Today I want to talk about the federal laws regarding housing discrimination. They are actually about eliminating discrimination when people want to buy a home. This topic is really important. To start with, Title VIII of the Civil Rights Act of 1968 (Fair Housing Act), prohibits discrimination in the sale, rental and financing of dwellings based on race, color, religion, sex or national origin. This was amended in 1988 to include discrimination because of disabilities or family status. At the United States Department of Justice, Civil Rights Division, the latest Fair Housing Act directive is spelled out, including how to file complaints and criminal penalties.
What are the exceptions? Who is exempt from following these laws when selling their property to someone?
There is an exception to the family status (children or pregnant women in the family) which is based on the Housing for Older Persons Act of 1995 (HOPA). To qualify for the exception, the housing development must advertise that it is for older adults and there must be a person who is 55 years of age or older living in at least 80% of the occupied units. If you want more information about the "older people" exception, it's available in the Federal Register for Friday, April 2, 1999.
Religious organizations and private clubs can still limit their property to just their own members as long as the restriction is only based on religion or club membership. Also exempt is someone selling their own home as long as that person doesn't own more than three homes at a time. Another exemption is an owner who lives in a unit of a fourplex or smaller.
However, if the person or property doesn’t fit into any of these categories, he or she does not have to worry about discriminating against someone who has been convicted of illegally manufacturing or selling "controlled substances" (drugs). It is okay to not sell their property to someone like that.
Now that we've talked about exemptions, let's talk about what the Fair Housing Act basically means. Ignore the exceptions for now. Let's say I'm a Colorado real estate broker, which I'm going to be some day, and someone comes in to buy or sell a house.
Let's take two imaginary people. We'll call them Jang and Vanar, using names from a "neutral baby name" site. We will say that they are two people, but beyond that I don't know anything about them: their genders, ages, nationalities, functionalities, or beliefs. One or both of them could need my services.
If one or both want to sell a house and I create a legal contract with them to list and sell the house, I would want to see the house and get the best value possible, which means showing the house to anyone who qualifies financially and is interested in that type of housing.
If one or both want to buy a house, and if I have a policy of asking people to prequalify financially, I would ask the prospective buyer to do that first. If I am truly acting without discrimination, I treat everyone equally. I find out what kind of housing is wanted and I try to show places that will work.
Basically, if we ignore the exceptions (housing for only those over 55 years of age, religious or private clubs, someone convicted of involvement with illegal drugs), it is not okay to treat someone differently when selling, buying, renting, leasing, etc., because of their family status, ethnicity, age, religion, gender, or physical or mental disability. The only way to differentiate people is on their "ability to pay" or for economic reasons.
Tuesday, November 9, 2010
Friday, November 5, 2010
What Do Real Estate Appraisers Do?
Hello again. Along with lots of studying, this week I have been doing some fun things, too. On Tuesday night I went to the Grand Junction Symphony Orchestra's performance. It was great as usual. On Monday night I went to Pantuso's Ristorante at their new location. They invited people to dine before they officially opened in order to get the wait staff some experience and to see what needed to be improved.
On the real estate front, I wanted to share some information about appraisals. Lenders usually require an appraisal done before financing is approved. That is done to make sure that the lender is not authorizing more money than the property is worth. There is an organization, the Appraisal Foundation, which establishes national qualifications and standards for practicing appraisers. Then each state has its own requirements. If you want to find a licensed appraiser on your own, you can go to the Appraisal Institute. You can enter your zip code and find a list of appraisers who are members of the institute. You can also find out about those initials after the appraiser's names, like MAI, SRA, and SRPA.
But what do appraisers do? Remember last time when we talked about picking a listing price for your house. We talked about finding recently sold properties, currently listed properties, and properties that were taken off the market without selling. Appraisers look at recently sold properties, but they also look at so much more. They look at the national, regional, and even neighborhood trends. They look at the physical conditions of the property. When they compare the property to other properties, they are usually looking at market value.
What if you have updated your house yourself and kept all your receipts? You may be wondering if you can just add that to the original cost of your house. Or what if you read on the internet that the cost of houses in your city is increasing by so much per year - can't you just do the math yourself?
I wish it was that easy. Although all the hard labor you put into your house is very valuable to you, it may not mean as much to someone considering the purchase of your house. Buyers pay attention to market value, not the value that you have put into your house. Market value is what a motivated buyer is willing to spend on your house, but, in order to be accurate, the buyer must not be emotionally involved in your hard work. The buyer is emotionally involved in seeing themselves in your house, instead. Their tastes might be different from you and they probably care about different things than you do. Sellers and buyers definitely look at the same house differently.
This is why selling a house is hard work for the seller. It means letting go of memories and trusting that someone else will make new memories with their house.
Once an appraiser has done the market research of your house, the neighborhood, and real estate trends, the appraiser analyzes the information usually using three approaches. They are the sales or market approach (comparing it with other properties sold), the cost approach (how much would it cost to rebuild it at today's prices), and income approach (how much money, like rent, could be gotten from the property). He or she picks the "highest and best use." If your house is in a residential neighborhood, its highest and best use is usually to be used as a residential property. He or she reconciles the estimated values to get the final estimate. Then he or she prepares a report with all of that information.
The most important thing to remember is that the appraiser doesn't create the value of the property. He or she does research and then verifies the value with the appraising tools.
On the real estate front, I wanted to share some information about appraisals. Lenders usually require an appraisal done before financing is approved. That is done to make sure that the lender is not authorizing more money than the property is worth. There is an organization, the Appraisal Foundation, which establishes national qualifications and standards for practicing appraisers. Then each state has its own requirements. If you want to find a licensed appraiser on your own, you can go to the Appraisal Institute. You can enter your zip code and find a list of appraisers who are members of the institute. You can also find out about those initials after the appraiser's names, like MAI, SRA, and SRPA.
But what do appraisers do? Remember last time when we talked about picking a listing price for your house. We talked about finding recently sold properties, currently listed properties, and properties that were taken off the market without selling. Appraisers look at recently sold properties, but they also look at so much more. They look at the national, regional, and even neighborhood trends. They look at the physical conditions of the property. When they compare the property to other properties, they are usually looking at market value.
What if you have updated your house yourself and kept all your receipts? You may be wondering if you can just add that to the original cost of your house. Or what if you read on the internet that the cost of houses in your city is increasing by so much per year - can't you just do the math yourself?
I wish it was that easy. Although all the hard labor you put into your house is very valuable to you, it may not mean as much to someone considering the purchase of your house. Buyers pay attention to market value, not the value that you have put into your house. Market value is what a motivated buyer is willing to spend on your house, but, in order to be accurate, the buyer must not be emotionally involved in your hard work. The buyer is emotionally involved in seeing themselves in your house, instead. Their tastes might be different from you and they probably care about different things than you do. Sellers and buyers definitely look at the same house differently.
This is why selling a house is hard work for the seller. It means letting go of memories and trusting that someone else will make new memories with their house.
Once an appraiser has done the market research of your house, the neighborhood, and real estate trends, the appraiser analyzes the information usually using three approaches. They are the sales or market approach (comparing it with other properties sold), the cost approach (how much would it cost to rebuild it at today's prices), and income approach (how much money, like rent, could be gotten from the property). He or she picks the "highest and best use." If your house is in a residential neighborhood, its highest and best use is usually to be used as a residential property. He or she reconciles the estimated values to get the final estimate. Then he or she prepares a report with all of that information.
The most important thing to remember is that the appraiser doesn't create the value of the property. He or she does research and then verifies the value with the appraising tools.
Sunday, October 31, 2010
Choosing a Listing Price
Hello, readers. I have been learning so much new material that I've been overwhelmed by all the good topics to blog about. And I've been busy with my class: after I went through the chapters and homework and quizzes, I had to study for a huge test that covered lots of material regarding national real estate laws. There will be more of those tests, so I developed a process of studying the material and doing well on the tests.
I'd like to share with you about finding a listing price when a house is offered for sale. Let's say that you have a house that you want sold. You contact me and I come over to look at the house with you. We reach an agreement that I am going to sell your house. We are going to use an exclusive right-to-sell listing agreement. This means that I will be the agent working for you and I will follow all legal orders you give me about selling the house. In order to help you decide on the selling price, I will provide you some information about:
1. similar houses that were recently sold,
2. houses currently being offered for sale, and
3. those that were taken off the market without being sold.
If you have a range of comparable prices that are gotten from those three groups, you can make a decision. After studying that information, you choose a price that reflects both how soon you want the house sold and how much money you want from the sale. The price will be the compromise of those two wishes.
Of course, most people want the house sold as quickly as possible and for as much money as possible. But it's not often possible to achieve both.
In example 1, the wish is to sell the house as quickly as possible. Let's say that you want the house sold in the next hour. We could list it at $100. Somebody would pay that. If you priced your house at an astonishingly low price, it would increase the chances that someone would hand over the money and buy the house on the spot. You could even say that the land without the house itself is worth at least $100. You would achieve your goal of selling your house as quickly as possible by ignoring your wish to get as much money as possible.
In example 2, the other wish is to get as much money as possible when selling the house. Let’s say you want to list the house for $5,000,000, which is probably nowhere near what you paid for it. How long do you think it would take to get the house sold for that price? In most cases, the house would be on the market until all the other houses are sold and someone really needed a house to live in. If there were no other houses available to be sold & someone really wanted to buy a house, they could pay five million dollars and buy yours. It may take many, many years for that situation to happen, but you would have achieved your goal of selling your house for as much money as possible by ignoring your wish to sell your house as quickly as possible.
Hopefully, this shows you that there is a direct relationship between price and time when it comes to selling a house. The lower the listing price, the sooner it will probably sell, but the less money you will make from the sale. The higher the listing price, the more money you will probably make from the sale, but the longer the house will be on the market.
You tell the buyers a lot about your intentions with the initial listing price of the house. And you tell them even more by the changes in the pricing as the house remains on the market. As a general rule, it makes more sense to not start selling the house until you're ready, and to list it at the most reasonable price you can afford.
I'd like to share with you about finding a listing price when a house is offered for sale. Let's say that you have a house that you want sold. You contact me and I come over to look at the house with you. We reach an agreement that I am going to sell your house. We are going to use an exclusive right-to-sell listing agreement. This means that I will be the agent working for you and I will follow all legal orders you give me about selling the house. In order to help you decide on the selling price, I will provide you some information about:
1. similar houses that were recently sold,
2. houses currently being offered for sale, and
3. those that were taken off the market without being sold.
If you have a range of comparable prices that are gotten from those three groups, you can make a decision. After studying that information, you choose a price that reflects both how soon you want the house sold and how much money you want from the sale. The price will be the compromise of those two wishes.
Of course, most people want the house sold as quickly as possible and for as much money as possible. But it's not often possible to achieve both.
In example 1, the wish is to sell the house as quickly as possible. Let's say that you want the house sold in the next hour. We could list it at $100. Somebody would pay that. If you priced your house at an astonishingly low price, it would increase the chances that someone would hand over the money and buy the house on the spot. You could even say that the land without the house itself is worth at least $100. You would achieve your goal of selling your house as quickly as possible by ignoring your wish to get as much money as possible.
In example 2, the other wish is to get as much money as possible when selling the house. Let’s say you want to list the house for $5,000,000, which is probably nowhere near what you paid for it. How long do you think it would take to get the house sold for that price? In most cases, the house would be on the market until all the other houses are sold and someone really needed a house to live in. If there were no other houses available to be sold & someone really wanted to buy a house, they could pay five million dollars and buy yours. It may take many, many years for that situation to happen, but you would have achieved your goal of selling your house for as much money as possible by ignoring your wish to sell your house as quickly as possible.
Hopefully, this shows you that there is a direct relationship between price and time when it comes to selling a house. The lower the listing price, the sooner it will probably sell, but the less money you will make from the sale. The higher the listing price, the more money you will probably make from the sale, but the longer the house will be on the market.
You tell the buyers a lot about your intentions with the initial listing price of the house. And you tell them even more by the changes in the pricing as the house remains on the market. As a general rule, it makes more sense to not start selling the house until you're ready, and to list it at the most reasonable price you can afford.
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