McGrath Real Estate Services, Inc.

McGrath Quarterly

Special points of interest:

New Virginia real estate laws that could affect you as a landlord. Find out what you need to know. Meet the McGrath Accounting Team and how they handle your money Toxic Mold or No Big Deal ? Learn about mold and what can be done to prevent it and cure it! Do you know the life span of your carpet? Its not as long as you think...

Summer 2011

Volume 1 Issue 4

Home Warranties with Rentals: Not All Theyre Cracked Up to Be

Home warranties are a big selling point when buying or selling a home and why not? The way home warranties are presented to homeowners gives the perception that you will pay a nominal fee each year and never have to pay full price again for home repairs. This is partially true and if you live in the home yourself there is value to a home warranty. Depending on your plans deductible you can receive considerable savings for unexpected repairs. However the risks start outweighing the rewards in a rental situation. Like you expect your tenant to live up to his responsibilities in your home, you plan to live up to yours as a landlord. It may seem like common sense, but the more understanding and cooperative you are with your tenant in most cases it will increase their good will towards you and encourage them to treat the home as if it was theirs, which is one of your goals. So what does it mean to be a good landlord? This means providing the home in an acceptable condition for move in, granting reasonable requests and addressing repairs in a timely fashion. (McGrath Real Estate Services, Inc. does not recommend conceding to every tenant request just to gain some good will but there is a benefit to being reasonable.) The last point is the reasoning behind our recommendation to not have a home warranty. Home warranties prolong repairs and oftentimes require multiple trips before the job is satisfactorily done. Below are two recent and prevalent examples of McGrath Real Estates clients home warranties gone awry: for at least seven days. When they finally did visit the property, the contractor found that a dirty air filter caused the air conditioning to malfunction. The warranty company would not pay to have it fixed because this issue was

McGrath
received an emergency repair request for an air conditioning unit that was not functioning. While this is not considered an emergency, we do try and prioritize A/C requests to alleviate discomfort of the tenant. The property was identified as having a home warranty. Dave Buckingham, head of the Repairs Department, contacted the home warranty company and informed them of the issue, at which point we were informed that this particular contractor was a week out on maintenance calls and would not be able to go to the home

Inside this issue:

Spotlight on ACCOUNTING FSYF Essay Contest and Awards Ceremony Life Expectancy of Household Components New VA Real Estate Laws Take Effect Mold: What Is It and How Do You Keep It Away? Friend Us!

2 3 4 4 5 6 6

not under warranty. The unit was still not working, 10 days after the initial request. McGrath then sent out one of our preferred contractors who had the problem fixed and the tenant was charged. The relationships that McGrath has made with our contractors over the years allows us to make our requests a service priority. McGrath, now managing over 650 homes, offers a huge supply of potential business for our (continued on page 6)

Contact Information

McGrath Quarterly

Spotlight On Accounting
The single most important part of the management of your home is the organization of your money. The Accounting Department, while often in the background, is constantly working on your behalf to ensure you are receiving your rent and you will be prepared to file your tax return at the end of the year. There are many intricate parts of your owner statement and expenditures that you will incur throughout the month and it is important to understand your owner statement. Meghan McGrath, Accounts Supervisor, collects rental payments from the first to the fifth of every month. We encourage all of our tenants to pay with automatic payments through their tenant portal but checks and cash are also accepted. On the 10th of every month Meghan pays you the disbursements that are due to you. If we have still not received rent by the 10th you will be informed that your rental payment will be late this month because of it. Also please note that depending on which bank you use, it could be a couple days before the payment clears and you can access your funds. The monthly owner statement is created on the 11th of the month. It will cover the period from the 12th the month before until the 11th of the current month. This was a recent change we made at McGrath Real Estate Services, Inc. based on your feedback. It allows you to see whether your owner payment was received and that it was dispersed to your account. On this statement you will see a detailed description of rent received, management fee charged, as well as any repair invoices that you were charged. Please Favorite the URL for your owner portal to ensure you have easy access each month. The management fee is a percentage of rent collected that is charged every month that your home is actively rented. Typically 9% of one month rent, you will see the management fee on your owner statement each month that rent is received. Please refer to Clause 5 Paragraph I of your management agreement for your specific terms. For repairs that were deemed to be over $500, you should receive an estimate from Richard Price in the Repairs Department. Upon receiving your approval, Richard will meet with Ann Orem, our Accounts Associate, to discuss payment of that estimate. Richard will contact you asking to send money so that we can pay the invoice within 30 days of receiving. When the work is completed and the invoice comes in, Ann processes it. The invoice will be attached to the accompanying work order. Once the invoice gets paid, a copy of the invoice will be in your owners packet on the owners portal. Ann pays the vendors every Friday. She will also pay the vendor on the 9th of the month, right before you receive your owner payment on the 10th. The reason for paying vendors every Friday is to maintain our policy with them and further ensure Has your address changed? they keep our clients a high priority.

NEW INFO?

Certain charges only occur when your lease is renewed or we re-market the home. These will be classified as Re-Leasing Commission or Commission on your owner statement.

Is there a new HOA managing your community?

ANY changes to pertinent information regarding managing your home should be sent to MCooper@McGrathRealEstate.com so we can provide the best possible service to you!

Page 2

Volume 1 Issue 4
Continued from page 2...

The Re-Leasing Fee (for renewals found on page 4 clause G of your management agreement pays for the monitoring and renegotiation of your existing lease. Under this fee we are negotiating not only to renew the contract, but we are pulling comparables for your home, making sure to see if you are at market value and working on your behalf to ensure the paperwork is signed and the tenants are secured for another year or longer. If your home went on the active rental market, an application accepted and a lease signed, you are charged the Commission. The commission is equal to 90% of one months rent or a full months rent if the lease is longer than two years. This fee is applied not only for the marketing, processing and lease creation but also a part of that commission is given to the procuring agent who brought in the tenant. Miscellaneous charges that you may see during your time with us could include utilities charges and service charges if you have a lawn service or any other type of recurring service you have contracted. At the end of the year your IRS Form - 1099 is prepared as well as a cash flow statement. The statement breaks down everything we have paid for on your behalf (repairs, etc.) as well as all income you have received. It is important that if you should have receipts from repairs that were not through McGrath Real Estate Services, Inc. or your total HOA/COA dues (which McGrath in most cases does not pay for) to make sure that you add these totals to your end of year tax filing because they will not be included in the 1099 and cash flow statement we send to you. If you ever have any questions regarding your owner statement, rental payments or your end of the year 1099 please contact our Accounting Department at Accounting@McGrathRealEstate.com.

2011 Foreign Service Youth Foundation Essay Contest Highlights

McGrath Real Estate Services, Inc. invests in the annual Foreign Service Youth Foundations Essay Contest The annual FSYF Essay Contest challenges U.S. Foreign Service youth to answer a topic question in 1,000 words or fewer. The contest allows FSO Youth to express the opinion through their unique experiences. The 2011 topic question was, "As a Youth Ambassador choose one issue/ problem you would focus on for improving the lives of youth in the current country you live in. What would your focus issue be and how would you convince others that this is an important issue to tackle and prioritize, given there are so many problems/issues that need attention?" Broker Jim McGrath and Senior Marketing Manager Tommy Chambers dedicated their time as judges on the panel of the FSYF Essay Contest. McGrath is all about preparing Foreign Service Families and representing their real estate needs when they are heading overseas, but it is also an honor to give back to the youth that are the next generation of our countries thinkers and leaders and youth that are already contributing to the mission of the Department of State, Chambers said. The five winners received cash prizes provided by McGrath Real Estate. The awards ceremony for the winners of the Foreign Service Youth Foundations annual Essay Contest was Friday July 15th and was a huge success. The winners from the high school category were Chungdhak Lhamo Sherpa who spent most of her life growing up in a village in Tibet and Castilleja Kuzis who aims to travel the world and pursue a degree in arts or business. The winners in the middle school division were Andriy Etcheverry who is currently posted to St. Petersburg, Russia. Anna Bailey won second and is currently posted to Riga, Latvia. Olivia Mozdzierz also won second and currently posted to La Paz, Bolivia. To read the winners essays please visit http://fsyf.org/
contestawards/Winners/ Winning%20essays%202011.pdf

Page

McGrath Quarterly

Life Span of Household Components: When Should You Expect to Replace

McGrath Real Estate Services, Inc. understands that as a landlord you are trying to maximize your profits and reduce your expenditures. Then you get an email from McGrath saying your new tenant wants the entire property repainted. They need all new carpets! Replace the dishwasher, install a new air conditioner! You probably say to yourself, well it was working fine while I lived there and you are probably right. However, one of the realities of being a landlord is that everything in your home has a life span and it could be up. McGrath Real Estate wants you to be prepared and expect that eventually parts of your home will reach their life expectancy and will need to be replaced in order to secure a quality tenant. Average life expectancy for common household components are: mid, high grade), quality of installation, level of maintenance, and the intensity of use. It is very beneficial if you know when a certain component of your home was last replaced, let McGrath know so we have a record of age. If you have any questions about the replacement of an aspect of your home, please feel free to contact our Repairs Department at
Repairs@McGrathRealEstate.com

Carpets: 6 years Paint: 3 years or less **More

move ins and move outs tend to reduce life expectancy of paint, another benefit of longer term leases Washer & Dryer: 8-11 years years

Fridge & Dishwasher: 10-12 Stove/Oven: 5-8 years AC Unit: 12-15 years Hot Water Heater: 10-12
Of course the life expectancy will vary depending on quality of material or equipment (low,

Virginia Passes New Legislation Affecting Landlords

Effective July 1st, 2011 there were several new measures passed, many of which will affect you as a landlord. A complete list of this new legislature can be found at NVAR.com but weve compiled a summary of the most pertinent laws to landlords and how they could change your landlord experience. 1. Mold Remediation: Clarifies tenant is still responsible for payment of rent for the remainder of the rental term following a temporary relocation for mold remediation. The tenant is not entitled to terminate the tenancy New laws could affect your experience as a landwhen mold is remediated lord, are you aware or on the outside looking in? according to professional standards. As a landlord, if evidence of mold is found at the property, you are required by law to have the mold remediated. In the past, tenants would sometime use this as a way to get out of a lease because the house was inhabitable. Under the new measure, if the landlord takes the appropriate steps to remediate the mold in a timely manner, rent cannot be withheld later and the tenancy cannot be broken unilaterally. 2. Delinquent Utility Fees: Requires a water or sewer authority to provide 30 days written notice to the owner before recording a lien for a tenants unpaid charges. The authority may not deny service to a new tenant for a prior tenants unpaid charges unless a lien has been recorded against the property owner. At McGrath Real Estate Services, Inc. we already have a provision in our lease as an attempt to prevent this from ever happening. We require evidence that the final water and sewer bills were paid before returning the tenants security deposit. If there is an outstanding balance it is paid through the security deposit, thus reducing your risk of a lien against the property. When there is a gap between tenancies, we put the utilities back in your name Care of McGrath so any such notice would be sent to our office and handled immediately. 3. Adverse Conditions: Directs a tenant on procedure, including escrow of rent, when the tenant asserts that adverse conditions exist within the rental unit. Virginia is moving towards a more pro-tenant law and this is a perfect example of such legislation. If the tenant proves that required repairs are not being completed or the home has adverse conditions (including a fire hazard or a serious threat to the life, health or safety of occupants) they are allowed to put rent in an escrow account held by the specific county Circuit Court until the condition is fixed. This means you will not receive your rental income, cannot charge late fees, send a sheriff notice or evict, because the tenant has been paying rent to the court. If you have any questions about these or any new measure please feel free to contact John Bennett, our Senior Property Manager and member of the National Association of Residential Property Managers at JBennett@McGrathRealEstate.com

Page 4

Volume 1 Issue 4

Mold In Your Home: What Is It and How Can You Prevent It?
In the mid 1990s there was an outbreak of pulmonary hemmorages in infants in Cleveland. "Stachybotrys", a type or group of molds, was found in some of the victims' homes or buildings. The Cuyahoga County Board of Health and local Case Western University blamed the mold for the outbreak and the media soon followed suit. The "black mold" scare had begun. The Center for Disease Control later determined that the mold was not the culprit but the widespread media coverage had left a lasting impression on Americans. In the ensuing years insurance companies in California and Texas began dropping clients whose homes had several water damage claims with the assumption that they were at a higher risk for mold. Today there is a national, legal blacklist called The Clue Database which allows insurance companies to track water damage claims. If a homeowner files one flooded basement claim, not knowing the previous owner of that home had filed two before, his or her insurance could be dropped. All insurance firms have access to the database. In the past several years insurance companies have been leaning toward not insuring against any mold or water damage. There is no one type of mold, in fact, there is a countless number of spelittle science is actually presented in these claims. In the old days one might have tried to kill all mold with bleach and seal it with Kilz. Today the stakes are higher. We have had three tenants break the lease and move out because of mold. Remediation was done in these three houses, at a cost of over $5000 each and the mold was eradicated. We have spoken with an attorney, consulted remediation firms, and researched the issue and recommend that if you are looking for more information, visit the EPA website. The EPA, CDC, and AMA have no standards of acceptable levels of mold thought thats likely because the issue is new. Testers usually report mold levels as "elevated" if the inside air is considerably higher in mold parts per million than the outside. If visible mold is found in a rental home, you as the landlord have a responsibility to solve the problem "exercising ordinary care" in accordance with "professional standards." Please read Virginia Passes New Legislation Affecting Landlords on page four, for more information regarding legal requirements of mold remediation in rentals. In theory, a homeowner could solve the problem with the bleach and Kilz method, but mold remediation firms use more sophisticated equipment. For $500 a remediator can use an "air trap" to sample air inside and out, and send the traps to a lab. The lab returns a detailed analysis of the air, particulate matter, primarily biological. They also may use an infrared camera to find mold hidden behind walls and ceilings. Another advantage to using a pro is the ozone generator. This piece of equipment creates negative air, or unbreathable air, in the house, killing airborne spores. When their work is done, they test the air and provide a clearance notice. Most companies will warranty the work and return if the problem returns. In most cases paneling or drywall is removed in areas where there is visible mold or where infrared detection finds hot spots inside the

wall consistent with biological activity. Insulation is also removed when affected. Usually studs, plates, beams and joists are not removed but are treated. After drying and removal of contaminated materials, a HEPA Vacuum (High Efficiency Particulate Air) is used for cleanup. Some firms will even wipe down every surface in the entire dwelling, including all personal possessions, though this is not required. If a tenant reports evidence of visible mold, McGrath will investigate and contact you with our report and recommendations. The EPA and McGrath recommends professional testing and remediation if the mold covers more than 10 square feet. If bathrooms are ventilated by vent fans or windows (either of which is required by code), surfaces are cleaned with normal cleaning products, there are no water leaks inside or outside penetration of rain or groundwater, and there is normal circulation and humidity in the home, mold will rarely appear. If a small amount appears it can easily be killed with bleach based products. The risk in any case of mold usually occurs when it is hidden inside of walls or ceilings. Anyone who wishes to remediate without professionals should read the EPA booklets "A Brief Guide to Mold, Moisture, and Your Home" and "Mold Remediation in Schools and Commercial Buildings" both available on the EPA website www.EPA.gov. Also feel free to contact John Bennett, McGraths Senior Property Manager, with any questions relating to mold and your home. JBennett@McGratRealEstate.com

In the old days one might have tried to kill all mold with bleach and seal it with Kilz. Today the stakes are higher.

cies in the world. The most common molds in Virginia that cause concern are Stachybotryus and Pennecillium/Aspergillus. A case can be made that molds are actually not a toxin but an allergen, however the medias use of the term Toxic Mold has caught on with the public who use it at the drop of a hat. A new term has been coined, "toxigenic" which means mold that excretes a toxin. New laws in Virginia regulate examination for visible evidence of mold and professional testing and remediation. There are many scary stories out there on the internet and TV but

Page 5

..continued from page 1

preferred contractors and while our vendor policy is in place to protect your interests, it does provide several benefits to our contractors including quick payment upon receipt of their invoice.

McGrath Real Estate Services, Inc.

761C Monroe Street Suite 100 Herndon, VA 20170 Office: 703-709-2264 Fax: 703-709-5230 Email LCurtis@McGrathRealEstate.com

Our contractors are also keenly aware of determining whether the repair is a defect or tenant caused and will inform us of their professional opinion of who should be responsible. As you can see from the above example, not only was the issue not fixed in a timely manner, upsetting the tenant who had no A/C in the summer for two weeks but as the owner, you still had to pay a deductible for the initial warranty that did not cover the issue.

one of our contractors he determined that in fact the dryer had a defect and would need to be replaced. Again, the owner paid a service charge for an incorrect diagnosis, the tenant was charged for cleaning the vent which turned out to not be the issue and the repair would take another week to be completed.

repairs are handled professionally, quickly and at a good value price point. To learn more about our Repairs Department please reference the 2011 Winter McGrath Quarterly Newsletter (found in the Landlord Library section of our website McGrathRealEstate.com) for the Spotlight on the Repairs Team. We could go on with several more examples but in the end home warranties in a rental home tend to cost the homeowner more than if they had relied on the property managers contractors. McGrath understands the appeal of the home warranty and appreciates your desire to keep the home in working order while you are away, but we believe that a home warranty is not the best way to accomplish this. Our job is to protect your interests and through years of experience we know we can offer our clients the lowest prices at the highest quality. If you ever have any questions about a home warranty or the management of your home, please contact our Dave Buckingham of our Repairs Department at
Repairs@McGrathRealEstate.com

FOLLOW US!
Now You Can Get Important Updates from McGrath Real Estate any time, any where! Wed love to get to know you better, follow us!

When a contractor receives a work order from a warranty they only receive a repair deductible typically between $60-100. The reality is this makes contractors working with warranty companies look for the quick fix instead of identifying the actual issue and correcting it. All of our contractors sign our vendor policy which states that not We received a repair reonly do we require them to quest for a broken dryer. provide us detailed before and The home was identified to after pictures to prove the have a home warranty so repair was done, but if it is the warranty company was determined later that they did called. The contractor went not perform the job correctly out and determined that the and to our satisfaction, we can dryer vent was dirty and leverage our relationship with just needed to be cleaned. the vendor to go back out and This was done and assumed bring to our standard. that the issue had been McGrath holds all of our conresolved. A couple days tractors to a high standard and later the tenant reported are constantly implementing that the dryer was still not new policies in our Repairs working. When we sent out Department to ensure that

Did You Know McGrath Has a Sales Team?

McGrath RealEstate @McGrathRE_NoVA

As you well know, McGrath Real Estate Services Inc. has specialized in property management for over 35 years. Through the relationships weve forged managing our clients homes, McGrath Real Estate has had the distinctive opportunity to come to know your expectations and goals, and we have unique knowledge and background with your home! As a valued customer of our property management services, we wish to continue to provide you the best service in all your real estate needs.
McGrathPropertyManagement.WordPress.com

Please let us know if youd like a no-obligation sales market analysis and consultation sent to you! Marketing@McGrathRealEstate.com