First of all let me clear up a very important misconception here: It’s not just a “termite report”. While termites are certainly one of the little rascals exposed in a “termite inspection”, there are many other potentially damaging issues identified therein. For this reason the correct term for this inspection is typically exemplified by a title something like “Wood Destroying Pest and Organism Inspection”.

You see, termites are not the only wood destroying varmits you need to be concerned with when it comes to keeping your home “healthy”. Other threats may include (to name just a few) various other insects, fungus, mold, mildew, dry rot, leaky plumbing, leaking shower pans, etc. When a professional pest inspector is hired to evaluate a building, that person will be looking primarily for any potential threats to its structural integrity.

A pest inspection will typically identify problems areas in one of at least four categories:

1. Active infestation of a wood destroying pest or organism.
2. A condition likely to lead to active infestation of a wood destroying pest or organism.
3. An area inaccessible for inspection, with further inspection recommended.
4. Items which are not currently harmful but which are meant for disclosure purposes only.

Active infestation is somewhat self-explanatory. This typically refers to the infestation (primarily of wood structural members) by either an insect or a biological agent. Insect infestation is noticeable in forms ranging from small pellets found on floors or window sills in the case of termites, to obvious holes bored into wood members by certain beetles. Evidence of biological infestation often includes a patchy either dark- or light-colored “mold” or “mildew” which may also be accompanied by a distinct odor.

Inaccessible areas for inspection can include attic spaces, subfloor areas, a deck with no crawl space, or even areas with too many personal effects stored adjacent to them. These issues are of particular concern when you sell your home, because a buyer may have a contractual right to request such an area be made accessible and inspected. The industry standard used to determine who will pay for the cost of accessing these areas usually depends upon the ultimate outcome. If an infestation is discovered, the seller must pay. Consequently, if no infestation is found, the buyer must bear the cost.

A common example of an item usually identified as an item for “disclosure only” would be an exterior wall in contact with soil at a level which could cause possible moisture intrusion (such as a house built into a hillside). In this example there is no practical solution, and as long as no moisture intrusion is evident on adjacent interior walls, the pest inspector will frequently recommend that a buyer or homeowner condut further investigation(s).

Unfortunately most homeowners wait until they have accepted an offer from a buyer to purchase their property before ever having a pest inspection. Subsequently the vast majority of people may only think about this issue every 5 to 15 years! Since a variety of infestations may occur at any time, for numerous reasons, it’s a good idea to have one every 2 – 3 years. It makes great sense to know what, if anything, is gnawing away at one of your most significant investments.

If you wait to have a pest inspection until your property is under contract with a potential buyer, you are putting yourself at a tremendous risk. First of all you may agree during negotiations to remedy problems which you don’t yet know exist, based upon the findings in the inspection. Secondly, and perhaps even more importantly, you may suddenly find yourself paying a premium to a contractor for a quick remedy to avoid even more costly delays in the closing time.

Don’t let this happen to you! My advice is to have a pest inspection on a regular basis. At the very least, have an inspection prior to listing your property for sale so you know what you’re dealing with. Imagine the money and grief you can save yourseffl Also be very clear in your negotiations with any buyer what items you are willing to remedy, and at what cost. It is not uncommon for sellers to limit the amount they will pay to repair pest damage to a certain dollar figure.

It’s always best to ask a real estate professional for a referral to a reputable pest inspector. You may also want to research reliable contractors for any remedial work to be done, since pest inspection companies may not always bid their recommended repairs competitively. If your intention is to sell your home in “as is” condition, with no pest corrective work to be done at all, then you can inform a prospective buyer upfront and save valuable time for you both. This is truly an example of the old saying regarding the cost of education in comparison to the cost of being unaware!

Most sellers experience a great deal of anxiety when the time comes to open their homes to prospective buyers. Some sellers paint inside and out, install new carpet, or even replace the roof. Others merely vacuum and dust. There is a happy medium where getting your home ready to show may not be as difficult as you might think (or try to make it!).

An excellent excercise for you is to get in your car with a pad and pen, take a short drive, and pretend you’re a buyer going out to look at an open house. Now drive back to your house, but instead of going into the driveway park across the street from your house to get a buyer’s perspective. Get out of the car with your pad and pen and study your home’s curb appeal. (Your neighbors may think you’re strange, but what the heck, you’re moving anyway, right?!)

First pay close attention to your landscape. Now may not be the time for heavy pruning, but some light trimming may make give your home that “well groomed” look. A little shot of fertilizer can green up a lawn quickly, and a visit to your local nursery will reveal several varieties of colorful flowering annuals to brighten up beds. Keeping walkways and hardscape areas clean, eliminating weeds, fallen leaves and general debris is tantamount to putting a sign on your home that says “Come on in!”

The condition of the exterior structure should be your next area of inspection. Look for loose or missing shingles on the roof, cracked and/or peeling paint, stains on exterior finishes, torn window screens, etc. A buyer is likely to view any items of deferred maintenance to justify a lower opinion of value. One small investment that pays huge dividends is clean windows; they reflect light and make your home sparkle like a jewel!

Now step inside your home, once again pretending that this is the first time you’ve ever done so and try to be objective. Scan the spaces as you walk through the home and keep in mind that spaciousness is one of the most desirable characteristics today’s buyers are looking for. Make sure traffic flow patterns in the home are unobstructed and generally try to furnish rooms to make them look and seem larger (this may require you to put some furniture and/or artwork in storage).

The “brightness” of your home’s interior is also very important to most buyers. Someone once told me that dark surfaces “eat” light; how “hungry” is YOUR home? You may need to consider some painting, removing dark curtains (you can always offer to put them back if a buyer wants them), and perhaps even new carpet (choosing a neutral color is essential!).

Eliminating clutter in your home is one of the easiest and most inexpensive “home improvement” projects. Clean and clear countertops in kitchens and bathrooms, as well as well organized closets and storage areas allow a buyer to mentally unpack THEIR possessions. If you appear to be overcrowded in your home, it’s very logical for a buyer to feel that they may also be.

The best advice you can get is from your real estate agent, who has seen hundreds of homes and knows how to best show yours. Once your home has been seen and/or shown by other agents, have your agent obtain feedback from them and their buyers as to what changes you can make to further enhance your home’s appeal. Remember, you don’t have to quit living in your home, but a few lifestyle changes could translate into more money in your pocket when it sells!

VALUE: The first step is to determine the price or price range you are ultimately willing to pay for the property. To do this you need to review recent comparable sales of homes located within the neighborhood you’ve selected, preferably limiting your search to the past 6 to 9 months. Current market conditions also heavily influence price (remember that rule about supply and demand?)  Real estate agents typically are the best sources for this information because they usually have comprehensive knowledge of the homes that have sold as well as the terms under which they sold. Real estate agents also have the most direct contact with home buyers, giving them invaluable insight into today’s consumer.

OFFER PRICE: Let’s face it, most people feel compelled to offer less than they’re ultimately willing to pay. There are many theories on this issue, ranging from “10% below list price” to “What have I got to lose?” My advice is to reach a compromise between your opinion of what is “reasonable” and advice from your real estate agent. Find out the seller’s motivation (how badly does he/she need to sell?) and determine how patient and tenacious you’re willing to be in the pursuit of the lowest possible price.

OFFER TERMS: These can be nearly as important to a seller as the price. Because the length of the escrow or settlement period has a financial impact to both a buyer and seller, find out what the seller’s optimum closing date would be and try to accomodate it. Other terms to address in an offer include repair of any termite and/or fungus damage, who will pay for what inspections, who will pay for a home warranty, and time frame for removal of all contingencies to name just a few.

CONTINGENCIES: Protect yourself and give yourself the opportunity to have inspections on the home, review documents related to title, solidify your mortgage, etc. Contingencies reduce the risk of you losing your earnest money deposit should you decide not to buy the home for certain reasons after your offer has been accepted. Carefully consider the time periods that may be necessary for you to complete your “due diligence” phase of the purchase, and make sure your contract addresses these timeframes clearly.

It is a very good idea to ask your real estate professional for a copy of a standard purchase contract as you begin searching for a home. This gives you an opportunity to preview all of the components of the offer and ask questions well in advance of actually writing an offer on the property. Remember, the more prepared you can be the less stressful the whole experience may be and the less chances you will have for mistakes!

The most important aspect of making an offer on any home is to structure that offer to be as attractive as possible to the seller, especially when there are multiple offers on the property. Make every effort to identify all of the seller’s goals, financial and otherwise, then make them an offer they can’t refuse!!

As you may have noticed, our society today is extremely oriented toward protecting consumers. Therefore when and if a buyer discovers something about a piece of property that may be considered a defect, or even “disagreeable” to them, the buyer usually has a contractual right to cancel the contract if the seller is unwilling or unable to provide a remedy. This is the second period of negotiations which I mentioned previously. If these negotiations fail, and trust me, they often do, it’s not a pretty sight!

Homeowners can save themselves alot of grief and potential surprises during the selling process by having and giving the buyer as much detail about the property as possible. Two excellent methods of educating yourself about your property are to have a pest inspection and professional home inspection.

A pest inspection is often erroneously called a “termite inspection”. I call this eroneous because it is much more than just a search for peskly little wood-chewing critters. The inspection may also identify such issues as faulty grade levels outside the house, excessive moisture conditions both inside and outside, leaking shower pans, leaking roofs, and improper ventilation to name just a few. The potential for unexpected expense and frustration is immense, not to mention the inconvenience of having to deal with any surprises under the pressure of time constraints during a pending sale.

A home inspection is quite different from a pest inspection. Professional home inspectors usually investigate such issues as plumbing and electrical systems, operation of appliances, windows and doors, structural integrity, broken or missing fixtures, etc. Suffice to say that a home inspection, when done by a professional, often times reveals a variety of problems which you, as a homewoner, may not have known about. When this happens during a pending a sale, all parties can be disappointed and upset. The next thing you know the buyer may be asking you to make expensive repairs in order to continue with the sale.

So just imagine how much easier and more pleasant this whole process could be if you handed your prospective buyer a copy of a pest inspection report, and a home inspection report, during the initial negotiations. You can disclose in writing that these are the issues you know about, and whether you have elected to fix none, some, or all of them. The price you ultimately accept for your property should reflect what you know and what you’re willing to remedy.

Keep in mind, however, that the buyer still may have the right to have their own inspections, at their own expense, but if you’ve had good reliable professionals working for you there should be no new surprises! Your cost of these inspections are very minimal (often under $400.) compared to the tremendous potential benefits!

An article appeared recently in one of our local newspapers that left many people with confusion.  I received more than a few calls from some of my clients wondering how the median home price can be going up if sales are going down.  The article discussed two separate topics as if they are closely correlated.  The truth is: These issues are related, but not in the way we are led to believe.

The median home price is defined as “the statistical point where half of the homes sell for more and half sell for less.”  This statistic can be misleading because it is strongly affected by variations in buyer behavior.  To illustrate this point, let’s assume that 9 homes sold in each of two different one week periods, with prices as follows:

Week 1                  Week 2
$400,000                $450,000
$450,000                $500,000
$500,000                $550,000
$550,000                $600,000
$600,000                $650,000
$650,000                $700,000
$700,000                $750,000
$750,000                $800,000
$800,000                $850,000

In the example, the median home selling price in week 1 is $600,000 and in week 2 is $650,000.  One could say the median home price increased by $50,000 (or 8%) in one week. The only difference in the data is that in week one a house sold for $400,000 and in week two there was a sale for $850,000.  It’s easy to see now that the median home sale price merely indicates buyer behavior, and not necessarily house values.

The second issue that must be examined is that of declining (or even increasing) sales.  Two dates are important to consider here, the date that the property went into escrow and the date escrow closed. Property sale statistics are typically gathered from county recordings of grant deeds on the date of close of escrow.  Since the average escrow period can be anywhere from 30 to 90 days from the date an offer is accepted on a property, sales in June indicate a decision to purchase, made by a buyer, in either March, April, or May.

There are two significant categories of buyers whose activity has decreased in San Luis Obispo County over the past few months: Investors and first-time home buyers.  Both of these types of home buyers are more sensitive to fluctuations in home values, and their inactivity can be largely responsible for a decrease in  sales.  The majority of home sales today are among move-up or move-down buyers (who are often selling and buying), and buyers relocating into the area.  These buyers have equity and/or other resources to enable them to participate in this market.

Hopefully by now it is becoming evident how declining sales can actually cause the median price of homes to go higher. The demographics of today’s buyers are such that they are more active in the middle to upper price ranges.  With the absence of many investors and first-time buyers it is the middle and upper price homes that are selling, causing the median home price to increase.

The important thing to keep in mind is that an increase in median home price does not automatically indicate that the value of real estate is increasing.  Consequently, a lower median sale price does not necessarily indicate falling property values.  Like most industries real estate is strongly driven by supply and demand.  Today our supply is higher, and demand lower than in the previous few years.  It can be said with accuracy that our local real estate market is currently a “buyer’s market”.  In a buyer’s market the buyer will have a strong influence on values.  That, however, is another topic altogether.

This summer of 2006 is like any other in history, with an abundance of information and opinions about the real estate market.  All media reports seem to agree that sales are down, and inventories are up.  It’s a buyer’s market and price reductions are a common occurrence on the daily multiple listing service reports.  What does all this mean?

For many people this is just more bad news to face every day, along with news of war and terrorist threats.  There are many other people who think that a slowing housing market is good news.  Like many other circumstances in life we can look for, and find, good news in all this real estate business.

INTEREST RATES

Yes, interest rates have increased in the past year.  However, when compared to historical data for the past 3 or 4 decades, they are still relatively low.  Not only that, but there are more creative loan programs available today which offer people many options for purchasing and refinancing a home.  Furthermore, the tax advantages of mortgage interest and property tax deductions continue to make home ownership an attractive alternative to renting.

INVESTMENT POTENTIAL

While there is absolutely a category of real estate buyer that buys and sells real estate for short-term profit, the majority of people invest in real estate with long term potential in mind.  In addition to the wonderful tax advantages there are huge emotional dividends paid by home ownership, all of which can be found in the very definition of “home”.  The more people who are able to afford to buy a home, the better our society becomes as a whole.

A BALANCED COMMUNITY

If real estate prices decrease more people are able to afford a home.  The idea of a community in which police and fire personnel, school teachers or young families cannot afford to live is a troubling concept.  As the housing industry experiences a national “recession” more pressure will be on the Federal Reserve to keep mortgage interest rates low, allowing more economic and cultural diversity in our communities.

SUBURBAN SPRAWL AND RAMPANT GROWTH

A slowing of sales translates to decreased demand for housing.  With less demand for housing there will be less pressure on municipalities to build more homes.  This concept will result in growth that is less spontaneous and more planned.  Our infrastructures will have reduced demand upon them and the quality of life for all citizens will subsequently be improved.

Let’s face it, for the real estate market to continue to boom along at an annual rate of 20 to 30 percent appreciation every year would certainly result in catastrophic consequences.  That kind of growth is simply not sustainable, nor should it be.  It is far better for consumers to be able to shop for housing without intense competition that results in sales prices that are higher than asking prices.

It’s far better as a parent to know that lower real estate prices gives our children a better chance of someday being able to live in this community, perhaps even raising their children here, and maintaining the exceptional quality of life we’ve come to love in this most beautiful corner of the planet.  It’s important to recognize that change is inevitable, and that change is not always a bad thing.

Ahh…the wonders of modern technology!  It used to be we had to seek the help of professionals and spend a lot of precious time reviewing confusing data to determine what our homes were worth.  Today, all that has changed and now we can simply log onto a website and within seconds we have an answer.  What’s absolutely fantastic about this is that some computerized model takes so many factors into consideration so quickly to determine the value of real estate.

Someone must be driving around neighborhoods collecting data on all of the homes therein.  There must be some sort of check list requiring a score for landscaping, condition of roof, appearance of neighboring properties, curb-appeal, paint, and all the many other details that prospective buyers quickly analyze when they look at a house for sale.

It’s astonishing to consider how thoroughly this data is collected and then downloaded into the magic mainframe.  Along with a physical analysis of each individual property someone must be doing extensive research into neighborhood and community development/zoning issues.  Certainly the plans for vacant lots to be developed and/or adjoining and imminent housing developments would have an impact on the value of existing properties.

It puzzles me how this miraculous mainframe knows that one property has been completely remodeled with Italian marble in the bathrooms and granite counter tops in the kitchen, when a similar size home down the street hasn’t had any interior upgrades since it was built in 1975.  How in the world do they analyze the vast array of floor coverings, fixtures, appliances, etc. that aren’t visible from the exterior of a home and yet have such a significant impact on its value?

This is where a professional real estate agent can be most helpful.  An experienced, full-time professional looks at homes everyday and watches market activity closely.  The industry demands serious real estate agents know about local weather patterns, planned developments, mortgage interest rates, and countless other components that can affect the value of any particular real estate.

As fantastic as the concept seems, the idea that all of the nuances that go into real estate sale statistics can be taken into account by a single computer to give consumers an accurate estimation of their home’s value is a little like science fiction.  It’s all sort of like a typical episode of “Star Trek”: Technology could always take the Starship Enterprise to distant planets but the “away team” had to physically beam down to the planet to physically explore and accurately assess it.

A few weeks ago the chief economist for the California Association of Realtors, Leslie Appleton-Young, spoke at a conference held in San Luis Obispo. She addressed the near future economic forecast for California real estate and shared the many indicators that point to this slow-down in our market lasting over the next year or two. One of her points was that in today’s market sellers are thinking about what property values were 6 months ago, while buyers are thinking about what the value will be 6 months from now.

This conflict of opinion is wreaking havoc on the local real estate industry. The days of “low-ball offers” have returned and buyers are expecting to get a bargain, while sellers still want top-dollar for their home. Real estate salespeople and appraisers are working overtime to bridge this chasm and arrive at a value that both buyers and sellers can live with.

There’s an old saying: “The customer is always right”. There’s another saying more specific to real estate: “Value is determined by a ready, willing, and able buyer”. When you stop to think that everyone who attempts to assess the value of real estate does so by looking at prices of comparable properties that have sold recently, both of these sayings ring absolutely true.

Real estate is a supply-and-demand driven industry. If supply is high and demand is low, we call that a “buyer’s market”. When supply is low and demand is high, it’s called a “seller’s market”. In either market the buyers influence value by how much they’re ready, willing, and able to pay. In a “seller’s market” the seller has more influence on value, but it’s still the buyer who ultimately confirms the value by willingly paying the price.

It would be safe to say that we are currently experiencing a “buyer’s market” here on the Central Coast. The homes that are selling in this market are perceived as the best value in terms of either price, condition, or location; or a combination of all three. When a property sells there is synchronicity between buyer and seller, and hopefully there will eventually be satisfaction for both.

A mobile home park that is. A shining example being Quail Run; an age-restricted, gated mobile home park on the east side of Paso Robles. This is a housing complex characterized by sweeping lawns and lush, well-tended gardens. The streets are clean, and manicured parkways lead to a modern looking clubhouse with swimming pool, spa and tennis courts. Residents own their own lot and pay a modest homeowner association fee rather than space rent.

Two-car garages and sunken foundations replace the ubiquitous carports and tin skirting so commonly found in traditional mobile home parks. It’s difficult to tell, at first glance, that these are in fact mobile homes. The lots range in size from 3,000 to 5,000 square feet (standard mobile home parks feature lots anywhere from 2,000 to 3,000 square feet). The terrain is gently rolling, so as you drive through this unique community you’re rewarded with hints of distant views enjoyed by those homesites that sit higher than the street. The topography is just one more element that betrays the standard “trailer park” design and sets this community apart.

What if we created parks like this in San Luis Obispo and other cities in the county? What if we opened these parks to families as well as the over-55 crowd? The technology in mobile homes today is far improved from that of the 1970 double-wides with expandos. Dry wall has replaced fake wood paneling and today these homes offer modern amenities found in mainstream, site-built homes tract and custom homes. Furthermore today’s mobile homes (or “modular homes”, thank you) can be purchased at up to 1/3 the cost of most tract homes.

Obviously there would need to be rules in place to maintain peaceful cohabitation among residents; just like we have now in most tract developments. Designated parking areas could handle extra vehicles and small parks with playgrounds could offer a communal backyard for kids to play in safely. Hey, we’re already doing THAT also! The land would be the most expensive component, however with the reduced building costs these homes could quite possibly cost only between $300,000 and $400,000.

There’s no reason such communities need to be a visual blight on the landscape, or suffer the stigma long endured by more traditional mobile home parks. Certainly our advances in civil engineering and design could mitigate most aesthetic concerns. If you have any doubts about this take a drive up to Paso Robles and visit Quail Run. Imagine well-planned common areas, creative and thoughtful landscape standards, and a unique sense of community. Imagine thinking outside the “box” (pun intended) to an alternative that could provide affordable housing AND a walk in the park!