Keys To The Lockbox

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What Does a Room Need To Be Labeled a Bedroom? Windows? Closets? Q: Must a room have a window to be considered a bedroom? What other things are required for bedrooms? A: You might think of a “bedroom” as just a place where people sleep, but for purposes of safety, the actual definition is somewhat different. State and local governments, as well as groups such as the American National Standards Institute, the Building Officials and Code Administrators and the Southern Building Code Congress International, have established standards to determine what is or is not a “bedroom.” You can find different standards in different places. For instance, some regulations say a bedroom must have 120 square feet of space.A bedroom below the fourth floor must have an operable and accessible window or exterior door to provide ventilation, light and an emergency exit. The window cannot be more than 44 inches above the floor and must have at least 5.7 square feet of “openable” space.A bedroom must have a smoke alarm. Closets are not required, but privacy is preferred:A “bedroom” should not serve as a passageway to another room, etc. Certain areas inside a home should not be advertised as “bedrooms.” For instance, a basement rec room with small windows five feet above the floor and no exterior door would not qualify as a bedroom. For specifics in your community, speak with a local appraiser or building inspector. Q: My house has been on the market for two months, which, by the way, seems like a lifetime. I have upgraded the bathrooms, all new flooring, oak floors in the dining and living rooms, fresh paint throughout. The house even has a new roof, new siding, as well as a new furnace and central air. The house is located in a lower-income area, so qualified buyers seem a little hard to come buy. Homes are selling in my area but slowly. I’ve only See ASK OUR BROKER, Page 2

‘Understand the neighborhood extremely well’:When considering flipping houses, be sure to track what houses are selling for in what neighborhood you’re targeting, the spread between asking and selling price and how long houses are staying on the market.

Plan to Flip? Beware of Flopping Making that quick real estate buck isn’t as easy as it seems BY PAUL ROGERS CTW Features

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he buzz surrounding flipping homes has quieted some this year as the real estate market cooled. Many experts say it probably never should have buzzed so loudly in the first place, even when home sales were blazing hot. Flipping, the idea of buying a home and quickly reselling for a profit, usually after renovating all or part of the structure, certainly can work. But the success of flipping relies on a laundry list of factors – any one of which can quickly and without warning go wrong, turning the flip into a flop. Plus, the

process of flipping is simply much more time consuming and costly than is often portrayed by get-rich-quick seminars and rose-colored glasses television shows. “You see these claims,‘We can turn you into a millionaire overnight.’There’s no such thing. If it was so easy, everybody would be doing it,” says Neil Garfinkel, a partner at law firm Abrams Garfinkel Margolis Bergson LLP, New York. The first factor that often gets distorted is the cost. It is tempting to think of the profit earned by flipping as the cost of the property minus the cost of the renovations. It’s never that simple. People often leave out the full costs asso-

ciated with the transactions – all the fees, taxes, insurance, appraisals, etc., associated with any real estate deal.Then there is the cost of the mortgage paid during the renovation process.And almost never considered is the value of the flipper’s time. Flipping is not a casual, hands-off activity. Finding and purchasing a flippable property in the first place usually requires days of researching, combing neighborhoods and identifying potential targets. Coordinating and riding herd on the renovation process adds countless additional hours. Imagine how long it takes to get three estimates to replace the roof on your own home and multiply that by every project you plan to undertake on the flipped home.Then take into

See FLIPPING Page 2

There’s One Key to Around-the-Clock Showings:The Lockbox BY CHARLES SCUTT CTW Features

MANY REAL ESTATE professionals will tell you that the key to a successful sale is often an invisible seller – at least from the buyer’s

perspective.While some buyers prefer to have the seller on hand to answer questions during a house tour, many buyers need to be able to envision the residence as their future abode, which means that the seller has to make

him or herself scarce. And that’s where a lockbox can come in pretty handy. A lockbox is simply a hollow metal box that affixes to the front doorknob or some other convenient and highly visible spot on the

property for sale.Within the lockbox is another small-sized container that stores the home’s front-door key.The outer lockbox can be a simple low-tech device that, for example, requires a threenumber push-button or dial com-

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bination to open it. Or it can be a more commonly used modern lockbox with a tiny microprocessor inside that requires an electronic key to gain access. Only licensed real estate agents who are members of the local multiple

listing service have access to a seller’s lockbox, if the seller allows it. The benefits to using a lockbox are numerous, says Raphael Isaac, a broker with Wakefield

See LOCKBOX Page 2

LOCKBOX When you’re gone, your home’s open CONTINUED FROM PAGE 1 Properties LLC, Bronx, N.Y.With a lockbox,“the seller or seller’s agent does not have to be at the house to let prospective buyers in. Buyers, with their agent, can come and go on their schedule, and the house can be shown late at night, on weekends, holidays, et cetera.” That makes the lockbox option particularly advantageous for owner-occupied sellers who work all day or are frequently away from home, says Alex Aguilar, sales manager for RE/MAX Olson & Associates in Granada Hills, Calif. It also provides an extra convenience for agents and potential buyers, free-

FLIPPING Sellers need to be more selective CONTINUED FROM PAGE 1 account scheduling the work and the oft-experienced phenomenon of a contractor being unable to finish on time and/or on budget. And then factor in the time it takes to market and sell the property after the renovations are complete. Flipping is a fulltime job, not a free-time hobby. “At the end of the day, there are all these pieces that go into it,” Garfinkel says.“And even then, there are, for lack of a better term, surprises.” New York levied an unexpected $7,000 charge for past-due pest extermination fees two days after closing for one of Garfinkel’s clients.Another client experienced squatters. (“People may move into a property and you have to get them out, and that’s not always so easy,” he says.) Surprises can be even simpler. You might discover the plywood under the roof shingles is rotted despite the roof appearing sound prior to closing. “There are all kinds of legal

ing them from the constraints of a seller’s often limited availability. “There are currently over 8,000 homes for sale in my market. Unless a home is an incredible value or very special, I probably won’t go out of my way to show a house that I have to make special arrangements for,”Aguilar says.“The easier you make showing your home, the odds are better of selling it quicker.” The good news is that there is no extra cost to obtain, install or use a lockbox on your property for sale, says Margaret Sophie of Coldwell Banker Howard Perry and Walston, Cary, N.C.“It’s part of a full-service real estate agent’s job to obtain one for the homeowner.” Moreover, sellers can rest assured that lockbox privileges will not be abused, say the experts. “Licensed agents are the only people that have access to an

electronic lockbox, and they need to be in good standing with their local board of realtors in order to have an operable access key,”Aguilar says. The advantage of using a modern electronic lockbox is that it can identify any agent who opens it via his or her unique code and it logs the date and time they entered the premises – information that can be downloaded at the local MLS association, providing extra peace of mind for sellers. “The seller has to OK the use of a lockbox,” Isaac says.“But not all sellers want people to have access to their house when they aren’t at home.” Sophie says that a lockbox should not be used if the property is a high-end home or if interior items need to be explained, such as an expensive fixture, rare work of art or other coveted amenity. Lockboxes also are not

recommended in high-crime areas, as they can be smashed open or tampered with by clever thieves.Additionally, sellers with higher-risk pets, night-shift jobs that require daytime sleeping, or who run a daycare service out of their home probably should not use a lockbox. The alternatives to using a lockbox are time-tested, oldschool techniques – such as an agent making an appointment with the owner to show the home at a specified time or allowing showing agents to pick up the house keys at the listing agent’s office.A seller also could opt to leave their key hidden under a rock or in a special hidden place that they only tell their listing agent about, says Isaac, although most real estate professionals would not recommend this.

and physical issues – all of them things that mean you can’t sell the property,” Garfinkel says.“I’m not saying no one can do it. But if you do it, do it with your eyes open wide and know that you really need professionals.” Paying a security firm to guard the property against squatters, hiring a law firm to thoroughly defend against unfounded claims and keeping a reliable contractor on retainer all run up the costs. But the most successful flippers are backed by a team of professionals: lawyers, mortgage brokers and especially general contractors. One of Garfinkel’s clients who flips has an in-house staff of salespeople to sell the properties post-renovation. “For the novice, it’s not the way to go. It’s like playing musical chairs and you don’t want to be left without a seat – in this case without a buyer,” says Ellen Bitton, chief executive officer, Park Avenue Mortgage Group, New York.“In order to be a flipper, you really have to have experience and know your worst-case scenarios and know that you have the wherewithal to outlive any market turndown, which could last a couple of years.” In that vein, use money that

has been set aside for a riskier investment where potential failure will not endanger your budget or lifestyle, says Bitton. Put aside enough dollars to support the property for an extended period of time, or make sure the numbers work for you if you need to change from a flip to a rental.You can’t count on that three-month turnover, says Bitton. The other big mistake people make is turning the property into a mansion. Don’t overdo the

The best way to earn money flipping is to start from a house that literally is uninhabitable or borderline inhabitable and do the minimum required to get an occupancy permit, advises John T. Reed, writer and publisher of the newsletter “Real Estate Investor's Monthly.” Changing a one-bedroom into a two-bedroom, correcting a bad foundation (foundation trouble always scares buyers away) or eliminating cat urine in a house where cats were allowed to roam free also are sound flipping strategies. “Everyone makes the mistake of doing all the work – going for the last buck and not the fast buck,” Reed says. Most of all, investigate. Research.Track what houses are selling for in whatever neighborhood you’re targeting, the spread between asking and selling price, and how long they’re on the market. “Understand the neighborhood extremely well,” says Garfinkel.“And maybe partner up with a more sophisticated developer or real estate broker on that first transaction.Anyone thinking,‘I can do this myself,’ needs to be extremely careful.”

In order to be a flipper, you really have to have experience and know your worst-case scenario renovations. Don’t upgrade so much that the house becomes the highest priced in the neighborhood.You likely will not be able to recoup the investment. Just look at the average return for a remodeling investment.The only room to show a return is a midrange bathroom remodel, according to the 2005 National Association of Realtors’“Cost vs. Value Report.”And that return was 2.2 percent.

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Ask Our Broker CONTINUED FROM PAGE 1

had one person look at the house, she loved it (so she said) but has not made an offer. I don’t feel that my broker has been doing enough to sell my home. All she’s done so far is put a for sale in the front yard, and had two open houses to which no one came. She wasn’t doing any adverting in the local papers or in any of the home books. Only when I confronted her did she list the house in the local newspaper. She said the cost to run the ad for two weeks is $85. I find that a small cost considering the size of her commission. I have already closed on my new house, so I need to the get this one sold soon. Any advice you can give would be greatly appreciated.

A: Let’s go through the issues you raise. • Two months may not be a long time to market the typical home in your neighborhood.Ask your broker to show MLS figures for days on the market. • The fact that the property is located in a lower-income area does not mean there’s a shortage of qualified buyers. Logically, there are more qualified buyers for your neighborhood than one filled with mansions and estates. • That the broker has held an open house twice in two months may be entirely reasonable in your marketplace. Were the open houses advertised? If you are not on a main street a lack of advertising could explain the shortage of visitors. • The broker’s commission is not in hand.A real estate listing agreement is a “performance” contract – the broker is only paid if the property sells.That said, if the marketing plan provided when the property was listed said the broker would advertise, then that’s the broker’s obligation. You need to sit down with the broker and raise several questions: First, is the original market plan being followed? If not, why? Is a new plan required because of changing market conditions? Second, is your home competitive with like properties in the community? You have made many improvements to your home and the result may be that you have a property that is expensive when compared with nearby houses.Your pricing may violate the general rule of home selling: Buyers seek the least expensive home in the most expensive neighborhood they can afford. Third, would it make sense to change your price or offer? For instance, would your property have more appeal if you lowered your price, offered a “seller contribution” to help with buyer closing costs, or both? Lastly, if you remain dissatisfied with your current broker then you may want to switch to a different broker when the current listing agreement ends. © CTW Features

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Need real estate advice? Peter G. Miller, author of “The CommonSense Mortgage,” would love to hear from you. Send your questions to [email protected].