Old Neighbor in Preforeclosure

This is interesting! Last night, I was going through some preforeclosure listings and came across an address that seemed very familiar: it is across the street and about 2 or 3 houses down from the house I used to live in about 2 years ago! I never met the guy living there, but I know the neighborhood and the houses and they are both pretty nice.

From what I can tell, this property is not yet listed in the MLS, so the owner may not have an agent yet. I'm going to send him a letter today and hopefully, if he does decide to sell, I can do it without an agent, thus saving him some money on commissions (which, of course, means I don't have to pay as much).

I did some research on him this morning and it looks like it's the second mortgage that is foreclosing. He bought the property as a new home from the builder in 1995 and refinanced once in 1997. The home owner's association also filed a lien against the property in 2004 for about $2,000 in unpaid fees and took him to court to get that paid in 2005. The civil judgment hasn't been released yet, meaning he still owes them. With late fees and court fees, the amount is now around $2,800.

So my letter will emphasize that I used to be his neighbor, that I can buy his house quickly if he wants to sell it, and that he can save some big bucks on commissions by dealing with me. If I don't hear anything back in a week or two, I'll send a follow up letter. I sure hope the closing on the house I am selling now goes smoothly. It's scheduled to close on 9/16. If all goes well with this guy, I may need my cash by then!

Buyer's Inspection Notice

On Friday afternoon, I received the Buyer's Inspection Notice. They had the property inspected and this notice is a list of things they'd like me to fix. I went out to the property Sunday to verify the items and to meet with my handyman and go over which ones I am willing to fix. Here's the list with my responses:

  • Fascia boards and trim have wood rot / deterioration on northwest corner of patio cover. I will fix this. There is about a 6 inch section of wood at the corner that has some wood rot. You can tell the bottom half of the piece of wood was replaced previously. It looks like whoever did the work previously didn't get all the rot.
  • Electric panel cover missing blanks. I will fix this. This showed up on the inspection I had performed when I bought the house. I had mentioned to the electricians I hired that I wanted this fixed, but I guess they forgot. This isn't a big deal. Basically it looks like two circuits were moved in the electrical box and the blanks that cover the old breaker locations were not installed.
  • Screen door at main entry needs repair / replacement. I will fix this. The inside handle is missing.
  • Laundry drain pipe vent needs to be installed up through the roof to the outside. I will fix this. The laundry room of this property is attached to the enclosed patio and the vent pipe extends up to the ceiling and stops, so it vents into the room. I made things a bit easy here for my handyman because the range vent hood I bought was a non-venting model. The old one vented to the roof. Since the laundry room is on the other side of the kitchen wall, we're going to extend the laundry vent pipe in the attic and join it to the old range vent pipe, which is not being used anymore. My handyman won't need to cut any new holes in the roof this way. This item also showed up on my inspection.
  • Closet door guides in the guest bedrooms are missing. The closet door in one of the bedrooms needs to be adjusted. I'll fix this.
  • One of the guest bedrooms has a broken window. When I looked at this, the crack is a little 1.5 inch semicircular crack that runs from one edge, out a tiny bit into the window, then back to the edge. I was going to not fix this because it's such a tiny crack, but my handyman tells me replacing the window isn't difficult and the glass should only cost about $20, so I'll fix this as well.
  • Ceiling fans and lights in master bedroom and one guest bedroom do not work. I know these work because I checked them when I bought the house. The problem with the one in the guest bedroom was that the fan direction switch was in-between positions. I pushed it all the way up and it worked. Issue solved! The one in the master bedroom however, doesn't work. I know this one worked before and, when I had the electrician pigtail all the aluminum wiring, I had him do the fans as well. His work order shows he did this fan and that he tested it afterwards. I checked the circuit breaker and that was ok, so I have no idea why this fan decided to stop working. My handyman will check it out and, if necessary, replace the fan with a cheap one.
  • Drain leak at kitchen sink. I don't see it. I filled both sides of the sink with water and let them drain simultaneously. No leak. I let the water run for a while on both sides and saw no leak. The only thing I can think of is that, if you feel the bottom of the cabinet, there is a spot under the drain pipe that feels like there might have been water there once, but I imagine that happened during the installation of the cabinets and sink. So I just tightened all the plumbing joints and reported the leak was fixed.
  • Exhaust fan from hall bathroom terminates in attic instead of outside. This is something else that showed up on my inspection and I had asked my handyman to fix it earlier, which apparently, he didn't do. The attic entrance is actually in that bathroom, right next to the fan, so all I had to do was open the hatch and I could see the vent hose not going anywhere. There is a vent in the attic wall right next to it. I suggested to my handyman that he might be able to route the vent hose to that, thus avoiding the need to put a hole in the roof. He said he'd check to make sure that was ok code-wise before doing it. Anyway, this is another item I will fix.
  • Interior water pressure is low and both bathrooms. I will not fix this. Truthfully, the water pressure seems fine to me.
  • Main entryway security light not working. Fixed this. Just needed to replace the lightbulb.
  • Master bedroom door strike plate needs adjusting. The door doesn't latch closed unless you push hard. What a ticky-tack thing. I'll fix this.
  • Caulking needed around shower enclosures. I'll fix this. The caulking has some gaps in it in both bathrooms where the drywall meets the shower enclosure.
All in all, it's not a bad list of problems and three I was able to fix on the spot. My handyman tells me it's about a day's work, which is what I figured, but experience tells me it will probably take him 3 days to finish. He will start working tomorrow. I expect most things will be pretty inexpensive. The biggest expense might be if he can't use the wall vent in the attic and needs to extend the bathroom fan exhaust through the roof.

I sent my response to the buyer's list to my agent. She's typing it up on the correct form for my signature and then we will fax it back to the buyer for his approval. Tomorrow is the end of his inspection period and the point at which his deposit becomes non-refundable.

Article On Why RE Agents Aren't Getting Rich

There's a good article on Slate.com about why real estate agents aren't getting rich from the current housing boom. I love the last line :-)

Building My Company's Credit part 2

Following some of the advice from the site in Steve's comment, I went to Dun and Bradstreet to request a D&B number. They have a section where you can check to see if you already have one because 1 out of 2 companies requesting a number already do. It turns out, my company does! So I requested it online. A short while later, I got an email saying they couldn't email me anything because the information I provided didn't match what they had in their records, and to call in. So I called and gave them my company's name and they found me. They asked for some additional information to complete their profile and then they told me my number. Based on their questions, I think my company has a plus - because my largest investor is a woman and she owns at least 51% of the company, I qualify as a "woman-owned business." That will probably help obtaining loans down the road.

If you do call in, watch out for the upsell. (Watch for it on their website too.) All you need is a D&B number. They will try to sell you a whole credit building package. The one on the website is $499 and the one they pitched on the phone was $799. For the purposes of building business credit, you really don't need these (from what I've read).

Building My Company's Credit

I'd like to get to the point where my company can apply for bank loans and other financial instruments without a personal guarantee from me, but few banks will lend to a company without some legal recourse against a person should the business fail. To show the business is solid, it needs to have a good credit history. Today, I took the first step towards establishing that credit history.

I received an application in the mail from Chase Bank for a business credit card. Normally, I throw these in the trash, but this one caught my eye because it offers a cashback bonus. You earn 3% cashback on purchases at gas stations, restaurants, office supply stores, and home improvement and hardware stores. All other purchases earn 1% back. Based on what I have read on other personal finance blogs like Savvy Saver and Personal Finance For The New Age, this sounds like a pretty good deal. There is no annual fee and all charges for the first year are at 0% interest. After that however, the interest rates are killer. They offer the program at three different levels: The Elite level gives you a 8.99% rate. The other two levels (I forget what they are called) give you a 13.99% and a 20.99% rate. Of course, they don't tell you what level you will qualify for until after you apply. But reading the fine print discloses some additional gotchas: They can change the program at any time. They can change the interest rate at any time. They can changed fix interest rates to variable or variable to fixed at any time. And, the killer, the interest rate will NEVER go lower than 8.49%, 13.49%, or 20.49%, depending on what level you qualify for.

I would never get a card with terms like this for my personal use. In fact, I probably wouldn't even get this card for a business. However, I am lucky in that my house flipping business is basically a cash business. I have my investor's money to use for all expenditures and therefore, I never need to carry a balance on a credit card. So now I'll use this card to buy all the appliances and materials needed for rehabbing a home, collect the 3% cashback bonus, and then pay off the bill in full each month.

FYI, I couldn't find this offer on Chase's website anywhere, so it might not be offered online.

Meta: A New Record!

Yesterday, this blog had the highest single day hit count in its history: 611! The previous record was somewhere around 400 and I was waiting for the day we broke 500. Turns out, we shattered 500! Thanks to all you readers for making this blog a success!

Yard Violation Cleared Up

I called the city inspector to verify he got my message from yesterday stating the yard was cleaned and could be re-inspected. He said he did and had checked out the place and it looks good, so that violation is now cleared up.

Meta: Comment Spam

I've been hit with a bunch of comment spam lately. Deleting it is annoying and time consuming so, in an attempt to limit it, I've enable Word Verification for comments. What this means is in order to leave a comment, you will now be asked to type in a series of random letters shown in a graphic in order for your comment to be posted. This prevents automated programs from leaving spam comments.

Now The Paperwork Begins!

Now that escrow is opened, the paperwork begins in earnest!

Today, I received a fax from my agent of the earnest money deposit receipt. I also received a contract addendum that changes the name of the buyer from agent's name and nominees to the name of the agent's father, the actual buyer. This is functionally equivalent to assigning the contract but was done via a contract addendum rather than a separate assignment document. My agent also said she did not receive my signed agency disclosure and listing agreement that I faxed last week, so I had to re-fax those.

When I got home, I had a paperwork package from the escrow company waiting for me with more stuff to fill out:

  • Proceeds Authorization - how I want my money from the sale delivered to me
  • Seller's Escrow Information - data needed by the escrow company (any mortgages, any HOA, assessments, my social security number, etc.)
  • Terms of escrow - the terms and conditions of escrow. This is standard legal stuff detailing the escrow company's role and duties.
  • Notice of Title Policy Discounts - notification that I may be eligible for discounts on title insurance because I recently purchased title insurance when I bought the place.
  • Checklist of things I need to do.

If past history is any indication, in addition to the above documents, I will probably need to provide a copy of the articles of incorporation of my LLC to prove I am the manager and am authorized to act on behalf of the LLC.

The title policy discount is a nice touch. I knew that if you got title insurance recently through the same company, you could get a discount, but this says I may get a discount even if the policy was purchased through another company.

And speaking of discounts, I need to make sure they give me investor rates. My agent told them , but I like to follow up myself to make sure.

Yard Is Clean!

Wow! I stopped by the property this morning to check out the work the yard maintenance company did and I am completely impressed! I had told the company about the violation notice I received from the city and that I had to cut the weeds down to no higher than 6 inches and trim a tree that was overhanging the sidewalk. That was what I expected them to do - cut the weeds down. What they actually did was pull them all! There is no evidence of weeds at all, anywhere! I must say, the yard looks very impressive now! Of course, it cost me $400...

In addition to doing a good job, the landscape company was willing to work with me. Normally, they collect payment at the property after the job is complete. Since the property is vacant, they couldn't do this. Believe it or not, this company does not accept credit cards, so I couldn't even pay over the phone. They suggested that I leave a check under the doormat, but I told them the property was an hour away from my house and I couldn't do that easily. They agreed to let me mail in the payment that day. And they performed the work on a Saturday too!

While I was at the house this morning, a neighbor came over and started talking to me. He said the landscape company had a bunch of people working there. We got to talking some more about the previous owner and the neighbor was probing me for what I paid for the house and what I sold it for. I didn't see any harm in telling him. He's glad that the sales price is high because it helps his home value. I did find out a funny story about the previous owner: I guess he liked to tell stories with a little bit of embellishment. As the neighbor told me, according to the previous owner, I bought the house by bringing over cash and counting it out to him on the hood of his car!

In other news, I submitted the SPDS to the new buyer on Thursday. I haven't heard anything else yet on the sale and I'm just waiting now for them to have their inspection completed.

Psychology Of MLS Listings

As I wrote about before, I wanted to get this property listed in the MLS using the key words identified in Freakonomics that correlate to a higher sales price. Here is the text of my MLS listing:


One of the keywords was maple. That didn't apply to my property, but oak did, so I had my agent substitute that. Also, move-in-ready was a keyword and that was included in a slightly modified form. New, another keyword, was inserted all over the place :-)

So how did the psychology experiment go? Well, it's hard to tell because Phoenix is such a seller's market right now. I received a total of four offers in four days: two were at full price, one was more than list price, and one was under list price with the caveat they would go over list price by a certain amount. All in all, good bids! But it's hard to tell if the wording caused them or market conditions did. I do know I'll keep using these words in future listings, just in case!

Moving Forward With Sale

My agent confirmed escrow was opened yesterday. As soon as she gets a copy of the earnest money payment, she'll fax it to me.

The next step is providing all the paperwork the contract states I will provide to the buyer: the lead based paint disclosure, the SPDS (seller property disclosure statement), and a list of any insurance claims against the property.

I faxed over the lead based paint disclosure this morning.

I have requested and received a CLUE report from my insurance agent on the property. A CLUE report is a report provided by the Comprehensive Loss Underwriting Exchange and it lists all the insurance claims against a property in the last seven years. I knew from when I purchased this property that there was a claim filed for roof repair due to hail damage a couple years ago. This needs to be disclosed to the new buyer. This was also the only claim that showed up on the report.

The SPDS is 6 pages of questions about the condition and history of the property. For this property, there are only two issues that have to be disclosed. The first is the roof repair. I'm attaching a copy of the CLUE report to this document, as well as a letter from the previous owner's insurance stating what the repair was for and when it was fixed. (I asked for this when I purchased the house. I don't need to provide it, since the CLUE report shows the same thing, but I'm trying to "kill them with kindness" here.) The other thing I need to disclose is the aluminum wiring issue. Normally, this might give a buyer pause, but in this case, it allows me to show I have fully repaired the problem. I will be attaching the invoice for the copper pigtailing work that I had done by a licensed electrician. And, of course, I am writing the magic phrase on the SPDS as well.

The next step is to wait for the buyer to have an inspection performed and to get their list of items they want corrected. As with everything in real estate, the items on the list are negotiable. I'm hopeful things will go smoothly. The buyer is a real estate agent and I'm sure she understands she is buying a 30+ year old house, so it won't be in immaculate condition.

Oh, the one other thing is the yard clean up. I submitted a request for a quote via a website yesterday, but never heard anything back, so I had to make a phone call today. The company will be out at the house tomorrow at 10 AM to make an estimate and then the work can be performed usually within a week after that.

House Is Sold!

My counter offer to the previous offer was rejected. The buyer did not want to come up with the extra cash or to make the earnest money non-refundable. His agent said she's been trying to get him a house for a couple months, so I guess he's pretty picky. Could be a good thing he backed out.

Yesterday afternoon, my agent received a rather strange offer: it was from a family-run real estate agency here in the Valley which is rather large and whose members are all Realtors. The offer was for $175,000 but the buyer's name was "name and/or nominee." Of course, anyone who has read anything about birddogging recognizes that phrase and what it means - that the person making the offer likely won't be the buyer and will be looking for someone else to buy it. The offer also wanted a 45 day escrow (30 is normal) and they wanted their earnest money to be refundable anytime during the first 2 weeks after contract acceptance. The cover letter to the fax stated that this agent had lots of investors willing to buy properties. It also stated they would beat any other offers by $500 up to a maximum price of $184,000.

I rejected this offer. Or rather, we were going to sit on it until Wednesday, 9 PM, which was when it expired. I felt this offer was obviously a mass-market type thing by an agent who puts out tons of offers in the hopes of getting one accepted and then finding a buyer for it. The way it was written, I wouldn't have been able to entertain any other offers for two weeks and, if the guy changed his mind or couldn't find a buyer, he could walk away for free, wasting two weeks of my time. We decided to sit on the offer for as long as possible before rejecting it because this would give us a competing offer if another offer came in. A little ammunition for a bidding war, if you will.

Late last night, my agent got another offer. This one was from the agent of the guy above who rejected my counter offer. She decided the property would be great for her father, so she put in an offer for $181,000 with a $2,000 earnest money deposit and a $7,000 down payment. The deposit is non-refundable after the inspection period. They are paying for the appraisal and home warranty. Her father is pre-approved from his bank. This offer was for $1,000 over list price and I can't find anything else wrong with it. I accepted it and escrow will be opened today!

Need New Cabinets In Phoenix?

Ok, I met up with Keith yesterday to settle up our bill. After working with him on this project, I have to say he is a fantastic person to do business with. He has fantastic attention to detail and is considerate of my time. For example, we agreed to meet yesterday at my work to wrap things up. We had not agreed to a specific time - he was going to call when he was on the way. I got a call about 10 minutes to 3 PM saying he was just getting off the freeway near my work. Turns out, he remembered that I work 6 AM to 3 PM and planned his arrival to be near 3 PM so he would not disturb my working day.

He probably isn't the cheapest cabinet guy around. However, he is honest, fair, and incredibly dependable. He cares about getting the job done right. He works with several investors who flip properties, so he knows time is of the essence when replacing cabinets. He manages projects well. If you need cabinets, I can't recommend him highly enough. He is a franchisee of Kitchen Solvers and his contact info can be found here. His name is Keith Wolfram. Tell him Shaun sent you. (This is an unsolicited recommendation.)

Offer Fell Through, But New One Received

Now the fun stuff begins - offers and counter-offers!

The buyers did not want to agree to my counter offer to make the earnest money non-refundable after the inspection period, so that deal is gone. My agent says this, along with the use of an FHA loan (which is usually used by people with poor credit), indicated a weak buyer.

But we've got another offer on the table. This one is for $185,000, which is $5,000 more than the list price. However, the buyer wants a seller's contribution of 3%, which is $5,550. Now this buyer also did not want a home warranty and there is no $410 fee associated with an FHA loan like the last offer, so on the surface, it looks like there is only a $140 difference between the two offers. However, I would need to pay commission on the higher selling price. That's an extra $200 I'd have to pay, meaning this offer is now $340 less than the previous offer. Other details are a $1,500 earnest money deposit and a $5,500 down payment. The buyer has a FICO score of 805, which is great. Apparently he's got money, but it's in accounts he doesn't want to touch - IRAs, 401(k)s, etc. This is the reason for the seller contribution.

We're countering back with a seller's contribution of 2%, or $3,700. As before, we are asking the earnest money deposit be non-refundable after the inspection period.

Offer For House!

A couple hours before I got the call from my cabinet guy with his cost for fixing the cabinet fiasco, I got a call from my agent telling me she had received an offer for the property! The offer was for full price ($180,000). The buyer was putting 3% down with $1,000 earnest money. It was an FHA loan. They did not want a home warranty. They will pay the appraisal fee. I am to pay a maximum of $410 towards the buyer's closing costs.

It sounds like a great offer. The only strange thing is that it's an FHA loan. My agent said she hasn't seen one of those in 3 years. I counter offered with the condition that the earnest money is non-refundable once the 10 day inspection period has passed. They have until 5 PM today to respond.

Because this is being bought with an FHA loan, the buyers are owner-occupants, not investors. It also means there are likely going to be some additional hurdles to jump through and I would not be surprised if this sale did not go through. First, the FHA will not issue a loan if the seller has owned the property for 90 days or less. I pass that test, since I've had it for almost 6 months. However, if the seller has owned if for less than 12 months, they may require two appraisals to verify the purchase price. Full details of their requirements can be found here. My agent says sometimes they will want two appraisals, and sometimes they will accept one appraisal, but it will be reviewed by a second person. The other reason I think this sale may not go through is that, during my research on the seasoning issue, I came across the maximum amounts FHA will loan for Maricopa county: $172,632. The buyers will need a loan of $174,400. Oh, scratch this. I found another site that gives a bit more detail. That $172,632 amount is for non-metro areas of Maricopa county. For the Phoenix - Mesa - Scottsdale area, the max is $214,700. So it looks like we're ok there.

If they accept my counter-offer, then it looks like the place is sold and the only thing I have to worry about is the dual appraisals. If they do not accept my offer, I'm not too worried. My agent said she had a couple other agents express interest. She was trying to get them to submit their offers before the reply-by deadline of this FHA offer, but it didn't happen. So there could be other, non-FHA offers out there, waiting to come in.

Cabinet Costs

I got a call from Keith last night to discuss the bill for getting the cabinets installed. I had mentally figured around $2,000, which is what the other guy charged me for the job. It turns out to be a bit more than that... The total cost is going to be around $5,200! Keith had about 25 hours of his time in the job, plus his assistant had 25 hours. His rate is $40 - $45 an hour. There was a little more than $1,000 in parts costs and the countertops were about $1,500. Oh, all these figures are not just for the kitchen cabinets and countertops. They also include the bathroom vanities, countertops, sinks, and faucets. Although the old cabinet guy had the kitchen cabinets made and in the house, he did not have the new bathroom vanities made, so I had to buy those. I'm meeting with Keith today to get a full invoice and to give him a check.

This was more than I expected, but I'm not too concerned. Why? Well, for one thing, there was the $13,000 phone call. For another, well, you'll see in my next post!

Yardwork Revisited

Well, it seems like I'll have to get the weeds cut down anyway. When I came home from work this afternoon, I had a letter from the city stating I was in violation of city codes. They say the weeds must be cut down to less than 6 inches and a tree on the south side yard must be trimmed so that its branches are at least 7 feet above the sidewalk and 12 feet above the street. I have until August 31st to comply and I will need to have the city inspector back out again to verify the work has been done. At my last property, my handyman cleared the yard of weeds, so, given my difficulties finding people to work the yard at this house, I've called him again to see if he can do this. I called at 4:30 on a Friday afternoon though, so I don't expect to hear from him until next week.

Cabinet Photos

Here are some pictures of the long awaited cabinets. I have previously posted photos of the old cabinets. Click the pictures for a larger view.

The $13,000 Phone Call

I was just leaving for lunch when my agent called me. She checked out some active listings in the area and she thinks I can get more than $167,000 for the place. She suggested $180,000. There are 3 active listings in the subdivision and, even at $180,000, mine would still be the lowest priced one. I was a bit concerned because, although I did do a lot to improve the place, the bathroom showers are still a bit, well, not the best. But one house in the neighborhood is a pending sale for slightly more than $180,000 and it is tenant occupied, so you can be sure that house isn't in the best of shape either. So what the heck! I told her to list it for $180,000! She thinks it'll sell fairly quickly too. That was a great phone call!

Of course, this leads me to reassess my valuation skills. I had seen some higher priced homes show up on the comps list, including one that sold for $225,000. Some had pools. I figured a pool added $20,000 to the price. My agent said it only adds about $10,000. A two car garage adds a bit (my property just has a 2 car carport) too, but not a huge amount. I think, in my mind, I had assumed the higher priced homes were in immaculate condition or had some other features that I couldn't tell from looking at the comp list. I guess I need to change my thinking a bit.

House Is Listed!! (Updated)

Or it will be, as soon as my agent checks her email.

I went to the property this morning and everything looks good! The cabinets are finished!! Finally!!! I spent about 45 minutes cleaning up the place. There was a bunch of sawdust from the cabinet install to vacuum up, plus all the boxes for the cabinet doors had to be thrown out. I installed the bathroom light cover and the sink hole plug. The old kitchen countertop was on the back patio. It's too big to fit in my car as is and I didn't want to spend the time taking it apart, so I moved it under the kitchen window, where it is out of sight from inside the house. With all the boxes and wood cuttings, the two trash cans are filled again. I have not done anything with the dead weeds in the yard and one bathroom is missing a shower curtain, but I'm not going to do anything about those unless the buyer requests it.

I did take pictures of the cabinets and I was all set to include them in this post when I realized I forgot to bring the camera's USB cable to work with me. So pictures will have to wait until this evening. Sorry!

I'm listing the house at $167,000. We'll see if we get any bites. Hopefully, my agent will have it listed and a Realtor lockbox on the place in time for the weekend.

11:05 AM Update: Just heard back from my agent. The signpost for the For Sale sign is being ordered today and the house will be in the MLS by this evening. FYI, as I mentioned way back when, I instructed her to use some special words and to avoid using others in the listing to try to get a higher price.

Guess What?

The cabinet are not done!

Now, I know that probably comes as a surprise to many people. After all, this is just a simple little cabinet job. I mean, how long can it take, right? And the guy told me he would be done yesterday...

Ah. Nothing like some sarcasm to start the day off right. I ventured out to the house this morning and discovered the remaining two cabinet doors were still not installed. I was pissed and proceeded to give my lungs and vocal cords quite the workout. I left, forgetting to install the new bathroom light cover.

So I get to work and figure I'll wait until around 8:30 or so to call Keith. At 7:00, I get a call from him. He said he was wondering if he could meet up with me at the house this morning. When I told him I was already there and gone, he was taken aback. Yesterday, when I told him I was going to swing by before work, he assumed I worked the standard 8 AM to 5 PM hours. Actually, I work 6 AM to 3 PM, so when I visit somewhere before work, it's really early. I told him the doors weren't installed. He said he knew that and he didn't get over there last night because he wasn't done with another job until 10 PM. He said he was going to pick up some coffee and get over to the house this morning and finish. He'll call me when it's done.

It looks like things will be done today. At least I hope they will. If so, I'll email my agent the property details to get it listed, but I will still need to go back there for some work. The stove was still not put back in place and, although the debris from the cabinet install was swept up, it was still in a pile in the living room. Not sure if Keith will clean this up or if I have to. And of course, I still need to install the bathroom light cover and the sink plug.

Third Time's The Charm For The Hinges?

Keith called me just now and said he's picked up yet a third type of hinge for the corner cabinet doors. Man, I guess Joe didn't have a clue how to make the cabinets and must have done something really strange. Anyway, Keith said he'd get over there tonight after dinner to install them. I told him I was planning on stopping by tomorrow morning before work to check out the job. He said fine. I'm keeping my fingers crossed this will be done. If it is, I'll try to post some pictures.

Turns Out, It's More Than A One Day Delay

Why did I expect things to be done on time? I got a message from Keith on Thursday saying the cabinets would be done on Friday. So I went out to the property on Sunday afternoon and nothing was done. The parts that still need to be installed were there - the veneer and toekicks and such, but they weren't installed yet. The stove was still not put back in place either. So this morning I called Keith and asked what was up. He said his guy was out there Sunday and finished everything except for the doors on the upper corner cabinets - the hinges for those didn't work. I was at the house Sunday from about noon to 1 PM, so I asked Keith when his worker was there. He wasn't 100 percent sure, but said he'd find out. It must have been after I was there or someone is lying. So theoretically, there are just two cabinet doors to install that's it. Keith tells me he's getting hinges for those today.

It wasn't a totally wasted trip out there for me, though. I vacuumed the house and threw out some boxes that were left from the installation of the bathroom sinks and faucets. (By the way, these cordless vacuums are fantastic! Lightweight, cordless, and they pick up fairly well. They won't do heavy cleaning, but they are great for doing a final touch up.) I also did a tiny bit of painting. The new cabinets that go over the stove are shorter than the old ones. Since the place was painted before the new cabinets were installed (yeah, I know.. stupid move), I had about a 6 inch wide strip of old paint visible. So I painted over that. There were also some cardboard boxes laid down ages ago by the appliance delivery people to protect the carpet . I finally hauled those out. I also took the full trash cans out to the curb for garbage collection, which happens today.

While there, I noticed that the light fixture in the master bathroom was missing the glass that covers the light bulbs and that one hardware mounting hole in the new kitchen sink was not covered. So on the way home I stopped by Home Depot and picked up the light cover (around $11) and a hole plug ($1). After I bought the plug, I starting thinking that maybe that hole was for the dishwasher overflow drain, so I might not need the plug. I need to check that out. I still need to get an air conditioner filter, but I didn't have my tape measure with me, so I don't know what size I need. I'm just going to get one of those cheap $1 filters. I know if I don't, the home inspector will note it.

The yard still has weeds in it. Most are dead and I think I'm just going to leave them. The guy I spoke with last week did indeed blow me off. I even called him back and left a message, but he never returned my call. I tried calling someone else and he told me that he only does weed pulling in the spring. Apparently, he's got so much work he can turn jobs down. If the house is listed and doesn't sell for a month or so, I may revisit this and pretty up the yard at that time, but I'm reaching the point where I just want this to be done, so I'm willing to forgo some stuff I would ordinarily do.

Depending on what Keith tells me when he calls me back today, I am planning on heading out there tomorrow morning before work and finishing up these last details and then getting it listed for sale. I suspect I won't hear from Keith until towards the end of the day because he spent the weekend in Las Vegas at a bachelor party :-)

A Call To End Tax Free Gains On Real Estate

I came across an article on msn.com this morning by a Business Week writer who is complaining about the $250,000 to $500,000 tax free gains policy the IRS provides when selling a residence. (If you aren't aware, you can sell you house and keep up to $250,000 of gains tax free if you are single, or up to $500,000 of gains if you are married. You must have lived in the property for 2 of the last 5 years to qualify for this.) Basically, he is saying this skews investments away from businesses and into real estate and encourages people to move every 2 years. His complaint is that other investments, such as stocks, are subject to a 15% capital gains tax and he doesn't see why selling a home should be any different. The article sounds like sour grapes from a stock investor.

The author states "The powerful lure of tax-free profit is one reason that home prices have risen at a nearly 7% annual rate, vs. about 4% for the stock market since 1997." Although he mentions it briefly, he dismisses all-time low interest rates as a major factor (perhaps the major factor) in the real estate boom and instead seems to think everyone is buying a new home every 2 years solely for the tax benefit. He also misses the boat in assuming it is owner-occupants (the only ones eligible for this tax break) who are driving up the housing market. What I believe is really happening is investors are buying houses for rentals, not to live in. Turning a profit on these investments is pretty easy, given low interest rates. That is what is inflating the price of a house.

Had he really understood real estate investing, rather than railing against the tax break on the sale of a primary residence, he would instead be railing against the tax advantages of the 1031 exchange, which allows investors to defer capital gains tax on income property indefinitely.

Finally, he states "
As much as possible, the tax code shouldn't bias investment decisions." On the contrary, the tax code is expressly designed to bias investments toward what the government believes people should be investing in. Take, for example, all the tax benefits of owning a small business. The government wants businesses created so that more jobs can be made, jobs from which the government collects payroll taxes. The tax code encourages investment in real estate so that a healthy housing market is maintained and the government does not have to provide shelter for millions of people.

One Day Delay

I was planning on heading out to the property today to take some pictures and see how things looked, but I just got a call from Keith and will postpone that trip one day. All the cabinets are hung and today they are installing the doors. They are missing one drawer box, so Keith has to pick that up and get it installed. The panels for the sides of the cabinet are still not done, but they should be done and installed tomorrow. (Keith says they are just veneer that is cut to fit and glued on, so installation time is minimal.) They also realized they needed toekicks, so they've got to get those. In short, all that's left is the little stuff that was overlooked because the job was half done when Keith got it.

The yard guy called this morning and said he could get the yard done today. He was a bit put off when I told him no one would be at the house. He said I needed to be there to tell him exactly what needed to be done. I explained the yard is all rock and I just need all the weeds pulled. There is really nothing ambiguous about it. He said he'd call me again when he gets there. This was about 2.5 hours ago and I haven't heard back, so I'm wondering if he just blew me off.

I got the invoice for the tree trimming, so that should be done. I'll check tomorrow when I go out there before I pay it.

I ran comps again and, as Scott alluded to in the comments to my previous post, the increased holding time I have encountered has worked to my benefit. Using the same source, comps for the property went from an average of $99.94 / square foot in March to $102.65 / square foot in May to $112.20 today. That's an increase of $12.26 per square foot, which translates to an extra $16,600 for this house. Yeah, that pretty much covers my holdings costs of $160 a month!