Wednesday, March 18, 2015

Pigs Get Fat | California Tactics in Boulder Real Estate

by Osman Parvez

Heads up sellers! 

California style bidding wars are also bringing California style negotiation tactics into the Boulder real estate market. We've run into the following situation several times in recent weeks.  


Here's how it plays out:   

Step 1. Buyer makes an absurdly high (usually cash) offer. Other buyers are blown out of the bidding war or simply won't pay that far ahead of the comps. Seller and listing agents are shocked, but pretend to be otherwise, and accept. Buyer's earnest money goes into an escrow account.   

Step 2. Now that the property is tied up, buyer's agent uses the inspection objection and resolution to negotiate an absurdly large discount. If buyer can't find a real inspector to play ball, they use a bogus inspection (example). Inspectors are very poorly regulated and certification is not required in Colorado. If the negotiated discount doesn't drive the price low enough, buyer terminates and gets their earnest money back.   

Rinse, repeat. 

Understand the Negotiation Leverage

Sellers, beware. Once a property is under contract, leverage in the negotiation mostly falls to the buyer - yes, even in this inventory deprived market. Why? Because the seller bears the risk of a tainted listing if it returns to market. The seller pays for wasted time and incurs holding costs. The seller has few options to exit the deal without a buyer default because that's the standard position in the Commission approved contract in Colorado. At most, a buyer default only risks earnest money (unless they choose § 21.1.1. Specific Performance). 

Ever heard the phrase, "Pigs get fat, hogs get slaughtered"? If the offer is too good to be true, you're probably looking at a less than earnest offer.

Want to fight back? Smart listing agents use multiple offers to reduce or remove buyer contingencies and utilize Additional Provisions to claw back leverage
How? If you're thinking about selling your home, call me. 

Note to fellow agents: Boulder is small real estate market. The vast majority of deals are done by a handful of agents. If your buyer is playing this game, your reputation is on the line. Negotiating in bad faith will cost you and your future clients down the line.   

California love...







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As always, your referrals are deeply appreciated.  

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

Image:  Andy L

Friday, March 13, 2015

This Week's Fresh Listings [Get 'Em Hot]

Ready for the next owner!
27 new listings hit the market this week. Can you guess how many are worth seeing? 

Let's see... 

Already under contract or pending (sorry, you should have called me): 8

Poor location, layout, or otherwise uninspiring: 5

Refreshed old listings: 2

Ridiculously overpriced and the seller hopes you don't know better: 5

Actually worth seeing: 7

To schedule a private showing, which includes a discussion of valuation and price trends, call Osman at 303.746.6896.


Let's take a closer look: 
Single Family Homes


535 Hartford Drive | $549,000 | More Details
Great location, great schools, and a functional layout with 4 bedrooms. It could use some updating, but because there is so little inventory, expect a bidding war.   











1695 Orchard Avenue | $650,000 | More Details
A scrape. The value is in the giant lot in a decent location. You're going to need a bigger mower










3030 Galena Way | $848,000 | More Details

Backs to open space and has nearby trail access. Note to clients: Value anchors like open space help the house weather real estate cycles. Homes with value anchors sell in any market, often get a premium when it's a seller's market, and decrease less when downturns occur. The lot size is a little small so don't expect to add much SQFT in the future due to Boulder's onerous Compatible Development regulations.    






1526 Sunset Boulevard | $1,200,000 | More Details
Another scrape. You're buying a giant lot on one of the most desirable streets in Boulder and the fact is the city probably won't care if you bulldoze it because the structure was built in '58. $1.2 for dirt is a little steep but maybe not for this awesome location. Safe neighborhood full of families and happy young children. Rumor has it, the next door neighbors are pretty great. 




2060 Norwood Avenue | $2,950,000 | More Details
This one is spectacular. Clients: Note how the home is built to frame the flatirons and everything is tastefully updated, inside and out. For those of you considering buying (or building) a luxury home in Boulder, this is what you're looking for. Turn-key, move-in ready. Due diligence tip: Ask your Realtor to check depth of market for high end homes in this location. If they waive their hands around and pull numbers out of their a**, get a better Realtor





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Attached Dwellings



3071 Carbondale Lane | $785,900 | More Details
Markel construction quality is decent but this location (Northfield/Kalmia 38) is unproven. The big benefit of new build is that you pick the finishes and the space is always more efficiently designed than old construction. One of several duplexes to pick from. What's that? A duplex for nearly $800? Yes. 



Investment Properties

1623 Grove Street | $685,000 | More Details
The only investment property this week. It's a 3 unit multi-family dwelling, currently rented well below market. Expect to incur some cost to comply with SmartRegs in the future but not a bad one to see with a cap rate of 5.4. 












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Your referrals are deeply appreciated.  

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend rigorous due diligence and professional advice before buying or selling real estate.


image:  Thomas

Thursday, March 12, 2015

Heatherwood Owners Pocketed $50-60K Last Year

by Osman Parvez

As we seek to provide our buyers and sellers with higher quality advice on market conditions, we're doing more neighborhood level research. Take a look at the following analysis for appreciation in Heatherwood. 



Heatherwood is a family friendly neighborhood of mostly 3 and 4 bedroom houses in Gunbarrel. Most are tri-levels or 2 story in the 2,000 to 3,000 SF range, constructed in the late 1960's to mid 1970's. 

From our analysis (above), homeowners in Heatherwood put $50,00 to $60,000 of equity into their pocket last year. It's a thinly traded market (i.e. low volume), but the uniformity of construction says you can put some confidence in that number. 

Note that the average negotiated discount tightened last year and the percentage of listings which sold for a premium (more than asking) remained a small component of the overall market. 

Buyers
Last year's market saw extraordinary gains. 2015 is off to an even stronger start. From a historic perspective, prices rise quickly during an upswing in the real estate cycle and are sticky on the downside. Nobody can accurately predict the peak but you're also unlikely to see a $50K one year gain sitting on the sidelines and paying rent. Talk to a Realtor who understands the market. Pay close attention to valuation. Don't let the bidding war frenzy drive you to overpay for a less than desirable asset. Some houses are worth a premium. Others are not.  

Sellers
Get professional advice before listing your home. This market rewards a comprehensive marketing plan and listing agents who know how to negotiate. Carefully analyze the comps and talk to a Realtor who understands the market. It's very easy to overprice, to mismarket, and end up with long holding periods and/or selling for far less. Two sales in Heatherwood thus far in 2015 illustrate the point. 4742 Chatham sold for a $20,000 discount after more than 4 months on market. 4782 Devonshire sold for almost $50,000 over asking (10% premium) in less than a month.  

Guess which one was professionally staged, marketed, and priced right?



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Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 
You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

Tuesday, March 10, 2015

Bidding Wars, How High Should You Go?

by Osman Parvez

Last weekend we engaged in two bidding wars on behalf of clients. The #1 question: "How much should we offer?"

As you know from reading this blog, inventory in Boulder is ~70% below the long term average. But not all is what it seems. Once again, it's a tale of two markets.  

Some listings are receiving multiple offers and selling the first weekend they hit the market. Others are stagnating for weeks (or months) without a single offer.   

The only way to know what's worth a premium and what's not is to deeply analyze market conditions specific to the property, something few of our competitors are willing (or able) to do

Take a look at the following: 




The chart above is an analysis of homes that sold for more than asking so far this year in Boulder. 59 houses under $1MM sold since January 1st. Guess how many received a premium? Only 8, or just 13.5% of sales.   

The premium for bidding wars (under $1MM) ranges from 0.7% to nearly 15%. This is a huge range of variability, although most premiums were in the 1% to 3% range. 

Which houses are worth a premium and which ones aren't? What factors drove the two bidding wars past 10%? How do you maximize the value of your dollar in this market? 

Sorry, that analysis is for our buyers and sellers only. We love rolling up our sleeves and analyzing market conditions because it helps us better advise our clients. If you're buying or selling a home in Boulder, call us at 303.746.6896. Make a smarter real estate decision. 

p.s. We've recently started receiving a lot of calls from buyers and sellers who are represented by our competitors. If you are under an exclusive agreement with another Realtor, don't call us. Call your agent.  



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Like this analysis?    Subscribe to our client research report.     
Want to get blog updates via email?  Click HERE.       
Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 
You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate.  
image:  DC Central Kitchen

Friday, March 06, 2015

Spring Is In the Air, It's Time to See Houses [Fresh Listings, Get 'Em HOT]

19 listings hit the Boulder market this week. We sorted the wheat from the chaff and only 8 are worth seeing.   

Let's go see some houses. 

To schedule a private showing, which includes a discussion of valuation and price trends, plus the occasional snarky comment, call Osman at 303.746.6896.



Single Family Homes


1584 Old Tale Road | $1,550,000 | More Details
This location feels rural even though you're just on the outskirts of the city. 5 bedrooms with a family friendly layout. Updates are very Colorado. Giant lot. Golf course and the hospital are nearby. Doctors wanted.










2890 15th Street | $1,750,000 | More Details
Plenty of above grade square footage in this one. Pricing is a little steep given that you're east of Broadway, but the location is otherwise great and you're still under $400 per SF.   
By the way, if you're shopping in the $1.5MM to $2.0MM range, you should know that there were 38 sales last year in Boulder but only 9 were east of Broadway. There were also 26 failed listings in this price range at the end of the season. In other words, it's not entirely a seller's market at this price point. Shop carefully and be cautious entering bidding wars against phantom buyers. If your agent isn't telling you stuff like this, get a better agent




Attached Dwellings

60 South Boulder Circle | $169,900 | More Details

It's a cheap place for junior to study, far from the parties on the Hill. Enough said. 











2800 Kalmia Avenue B314 | $224,900 | More Details
The best units are on the upper floors, away from HWY US36. This one appears to qualify but I can't tell because of the fuzzy listing photos. Interesting art. Aspen Grove saw a big HOA cost increase after the flood. There's a strong rental market for units in this development. Student density is reasonable because of the distance to CU. Walk to 24 HR fitness and the grocery. 







1895 Alpine Avenue B-F29 | $257,500 | More Details
Central Boulder location, reasonable HOA. Lease ends in June and tenant wants to stay. Of course they do, it's currently rented way below market. 










750 West Moorhead Circle D | $398,500 | More Details

These units are near south Boulder open space and offer easy commuting to job centers. The nearby retail mix continues to improve. Finishes in this one could use an update but at least it's an end unit.   








432 Maxwell Avenue | $400,000 | More Details
Sure, it's a duplex but you're in one of the best locations in Boulder for $400K? The reasonable HOA includes heat. Jump on it but beware that ordinary financing may be an issue. You'll most likely need a portfolio lender like Elevations or Firstbank.  








Investment Properties

964 Arapahoe Avenue 4 | $589,000 | More Details
Almost a 6% cap rate in this location is pretty good. Pre-leased through August 2016. Easy access to CU and front row to downtown. 










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Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 


You can also like our Facebook page or follow us on Twitter.

Your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend rigorous due diligence and professional advice before buying or selling real estate.


image credit: Nate Kay

Thursday, March 05, 2015

What's an Egress Window?

by Osman Parvez

The other day, I took a buyer to see a house in Boulder. It was listed as a six bedroom house and two of the bedrooms were in the basement.    

Here's what they looked like:




The windows in the basement bedrooms wouldn't comply with code. In other words, two of the six bedrooms in the house are "non-conforming." The listing description doesn't mention it.

Here's the issue. In a fire, basement bedrooms without egress windows are a deathtrap. Boulder uses the International Residential Code which defines an egress window as follows.

IRC egress window requirements (2012)

Opening area of window shall have a minimum opening area of 5.7 sq ft. Unless it is a grade floor window then it can be a minimum of 5 sq ft.

Regardless of opening area the following minimums are required. Minimum opening width 20”. Minimum opening height 24”

Sill height of the window opening may not be more than 44” from the floor. 

Basement window wells shall have a horizontal area of 9 sq ft minimum. With a horizontal projection of 3 feet and allow the window to fully operate.

Window wells deeper than 44” shall be equipped with a permanently affixed ladder.

If the window well has a security grate or cover it must be easily open able from the inside in case emergency exit is required.

This is the sort of thing we caution our clients about. Whether you're an investor or a personal home buyer/seller, not disclosing the fact that basement bedrooms are clearly non conforming is risky. Marketing and staging them to look like bedrooms for small children is even worse. It's something buyers and sellers should know before writing an offer or listing a property for sale.  

Code Source:  Integrity Design Build


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You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

The Inventory Shortage Gets Worse [Analyze This]

by Osman Parvez

Time for a quick inventory analysis update. Let's look at the charts. 



The graph above shows House Einstein's inventory tracking for attached and detached dwellings in the city of Boulder. Inventory has been rising since mid January.  

Now let's look at the bad news. 



This chart shows the breakdown between available and under contract houses. Beginning in early February, the number of "tied up" houses spiked upwards.   




The inventory shortage is worse for condos and town homes. Under contract properties (including pending listings) are 41% higher than available homes.   

From The Front Line

We've been writing offers and negotiating deals for our buyers and sellers at a furious pace. Here's what we're seeing on the ground since the beginning of the year: 

1. Inventory and thus selection is increasing, but buyer competition is increasing faster. 

2. Desirable properties are drawing multiple offers, well beyond what appraisals will support. Cash buyers have an advantage in this market. Some of that advantage can be mitigated by drafting intelligent additional provisions into the contract.  

3.  Leftover inventory is largely comprised of grossly overpriced listings or properties with obvious and difficult to fix problems such as structural defects, busy and historically weak locations, and bad floor plans. Your Realtor should be warning you away from the flotsam of the market. If not, get a better Realtor

4. The high-end is treacherous for buyers and sellers. Sellers want to maximize price but comps are few and trailing. Pricing is tricky. If a seller grossly overprices and the listing sits for weeks (or months) without an offer, buyers conclude something is wrong with the property. If the property goes under contract and then returns to market, it's worse. A bad listing history can cost high-end sellers hundreds of thousands of dollars as well as additional carrying costs. This is leading some Realtors to utilize a pre-MLS, private marketing period to test high-end pricing before opening the property to the public. To have access to these listings, buyers need to have a relationship with Realtors who maintain good relationships with their colleagues, increasing the importance of reputation and trust.   Buyers should also be very cautious about overpaying for a property during the private marketing period. Again, choose your adviser carefully.    

When I worked in the securities industry, our regulatory body (the SEC) was deeply concerned with transparent and orderly markets. That's the not the case with real estate. There is no Reg FD and information flows are anything but orderly. Here at House Einstein, we deeply analyze market conditions because it helps us better advise our buyers and sellers.   

Note: We've been writing and analyzing the the inventory shortage since 2012. It's not new, it's just getting worse. When improvement occurs, we expect it will likewise be a gradual process which occurs over several years. 



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Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 
You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

Image: Jon Ross 

Wednesday, March 04, 2015

Market Knowledge - Realtors HATE This!

by Osman Parvez

This past weekend, I negotiated on a $2.2 MM deal for an international buyer and held two separate discussions with private sellers in the $1.4 to $2.5MM range.  

Everyone was concerned with the same thing. 


Question: "What about private sales?  Am I missing out on something?"
Answer: Certain brokers would like you to believe that private, off-market sales are a big portion of the Boulder real estate market. This myth gives them undue leverage.  

Don't believe the hype.  

The vast majority of transactions are conducted by professional, full time real estate agents with properties that are publicly listed on the MLS. Private transactions are a tiny fraction of sales. This is particularly true at the high end.  

Yes, even in this seller's market.

Question: How do you know?    
Answer: I obsessively analyze the Boulder real estate market from top to bottom. It's how I advise my buyers and sellers on property selection and due diligence. I don't rely on hand waving and happy talk. I don't rely on Zillow (which admits to an 8% median error rate).   Even the MLS is not enough, by itself. 

To quote my favorite real estate investor, "sophisticated transactions require deep market knowledge." If you want to understand the market, you have to roll up your sleeves and dig deep. There is no shortcut.  
  
Take a look at the following chart: 




  
Fact: 96% of transactions above $1MM were handled by Realtors on the MLS in 2014.  

Yes, private sales are a real thing and you can't ignore them. Just don't base your entire buying or selling strategy on 4% of the market.  

To produce the chart above, I analyzed all sales above $1MM in Boulder during 2014. I removed multi-family income properties, commercial, industrial, churches, land, open space acquisitions, and family transfers (usually divorce or trust).   

In 2014, there were only nine private arms length transactions above $1MM. 

Fact: 10x more homes sold between $1MM and $2MM than sold for $2MM or more.    

If you're shopping for a home in the $1MM to $2MM range, you have lots of options. Nearly 200 sold last year alone. Don't feel pressured to buy a subpar asset.  

If you're shopping above $2MM in Boulder, you're wading into thinly traded, illiquid asset territory. Nearly as many $2MM+ listings failed as sold during 2014. Double down on the your valuation analysis, your marketing plan, and buyers... I strongly recommend caution with transactions that are not on the open market. 

Choose your adviser carefully.   If you'd like to review my bio, CLICK HERE.   You can also reach me at 303.746.6896.

image: Michelle Tribe


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Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 
You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

Friday, February 27, 2015

This Week's Fresh Listings [Get 'Em HOT]


Tired of all this snow yet? Us too.  

Too bad.   

If you're shopping for real estate in Boulder, you can't sit around chugging hot cocoa in your PJ's all weekend. 26 new properties hit the market this week. We sorted through the riff raff and only 12 are worth seeing. Our rundown is below. 

To schedule a private showing, which includes a discussion of valuation and price trends, call Osman at 303.746.6896.



Single Family Homes


5323 Aztec Drive | $659,000 | More Details
A nice east Boulder property in Keewaydin. It has some tasteful updates at a reasonable price. Suitable for a family. Expect a bidding war. Due diligence: It backs to a church so check traffic and noise on a Sunday. 

 






2535 Kenwood Drive | $675,000 | More Details
Ranch with a finished walkout basement in Table Mesa. The location gives good access to open space and you're near the best schools in Boulder. Only one of the four bedrooms is in the basement. Due diligence: Check for traffic patterns that feed upper Table Mesa.  

 






712 Locust Avenue | $1,250,000 | More Details
Curb appeal is lacking but you've got open space access and views, two of the most important value anchors for Boulder Real Estate. This house is west of Broadway, Lucky's is nearby and the house has some nice updates. Worth seeing. 

 







480 Oakwood Place | $1,250,000 | More Details
The location is a dead-end street in desirable Wonderland Lake. It's a decent size house on a decent size lot. There are interesting architectural details and some nice updates. Due diligence: Most families don't like split layouts for the bedrooms. Are the lower level bedrooms below grade?

 





1070 Juniper Avenue | $2,490,000 | More Details
This estate is quality. Very private feeling house and looks like it belongs in the English countryside. 1990's construction means better quality and higher energy efficiency. Lots of great updates, a giant lot, and an intelligent layout. Definitely worth seeing.  


 


Attached Dwellings
 
3050 Corona Trail M-307 | $169,900 | More Details
If you're going to buy at Remington Post, south facing on the upper levels is the way to go. Often these units are mispriced. Views and southern exposure sell faster and for more money. My investment clients tell me these units rent quickly. Sadly, no dogs allowed. 

 




2930 Shadow Creek Drive #303 | $212,000 | More Details
Top floor units are the way to go at Gold Run. This would make a decent one bedroom kiddie condo, just keep in mind that in weak markets, two bedroom units are more liquid. Due diligence tip: Gold Run has experienced several fires in recent years. One of the buildings was reconstructed with sprinklers and the HOA has been exploring adding sprinklers to remaining buildings. Check for emergency egress and future special assessments. 

 

2875 Springdale Lane | $439,900 | More Details
Another Gold Run unit, this time with 3 bedrooms. The pros of this development are proximity to CU, retail, and the Boulder Creek path. On a bicycle, you can be downtown or on campus in less than 15 minutes. Due diligence tip: See notes for 2930 Shadow Creek. 

 





1110 Poplar Avenue | $539,000 | More Details
Boulder has a shortage of "adult" condos and townhomes. The majority of our attached dwelling inventory is aimed at students. This is an exception. Older construction with some updates. Lucky's market is a stumble away. Layout is split, with one of the bedrooms in the basement. A decent alternative to an entry level stand alone house and likely lower maintenance. No main floor bedroom, so not ideal for aging Boomers or others with potential knee problems. 

 


1850 Folsom Street #911| $799,000 | More Details
As we know from 1829 Columbine, some flips are worth seeing. This one seems to be banking on Google executives. The location is a mix of residential, commercial, and retail. Worth seeing but at this price point, you have alternatives. Call me for details. 303.746.6896. 






Investment Properties

965 10th Street | $549,900 | More Details
We looked at this property for our clients the last time it was on the market in 2012. It's a great example of how we help our clients select homes. Here's our client preview album with 50+ photos from 2012 and notes.  








1045 9th Street | $875,000 | More Details
9th street has tons of traffic and the lots are narrow, but the students don't care. That's why the majority of homes on this street, particularly close to the University are student rentals. Rapidly rising rent could make this one a solid investment play. A duplex with six bedrooms and five parking spaces. Due diligence: Rental license and cost to comply with Smart Regs should be on your checklist.   






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Like this analysis?    Subscribe to our client research report.     

Want to get blog updates via email?  Click HERE.       


Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 


You can also like our Facebook page or follow us on Twitter.

Your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend rigorous due diligence and professional advice before buying or selling real estate.


image credit:  Teresa Alexander-Arab