Are Pre-home Inspections a Good Idea on Older Homes?

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Dave,

We will soon be selling our home and looking to downsize.  We have lived here almost 15 years and are the second owners.  We have taken good care of our home and have kept up on routine maintenance and also fixed any items needed over the years.   Our home is older, built in 1976, but has been well taken care of.  We are considering a Pre-home inspection, as one of our friends intimated that it might be a good idea.  Your thoughts on pre home inspections?  Thanks.

Dwight, Grand Junction



Dwight,

 

On face value it sounds like you could go either way.   Your friend is right, it can be a really good thing and offer you, the buyer, and the real estate agents some peace of mind that the home is in good condition and free of any major problems.   The decision should be based on your knowledge of the home and how likely you believe it is that a problem may come up during the home inspection period. With any home built in the 70’s there is a reasonable chance that quite a few items will come up on the home inspection, not because you haven’t taken care of your home, but because it is old!   Generally I think it is a good idea, based on the age of your home, but it will set you back $300-$400.  This may be a very small sum in the long run, if it prevents a deal from falling apart.

One major thing that a pre home inspection will do is likely bring any “deal killers” to the surface before you get your home on the market and under contract.  If you do find a significant issue up front this will allow you to get it resolved prior to putting it on the market and getting it under contract.  There is no doubt in my mind that many things that happen during and related to the inspection period, after a home goes under contract, are blown way out of proportion and have as much to do with leverage, emotion, fear and lack of knowledge than the problems that are discovered and their remedies.  Once a For Sale sign goes up in your yard, regardless of what anyone says, everything changes and everything gets magnified, especially in a market where buyers can be difficult to find.

There are two things that I think are a great idea, regardless of the age of your home.    If you are currently on a septic system, I highly recommend you have your tank pumped and inspected prior to putting the home on the market as this serves not only as great preventive maintenance but will also put a stop to any potential septic issues before they generally get started.  Also, have a Licensed heating and air conditioning professional come and give your heating and cooling systems the once over and provide a receipt for a clean bill of health.  Septic systems and your homes mechanical systems (especially heating) are two items that many home inspectors single out and recommend buyers have those evaluated by Septic and HVAC professionals.  It is good preventive maintenance and eliminates the potential for a conflict of interest to have those things checked out ahead of time.   One more thing, if you have any question or doubts about your roof, have that inspected also.  Roof inspections are generally free and will bring any potential issues to light and notify you in advance if your roof is at the end of its expected life. 

I recommend a pre-home inspection if you have ANY concerns about a “deal killer” issue that may come to light.  If you have no concerns about that, then I would not do one.  If you do have concerns that there may be an issue there, some little nagging hunch, then I would pull the trigger on one and not even think twice about it.  You know your home better than anyone and if you think you need to have one done let me know and I will be happy to recommend a few that will do a great job!  A pre-home inspection is not for everyone, but maybe it should be….. I am finding myself rethinking the issue as I write this column.   Thanks for the thought-provoking question.

 

Dave Kimbrough

The Kimbrough Team

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What Is The Best Way To Estimate The Value of Our Home?

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Dave,

We are thinking about selling our house, but we would first like to know how much our home is worth. We’ve seen a few websites—like Zillow and Truila, just to name a couple of them—that say they can estimate the value for us, but we aren’t sure if they are reliable. We know you’ve been doing this for quite a while and trust your advice. When you are selling a house how do you determine if these web sites are a reliable source for establishing the value of our home?

Tom, Grand Junction



Tom,

 

I love this question!   For the purpose of this answer we will focus on Zillow as it is by far the most used and relied upon real estate web site.  Zillow is, in my opinion, the best of all the real estate web sites at marketing to the public and to Real Estate agents.  It has established itself as the “go to” web site for helping the public not only keep track of local and national real estate trends and homes for sale, but has also been effective at instilling the perception that it can help you establish a value for your home.  The Zillow.com home valuation tool is called a “Zestimate”. 

I encourage you to go to Zillow.com and click on the FAQ, frequently asked questions, and scroll down to the “How accurate is the Zestimate?” and click to open.  What you will find is what very few know or ever venture to find out.  Here you will find out how good their marketing has been.  The marketing has been so good that the public has willingly flocked to a product that is almost wrong more often than right.  In the terms of statistical accuracy a “Zestimate” is virtually worthless.  What Zillow.com is admitting, in the fine print, is that their Zestimate is not overly accurate.  Actually, statistically speaking it is amazingly inaccurate!  There are too many variables, that don’t have to do with measurable and quantifiable characteristics, to allow a computer to provide an accurate statistical analysis on a home’s value.  Lets dive into some of the specifics!

When the Zillow website states that the Zestimate is accurate within 5, 10 or 20% keep in mind that can potentially mean a PLUS or MINUS percentage number!  In other words, IN COLORADO, if an “off market” (meaning the home is not currently for sale) home zestimate is $400,000 you can figure that value is correct within 10% ($360k - $440k…. an $80k spread) only 68.4% of the time… that means that 31.6% of the time they are even more inaccurate!  In Colorado the Zestimate gets it right to within (+ or - 5%) only 43% of the time!  This means that if you are on Zillow and your home is NOT on the market, the value provided by the Zestimate can not be considered accurate… its more of a poor guesstimate!  On the bright side…. If we look at the Zestimate numbers of “on market” homes the numbers are much more reliable. 

Zillow’s accuracy numbers in Colorado for “ON MARKET” homes (meaning a home that has been listed for sale by a real estate agent or for sale by owner) the accuracy increases significantly (90% are within +/- 5%) and are much more reliable.  Why such a dramatic increase in accuracy AFTER a home goes on the market?  This is because they have a local real estate agent establish a market number so the Zestimate can react accordingly.  In their own FAQ’s they site that after a home is listed that their algorithm incorporates new listing data to provide “valuable signals” about the homes eventual sales price!  I find this statement funny….. the new listing data or “valuable signal” is an accurate list price established by someone with local market knowledge!  

Overall, I would say that online valuation modulators are not a reliable source to establish a homes value.  At Zillow.com it goes on to say that a “Zestimate is a good starting point as well as a historical reference, but it should not be used for pricing a home.”  The very best way to establish your homes value is to have a local real estate professional (or two or three) out to view your home and help you establish a proper market value for your home based on neighborhood home sales and what those numbers indicate that a buyer is willing to pay for similar homes!  These quick computer tools are novel and potentially useful to gauge the overall market temperature, but that may be the limit of their usefulness at this juncture.  No doubt there will be many that work to improve the AI in an attempt to better hone property values, but that day has yet to arrive. 

Hope that helps,

Dave Kimbrough

The Kimbrough Team


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What are the most important things to consider when evaluating your homeowner’s INSURANCE policy?

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Dear Dave,

We recently bought a house and have been looking at what exactly our homeowner’s insurance covers.  We are quickly learning that there is a lot more to it than we initially thought and it is actually more complicated that we imagined it would be.  What do you think are the most important things to consider when evaluating your homeowner’s insurance?

Linda – Grand Junction, CO



Linda,

 

I will admit, your question is going to teach me a thing or two about homeowner’s insurance, as I must admit it is not something I have spent any significant time looking over.  I have spent the past 15 years trusting my insurance agent, Mike Daniels at American Family Insurance, to make sure we have the right insurance coverage.  So where better to turn for a little help in giving you a credible answer?  I asked Mike to give us some insight into what you need to look for when reviewing your homeowner’s policy.

 

“Keep in mind that every homeowners needs are different and very personal, finding a local company and a local representative is a leading factor to ensure you are getting proper guidance and counsel.  There are a lot of great people in the business.  There are

2 homeowner’s policies that are very popular, HO3 and HO5.  Both of these will cover all named perils, however the form 5 will throw in some supplementary coverages that some will find important and some will not.

 

Everyone should pay close attention to look over the named perils of how the home is covered.  These primarily include fire, smoke, theft, windstorm, hail, explosion, vandalism, and frozen and broken plumbing.  Every company or agent should provide you with a brochure of all the named perils and supplementary coverages included with your policy.  When the policy comes in the mail, take the time to review the coverages and then also spend time reviewing the exclusion section of your policy.  It is important that if you have questions to call your agent to answer your questions or correct anything that may need to be fine-tuned.

 

As a home owner you need to consider the dwelling amount, how much will it be to re-build your home?  Make sure the insurance policy will cover that amount in full.  It is also important to know how much the deductible amount is on your policy.  Make sure to ask yourself how much you can afford if you have a loss?   The higher the deductible the lower your premium costs will be.  Generally speaking, if you maintain your property, you should be able to go with a higher deductible.  Lastly you also need to consider personal property loss.

 

When we are looking at personal property coverage, the questions to ask are how much? And how is that covered?  Also consider any specialty items you want covered such as jewelry, coin or gun collections or just any collection or specialty items you want to make sure are covered.  Lastly, look for discounts including Alarm systems, age and type of roofs, age of home, complete renovations.  It is also possible to save by combining other insurance needs including automobile and umbrella policies.  MOST IMPORTANTLY, review your homeowner’s policy at least every two years!” 

 

Well, that about covers it and as you can see, there is a lot to it and being a bit overwhelmed is completely understandable.  I always recommend, find an agent you can trust and build a relationship with.  I know, for our family, when we need our insurance to kick in, we can trust Mike has us properly covered.  Consistently review your policy with your agent to ensure you are both staying on top of your policies and things that may have changed so you are properly covered if you ever have to make that call.  

 

Dave Kimbrough

The Kimbrough Team 


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Advice For Providing Banking Passwords For A Mortgage Loan Application Portal?

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Dave,

We were applying for a 30-year fixed-rate mortgage. Our credit scores are in the 800’s, and we were applying for a mortgage in order to avoid IRA withdrawals and the taxes. This mortgage company is pushing us to use an internet portal that requires all of our passwords to our banking and investment accounts. Having had my security hacked twice, I refused. They said I could furnish copies of the accounts, but when I did, they made it so difficult for me that my only course would be to furnish my passwords. Am I wrong to be concerned about this?

- Kathy, Grand Junction



Kathy,

First, I think congratulations are in order for the 800+ credit scores! It's not very often that we see those kind of credit scores so a little pat on the back is in order. As for your question, I do believe you have good reason to be concerned, but to be sure I posed your question to James Pulsipher, Branch Manager of Fidelity Mortgage.  He knows the Mortgage industry better than anyone I know, so I figured who better to ask than James!

Here’s what he shared with me, “I think that you are right to be concerned. In today’s tech-forward culture there are many solutions like this that are designed to make the process of obtaining a loan easier. However, it is just an option – not a requirement. The reason that this option has become available is that many people would prefer to provide that information instead of providing the documentation. I would simply let the lender know that you are happy to provide them what they need outside of this automation. What they will likely need is a 60-day statement on any banking accounts of reference. Hope that helps.”

Good to know that you have the option to provide the information outside of their internet portal.  EVERYTHING is going the route of being easy and less cumbersome as our lifestyles are busy and time becomes more and more valuable. On a personal note, I know when I applied for a loan a couple of years, back with James, that Fidelity also uses a portal. I was intimidated and concerned at first, but quickly found that I fell in love with the ease of following the process and providing documentation online versus delivering paperwork. By the time we were done, I very much appreciated the collaboration of my accountant, James’ office and the ease of sharing needed documentation through the portal. Keep in mind it is always good to be wary of how you provide SS#’s and bank accounts to those requesting them. 

One note is to NEVER send either your bank account numbers or SS numbers via email. There are hackers and scammers that are CONSTANTLY scanning each and every sent email for numbers that fit the right character configurations of both and when they find a match consider yourself in serious jeopardy. I have several stories I could bore you with that would provide you with the proper amount of fear to never email either. 

The bottom line…you are right to be concerned as our information is no doubt under constant assault! You know the old saying (my mom would be proud!), “It’s better to be safe than sorry!” Great question and thanks for reading “Ask Dave”.

Dave Kimbrough
The Kimbrough Team

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What Is A "Pocket" Or "Off-Market Listing"?

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Hi, Dave.

Great columns. I always learn a lot. Can you explain exactly what "pocket" or "off-market listings" are, how they work, and how a buyer can tap into that segment of the market?

Thanks.

Bill F., Grand Junction



Bill F,

The under used, but often successful "pocket listing"! One of my favorites! A pocket listing can be a sellers best friend and is something that we certainly use an awful lot each year. In fact, we will sell a dozen properties each year by utilizing the “pocket listing” status. A pocket listing is a listing that is not advertised and may be withheld from the multiple listing service until such time you are ready to go public with the sale of your home. With a pocket listing your listing agent can promote it to their peers and colleagues and will typically do so through word of mouth. If you go this route, you always run the risk of word getting out, but your chances of keeping it quiet are exponentially greater. A pocket listing can be a successful way to flying under the radar and still getting your home sold in a timely fashion and getting a jump start on selling before you are ready to put the sign in the front yard. If you go this route, I would suggest you be prepared to move as the results are often times quite good. 

The pocket listing is a great way to get your property exposure on the “down low” and buyers are generally excited to see these properties as they feel like they are getting a sneak peak at it before everyone gets a chance.  It’s a great option for those who dread the showing process or don’t want the hassle of showing after showing for several weeks. The traffic flow is often sporadic at best, but using this method allows you to hunt and peck for candidates that are most often much more targeted and many times pre-screened to help increase the chances they are a fit!  Keep in mind that a pocket listing may not always be the best option.

The pocket listing process does not provide the best environment for competition and multiple offers as the selectivity of who knows or has access can limit the big rush that many times occurs when a new property hits the market. This means that getting multiple competing offers that may drive the price up above the listing price is not common but getting an offer at the list price is a likely outcome because you can leverage the early access angle. Access to these properties is often times just being in the right place at the right time!  Many buyers are often frustrated when they see a house has sold before it even hit the market and feel cheated that they did not get a chance to view it.  One way we help our buyers get access to the ‘off, but on market’ properties is networking with other agents and e-blasting (email blast) to all the agents about what kind of property we are seeking! It’s amazing how many properties turn up when we e-blast for a buyer’s need if properties on the market at that time don’t fill the bill. 

I would encourage you to hook up with a real estate agent and have them start networking and e-blasting your specific property needs and see what turns up after doing so. You have to turn over every stone and sometimes turn them over time and time again to find just the right place! It does not always happen, but it sure can be an effective way to discover special/unique properties that are ready for sale, but just not in plain sight! Looking off the beaten path is sometimes where the best trails are forged! Looking in ways and places not everyone is looking is sometimes where real gems are found. Have a wonderful Sunday and thanks for your question.

Dave Kimbrough

The Kimbrough Team

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How Do We Find The “Best” Realtor To Help Us In A New Location?

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Dave,

We will be moving out of state, to a city where we know absolutely no one.  How do we go about finding the “best” Realtor to help us in our new location?

Thanks,

Andrew - Grand Junction


Andrew,

Great question. There are several ways to go about finding an agent in the city where you are moving. First, if you need to sell your home here, you can ask you real estate agent to refer you to an agent in their network with their company. This typically works great, because your local agent will do their due diligence to make sure the agent in your new city is experience, professional and knows the ins and outs of your new market.  

You can also get on line and look for homes in the area and take note of names that you see over and over.  Those agents, are probably well known and well connected and have a good base of knowledge of the local market.  Be careful to just take the recommendations of “find an agent websites”, because many times the agents that are referred off these sites are not producers, they are paying the web sites a referral fee for buyer referrals, It may have nothing to do with ability, knowledge or results, but who is paying for the website for the referral. Your best bet is to find a local agent here that has connections and can find you a qualified agent in your new city!! Best of luck, I hope this helps.

Dave Kimbrough

The Kimbrough Team

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What Are Your Thoughts On Converting A Two Car Garage Into A Living Space?

Dear Dave,

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I own an older home, built in the 1980’s. I’m doing some upgrades this spring and am considering adding on to it. I recently saw a home that was a similar age and when they remodeled they turned the two car garage into a living room and opened up the adjoining wall into the house. Something like this might suit our needs perfectly. What are your thoughts on this? Is it good for potential resale or would I be better off leaving it as a small garage and not adding living space.

Thanks. I would appreciate the advice.

 John - Grand Junction, CO


John,

This one is a tough one. If you need extra living space, it does not get any more convenient or inexpensive than to convert the garage to a new living room or couple of bedrooms. Keep in mind that the conversion does come at the expense of valuable resale space, the garage. I am one of those who believe the garage is sacred space!  Where would one put his duck decoys, bikes (motor or pedal), ATV’s, kayaks, canoes, dog kennels, gun safes, hunting gear, tool boxes, work bench, etc.? I am sure you see my point. A garage, especially here in Western Colorado, is valuable space and hard to replace. Oh, and I nearly forgot, you might even have enough room to park your car!

For resale purposes I am of the belief that the conversion will generally cost you money and not increase your value. That being said, if you convert and add two bedrooms and go from a 3-bedroom home to a 5-bedroom home, you might find someone who has a large or blended family that has a specific need for the extra bedrooms. In this specific scenario I could see the possibilities of the conversion adding value. Outside of this specific situation I think the loss of the garage outweighs in cost and function the addition of added living space.  

For resale purposes I am of the belief that that a garage conversion will generally cost you money and not increase your value.

The last thing to consider is to go ahead and make the conversion, but do so in such a way that you will be able to easily convert it back when/if you sell in the future. By doing this you will have a cost effective addition and keep the flexibility to convert it back easily. This is a common practice and is easy to remedy when the time comes to sell.

As you can see, I am a fan of garages and believe that having a garage is an important and valuable feature. I will close with this, if a conversion will fit the needs of your family perfectly, then go ahead and do it and enjoy living there with the added living space. Converting and then converting back in the future will surely be less expensive than selling and buying. If the rest of the house fits your needs, just convert and do so in a way that leaves you the flexibility to easily convert back if needed. Hope this helps! 

Dave Kimbrough

The Kimbrough Team

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How Can We Remain Open To Higher Offers Without Losing The Buyer?

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Dave,

There are four siblings involved in trying to sell a house. The Realtor has it listed a price that two of us feel is too low. His hope/plan is to have an offer at the open house the day the house is listed. It seems like this will trigger an aggressive buyer to either offer this lower list price or an even lower lowball offer.  Can we hold out if an offer is less than the list price? So, this is the flip side to your article "Making an Offer Before the Open House." How can we remain open to higher offers without losing the buyer?

-Jake (area withheld)


Jake,

Okay, there are several angles to the question and answer. First, good luck with the four siblings “trying” to sell a house! I have found over the years that trying to get four siblings, or fewer for that matter, to agree on anything if quite difficult. I come from a family where I have three older sisters and as you can guess unanimous agreement is as rare as a Yeti sighting! That being said, I believe the strategy of your real estate agent is a bit risky…by putting all his (your) eggs in the proverbial open house basket!  For the purpose of this answer, I will assume that the home in question is being sold locally, as we do from time to time get questions submitted from outside our area and the location was not included with your question.

For anyone who has read this column for the past four or five years, you will know that I am not a huge fan of the traditional open house! Why am I not a fan of the open house? Simply put, they are not impactful at generating offers on the house being held open. Does this mean that they don’t work? No, it just means that in our market they are not very effective at creating a feeding frenzy type of atmosphere. I know, I also watch HGTV and see the open house frenzy at the end of each episode of Flip or Flop, Good Bones or Hometown. (BTW these are about the only kinds of shows, outside of football or hockey, that we watch at the Kimbrough house!) Unfortunately, I have just never seen it work this way… they call it reality tv, but it is far from any reality I have ever seen. Again, this does not mean it will not work, just means that the statistical chances are not high! If this magic open house does not work and you do not receive any offers at all or the offers you receive are from “low ballers” (any time I hear the word ballers I think of The Rock) you can certainly hold out for a higher price from another buyer on down the line. If you do receive an offer at your asking price and you do not accept, there may be some potential issues with agent commission being due, but that’s a question for a completely different column. The last part of your question is kind of like having your cake and eating it too!  How can we hold out for higher offers and not lose our low-ball buyer? This answer is also simple…you can’t!

I have heard my mother say it many times…you are either pregnant or you are not! As it relates to real estate, you are either under contract or you are not! You cannot, at least no self-respecting buyer would allow you to shop their contract, be under contract with one buyer and still soliciting offers from other buyers that may be higher and then just go kick your current buyer out of bed! It just does not work that way…or maybe it does in some weird “reality” tv show! You need to list the home for a price you are willing to sell it at and then market it to solicit offers. An angle that we will use from time to time when we think there may be an unusually high demand for a property is to put it on the market and then hold any and all offers for a period of 5 days. This allows more than just an open house to take place, it allows a fair amount of market saturation to occur and the generation of traffic and interest in hopes to accumulate several offers where you end up with buyers competing for the property. At times this works great, but it works best when the property is unique, in a high demand price range or in a high demand area. 

Ultimately you can look at this as any family would when there is dissent in the ranks…two of you are going to be right and two of you are going to be wrong! Sometimes being right is the only consolation you get!

Hope this helps.

Dave Kimbrough
The Kimbrough Team

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