Jun 30 2008

What is title insurance?

What the heck is it?

A History…
Up until the mid-1800′s transferring a title to real estate, such as a home, was conduced by conveyancers. They were responsible for all aspects of the transaction. The conducted a title search to make sure the seller did indeed own the property and what rights, liens, or encumbrances existed with the property. The conveyancer then signed a brief description of the title.

As with many things in the United States, title insurance was the direct result of a lawsuit.

In 1868, Watson filed a lawsuit against Muirhead, the conveyancer. Muirhead had researched the title to the property and wrote the summary of the title (called an abstract) for Watson. After consulting with an attorney and acting in good faith, Muirhead did not include some items on the abstract. He reported the title as good without any encumbrances.

As the title was good, Watson proceeded with the purchase of the property. After the purchase of the property, Watson was presented with bills that were liens against the property. As liens travel with the title, he was required to pay them. Needless to say he sued.

The case went to the Pennsylvannia Supreme Court who dismissed the case saying their was no negligence on the part of the conveyancer. Watson had no recourse and was out his money.

As a result of this lawsuit, the first title company was founded in Philadelphia in 1876.

What is Title Insurance?
Title insurance is exactly that..an insurance policy that the title, up to the time of closing, is a clean title as reported. As with Mr. Watson, buyers of homes are counting on the fact that the title is marketable.

Today’s title insurance policies protect you against loss or damage due to

  • Title is vested in another way.
  • Any unknown defects, liens, or encumbrances on the property
  • Unmarketable title
  • Lack of access

These terms don’t make a lot of sense to most people so here are some examples of when it pays to have title insurance.

  1. A family is split apart my chronic arguing and the daughter “disowns” her mother and father and doesn’t speak to them. After the death of her parents, they find a will leaving the family house to the daughter. They are unable to find the daughter, and the mother’s sister puts the home on the market and sells it FSBO. The sister forges a document in order to sell the home. A home buyer purchases the home unaware that their is a “lost heir” out there. Six months later, the daughter shows up to claim her inheritance: the buyer’s home.
  2. A homeowner remodels their kitchen and does some updating in order to sell the home. The homeowner doesn’t pay the contractors and stalls them with “I’ll pay you out of the money I get from the sale.” They place the home on the market and get a cash deal quickly which closes in two weeks. The homeowner does not pay the contractors who place a lien on the home for work done for the homeowner.

Typically when there is a title problem it is due to fraud, forgery, deceipt…essentially people not acting like good human beings. Title insurance is one of those things that feels like a waste of money, up until you are that buyer that is thankful that the policy saved you thousands of dollars.

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These are uncertain times for many people. Projections are that many areas are going to continue to decline with regard to the real estate market. Gas prices are soaring, food prices are going up, home equity lines are being slashed, foreclosures are continuing…need I go on?

Buyers are worried about buying a home and having it decline in value and sellers are watching home prices go down around them. Who to believe, what to do…This ambiguity is troubling and overwhelming for many of my clients.

I take pride in making sure I lay out all of the options for my clients. I firmly believe in the power of choice for my clients, and respect that their choice may not be the same one I made.

Twice today, once by my buyers and once by my sellers, I was asked, “What would you do?”

Both times, I squirmed in my seat, dread filling my soul…how I loathe that question…

One of my buyers struggling with making a decision about a home purchase, asked me “What would you do?” I hemmed and hawed trying to get them to see all of the options, doing my best to avoid the question. The choice: They were trying to decide which home to write an offer on, between the final two. It was like comparing broccoli to pears. A solid home that was a serious cosmetic fixer in a GREAT neighborhood at below market value, or a great home in a GOOD neighborhood AT current market value.

I suggested they not write an offer, “You’re not ready,” I said. I don’t do “buyer’s remorse” with my clients, you are either solid and we write, or you think about it until you are solid. That’s when the dreaded question occurred…”What would you do?”

The second time with one of my sellers, we were talking about an offer. Should they take it?

“What would you do?” This question seems so simple. As agents we are constantly giving our opinions about homes, neighborhoods, and pretty much anything you let us. We froth at the mouth at the thought of giving our opinions on real estate. This is what we do. The problem with this question is that it can sway our clients into making a decision that may not be the right one for them. By answering this question, I was going to take on some responsibility for their choice.

I NEVER tell my clients what to do.

NEVER.

Their home, their decision.

I present data, information, and analyze it for them. They decide what the best choice is for them.

Today, I was pinned in a corner. Today, with our current economy, it is not easy to make choices. Today, clients can be so overwhelmed: are they making the right choice?

My clients were so totally overwhelmed with the massive amounts of information flying at them from all directions. It was clear to me that my clients were not going to be able to make a decision without my opinion. So, I caved in and told them what I would do.

After today, I can say, I almost never tell my clients what to do.

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Jun 17 2008

An interesting proposition

As usual, I was reading my blog feeds to get a feel for what’s new in real estate. I have been very busy lately, so my opportunities to blog have been limited. I’ve been catching up.

Jeff Brown, a real estate agent in CA, proposed A different model for other agents to consider. I am all for innovation and changing the commission based model of real estate. I firmly believe that customers want to use real estate agents, just not in the same capacity as years before.

His model was to have sellers pay a monthly fee of $500-$1,000 per month rather than pay a commission upon the sale of the home. It is no big secret in real estate that pricing is key. Many agents take overpriced listings and hope the seller comes to some sense of reality before the listing expires.

This method would insure that agents have “good sellers” meaning sellers that WANT to sell their homes. If you are not motivated, you wouldn’t be willing to shell out that kind of money. Now Jeff specializes in investors and plans to try this model with that niche.

A buyer agent would still get a commission, but this would impact the listing side.

For all of you home sellers out there, what would you think about a model like that? Would you be willing to pay an agent a monthly fee for services rather than a listing commission?

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Jun 13 2008

Tree Preservation in Salem Oregon

When people think of Oregon they think of forests. Timber is a part of the Oregon economy and is what makes our part of the country truly stunning.

So it should come as no surprise to homeowners that we have city codes that require tree preservation.

This is really important for people that have bought newer construction homes or plan to purchase new construction homes. In addition to requiring street trees, homes that have been built since June of 2000 must have

Lot size Number of trees
Up to an including 6,000 sq feet 2
6001-7000 3
7001-8000 4
8001-9000 5
9001 and above 6

So what this means is that if the developer of the lot clear cut the area in order to make the lots, then you as the homeowner, or the builder of your home will be required to make up the deficit my planting the required number of trees in order to get finaled (also known as Notice of Final Completion).

While these codes only apply to structures that were built as of June of 2000, there are also codes that affect homeowners with older homes. These codes have to do with cutting down Heritage Trees or Significant Trees.

Heritage Trees have a specific designation as such. In order to cut down a Heritage Tree a certified arborist has to determine that the tree is hazardous, and then the city council has to rescind its status as a Heritage Tree.

Significant Trees are rare, threatened, or endangered trees or Oregon white oak trees that have a dbh greater than 24″.

If you are looking to purchase a home, please be aware of these laws. Contact the city of Salem if you have any doubt about your ability to cut a tree down.

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Jun 12 2008

Do you really get what you pay for?

I was reading the Inman News today and was struck by an article.

The article talked about a survey that was completed by VHT Inc., which provides marketing services to real estate professionals.

I was interested in the results not because of the obvious correlation they found but because of one of the outcomes of the survey.

Many customers in the real estate marketplace have complained about the high commissions for several years now…no big news there. Consumers feel they have to pay agents in order to get the marketing coverage they feel that agents have, and agents have successfully convinced consumers of this fact.

The statistic that really surprised me was just how untrue this seemed to be. According to the survey of 1, 304 real estate agents, agents spent $682 on average for a property listed in the $250,000-$500,000 range, and $1,742 on average for properties in the $1M-$2.5M range.

Think about it. The national average commission is around 5% now, so on a $250,000 home the average agent is receiving $12,500. Half of that should go to a buyer agent, at least, which leaves the listing agent with $6,250. Of that, they are spending $682 to actually market the property.

If the home is a $500,000 home it looks worse…$25,000 paid out in commissions, $12,500 to the listing agent and still only $682 to market the property, on average.

I guess my thought for the consumers out there, is are you sure you know what you are getting?

The old adage is “you get what you pay for” but what EXACTLY are you paying for?

You might want to clarify that with your agent before shelling out a lot of money.

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Jun 12 2008

Anti-puffing: the anti-marketing plan

First of all you need to know that I really dislike puffing. Agents know the term puffing: it’s what some agents do when describing a property.

Stunning views! (yes the mountains are great, but what about 50 junky cars that my neighbor has on their property right below that view)

or handyman’s dream (ie please be cautious of the hole in the floor).

Puffing can lead to misrepresentation if agents aren’t careful.

Now, it is important to describe a property accurately, and often times we use adjectives to get our point across. I personally don’t like flowery descriptions of properties. I prefer to get the facts, let the photos do the talking, and then make up my mind if a garden is luscious, a view stunning, or hardwoods are amazing, but there is a balance.

Puffing has been a staple in real estate marketing for a long time. There has been a general trend in my MLS to have more accurate descriptions, which I personally appreciate. I think I came across my first anti-puffing description on the MLS today. The PUBLIC remarks started out with

There are no known major problems with this home…

and ended with

Please remember it is the buyers’ responsibility to verify all details and measurements inside and outand. (we have a disclaimer on the bottom of every MLS sheet already).

Now, my first thought when reading this was, well…what are the minor problems then? The house has been on the market for 357 days…

Now, as anti-puffing as I am, this is not a solid way to start a conversation about a house. I can’t help but look at the words used and think there must be 100 small things wrong with this house. Why the heck would anyone start out that way?

Salem Oregon has a 10 month inventory of homes for sale. I have no doubt that the verbiage in the public remarks section is turning off many potential clients. With the massive amount of inventory to choose from, it is imperative that agents not turn off potential buyers. I was screening over 60 homes for my buyers, I know I read it and thought what the heck?

Next!

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Jun 9 2008

Dallas Oregon Real Estate Market Report

Well, it was brought to my attention by a reader that I forgot to include Dallas in my analysis of the towns. Nothing against Dallas…

So here are some basic market stats for Dallas, OR

90 Day Absorption Rate: 12.7
30 Day Absorption Rate: 16.0
Current Inventory: 10.7 months

Bonus stats since I forgot Dallas…

Average Sales Price $254,914
Median Sales Price $217,500
Average DOM: 110

I love hearing from you. If you have a topic or question, email me and I’d be happy to blog about it. Chances are if you want to know something, someone else does as well. melina@tomsonburnham.com

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Jun 9 2008

Salem Regional Market Stats

Well if my last two posts didn’t bore the crap out of you, here are the regional stats for our Salem housing market for May. The MLS tracks 6 regions here in Salem.

Central Salem
Average Sold Price: $155,068
Median Sold Price: $156,000
Average DOM: 94
Current Inventory: 10.6 months

Suburban E Salem/North (Jan Ree, Haysville, etc)
Average Sold Price: $186,894
Median Sold Price: $179,900
Average DOM: 100
Current Inventory: 8.8 months

Suburban E Salem/South (Houck area)
Average Sold Price: $148,817
Median Sold Price: 147,010
Average DOM: 97
Current Inventory: 7.8 months

South East Salem (Morningside, Pringle areas)
Average Sold Price: $257,738
Median Sold Price: $215,000
Average DOM: 121
Current Inventory: 9.7 months

South Salem
Average Sold Price: $260,239
Median Sold Price: $245,000
Average DOM: 107
Current Inventory: 10.9 months

West Salem
Average Sold Price: $265,074
Median Sold Price: $260,000
Average DOM: 137
Current Inventory: 6.2 months

At this point, the West Salem real estate market is the only localized market that is approaching that goal of normal market. With just over 6 months inventory, it is approaching a neutral market.

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Jun 8 2008

Salem Metro Area Home Inventories

Knowing how much inventory is on the market is an important statistic to know when considering the price of your home. These figures are for residential home sales.

The absorption rate is how fast homes are selling on a monthly basis. Inventory is how long it would take homes to sell at that rate.

Salem:
90 day absorption rate: 167
30 day absorption rate: 172
Inventory: 9.8 months

Keizer:
90 day absorption rate: 27.6
30 day absorption rate: 21
Inventory: 12 months

Silverton:
90 day absorption rate: 6.7
30 day absorption rate: 9
Inventory: 16 months

Stayton:
90 day absorption rate: 5
30 day absorption rate: 4
Inventory: 13 months

Aumsville:
90 day absorption rate: 5
30 day absorption rate: 7
Inventory: 4.3 months

Turner:
90 day absorption rate: 5
30 day absorption rate: 1
Inventory: 27 months

Jefferson:
90 day absorption rate: 5
30 day absorption rate: 2
Inventory: 15 months

Independence:
90 day absorption rate: 6.7
30 day absorption rate: 7
Inventory: 7.9 months

Monmouth:
90 day absorption rate: 5.3
30 day absorption rate: 3
Inventory: 17.6 months

Don’t look now, but bucking national trends is little Aumsville, OR. A 4.3 month inventory puts it at the low end of a neutral market.

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Jun 7 2008

Salem May Home Sales Trend

Grab some coffee…The next few posts are going to be my May real estate market updates. No fair falling asleep. If I take the time to calculate and post these for you, the least you can do is read them!

For residential homes sales in Salem, Oregon…

The 180 day trend:
Median sold price: $205,000
Average sold price: $225,000
Average original list price: $241,070
% of listing price to sale price: 93.19%
Average DOM: 122

The 90 day trend:
Median sold price: $205,000
Average sold price: $224,638
Average original list price: $236,672
% of listing price to sale price: 94.91%
Average DOM: 118

The 30 day trend:
Median sold price: $205,000
Average sold price: $231,525
Average original list price: $242,171
% of listing price to sale price: 95.6%
Average DOM: 113

This data would seem to indicate that the market is stabilizing here in Salem. While the trend is there, the biggest issue I see is that inventories are still running at 9.8 months for the Salem market. My concern for the market is that sellers are still holding out for pricing and when the spring and summer markets fail them, prices will drop.

What really happens remains to be seen.

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