Author Archives: Ethan Atkinson

Don’t Update Your Kitchen

Many people rush to update their kitchen when buying a new home. Though it can be tempting to rip everything out and start anew, it might be a terrible idea. According to the site Remodeling, the national average for a significant kitchen remodel over the last year was $68,490, but the resale value attributed to that kitchen was only $40,127.

Of course, if you’re not planning on reselling your house, this might not matter to you. But given dramatic shifts in the real estate market over the past few years, it might be good to keep resale value in mind.

Kitchen trends are some of the quickest to change, and to do so dramatically. For example, granite countertops were once perceived as high-end and somewhat exclusive. However, granite has become a builder-grade material sold in every large home improvement store, and can easily make a kitchen look dated. Bob Vila’s “Kitchen Trends You Might Regret” lists speckled granite second, after open shelving.

If you have an older home with original built-ins, leaving these intact can add to the old-world charm of your home. If you have a 1950s mid-century modern home with original fixtures, it might be better to sell it as-is, since original mid-century design is extremely popular right now. As mentioned above, an average kitchen remodel’s resale value is already about $17,000 less than its cost. However, if your home is a trendy and original 1950s home, and you do a new, mid-range kitchen remodel that doesn’t fit with the rest of the house, you could lose significantly more money on resale than the national average.

It’s often a better idea to focus on cleaning and modernizing the basic functioning of a kitchen rather than doing a dramatic remodel. That is, a fresh paint job, refinished floors, and the addition of a new garbage disposal and refrigerator are probably a wiser use of money than ripping out original built-ins and covering all surfaces with speckled granite.

That said, if you’re passionate about speckled granite and price is no object, don’t let us stop you from reaching for your dreams!

Air Space Condominium Ownership

Most condominium ownership is structured around the concept of air space. This means that the building, walls, and common areas are owned communally by all owners through the homeowners association (HOA). Thus, the individual condominium owner only controls the air space created by the walls of their unit. Generally, a condominium owner cannot eliminate walls, or cut through them without the express permission of the homeowners association, even if the walls are only on the inside of their unit.

Besides how strange it is to only own air, this type of ownership seems relatively straightforward. However, there are a number of complexities to air space ownership. Generally, the condominium owner may paint, tile, or put hardwood floors in their unit without the consent of the HOA. This may seem odd, since the individual owner owns nothing but air. However, the paint and floor surfacing are generally seen as part of the owner’s air space, and not as a fundamental part of the walls and floors themselves. By adding a layer of paint or tile to a wall, the owner is only infringing on their own air space; they are not taking anything away from the wall. The drywall, insulation, and reinforcements of the walls are owned by the HOA, but anything applied to the wall or floor surface is generally under the control of the condominium owner.

Another factor that complicates this air space concept involves HOA-maintained appliances or fixtures. For example, a radiator may be located well inside the walls of the unit, and therefore in the air space of the unit owner. However, since the radiator is part of an HOA-controlled system, the radiator is generally not under the control of the homeowner (besides the owner’s ability to turn the heat up or down). To remove a radiator would affect the entire radiator system, so a homeowner could not do this without express permission of the HOA.

A positive aspect of HOA-owned appliances like a radiator is that, if the radiator leaks and causes damage to the unit, the HOA is generally responsible for fixing this damage, as long as the homeowner has not interfered with the functioning of the radiator in any way. Many HOAs may try to make the homeowner pay for this damage; however, from a legal standpoint, the HOA is usually responsible for this kind of repair.

Another complexity of condominium ownership involves HOA-owned spaces that are limited to use by one or a few owners. For example, a parking space that is part of the HOA-owned parking lot might be limited to use by only one owner for the purpose of parking their car. Thus, this owner does not have much ability to change the parking space in any way, but they are the only owner who may use it. The HOA bylaws or CC&Rs should clearly specify this type of communal area that is limited to use by one owner.

Of course, condominiums have endless variability in their rules and regulations, and there are countless exceptions to the rules outlined in this article. It is essential to read the fine print of the CC&Rs carefully to understand how ownership of each individual unit is structured. Legal disclaimers are always fun, so please remember that this article should not be construed as legal advice. However, understanding the general concepts behind air space condominium ownership can help contextualize any variations or exceptions.

Reinforced vs. Unreinforced Masonry

Unreinforced masonry is stone, brick, or cement construction that supports itself, without any other framing to add strength and reinforcement. For example, a building made of only bricks, mortar, and poured cement without any steel or wood frame for support, is unreinforced.

A brick wall with no steel frame will crack in an earthquake very quickly. When a steel frame reinforces a building, that building can flex more without damage. The ability of a structure to deform without being damaged is called ductility. If a wall can be temporarily deformed by the shaking of an earthquake without suffering significant breakage, that wall has a high degree of ductility.

When buying a house or building, it is essential to verify that the building is reinforced, especially if you live in an area that experiences earthquakes. The steel reinforcement that generally frames buildings is called rebar.

Interestingly, wood houses are generally the best-performing structures in earthquakes. Wood has a high degree of flexibility and ductility, so it can shake and move flexibly without breaking. Additionally, wood homes are often made almost entirely of wood, without cement or brick that can crack easily. Steel-framed buildings generally are made of cement or brick, so while the steel provides flexibility, the cement is fairly inflexible and breaks more easily under stress.

An experiment by the Portland Cement Company showed that wood and steel have similar levels of ductility, meaning they both can be deformed to a similar extent without suffering damage. In the Portland Cement Company’s tests, both wood and steel began to suffer damage when 3,500 pounds of force was applied, which surprisingly suggests that wood and steel have almost identical levels of ductility.

Though wood and steel are similar in this regard, there are many ways in which they differ. Tests suggest that wood is more durable than steel in the long run, but that steel withstands sudden shocks more effectively.

Earthquakes affect identical buildings in different ways, based on what type of ground the buildings are on, and on their respective heights. For example, a short building will suffer more damage if the earthquake’s shaking is high frequency (short and fast vibrational waves), while a tall building will suffer more damage if the quake’s shaking is low frequency (longer, slower waves of movement). To understand this, it’s useful to think of a massive ship that is unaffected by short, fast, small waves, while a tiny boat will be highly affected by these small, fast waves.

The performance of buildings in an earthquake can be highly unpredictable; however, masonry buildings without any reinforcement perform poorly in all types of earthquakes. When buying an old masonry building, or a condominium inside of one, verifying that it is reinforced masonry should be one of the first steps in your purchase.

Property Servitude

Property servitude is not what it may sound like; it does not involve servants. Servitude in this context refers to someone having control over a property they do not own. That is, the property is owned by one party, but a different party has control over that property in a specific way.

For example, if one property is blocked from the road by another property, the blocked-off property owner may have a limited right to drive over the roadside property in order to reach the road. The blocked-off property owner does not have any other control over the roadside property except for a right to drive over it. This right to drive over the property would be limited; that is, the owner of the blocked-off property would not have the right to drive all over the property wherever they want, but would have the right to some specific path over the property for the sole purpose of reaching the road.

The reason the word “servitude” is used here is because one property (or “estate”) is dominant, and the other estate is “servient.” In the above example, the dominant property is the property that has a right-of-way over the other property, and the property that may be crossed over is the servient property.

This dominant and servient relationship between properties can take many forms. For example, if one property is located on a hill, that property may have a right to see over the property next to it that is lower down the hill. This might mean that the lower property would only be able to build a one-story house, since a two-story house might block the other property’s view. The uphill property that has a right to look over the property below it would be the dominant estate, and the property that may not block the view would be the servient estate.

These dominant/servient relationships are generally between properties, not between people. That is, the owner of the uphill property only has the right to control the other property’s height while they own their property. If the owner sells their uphill property, they no longer have any control over the neighboring property, but the new owner of the uphill property would have control over the neighboring property’s height.

Another word for the dominant/servient property relationship is easement. The dominant properties described above have some sort of easement over the servient properties. This easement is some right to use or control another property. These easements belong to the dominant property, not to the individual owner. Thus, these easements are appurtenant to the properties described here, meaning that the easements are attached to the properties themselves, and stay with the properties even when they are sold to new owners.

Property law is very complex. Even if you are the sole owner of a property, there may be multiple other parties who have certain control of your property in specific ways.

Property Tax Deferral

Property Tax Deferral: Hidden Gem?

Property tax deferral programs are often kept somewhat secret, and are far less popular than reverse mortgages. These deferral programs can cost states and counties current tax revenue, which is why some jurisdictions avoid advertising these programs extensively. However, tax deferral programs can be a much more attractive alternative to reverse mortgages in certain situations.

Like a reverse mortgage, a property tax deferral gives the borrower a financial benefit that the borrower (or the borrower’s estate) must repay when the home is sold or when the borrower passes away. This financial benefit is a deferral of property taxes, rather than a direct payment to the borrower.

Tax deferral programs are generally only available to people above a certain age; some states allow tax deferral for those 61 and older, and others start at 67 years and older. Certain other groups, like veterans and those with disabilities, are often allowed to participate in tax deferral programs as well. Usually, you must have owned your home for a certain number of years before you will qualify.

Reverse mortgages have significant upfront costs and complexity, but a property tax deferral is much cheaper and more straightforward. The complexity of a property tax deferral comes from the wide variation of programs between states and counties. State laws surrounding tax deferral programs are constantly changing, especially after the pandemic. However, if you find that your local jurisdiction offers a property tax deferral program, it is usually easier and cheaper to obtain than a reverse mortgage.

In some states, like Oregon, the state will pay your property taxes to the county for you, so your deferred taxes would ultimately be paid back to the state. In Massachusetts, the deferral program is between you and your town or city. Thus, the state is not paying the town on your behalf; the town must wait until you pass away or sell your home to receive tax payment.

Deferred tax payments generally accrue interest that must be paid back. In Massachusetts, the interest rate in some towns is 8%, and in other towns is as low as 1%. As you can see, the benefits of these programs can vary widely.

Since this is just a tax deferral, the amount of money you will free up will be significantly less than a mortgage. This may be perfect for those who are not comfortable with the responsibility and expense of a reverse mortgage, and who need a smaller amount of money.

If you want to free up funds using your home, and are uncomfortable with a reverse mortgage, it is worth checking with your state, county, or town to see if any deferral programs exist.

The states listed below currently offer some sort of tax deferral program, though this is not always available statewide. This list is ever-changing, so be sure to check with your local state, county, or city government website to see if you might qualify.

States with Tax Deferral Programs in 2022:

Colorado
Washington DC
Florida
Idaho
Chicago
Massachusetts
New Hampshire
Oregon
South Dakota
Virginia
Washington
Wyoming

Hydronic Floor Heating

What is hydronic floor heating, and is it more efficient?

Hydronic is a completely different type of heat, produced by water tubes in your floors. Forced air heating systems heat all the air in your home, and your contact with that hot air makes you warmer. With hydronic heating, the heat is closer to your body, since it radiates out of the floor. Because it’s close to your body, and heats your body directly whenever you’re near the floor, you do not need to heat all the air in each room in order to feel warm. Thus, people feel warmer at lower heat settings. 

Hydronic heating has been used in Turkish baths for centuries. Though this heating system is ancient, it has many advantages over forced air heat systems. For one, it does not require air to be blown around the home, which creates dust and dries out the air. Additionally, by not forcing air through the house constantly, there are fewer temperature air leaks throughout the structure.

Many who have lived in hydronically heated homes say that the heat these systems produce feels better. Heat that radiates from a surface you are constantly touching–rather than from hot air blown at you–feels like a much different type of heat. 

Hydronic heating systems have vastly improved since the last century. In Levittown, New York, the famous mass-produced houses built in the 1940s used radiant heating systems. These were made with copper pipes, which, unfortunately, had a tendency to corrode and leak. Modern systems use PEX piping, which is immensely more durable.

So, what is wrong with hydronic floor heating systems? Well, for one, these systems do not incorporate air conditioning. This means that an entirely different system for cooling air must be incorporated, if desired. Additionally, there are not a lot of studies that clearly prove radiant heating to be more efficient than other types of heating. In larger homes, it may in fact be less efficient. However, there are a wide array of factors to account for in comparing these types of systems. Given that only the lower half of the room needs to be heated with hydronic floor heat, and that people generally feel warmer at lower overall temperatures with these systems, there are significant advantages to hydronic heat when applied in the appropriate context. 

Hydronic floor systems are more expensive to install, which can counteract energy savings. However, they are worth looking into if you are looking to reduce your carbon footprint, and if you have a smaller house. Hydronic floor heating is also helpful if you have allergies, since it does not rely on circulating air and dust.

Hydronic floor heating systems are definitely worth considering, as the technology for them has vastly improved, and as their cost has somewhat decreased. Who knew a centuries-old heating system could be so cutting-edge?

How is Square Footage Calculated?

Square footage is not what you think.
You may think that square footage is an objective fact. However, in real estate, square footage is anything but objective. In this article, we will define what can and can’t be expected regarding square footage in real estate, and we will present the two most reliable ways to calculate square footage.

Appraisers will likely reach different square footage conclusions about the same house.
Even if you have an appraisal done, your appraiser may use a different method for square footage calculation. There are no federally mandated standards for measuring square footage in residential real estate; if you have four appraisals performed on your house, all four appraisers will likely arrive at different square footage conclusions. However, these appraisals will likely be in the same relative ballpark, since most appraisers are required to follow certain methods based on their trade associations and/or state laws. For example, a widely used set of standards developed by the American National Standards Institute (ANSI) is a fairly reliable and consistent method used across numerous appraisal organizations. Thus, an appraisal is one of the most accurate ways to calculate square footage, even though there will be slight differences between how various appraisers calculate the same property.

How can something that seems like an objective number be so complicated? One example that helps illuminate this conundrum involves how the square footage of a stairway with a foyer might be calculated. Often, the area that is open on the second floor of the foyer will not be added into the square footage of the second floor. This is because the open space does not have a walkable surface; it only provides the ability to see into the floor below. However, the stairway that leads up to the foyer often will be included in both the upstairs and the downstairs square footage calculations separately, since it is a walkable surface that is partially on both floors. Another complexity involves how finished and unfinished basements are defined, and whether they are calculated into the square footage of the building. There are countless other complexities like these that sometimes make square footage calculation more creative than objective.

Brokers who calculate square footage will be sued.
A significant problem with square footage comparisons is that real estate listings can generally list whatever square footage the seller wants to, not what the broker thinks the square footage should be. This may seem strange, but there is a very good reason for this; real estate brokers will likely be sued if the buyer disagrees with a broker’s calculations. Real estate brokers are not trained to calculate square footage, so they would be going outside the limits of their license by doing so. The same could be said of a real estate broker who gives out legal advice; this broker would likely be practicing law without a license, and could be sued for that as well.

Brokers are encouraged not to calculate square footage by liability laws. Thus, brokers are careful to state that the square footage information was provided by the seller, which means that the broker does not face legal responsibility for this information. If a broker were to contradict the information provided by the seller, they would take on massive liability. As a result, a broker is the last person you should consult to verify square footage, since they will likely say that you should hire a professional to determine it for you.

Assessor’s vs. appraiser’s calculations
An assessor map is made up of layers upon layers of assessments performed under different standards and possibly decades apart. Assessor maps may have square footage calculations based on outdated appraisal standards, based on the building’s footprint only, based on an assessment done fifty years ago, or based on a property before the basement was finished, for example. This is why an appraisal and an assessor’s map may list dramatically different square footage calculations.

Most accurate; least public
The appraisal will be the most current and comparable calculation, but it is also the least public, since appraisals are usually not required to be reported to any public authority or shared online. A seller’s quote of their own property’s square footage may or may not have been based on a recent appraisal. It also could be based on the seller’s own measurements, or their own feelings. Most real estate contracts contain phrases like “buyer to perform due diligence,” which is another way of saying that the buyer is responsible for verifying information like square footage.

The most accurate method might not be an appraisal.
The most accurate method of calculating square footage might be your own calculations. This is because you know what your spatial requirements are, and can rely on your own measurements. For example, a 1500 square foot condominium with 12 foot ceilings and an amazing view may feel much larger to you than a 2000 square foot ranch house with 7 foot ceilings and a few small windows blocked by trees.

When looking at real estate listings, take the square footage listed as a very loose figure. Remember that you may be a much better source of the square footage information you need than anyone else in the real estate profession.

New Fair Housing Continuing Education Requirements for Washington

Are you confused about the new Fair Housing education requirements for real estate brokers in Washington? We have answers!

If your real estate license renewal date is before May 31st of 2023, you do not need to take the new 6-hour Fair Housing course for your current renewal. In this case, you would simply renew your license as you normally would. For your renewal after this next one, however, you would need to take this 6-hour course.

If your license renewal date is after May 31st of 2023, you will need to take the 6-hour Fair Housing course.

This 6-hour course is a temporary course that will only be used for the next few years. This is because it will ultimately be replaced by three courses; a 3-hour Fair Housing segment for pre-license education, a 3-hour first-time renewal course (part of the required 90 hours of post-licensing study), and a 3-hour Fair Housing continuing education course.

Thus, future brokers studying for their real estate exam will automatically take the new 3-hour course in their pre-license studies, and then will take a separate 3-hour Fair Housing course as part of their first-time renewal. After these 6 hours (three with pre-licensing and three on the first renewal) are completed, every renewal going forward will need to include a 3-hour Fair Housing course.

To clarify, after pre-license and post-license education (both of which include 3 hours of Fair Housing), all subsequent renewals must include a 3-hour Fair Housing continuing education course.

We hope this clears up any confusion about these new requirements! Fair Housing is an essential topic for professionals in the real estate industry. Real estate brokers help shape the demographic fabric of our country, and are vital to giving everyone fair access to homeownership. We are happy to support Washington in providing this important knowledge to their licensees!

How Much Does a Mortgage Loan Officer Make?

Getting licensed as a mortgage loan originator (also called an MLO, or mortgage loan officer) has immense potential, and is much cheaper than many types of professional education. Having a skill for which a license is required makes your skill set unique and in greater demand, which is why doctors and lawyers often have high incomes. However, becoming licensed as an MLO is significantly easier than getting a medical degree. As a licensed MLO, you’re a highly skilled employee with significant pay potential, but you don’t need to spend $500,000 going to seven years of school.

You can find all sorts of information about how much mortgage loan officers make online. Most websites will confidently tell you they know precisely how much MLOs earn across the US, but these estimates are often based on non-representative self-reported salaries. In reality, there is a wide range of salaries and compensation structures for MLOs, so averages are very region-dependent and vary widely between companies. MLOs can make well over $200,000 per year, but they can also have a starting salary of $50,000 per year. There is no way to predict precisely how much you will make. There is immense potential to earn hundreds of thousands, but this will take time; do not lease a Maserati after you pass your MLO NMLS exam. At least, not yet.

A nice part about becoming an MLO is that you can always move up and do better, and your skills will always have value.

To get started as an MLO, you need to sign up in the Nationwide Multistate Licensing System (NMLS), and take 20 hours of national education and anywhere between 0-4 hours of state-specific education (depending on the state). You’ll then need to pass an exam and a background check.

This career path is challenging, math-oriented, and exciting, and can help you achieve your income goals much more quickly than many other professions!

To start your MLO journey, click here.

The Difference Between Title and Deed

Title and deed are often used interchangeably, but they are not the same. To start with, title is a concept, it is not a physical thing. Title is the idea of ownership, the idea of being entitled to something. Many cultures used to transfer title/ownership with spoken words only, or with a handshake. Title was simply a general agreement among people that you were entitled to land or other objects. This has not changed; title still is, in essence, a general agreement among people that a particular thing is owned by a particular individual or group.

What has changed about title over centuries is how it is referenced. Most jurisdictions require title to be referenced in writing. This is where the deed comes in.

In the United States, title must be transferred using written documents, or deeds. A deed is a legal instrument that transfers title. Deeds are carefully tracked and are usually recorded to be sure that they are unique. This uniqueness is essential to a deed; a deed cannot give the same ownership rights in a property to multiple competing people at the same time.

This seems fairly straightforward. However, title as a concept in the United States actually refers to a number of types of ownership. For example, the right to possess, build on, and inhabit a piece of property might be owned by one person, but the mineral rights to any oil, coal, or other valuable minerals from that same piece of property might be owned by another person or entity. In a big city like New York, the air rights to build over a property might be owned by yet another person.

Thus, title to a property involves many types of ownership. These types of ownership are referred to as title rights.

Most properties started out as a collection of title rights that were owned by one person. That is, the owner owned the title right to inhabit the property, as well as the title right to extract oil and minerals from it, and even owned the right to all of the airspace above it. After hundreds of years, multiple people or entities may now own separate title rights to the same piece of property.

As mentioned earlier, the way these title rights are transferred is generally through deeds. Thus, the same property might have one valid deed conveying the mineral rights to one party and another valid deed conveying the right to inhabit and build on the land to another party. Deeds are not title; they are how title is transferred.

To make things more complicated, someone may have most title rights in a property, but not have the deed to the property conveying these rights. This is what happens with a deed of trust. With a deed of trust, a borrower pays a lender over time for the right to own the property, much like a mortgage. However, the actual deed transferring title is in the possession of a trustee, who has the right to transfer the title (sell the property) only if the borrower defaults on their loan. The borrower has equitable title, which in this case means that the borrower may enjoy most of the title rights to the property (may inhabit it, build on it, etc.). However, the legal title rests with the trustee so that the trustee can quickly sell the property if the borrower defaults.

As you can see, title is a concept of ownership that has many different forms. Having title to a property and a deed conveying this title is not as straightforward as it may seem. Many property owners do not clearly understand the wide variety of title rights, and may not realize which ones they have and do not have. For example, owners who do not possess the mineral rights to their land are frequently unaware of this fact.

Though the concept of title and how it is transferred can be confusing, it is helpful to understand the basic theory behind it. Without this understanding, it is difficult to know what exactly you’re buying when you make what might be the biggest purchase of your life.