What’s the One Unbreakable Rule of Real Estate?

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“Perform due diligence!” is the one rule you should never break in any kind of real estate deal – residential, multi-occupant, or commercial!

What is due diligence? It’s a common phrase for the evaluation of a property and its surrounding environment before you commit to buying it.

Due diligence has two objectives. First, you want to reduce or eliminate risk! Needless to say, you’ll be assuming a large loan and will want to know exactly what’s right or wrong with a property before you sink any money into it.

Two, due diligence allows you to uncover real bargains, especially for investors. On the surface, one property may look like a “loser,” but a closer inspection may reveal that the building is structurally sound and requires only minor and inexpensive maintenance and repairs.

One part of due diligence is what you’d expect – the physical inspection of the property and inspection of all documents and records concerning that specific property. The other part is the inspection of the documents and records concerning that property.

In this article, I’ll just talk about the physical inspection portion of due diligence.

Physical Inspection of Properties

Below, I’ve listed all the inspection tasks which should be performed by a professional inspector. Of course, you should visit the property as well. Many times, a quick “eyeballing” can reveal any obvious signs or poor maintenance or decay - a leaky roof, wet basement, foundation cracks, cracks in the walls, plumbing leaks, etc.. In those cases, you’ll know you don’t need to waste any further time on that property.

As I mentioned earlier, such an inspection may reveal that you’ve actually got a bargain on your hands instead of a “dog.” In such a case, you’ll want to purchase or invest in that property quickly.

What happens when you find problems in a property and still like it? Well, then, you can require that the seller correct those problems or reduce the price before you sign any contract.

In general, defects fall into two categories. One category contains the obvious defects – wet basements, peeling paint, broken windows, leaky plumbing, warped floors, etc.

The other category contains the more expensive and dangerous hidden defects. These can include corroded pipes in the walls, roof or window leaks that don’t show up until it rains or snows, subtle cracks in the foundation.

Obviously, you want to make sure these hazards are spotted before you ever sign a purchase agreement. They can cost you a lot of money in the long run, not to mention the fact that they can send your blood pressure through the roof!

What Do Professional Inspectors Look For?

Below are the items inspectors examine when they check a property:

• Overall structural integrity
• Property drainage/landscaping
• Walks and drives 
• Foundation, footings, crawl space, basements, sub-flooring, decks
• Exterior walls, siding, trim 
• Windows, doors, cabinets, counters 
• Gutters, downspouts 
• Roof, roof shingles, roof structures. chimneys, attic
• Floors, walls, ceilings, etc.
• HVAC systems 
• Plumbing systems, (fixtures, supply lines, drains, water heating devices, etc.)
• Electrical system (wiring, service panel, devices, and service capacity
• Energy conservation/safety Items 
• Insulation & ventilation 
• Moisture intrusion/mold

And, of course, we can’t forget the voracious appetites of….bugs!

Pest Control Inspection

Depending on the area of the country in which you live, insects can cause a heckuva lot of damage to a property!

I’m talking about such bugs as termites, carpenter ants, powder post beetles, and any other insect that likes to munch on wood. Then, there’s fungus, in the form of “dry rot.” It can also cause a lot of destruction.
In such cases, you’ll need to hire the services of a specialist (pest control inspector) to examine the property.

If the operator identifies any problems, he or she should provide you with a diagram that pinpoints the location of the infestations. If serious problems exist, they need to be corrected immediately! The expense is usually paid for by the seller.

To protect yourself against any of the problems I mentioned above, ensure that the purchase contract provides for cancellation without penalty or loss of money if the physical condition of the property doesn’t meet standards.

First Quarter Home Sales Information For Our Area

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It's that time of the year where we've gotten the first quarter of 2012 homes sales information for our area and the nation. In the Huntsville Madison County market, the good news is that home sales are trending upward.

The National Association of Realtors shows the median home price at $189,900.  Although our median home price went down slightly, our sales have increased. The majority of our buyers closed under the $200,000 mark. As an example, in March 69% of our home sales closed under $200,000.  Only 4% of home sales were above the $400,000 mark.

Local home sales closed 2.6% up over 2011, which is great.  Our in-office sales are up 18.5% which is huge!  Our office just got 8 brand-new VIP exclusive listings. Our VIP buyers get access to our office exclusive listings before anyone else knows that they're available.

My projections for April 2012 show that we will be up over 30% from last year. Plus, we've closed 90% over last year in our home sale numbers. Remember that this time in 2011, our real estate sales numbers were skewed due to the tornadoes that hit.

At Amanda Howard Real Estate, our home sales in March 2012 moved upward by 11% when compared with February.  We remained steady and stable compared with March of last year. This shows that the Huntsville Madison County housing market is actually growing at a steady pace.  Our home sales are continuing to rise, so we anticipate a very busy selling season.  Although our median home prices may show a decrease, that's not related to a slow market.  Instead, it simply shows more activity under the $200,000 price point.

As for available inventory, the number of available properties in March 2012 went up by 1.9% month over month.  However, it decreased by 10.39% compared with March 2011.  Again, this shows improvement in the real estate market.

In addition, March 2012 days on market dropped by 12 days to 120 when you compare it with the previous month of February.  However,  it increased by eight days from the same time last year.

Although these real estate numbers may be confusing, what it shows is an improvement in the market and brisk, steady movement of housing.  We anticipate a busy selling season and would love to help you with any of your real estate needs.  Give us a call or drop us an e-mail with your questions, concerns and needs when it comes to real estate.