By Harvey S. Jacobs June 25, 2015
I co-own a rowhouse in the hot U Street area with my ex-partner. He wants to buy me out of the property which has appreciated quite a bit since we purchased it in 2001. My ex has proposed a selling price. When I ask how he determined it, the response was, I’ve been watching the market.
With his new mortgage, there will be an appraisal but that doesnt give me much comfort. I’ve been told that in a hot, fast-paced real estate market like D.C., appraisers cant keep up with the value because of the lag in available comparables. It was suggested that a real estate agent who knows the area would have a better idea of the house value. I shared that suggestion with my ex but he didnt think it was necessary. Any suggestions?
Pricing a home in todays market is a challenge. Pricing is part science, part art. It sounds like you intend to sell your interest for its fair market value. Fair market value is often defined as the price that a willing buyer, under no compulsion to buy, is willing to pay to a willing seller, under no compulsion to sell.
An experienced real estate agent in your neighborhood will be an essential resource for you and your ex-partner. The real estate agent will provide you with a comparative market analysis (CMA) which will tell you what the other comparable homes sold for over the past several months. They can determine if prices are trending up or down, and by how much.
Agents can tell you how long those comparables remained on the market. They can determine if those prices were affected by unusual external factors, such as: extreme weather, or government sequestration. Active real estate agents will know how contract terms and conditions impact their sellers bottom line.
In the current market, buyers often ask for, and receive, up to 3 percent purchase price concession from sellers at settlement. Finally, the savvy agent will be able to provide you with his gut feeling about the steps you need to take to maximize your sale price and minimize your days on the market.
If you are more the science type, I highly recommend you consult the District of Columbias Real Property Assessment Divisions Appraisers Reference Materials 2016 (ARM). This 148-page report is a valuation data treasure trove.
It is available online athttp://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/Binder2016finaldraftnumbered.pdf.
The report is broken down into sub-neighborhoods and provides guidance to the Districts appraisers on how to value literally all the factors which determine the assessed value. Assessed value is determined by the District on an annual basis in order to assess and collect real property taxes.
This approach takes vast amounts of data into account and assigns values to all major housing elements. For example, it values the second full bath at $12,500; each additional half bath at $8,125; a fireplace at $8,000; a finished basement will be valued at $55 per square foot; an open porch increases your homes value by $22 per square foot, whereas a fully enclosed porch fetches $55 per square foot in additional assessed value.
Even floor coverings can cause your assessed value to vary widely. Carpet adds $2.17 per square foot to your homes base value, whereas ceramic tile adds a whopping $8.53 per square foot, even more than hardwood, which the District values at $7.17 per square foot.
The main drawback to relying on assessed value to determine fair market value is that the data used by assessors for taxation purposes can be somewhat dated. The 2016 ARM data is based on closed sales through year-end 2014. The other drawback is the fact that District assessors do not field inspect every property every year.
If the scientific approach appeals to you, but you do not want to do your own number crunching, you can always hire an independent appraiser to do that for you. The costs are nominal at about $450. Most appraisals can be completed in a week or so. Your independent appraiser will have the market data, and your cooperation in allowing him to carefully inspect all the interior improvements that you have made over the years.
No home pricing discussion is complete without addressing online valuation Web sites such as Trulia or Zillow. These sites historically have had an abysmal error rate (between 18 and 32 percent) for their online, computer-generated valuation.
Recently, they have taken steps to increase their accuracy by entering into agreements which allow them to get near real-time data directly from the various multiple listing services.
As recently as June 10, they were still reporting an overall 8.3 percent median error rate nationwide. As Zillows own site says the Zestimate isnt intended to replace a real estate professionals opinion of value.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates-Attorneys At Law, LLC in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Harvey at (301) 417-4144 Jacobs@Jacobs-Associates.com or Ask@thehouselawyer.com.
By Harvey S. Jacobs June 12, 2015
We have lived in our newly built townhome for a little over one year. The builder advertised it as luxury, upscale and high-end.
We have had numerous problems, but the biggest one is the hardwood flooring. The flooring was an issue from day one, and we probably should not have closed on the home after the final inspection. The subcontractor for the flooring has verbally agreed to replace the hardwood. It is Bruce engineered flooring, and we did pay for the upgraded version. We are hesitant to replace it with the same product.
Can we insist on a different product? If it is at a higher price, can we make the builder eat the additional cost?
The Bruce flooring product was the builder’s choice. Should we hire an independent hardwood floor expert?
Any advice will be appreciated. Replacing the floor on two levels of our home will be a big and inconvenient endeavor.
I have handled wood-flooring cases. We used an expert witness in one case to prove that the flooring that was installed was not what had been selected. We also proved that the manufacturer’s installation method was not followed and caused warping and cupping.
In your case, it appears that unless the flooring is somehow not what you selected, is defective or was installed improperly, you may be liable for the cost of replacing it. Sales promotions using words such as luxury, elegant or high-end are not enforceable. The courts call those sales efforts merely puffery, and the builder cannot be held to such subjective criteria.
Check your contract to see whether it covers your situation. Most new-home contracts allow the builder to substitute materials for any or no reason. If defects in workmanship or materials are the issue, then check your new-home warranty promptly. Often new-home warranties will require you to make any claims within one year.
If your flooring subcontractor has already agreed orally to replace the hardwood, get that in writing. Make sure the writing addresses who is responsible for the materials, labor, warranty, the time frame, any necessary permits and the disposal of the old materials. Finally, make sure that subcontractor is licensed, bonded and insured.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144 or e-mail firstname.lastname@example.org or email@example.com.
By Harvey S. Jacobs April 23, 2015
I am a Realtor and recently sold a townhome to a nice young family. They have learned that there is a very abusive neighbor who has made their lives a living hell. He shows up at their door with his German shepherd dog and yells at them for no apparent reason. He is loud, boisterous and very intimidating.
Police have been called several times. Peace orders have been obtained, but the behavior continues. Now they are thinking about just selling and moving elsewhere. We have a few questions. First, can they sue the neighbor for their damages if they sell at a loss and/or for moving and other expenses? Second, can they sue the previous owner/seller for failing to disclose this well-known abusive neighbor?
Finally, if they do list their home for sale, do they have to disclose this abusive neighbor? -JW
It appears that your client may be able to sue his neighbor for causing a private nuisance, trespass and possibly assault.
Nuisance, as a legal theory, has been recognized since 1066. In its present evolution, the courts define private nuisance as: unreasonable or intentional conduct that causes substantial and unreasonable injury or interference with another ‘s use and enjoyment of his real property.
A court will decide if the nasty neighbor ‘s actions are reasonable. For example, courts have found that regularly playing a radio so loud that it could be heard in the house next door was unreasonable. If the nasty neighbor regularly appears at your client ‘s front door with his German shepherd in tow and intimidates your client without provocation, this conduct could easily be ruled unreasonable and certainly intentional.
That this intimidation takes place on your client ‘s property could support a trespass claim. Trespass occurs when, without consent, one enters onto another ‘s property in an unlawful manner. Unlawful manner means the trespasser has no legal right to be on the property. To establish no consent, the police often advise homeowners to post the property with a No Trespassing sign.
The courts will next examine whether the nasty neighbor ‘s unreasonable conduct has caused your clients substantial and unreasonable injury. If the court finds that because of the aggressive neighbor your client reasonably fears coming and going through his own front door then it could establish substantial injury.
In addition, if your client believed that he was in imminent risk of bodily injury from his neighbor and/or his dog and believed that the neighbor possessed the ability to make good on that threat, then it is a civil assault.
Once your client proves he is the victim of a private nuisance, trespass and/or assault, he can ask the court to prohibit the nasty neighbor from continuing his behavior. He can also request monetary damages for all losses caused by the nuisance, including the diminution in the property value and for any physical or mental injury. Assuming the nasty neighbor ‘s conduct is found to be outrageous or malicious, punitive damages are also available.
Whether your client can sue his seller for failing to disclose this nasty neighbor is a gray area. Many sales contracts have adopted a caveat emptor (let the buyer beware) approach. In those cases, the courts may rule that it was up to the buyer to knock on the neighbor ‘s doors to investigate. Depending upon the contract language, and the seller ‘s actual knowledge, the seller may not have had a duty to disclose. Unlike the failure to disclose a known but latent property defect, the existence of a nasty neighbor is not a property defect.
The Realtor ‘s Code of Ethics provides that Realtors shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. Realtors shall not, however, be obligated to discover latent defects in the property, or to advise on matters outside the scope of their real estate license.
But if your client decides to sell, the safest approach is to disclose. By disclosing, he cannot later be accused of hiding the nasty neighbor from his own buyer. If that disclosure causes him monetary damage, then he can sue the neighbor to recover those damages.
He will have to prove that the decrease in property value is directly related to the nasty neighbor – a difficult but not impossible burden of proof.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144, firstname.lastname@example.org or email@example.com.
By Harvey S. Jacobs March 19, 2015
When one hears the word eviction, one might conjure images of a sheriff’s deputy and a moving crew showing up at a rental property and forcibly depositing the tenant’s possessions at the curb.
But there is another, lesser known type of eviction, a constructive eviction, which is used by tenants to avoid the lease terms. Landlords and tenants alike need to be aware of the legal theory behind it.
Constructive eviction occurs when the landlord allows the property to deteriorate to such an extent that it becomes uninhabitable. Constructive eviction can also arise when a property is rendered uninhabitable by a natural disaster – such as a fire or a flood and the landlord cannot promptly repair the damage. Constructive eviction claims most often arise as a defense in a landlord-tenant action.
Generally speaking, if there is a written lease that calls for the tenant to pay rent and the tenant fails to pay, a court will enter a judgment for the landlord. One of the few reasons a court will excuse the tenant’s obligation to pay rent is that the property is rendered uninhabitable.
Minor problems or temporary circumstances that inconvenience the tenant will not rise to the level of a constructive eviction. Broken elevators or clogged toilets, if fixed within a reasonable time, will not support a tenant’s defense of constructive eviction. If repairs are possible but the landlord refuses to make them or delays making them, a court can order an interim remedy short of declaring a constructive eviction.
A court can order the tenant to pay his rent into a court registry, which is not released to the landlord unless and until all necessary repairs are made. If the landlord still fails to make necessary and timely repairs, the court can allow the tenant to use his rent to pay for repairs.
Because of the ramifications of a constructive eviction such as allowing the tenant to cancel the lease and make no rent payments courts will accept this defense only in the most serious circumstances. For example, courts have found a constructive eviction to exist when heat, potable water and sanitary facilities were lacking for a prolonged period.
To successfully assert the constructive eviction defense, the tenant must abandon the property within a reasonable period. What is reasonable is whatever the courts say is reasonable. Courts have found an abandonment occurring within a month of the event allegedly causing a constructive eviction to be reasonable.
Conversely, when a tenant did not abandon the property until a year had elapsed, that was held to be an unreasonable abandonment. Similarly, abandoning the premises after the lease expired was held to be an unreasonable abandonment. In those cases, the courts refused to find that a constructive eviction had occurred.
Constructive eviction can also be used affirmatively by a tenant. This can occur when a tenant sues the landlord for breach of the tenant’s covenant of quiet enjoyment. All leases contain an implied covenant of quiet enjoyment, which does not necessarily have anything to do with the decibel level at the property or whether the tenant is actually enjoying the property.
This poorly named doctrine guarantees the tenant’s right to use the property for the purposes the tenant intended. When prevented from enjoying such use, the tenant may sue the landlord for breaching the covenant. If the court agrees, it will declare the lease breached by the landlord and allow the tenant to terminate the lease without penalty.
Tenants assume a significant risk when using the constructive eviction defense or when suing for breach of the covenant of quiet enjoyment. Because the tenant must abandon the premises to satisfy the requirements for a constructive eviction, if the claim is not accepted by the court, the tenant will have abandoned the property but will still be liable for the payment of all rent for the entire lease term.
In light of this risk, tenants should think very carefully before using these legal theories.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville, Md. He is a real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144, firstname.lastname@example.org or email@example.com.
By Harvey S. Jacobs January 23, 2015
Pssst. Want to buy a luxury condo in warm South Florida for just $1? You can buy a luxury two-bedroom, two-bath condominium on a golf course in Boynton Beach, Fla., and many other warm-weather locations for $1.
What’s more, many of these ultra-cheap condos are even furnished soups to nuts and in turnkey condition (although the furnishings in many cases need updating).
There are currently at least 10 luxury condos listed for between $1 and $900 just in Palm Beach County. These deals really exist, and if you are looking for a winter getaway now with the goal of retiring to a warmer climate someday in the future, these deals are well worth your time, said Kathy Pendleton, a real estate agent with Lang Realty in Boca Raton, Fla., who has been selling country club community real estate for 28 years. One of these units comes complete with a new Keurig coffee maker and fully stocked bar.
So what’s the catch? Are the titles riddled with title clouds? Do they have insurmountable environmental contamination? Are the condo fees sky-high? No, these condos have clear titles, are clean and habitable and their condo fees are in line with comparable units.
The catch with these condos is that they require you to join their country club, pay the annual country club dues and eat and drink a minimum amount each year. Annual total carrying costs run between $20,000 and$30,000, Pendleton said.
Still interested? Do your due diligence.
Before forking over your hard-earned greenback on this or any other too-good-to-be-true real estate investments, you need to ask and receive acceptable answers to many questions.
You must determine the mandatory fees and what you get for them. For example, the $1 condos require you to pay a non-refundable $10,000 country club membership application fee as well as a $40,000 equity buy-in to join the club. When you sell your unit, you may get back as much as 70 percent of your equity buy-in ($28,000). You are also required to pay annual country club dues of approximately $10,000. These dues entitle you to unlimited use of country club facilities and, depending on your membership level, unlimited tennis and golf greens fees. All country clubs have golf cart fees and annual minimum expenditures for food and drink.
In addition to the country-club-related fees, you are required to pay condominium fees, any special assessments, real property taxes and insurance.
You should carefully analyze the country club’s and condominium association’s finances. Specifically, ask if these two associations are solvent. Determine if they have sufficient reserves to pay for major repairs, renovations and capital improvements. Ask about the number of unit owners who are delinquent and how many units have been foreclosed on for delinquent condo fees.
Examine the steps that management is taking to recognize and minimize these adverse conditions. For example, because of an aging population, many condominium associations have begun to offer discounts on application fees and club equity buy-in or even waive first-year club dues to attract a younger membership.
Investigate the covenants, conditions and restrictions (CCRs) and house rules governing your personal and/or rental use of your unit. Many condominiums restrict occupancy to individuals at least 55 years old.
CCRs typically allow only one rental per year. The CCRs will also let you know if owners and renters are allowed to have pets and, if so, if there are restrictions on pet size or the number of animals.
If you intend to rent your unit, you need to explore the tax consequences for such rental income. Though expenses related to generating rental income are generally deductible for federal income tax purposes, the rent you receive is taxable income. Even though the cost of your unit may be as low as $1, the additional mandatory costs of acquisition (but not the cost attributable to the land) generally can be capitalized and depreciated.
Certain states and counties impose a tax for rentals of less than six months. For this reason, many leases are drafted for six months and one day.
If you have $1 in your pocket and can afford the lifestyle, perhaps a country club community is in your future.
Harvey S. Jacobs is a real estate lawyer in the Rockville office of Jacobs & Associates. He is an active real estate investor, real estate agent, developer, landlord, settlement attorney and lender. This column is not legal advice and should not be acted upon without obtaining legal counsel. Jacobs can be reached at (301) 417-4144 via e-mail at Jacobs@Jacobs-Associates.com or firstname.lastname@example.org.
By Harvey S. Jacobs November 14, 2014
If you live in Maryland and your real estate agent refuses to refer you to a mortgage lender, he isn’t being rude. Real estate agents making referrals to service providers in Maryland can now be fined up to $5,000 if they violate a new state Real Estate Commission regulation.
That regulation requires agents to make a referral in writing, to verify that the service provider has a current state license, to provide the date on which the agent last checked the state-licensing database and to provide an electronic link to the licensing record.
Making real estate agents the de facto license police under this unduly burdensome regulation will more than likely prevent licensed real estate agents from making any referrals when providing routine brokerage services.
Previously, experienced real estate agents, familiar with the good and bad service providers, were able to pass along, on an informal basis, the names of service providers they found to perform good work at reasonable prices. The public will no longer be able to readily take advantage of the valuable experience that licensed agents brought to the real estate buying process.
It is safe to assume that when faced with the risk of being fined and reprimanded or even losing their licenses, real estate agents will demur when a client asks for a referral.
This regulation interferes with the professional relationship between the agent and his client, censors the agent’s ability to give meaningful information to their clients, and turns the agent into an agent for the state, said Dennis Melby, former president of the Greater Capital Area Association of Realtors, district vice president of the Maryland Association of Realtors and a real estate agent in Bethesda.
This regulation’s broad scope includes, but is not limited to, referrals to mortgage lenders, mortgage brokers, real estate appraisers, home inspectors, home improvement contractors, plumbers, electricians, heating, ventilation and air-conditioning contractors, and all others who are required to be licensed. The regulation covers referrals provided in connection with the provision of real estate brokerage services.
The new regulation is intended to protect the public, said Kathie Connelly, executive director of the Real Estate Commission.
If the public uses a non-licensed contractor and is harmed, the consumer will not have access to the Maryland Home Improvement Commission’s Guaranty Fund, Connelly added. That fund can reimburse the aggrieved consumer up to $20,000 per claim. A consumer harmed by the unlicensed contractor can still resort to the courts for a remedy.
Insurance companies that provide errors and omissions insurance for Maryland real estate agents certainly see the potential for increased claims against agents. This regulation will add to the huge number of frivolous claims being filed against agents. As a result, insurance premiums may have to be reevaluated.
The District and Virginia maintain similar real estate transaction-guaranty and education funds to assist consumers who have been harmed by their licensees. Neither has or contemplates a similar regulation governing referrals. Nor are any other licensees in the region required to vouch for other licensees’ bona fides.
For example, a Maryland licensed plumber may freely refer a consumer to an electrician without having to check on that electrician’s license and without fear of jeopardizing his plumbing license.
It is a simple matter to verify licensing in Virginia by visiting the Virginia Department of Professional and Occupational Licensing site, www.dpor.virginia.gov/LicenseLookup. In the District, go to www.pearsonvue.com/dc/realestate for licensing data.
It took me three hours to locate a licensed inspector with the necessary credentials, said Anne Brown, a real estate agent with Prudential PenFed Realty in Olney, Md. She added, I am almost to the point of not making any more referrals.
The Maryland Division of Occupational and Professional Licensing is responsible for licensing and regulating the activities of more than 210,000 individuals, corporations and partnerships. There are 23 licensing boards, commissions and programs appointed by the governor regulating 24 different licensed occupations.
Most but not all of these licenses can be verified at www.dllr.state.md.us/pq . Mortgage lender, broker and originator licenses can be verified at www.dllr.state.md.us/finance/industry/licsearch.shtml.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144, email@example.com or firstname.lastname@example.org.