires training. 

But there can be no excuse for discrimination by real estate agents,  who are required to attend training (at least in Connecticut).  But if you read Susan Eaton’s book, you will see that the real estate industry has a shameful past in Hartford -and by real estate I mean Realtors, mortgage lenders and insurance companies. 

“…up to and after WWII, the National Association of Real Estate Officials openly acknowledged a policy that restricted African Americans (and other new arrivals) to a few outlined areas.”

“Through the 1970s, a Hartford-based research and advocacy group, Education/Instruccion (EI), investigated housing discrimination…Real estate agents made disparaging remarks about black and Puerto Ricans to the white researchers.  They warned whites off racially mixed neighborhoods.  And they steered blacks and Hispanics into developing ghetto neighborhoods and suburban enclaves populated by minorities.

EI’s taped transcripts caught agents describing racially transitioning Blue Hills section of Hartford to a white buyer as a ’slummy and high-crime area,’ ‘not safe,’ a bad investment,’ and ‘a depressed area.’”  The Department of Justice did file suit against eight of the nine largest real estate brokerages in the Hartford area for these practices. 

Mortgage lenders and insurance companies have been just as bad, with insurance companies refusing to insure homes in the North-end of Hartford or lend to borrowers who were buying houses in certain areas - called redlining. 

If you’d like to read more about fair housing and predatory lending, visit my post called “Home Buying 101 - Step 4: Know Your Rights.”

I attended a great government mortgage seminar in Hartford yesterday and I have some little nuggets of info I’d like to share related to government loans.

FHA Mortgages 

• Borrowers may be able to qualify for an FHA Mortgage with credit scores as low as 600. 
• There are no purchase price limits.
• No termite inspection is required anymore.
• There are no income limits.
• You don’t have to be a first-time home-buyer.
• Borrowers can write off the monthly mortgage insurance premium as well as the upfront mortgage premium.

VA Mortgages

• Most VA mortgages have a limit of $240,000 but the broker who gave the seminar yesterday stated that he has an investor who is willing to do VA mortgages up to $417,000.  WOW.
• You don’t have to be a first-time home-buyer.
• Veterans with service-related disabilities do not have to pay the VA funding fee. 
• There is no monthly insurance premium.
• You cannot have unmarried co-borrowers - either get married or only one person can be on the loan.

CHFA Mortgages

• You must be a first-time home-buyer or not have owned a home within the last three years.  If you are buying in a targeted area, this rule is ignored.
• There is a recapture tax which kicks in (50% of the profit or 6% of sales price, whichever is lower) if all three of the following happen:
  • You sell the house within 9 years;
  • Your income is above CHFA’s income limits at the time of the sale; and,
  • You are making a profit on the sale.

McMansions are 3,500 square feet of house packed onto a 1/2 acre lot in a subdivision of similarly disproportionate houses who all look alike despite trying not to.  They’ve sprouted up all over the U.S., including Connecticut and are easily found in most communities. 

According to an article on RIS Media, towns in New Jersey are trying to put an end to McMansion construction by limiting the living space of all homes so that they adhere to a ratio of the home’s square footage to the lot size, called a “floor area ratio.”  Some towns are coming up with an acceptable ratio and if a homeowner or developer is seeking to build a larger home than a lot may permit, a variance would be required which would be subject to approval by the town. 

The efforts by these towns reflects a growing concern about overbuilding and over-development.  But it also reflects a distaste for the perceived ostentatiousness or tackiness of these homes and the impact these homes have on how people perceive a community.

The difficulty lies in isolating what specifically is offensive about large homes on small lots, said Joanne Harkins, director of land use and planning at the New Jersey Builders Association.

Perhaps it’s because they seem to stick out on a piece of land with few trees or because they are new or because they seem to all be the same layout.  On the flip side, in some communities such as West Hartford,  large homes on small lots are the norm - and no one would consider them to be McMansions. 

To my knowledge, I don’t think any towns in Connecticut have begun to use the floor area ratio. 

Ever since the day I got my first paycheck and saw how much of my income went to pay taxes, I’ve been mad about paying taxes.  Now that I’m a home owner and real estate agent, the tax that upsets me the most is property tax.  I personally have been subjected to increases over the last few years of 30% -40%, due to revaluations and mill rate increases.  That is obscene. 

According to the Tax Foundation, Connecticut taxpayers have the highest state/local tax burden in the country.  This is not something to be proud of. 

People think that property taxes effect property owners only and who can feel sorry for them?  But property taxes affect everyone - who do you think pays for the property tax increases at rental properties?  Not the landlord, if he/she can help it. 

So, if you’re a homeowner, landlord, or tenant, you should know what your town plans to do to your taxes (or your rent).  And if you don’t want to continue paying more, do something about it by speaking at one of your town’s budget meetings, calling/e-mailing/writing your representatives, and get informed about what your town is doing. 

Here’s a roundup about budget news/property taxes in some towns around the area:

East Windsor

West Hartford

Ellington

Suffield

Tolland and More Tolland

East Hartford

South Windsor 

Enfield Revaluation & Enfield Budget

Vernon Budget & Vernon Mill Rate

This is the ninth post in a series of twelve on buying a home.  Click here for the other posts in this series.

Once your offer to purchase has been accepted, a few things must happen relatively quickly, including the home inspection by an inspector hired by the buyer.  A home buyer has a period of time, as outlined in the purchase and sales agreement and generally 7-10 days, to have the home inspection performed and then notify the seller of any unsatisfactory results. 

Here’s some advice on how to find a home inspector.

Ten Questions to Ask Your Home Inspector.

There can be several parts to a home inspection, including the general home inspection, well, septic, radon and environmental testing.  Depending on the property, the market and your experience in home buying, you may want all or none.  I always recommend home inspections, no matter the market or the buyers experience. 

• General Home Inspection.  The inspector will: 
  • Evaluate the physical condition: the structure, construction and mechanical systems.
  • Identify items that should be repaired or replaced.
  • Estimate the remaining useful life of the major systems (such as electrical, plumbing, heating, air conditioning), equipment, structure and finishes.
  • The inspector will also test for radon in air.
• Well Water.  Homes in Connecticut may either be on public water or well water.  If there is well water, the inspector will:
  • Test for bacteria in your drinking water and the presence of radon in water, among other things.
• Septic.  Homes can either be on public sewer or an individual septic system in CT.  The inspection is performed by licensed septic inspector, rather than the general home inspector.  A septic inspector will evaluate:
  • The use of the current septic system.
  • The condition and performance of the septic system.
  • The condition of the leaching system.                                                                Note: In CT, the buyer only pays for the septic inspection, not the pumping of the system, which must be paid by the seller. 
• Environmental Tests.  A home buyer may elect to have a variety of environmental related tests performed, including lead paint, mold, asbestos, and UFFI.  Some home inspectors will test for these items but they may also refer you to other companies.  Here are some things to consider if you are thinking about having these tests performed:
  • Expect lead paint in a home built before 1978.
  • Mold is present in every home but people with allergies or with diminished immune systems should be more cautious.
  • Asbestos was a common material found in insulating products and in CT, is commonly found in wrapping on pipes and water heaters, in floor tiles, shingles, etc.  It can be found in most older homes.

How Much Do Home Inspections Cost? Costs for home inspections vary, depending on the size and type of property as well as the number of tests being performed.  Expect to pay somewhere around $350 -$600 and up. 

Also keep in mind that the inspector(s) may suggest that you ”investigate” certain items  further.  For example, an inspector may note that there is a foundation crack.  He/she will likely recommend that you have a structural engineer analyze the crack for you and determine if you should be concerned or not.  This would be an additional expense. 

Renegotiating the Contract.  Many buyers attempt to use the inspection to renegotiate the purchase price, which aggravates many sellers.   However, if a buyer did his/her due diligence when putting in an offer, then there shouldn’t be too many huge surprises at the inspection and the price should hold.  If there are any big surprises, then it is perfectly acceptable for the buyer to request the seller repair the items, reduce the selling price or ask for money in lieu of repairs being made.  Getting the seller to actually do the repairs is completely out of the buyer’s control.

As-is Sales and What if the Seller Refuses to Make Repairs?  If you’re buying a house as-is, that means that the seller is not making any warranties about the condition of the property.  However, that does not mean the seller will not necessarily make repairs or offer to reduce the sales price of the property if a problem is discovered that is unexpected. 

For example, a buyer can see for himself/herself that a furnace is aged and that it may lhave to be replaced.  However, if that furnace is only a few years old, the buyer could reasonable expect that furnace to be functioning.  Upon inspection, the buyer discovers that the furnace was not installed properly and needs modifications.  The buyer can certainly request that the seller make repairs, although the seller may still refuse.

If a seller refuses to make repairs you requested, you have three options: 

1. Continue to negotiate and possibly give them an ultimatum - if you don’t do X, we’re walking.   Only do this if you really are willing to walk away from the deal.
2. Accept the property as it is and buy it, knowing that you will have to make the repairs yourself.
3. Terminate the contract - you are within your rights to terminate the contract as long as it’s done within the time-frame specified in the contract.