Buyers Archives - Page 28 of 29

What is the difference between a BPO and appraisal?

October 17, 2015 By Tayson Rockefeller Leave a Comment

First of all, what the heck is a BPO? A BPO is a “broker’s price opinion”. You might also see BOV (broker’s opinion of value) CMA (comparative market analysis) or other forms of the same basic meaning. The broker is usually simply considered a real estate professional with expertise in the area. What is an appraisal then? An appraisal is an appraiser’s opinion of value. (no, I don’t think they usually abbreviate) since we know what a broker is usually defined as, a real estate appraiser is usually defined as a professional who develops an opinion of value on a specific type of property. Sound like the same person? Yes, but it is not.

So, back to the question at hand, what is the difference?

While any old real estate agent can compare recent sales (often called comps or comparables) and develop an opinion of value for someone, it usually cannot be used by a bank or lender to verify a property is worth or what someone is willing to pay for it. In fact, most real estate agents are not even allowed to be compensated for a BPO, usually only the responsible broker of an office can be compensated. However, most good brokerages will provide market analysis and opinions of value for free. (ahem).

On the other hand, a real estate appraiser is obligated by federal law to be state licensed or certified. That involves acting as a trainee for a certain number of hours, (yes, appraisers must train their own future competition) becoming a licensed appraiser, and becoming certified for specific applications. Just like a real estate agent, appraisers are required to complete many hours of education and continuing education for their profession. An appraiser is an unrelated party to a real estate loan, usually in place to protect the lender.
So, can a real estate agent performance appraisal? No! Unless that real estate agent is a licensed appraiser. Can a real estate agent give you an opinion of value for your property? Sure! But it cannot be considered an appraisal.

I have been trying to find someone to owner finance or lease to own, why is it so difficult around here?

October 17, 2015 By Tayson Rockefeller Leave a Comment

I’m glad you mentioned owner finance and lease to own in the same question. In a way, they’re the same thing. a summary of each;
-Owner finance is possession upon closing, usually in the form of a deed of trust. This works the same as getting a loan and buying a home, except the owner collects the payments. Usually the owner will collect payments through a third party such as a title company and a long term escrow. This way, your insurance and taxes are typically included in the mortgage payment to protect the seller from a disaster or tax foreclosure.
-A lease to own is not considered possession upon closing, but exactly how it reads, leasing until either obtaining finance by the bank, the owner, or cash at the end of the lease term. typically a portion of the lease payments would apply to the purchase price in this event.

Now, why aren’t they very popular? I think the best way to understand this is pros and cons of each. Not only that, but there are pros and cons for each the seller and the buyer, which are sometimes conflicting. In the owner finance situation, the buyer has an opportunity to recover poor credit, and purchase a home today at (presumably) a lower price. On the conflicting inside, the seller is (presumably) selling the home for a lower price today to a buyer with potential credit problems and not receiving a full cash payment to invest elsewhere. Of course in return for this, the seller will be making a return on the interest rate. That interest rate must be sufficient to cover a higher return than the seller would make investing the full cash investment elsewhere today. This might sound weighted towards disadvantages for the seller only, but there are other disadvantages for the buyer. The biggest disadvantage to the buyer in my opinion is the lack of inventory. We are already in short supply, and even shorter, approaching nonexistent supply for owner finance. That means the buyer has very little to choose from, and may be stuck with a home they really don’t want, or can’t afford just to make the terms of the owner finance work. The buyer must determine if this is the only route, even after credit recovery, the buyer can take.

With regards to the lease to own situation, this is very similar. However, the buyer may not have credit issues, but simply wants to learn about the area before moving into a purchase. Though the risk might be minimized on the credit aspect for the seller, the other terms remain the same. Even worse, they don’t have the initial cash deposit they would with the owner finance, which would come usually in full payment after the end of the lease term. Moreover, the same inventory and choice issues remain the same for the buyer. The buyer is looking for a home they will enjoy leasing, and living in, all in one. Where neither opportunities are common, this drastically reduces the availability in the number of homes to choose from, both for rent and for sale. In this circumstance I would advise the buyer to find a more affordable rental option, and keep their options wide open for a purchase after their lease is up and they have determined they want to live in the area.

On a final note, market conditions can drastically change the amount of inventory. With the two real estate markets in recent history though, it has not. In the wake of the downturn, a number of sellers had mortgages that far exceeded market value. They did not have the option to owner finance because even the initial or final payment would not recover their initial investment. Remember, in most cases an owner can only owner finance if they own the real estate out right. In today’s recovering real estate market with low inventory and supply, it simply does not make sense for a seller who can easily sell their home at market rates today, without the hassle of going through the owner finance situation. Since other markets are also doing reasonably well, the cash they would receive on a full purchase sale could be reinvested at a substantial return.

There are circumstances I did not touch on in this article. If you find yourself in this situation as a buyer or seller, and would like any free advice, don’t hesitate. Also remember to keep your eye on the Teton Valley Realty blog for other information on the topics above!

What do I need to know about the County assessment notice I just received in the mail?

June 17, 2015 By Tayson Rockefeller Leave a Comment

Not long ago I did an article on property taxes, and how they work here in Teton County. In that article I go over levies, taxing districts and so on. Since I won’t go into too much detail on that end of things, feel free to email me, and I will forward you the link to that post. I keep all of the Ask the Expert articles up on the Teton Valley Realty website blog.
Anyway – the county’s primary source of revenue is property tax. The county has to come up with a way for all property owners to share the cost of “operations”, and they accomplished that by prorating each property owner’s share based on the value of their property. They determine that value based on sales prices, construction costs, rents, etc. Whenever a property is sold here in the county, they send the new property owner a letter requesting the details of the sale, including purchase price. ***Note, Idaho is a non-disclosure state, and the new owner is not required to respond to the letter.
Back to your asessment notice. Many of you probably noticed an increase in your assessed value this year. Don’t get excited, this only means that your prorated share of property taxes is going to increase. The increase most of us are seeing is based mostly on real estate recovery. Building costs are up, rents are up, demand is higher than in recent years, and supply is low. It’s important that you understand the accuracy of this letter. If the county is assessing the value of your property too high, you could be unnecessarily paying more than your fair share of property taxes. If the value is too low… well, you decide what to do.
If you read read your notice, you will see instructions on how to “appeal” your property’s assesment. If you only made note of the value and stashed it in your file cabinet, you can find that information on the county’s website under additional information on the assessor page. If you don’t email, you can pick up the information at the county courthouse during normal business hours, or stop by my office and I will print it out for you. IMPORTANT – should you decide that the county is over valuing your property, the deadline for appeal is Monday, June 22nd at 5:00 PM. The county is surprisingly easy to work with regarding the appeal process, but probably less so as we approach the deadline. Those who wait until 4:30PM on Monday the 22nd, might see less cooperation.
Prior to starting the appeal process, it would be a good idea to arm yourself with data supporting your claim that your property is overvalued. If you are a land owner, you might obtain recent sales of lots in your subdivision or nearby. When the county assesses homes, they value the land, then the improvements for a total assessed value. You could obtain sales data for land, or data of recent home sales in your area, as long as they are similar in size. If you have a finished basement and your neighbor doesn’t, that would definitely affect assessed value. A great resource is your favorite real estate agent, who would probably love to send you the information you are looking for.
There is a bit of good news in all of this, our market is improving dramatically. If you missed last month’s article, It’s a good overview of where we are today.

Homeowner’s Associations, a brief explanation

May 17, 2015 By Tayson Rockefeller Leave a Comment

In light of the recent happenings with a local homeowners association (HOA) in Driggs, I thought I would write this week’s article about HOA’s purpose, and their ability to control certain situations – and why. Some feel certain HOAs have entirely too much control. However, the board of directors who represent the HOA, as well as each individual owner must abide by governing documents of the development that typically include; Articles of Incorporation, Bylaws, CC&R’s, and Rules and Regulations. The articles are usually simple documents to get the HOA up and running initially, and include non-profit filings with the Secretary of State. The bylaws dictate how the association is run. The CC&R’s are the bulk of these documents that include everything about the operation of the HOA, restrictions, requirements, etc. If written, the Rules and Regulations are typically a simplified version of the CC&R’s that include specific rules that will directly effect owners and residents. All of these documents can typically be found in the record, or provided by a county, real estate agency or title company.
When considering a purchase, it is imperative that you review these in their entirety, though they can certainly be comprehensive. For you, tenants or other residents, it might not be a bad idea to review (at least) the CC&R’s and/or rules and regulations as they most directly impact the residents. All of the above said, the problems with homeowners associations usually arise when someone hasn’t reviewed, or there is a misunderstanding. Regarding the issues I was recently involved with, it was a matter of interpretation. Honestly, the largest problem is lack of participation by the homeowners. Understandingly so, it’s usually a thankless job performed voluntarily. In this latest circumstance, I’m not convinced the majority of the owners didn’t disagree with the interpretation of the board of directors, but without enough participation from those that feel that way, nothing can change. Further, it takes initiative. If none of the Board of Directors take that initiative, oftentimes a member not directly involved with the board will know how to get that ball rolling. It’s all about questions, knowledge, and involvement. In this latest circumstance the entirety of the HOA took the brunt, even though it was only the decision of the board of directors that the residents didn’t agree with. Despite how all of these tenants and residents feel, all of this interpretation can be clarified exactly how the majority rule intends, but the majority must participate in the next meeting, ask those questions, and make their own personal decision, not leaving the decision to the board.
Next time you receive a proxy in the mail for your local HOA, forget about the proxy and set aside time for the meeting to cast your own vote. You will be enlightened and help the better cause that YOU believe in!

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