Archive for the ‘Advice’ Category
Friday, June 14th, 2013
Business is business, and oftentimes for many that means keeping emotions at bay and thinking with only a black and white palette. Real estate sales transactions are no exception, or are they?
There often comes a time in a real estate sale where the buyers discover information about their new home that they consider important, and as a result they appeal to the sellers for repairs, credit or a reduction in the purchase price. Most sellers are open to helping the buyers out in some way, but there are others who dig their feet in the dirt and refuse to budge. I have represented many buyers and many sellers, and I have seen both sides and understand where all parties are coming from. But there is something to be said about kindness and trying to understand viewpoints and concerns, and I think no matter what side you are on you can always be a good person.
Of course, each sale is very different and there is no way to formulate a plan that will apply in every situation. My best advice is to truly consider what is being requested and to try to weigh alternatives, then to make a compromise. Here are some tips on how to do just that.
1. Repair request compromises. When a buyer makes an offer on a home, especially for top dollar, and gets into contract s/he is unlikely to know of any problems with the home (unless of course they are obvious, as in a fixer-upper, or where the seller discloses defects prior to getting into contract). It is usually not until a buyer has a home inspection that s/he discovers issues that need to be addressed. At this point most buyers will ask the seller to either make repairs or credit money in escrow to fix items that need repair. In extreme cases, where the repairs are very high, a buyer might ask for a price reduction.
2. Price reduction compromises. These are harder for most sellers to swallow, and rightfully so. However, it is always imperative to look at the nature of the problem(s), and again to have an open mind. If your buyers are asking for a reduction in price because the home has old flooring or old appliances, that is something they knew when they made their offer, thus they had the opportunity to take that into consideration already. But if the buyer discovers something s/he could not see or did not know the extent of during investigations – like that the appliances had bad wiring that made them a fire hazard and have lead to their deterioration – that is an issue the seller should seriously consider.. Of course, it all depends on many factors and no two situations will be the same, so it is smart to have an open mind and imagine oneself on the opposite end of the transaction.
3. Avoiding pricey repairs or price reductions. A good solution for sellers in avoiding pricey repair requests or price reductions is to have a home inspection prior to listing. I do not suggest this to every seller, but only to those who are aware there may be issues OR who live in older homes. It is a good idea to gain an understanding as to what might need to be addressed – the seller can then take care of some items prior to listing to avoid surprises down the road.
As a seller it is important to fully understand where the buyer is coming from. Minor items are easy to fix, and if they are safely hazards I always suggest to my sellers to take care of them – this not only makes you a good person, but it makes a statement that you understand your buyers want to purchase your home and did not anticipate there were safety issues to be resolved. Sometimes it is important to be able to compromise, just as it is important to limit requests to items that are truly a safety concern or could lead to even bigger problems down the road. Of course, there are different factors in each case so every seller or buyer will need to discuss with their agents.
Buyers too need to understand where the seller is coming from. If a home is in contract for a reasonable price (i.e. the price is in line with the comparable sold properties), the buyers need to take that into consideration when figuring out a reasonable repair request or price reduction. If the buyer is paying a premium for the home then the buyer will undoubtedly expect a home that does not have tens of thousands of dollars of repair work added on top of the price premium – if the tables were turned the seller would feel the same.
The best advice when discussing repairs or price reductions between buyers and sellers of home, is to go into them with an open mind. Sellers who deny any type of aid without trying to understand why the request was presented could end up losing the sale – and don’t forget that anything a buyer discovers in a home or other type of inspection must be disclosed by the sellers to any subsequent buyers. Buyers could similarly end up walking away from a home they really love by getting caught up in minutiae, so it is imperative to carefully consider negotiation tactics after contract acceptance. Compromising can often lead to a successful close of escrow.
Monday, June 10th, 2013
For many real estate agents the paperwork involved in the sale of a home can be difficult, but it is also of utmost importance. Unfortunately a large percentage of agents lack either the knowledge or patience (or both perhaps ?) to properly handle this task, and this needs to be addressed in our industry.
From a legal standpoint there are agents who, on almost a daily basis, are setting themselves or their clients up for potential lawsuits. Here’s a great example: three times in the last week alone I have seen poor examples of paperwork skills, from sloppy and missing papers, to erroneously filled out disclosures (where the agent obviously did not review the client’s disclosures before presenting them to the buyers’ agent, me – this happened twice in the last week, by two different agents), to sending disclosures that are not on correct, updated forms.
Paperwork is of utmost importance in a home sale, as what one says, or neglects to say, could subject one to liability down the road. Now, it is understandable that most agents are not attorneys, but there are still ways for any agent to master paperwork skills, and here they are:
1. Broker responsibility: In my professional and legal opinion, no paperwork should go out for signatures without broker review…yes, even for those very experienced agents. Those who want to avoid this can get a broker’s license. But in all reality there is just not enough oversight in our industry and this leads to lawsuits. Personally as a broker I would NEVER want someone out there representing my company who is doing a sloppy job! Every broker should have such a clause in the employment contract – either the broker or a designated person inside the company should review everything before anything goes out for signatures. Call me over-the-top, but this is how I would do it.
2. Better training: this goes hand in had with the above: brokerages simply need to have more and better training. When an agent joins a firm s/he should learn how to handle paperwork, and that includes going through EVERY form…tedious but it will ensure better skills and fewer lawsuits. Many agents have probably never actually read many of the forms anyway. Furthermore, there should be training sessions held whenever new forms are released to make sure all agents understand any changes.
3. Have a checklist in your file: Every agents should have a checklist so they can see what papers have been fully executed and which still need to be submitted for signatures. This is imperative – those agents who fly by night and have no idea what forms are required are just asking for trouble.
4. Use a transaction coordinator! This is a GREAT way for anyone to stay on top of paperwork, and a very simple way, albeit at a cost (but you can shop around) to avoid potential legalities down the road. Make sure your TC is experienced; the best way to find one is to ask around and then interview the recommended person/team.
5. Review all paperwork filled out by your clients before sending them off to the other side: this is especially important if you are the listing agent and your client is filling out disclosures. You need to review them and see if your clients have failed to answer any questions, or left out information of which you are aware (e.g. if there is an HOA and the client did not check the box so indicating – this has happened several times in paperwork I have received from sellers).
6. When in doubt: ASK! There is always someone you can ask for help when you are not sure about which form to use or how to fill out a particular form. It is more important to admit you have no clue than to just “wing it” and submit paperwork that may contain errors.
Anyone can fill out paperwork correctly, so there is no reason to ever send over papers that are faulty. Use the above points to make sure you protect your clients, and you will not only be a hero, but you will be acting in a professional manner and doing the right thing.
Friday, April 26th, 2013
If you haven’t noticed, flippers are back in full force. It seems everyone wants to get into property flipping these days, even those who have never done so or may not have a good sense of what they are doing. If you are a buyer or know someone looking for property – whether a home, second home or investment property, you need to be careful when you come across flipped properties.
Let’s start with defining a “flip.” This is a property that has been recently purchased and then remodeled, oftentimes very quickly, in order to put back on the market and make a profit. There are all kinds of flippers – from experienced to do-it-yourselfers, and many different levels and degrees of remodeling. As a buyer you need to be very careful when considering writing an offer on these properties. There are several different types of flips, and I have categorized them to make it easier to understand:
Types of Flips:
1. Quick Flip or “Eye Candy” Flip: This is the most common type of flip that I see when showing property, and it is very easy to do and the cost is minimal. This type of flip often involves new paint inside and usually outside, a major cleanup, new (usually inexpensive) carpet in carpeted areas, new hardware to freshen up cabinetry, new light fixtures, and often new kitchen appliances. It gives the illusion of newness, but usually upon deeper inspection one finds that there are many items that need attention – furnaces and water heaters that need to be replaced, electrical issues, landscaping, and many others. If the home is older oftentimes the flipper does not replace the windows, which is an expensive job. Each home obviously differs in what is needed to make it look great to a buyer, and these quick flips often get the “oohs” and “ahhs” from buyers, but they may still need a lot of work.
2. Full Flip: These types of properties address replacement, or partial replacement, of most appliances and other issues, along with a remodel. They typically involve more than just painting and putting in baseboards and new kitchen appliances. Many flippers these days do not do this type of flip, because it is not cost effective. but for a buyer this is obviously the best kind of flip property to buy, because it is not just eye candy and things have been properly attended to. These flippers often address issues that quick flippers do not, like replacing old windows, flooring, cabinetry and sinks, appliances, landscaping, and any other issues that a quick flipper might pass over.
How to Avoid Making a Mistake in Buying a Flip that is a Lemon:
1. Get a home inspection: Keeping in mind that not all home inspectors are alike, it is a good idea to do your research – most real estate agents know inspectors who do a thorough job. If not, contact a few and get names of people who have used them. Talk to those people and see how well the inspector did. Also, check their credentials and make sure they are certified by either CREIA (California Real Estate Inspection Association) or ASHI (American Society of Home Inspectors); if you live in another state you can check with that state’s licensing board. My favorite inspector is a licensed civil engineer and a licensed general contractor as well, so I feel very confident my clients are getting the best inspection possible.
2. Get a home warranty plan. Home warranties are great for the first year, in case any appliances break or you have other issues that are covered under your policy. You can write this into your purchase contract and ask the seller to pay for it. You may want to ask the seller to include upgrades to the policy, like roof, pool (if relevant), air conditioner, etc. That way you are covered, and you can extend the policy at the end of the first year should you desire. Discuss this with your real estate professional.
In order to avoid having to waste time on a home that is a low quality quick flip, you should look beyond the “eye candy” that paint and fresh baseboards and appliances may present. Look inside cabinets, check the furnace and air conditioner (if there is one), as well as the water heater. Look for any signs of prior leaks (although paint usually does a good job of covering these up for a short time). Really take a good look at the home to see if there are other potential issues that may need to be addressed, either immediately or in the future. Have your agent ask questions of the listing agent if you need. If you feel comfortable in making an offer than you will find out more when you have your home inspection.
The bottom line is to hold off on getting excited about a flipped property until you have all the facts and can verify that the home will not end up in need of a lot of work soon after purchase. As always, if you do your homework you will likely avoid making mistakes…buying a flip home can be wonderful if you are careful. Happy home hunting!
Wednesday, April 10th, 2013
Someone called me the other day with a question about short sales and HOA fees. She wanted to know whether a homeowner should continue to pay HOA fees if they are involved in short selling their home, and are awaiting lender approval. The answer is YES.
Unlike other fees which short sale lenders typically agree to pay (such as county transfer fees and certain document fees, escrow and title fees, etc.), lenders normally will NOT pay late HOA fees. In most situations where the homeowner is behind on these fees, the buyer will end up having to pay for them. This obviously could be an issue if the balance is hefty.
The even bigger problem is that the HOA could file a lien on the property for the late fees. This could hold up the closing of the short sale, or even worse: cause the parties to miss the closing deadline that was specified in the lender approval letter.
The best advice to give short sellers (and I always do so right from the start) is to stay current with HOA payments, even when they are no longer current with their loan(s). This will assure a much smoother transfer of title and avoid any problems that could lead to a bungled short sale and a foreclosure.
If you have any other questions regarding short sales or questions related to legal ramifications of selling your home, please feel free to contact me at Rachel@LaMarRealEstate.org.
Monday, March 11th, 2013
Escalation clauses are becoming very popular again. Although controversial amongst those who work in the real estate field, they are not illegal nor prohibited. If you are a buyer or seller you should understand what they are and how they work…they could be a blessing or they could cost you in a big way.
An escalation clause allows a buyer presenting an offer to agree to pay a certain fixed amount higher than any other competing offers made on the property. Thus, the buyer has a huge advantage over other buyers. Usually there is a cap placed on the price overage.
Let’s look at an example. Say Mr. Seller puts his home on the market for $500,000. According to recent solds in the neighborhoods this is a fair price. He receives 3 offers, all for $500,000, and one with an escalation clause for $1,000 above any other bids, up to $510,000. Mr. Seller can either send out a multiple counter offer to all buyers, seeing if any of them will come up in price. If they do, the buyer with the escalation clause will still come in $1,000 higher, up to $510,000. If the comps do not support value over the $500,000 asking price, the only way any buyer getting a loan will be able to pay for this home is to agree to pay over appraised value, which many buyers will not or cannot do. Thus, the buyer with the escalation clause, who is presumptively willing to pay over appraised value, has an edge.
This sounds great for the buyer, who oftentimes cements his place as the winning bid in multiple offer situations. It also sounds great for the seller, who will undoubtedly sell his home over asking price. However, there are some major caveats when using these clauses, and you need to make sure you understand how they work in order to decide whether they are right for you.
1. Place a limit on your bid. If you are going to utilize an escalation clause, it is important that you do put a cap on your price increase, for obvious reasons. Do not put yourself in a situation where you could be taken advantage of.
2. Understand possible consequences if your escalated offer is accepted. You need to make sure that you understand will happen if your offer is accepted. If you are obtaining a loan with 20% down, for example, you will have several options. You can include the higher contract price in your 80% loan amount, if possible. If not, you will need to be able to pay the cash difference. Similarly, if you do not include the increased price in your loan amount and the home doesn’t appraise, you will need to be able to pay the amount in cash over appraised value…unless you have a contingency in your contract giving you the right to cancel should the home not appraise – but this would make your escalated offer not very desirable to the seller and really defeats the purpose of an escalation clause.
3. Seller could use your offer to her advantage. Consider this: if you submit an offer with an escalation clause, it is possible the seller could use that to solicit higher offers, just by letting other potential buyers know there has been an offer presented with an escalation clause. This could be detrimental, so you have to decide whether you want to put yourself in that position. Also, how long does the seller have to contemplate your offer? You want to discuss this with your agent, and possibly limit the time the seller has to make a decision.
4. How do buyers really know there IS an escalation clause on a submitted offer? You need to be careful, because even if a listing agent informs you that there is an offer coming in with an escalation clause, you want to make sure any offer you present is one you can afford, and one that you can afford the increased price should the home not appraise at the price you are offering. In other words, if you know there is another offer with an escalation clause and thus decide to make your offer up to $10,000 over comparable market value, you have to be comfortable with the possibility that you will need to pay the $10,000 cash above appraisal value if the home does not appraise.
If you are a buyer who has been told there is an offer on the table with an escalation clause, you should have your agent obtain proof of this offer before presenting an offer. The listing agent can do so without disclosing the name of the other buyer or the price offered, by whiting out specific terms (name and price) and showing you the offer form.
5. Do not waive your contingencies. Make sure you keep your loan and inspection contingencies when using escalation clauses…you always want to make sure you know if there are any issues with the home that could cost you lots of money, and similarly you never want to waive your loan contingency (unless you happen to have enough cash to cover the purchase price in the event your loan does not go through.)
1. Escalation clauses may not be in the sellers’ best interests and could backfire. If you are a seller who has received an offer with an escalation clause, and other potential buyers know about this, it could ruin your chances of getting other offers. If the buyer with the escalation clause does not qualify or backs out for another reason, you could be left with accrued market time and no other offers.
Let’s understand this using the above example. Say buyer 1 presented the offer with the escalation clause; buyers 2 and 3 know this and also know it is highly unlikely the home will appraise beyond a certain number. Not knowing what buyer 1 offered, nor the terms of his escalation clause, they may simply decide it’s not worth it to present an offer at all under the circumstances. If you accept buyer 1′s offer and down the road the contract is canceled, you now have to start all over marketing your home, as you have no backup offers. You go back on the MLS with the accrued market time, potentially causing other buyers question why your home has not sold.
The important lesson here is to really understand how escalation clauses work, whether you are a buyer or a seller. Buyers need to be sure they can accept the terms should their escalated offer be selected. Buyers and sellers should talk to their agents and brokers to make sure using an escalation clause is in their best interests, and I also suggest consulting an attorney before doing so. Escalation clauses can be beneficial if you are careful.
Sunday, February 17th, 2013
Just in case you needed more reasons as to why it is advantageous to buy a home, here is an extensive list about the advantages and disadvantages of owning and renting…
- May be cheaper than a mortgage payment
- Fewer (if any) maintenance costs
- No down payment required (less deposit)
- No real estate taxes (renters insurance optional)
- Less stress (who cares, it’s not yours!)
- Freedom to move or downsize when necessary
- No risk of home price depreciation
- Some utility bills may be included
- “Free” amenities such as pool, gym, security
- Money can be used for other, more profitable investments
- Can’t be foreclosed on (but you can be kicked out at the end of your lease if the owner is foreclosed upon)
- Rental payment may exceed monthly cost of mortgage
- No ownership or wealth creation
- Payments never stop when renting
- Rent will rise over time
- Must deal with a landlord or management company
- No tax benefits
- Rules, regulations, and limitations
- More temporary, less stability
- Always at the mercy of the property owner
- Pets may not be allowed
- You can build home equity and wealth
- Status- Status-Status
- Sizable tax deductions possible
- Your space, your rules (pets welcome)
- Ability to remodel, expand, tear down
- Pride of ownership (social status, accomplishment)
- Potentially better for children, family structure
- Mortgage can improve your credit history/score
- Ability to borrow against your home (HELOC or cash-out)
- No more monthly payments once mortgage paid off
- Fixed payments (if you choose a fixed mortgage)
- Mortgages are the cheapest loans available
- No landlord
- Can exclude capital gains when you sell (partially)
- Inflation hedge
- Can rent out to others
- Can sell and use proceeds for bigger/better home
- Retirement nest egg
- It’s the American Dream!
- Home prices may lose value
- Could overpay for your property
- Obtaining a mortgage (and finding a home) is a hassle
- Not everyone qualifies for a mortgage
- You must pay taxes and homeowners insurance
- Total housing payment can be more expensive
- Mortgage payment can rise (if an ARM)
- Sizable down payment necessary
- Maintenance costs can be excessive
- Pricey HOA dues (if applicable)
- You’re “stuck” in a home (long-term commitment)
- Increased liability and responsibility
- Transactional costs of buying and selling
- Ownership is stressful!
- Taxes and insurance generally rise
- Your home can be damaged or destroyed (and not fully insured)
- Can be foreclosed on and lose your home
The preceding post was written and shared with permission by Dan Dobbs, of Capital Mortgage Services. He can be reached at DanDobbs6@gmail.com, or http://danieldobbs.org. Or call him at 949-250-3981. DRE#00986886, NMLS# 307631
Tuesday, February 5th, 2013
If you have been contemplating purchasing a home, whether it be a starter home, your dream home, investment property, or any other type of property, you may want to get serious now before it’s too late. Here are some reasons why it’s better to jump off that fence now rather than wait:
1. It is cheaper to buy rather than rent. The last time this was the cast was 1973.
2. Home affordability is better now than it has been in a long time. Prices now are discounted 61.5% from 1981, the last time they were at an all-time low.
3. New home inventory has hit a 50 year low, contributing to very low inventory levels, which are not expected to improve for 3-6 years. Between 1968 and 2008 there were at least 1 million homes built per year. With the new home inventory at such a low, we have a deficit of 900,000 homes a year (homes that are not being built), thus making inventory even lower.
4. One third of all closed escrows in 2011 were cash transactions (2012 numbers are likely higher). There is a lot of competition out there, and will continue to be as inventory and rates remain low.
5. Recent changes to lending laws will likely make getting a loan much harder. While the new laws afford protections to consumers, lenders will scrutinize applicants even more so now. Click here to read more about this.
6. Interest rates will rise. With low inventory and high demand, and with an improving economy, it is only a matter of time until the rates are raised. (In fact, they just went up slightly last week).
7. Foreclosures are decreasing. Lenders are vying away from foreclosures, opting for short sales – which are being appraised closer to comparative market value nowadays, making the chance of getting a “great deal” lower. Many federal and state programs are also helping underwater owners to refinance and stay in their homes, meaning less distressed inventory.
(Information compiled from the Charfen Institute and Data Quick)
Monday, November 26th, 2012
I recently came across a home that was for sale by owner. My client and I had been out looking at properties, and she later drove back through a neighborhood she particularly liked. She noticed a For Sale sign partially obscured on a home, which we had not noticed. I searched the internet for information about the home, but found nothing indicating it was for sale. I called the very nice owner, but when we finally connected my client had already flown back home and he did not want to cooperate with agents.
I know there are many agents out there who specifically seek out for sale by owner (or FSBO) properties, and many of them make it a priority to get those homes listed. But there are some big problems on both sides that need to be considered before hanging up a FSBO sign.
Issues Owners Must Consider
1. Exposure. As indicated in my example above, if you are going to sell your home it is extremely important to get exposure. The MLS is the number one place to showcase your listing, as thousands of property sites (where the buyers are looking) link to the MLS. Most active buyers have searches, oftentimes multiple searches, set up on agent sites and other house hunting sites like Zillow, Trulia and Redfin. If your home is not there, these buyers have NO idea it is for sale. In today’s market, where there is little inventory in most places, and where there ARE active buyers (and many multiple offer situations), it is simply silly not to have your home on the MLS.
If you still insist on trying to sell yourself, my best advice to you is to get your listing on the MLS. There are brokerages that will charge a small fee to do so, without doing any other work for you. It is well worth the expense.
2. Calls from LOTS of agents…who will want to know if you are willing too cooperate with them should they bring a buyer to your home. Most buyers DO work with agents, and if you are not willing to do so yourself you could be losing qualified buyers. An agent will not show your home if s/he will not get paid for making a sale and doing all the work involved in an escrow.
3. Unqualified buyer issues. If you do find buyers who are interested and not represented by an agent, you will be responsible for making sure they are qualified. This requires a lot of leg work, which most agents do before showing homes to their clients. You could take your home off the market for weeks assuming your buyers are qualified, only to find they are not. During that time you could have found other buyers, and then you will have to start all over.
4. Possibility of no showings, as many buyers are working with agents. This goes hand in hand with some of the above points.
5. Loads of paperwork and legal ramifications. If you are representing yourself in the sale of your home, you’d better be careful. You need to fill out a disclosure packet, and if you leave out crucial information it could come back to bite you down the road. An agent on your side is there to make sure you have filled out the disclosures correctly, and that all the paperwork is in order. Also important, if there ever is a legal problem down the road (and this is not a rare occurrence), it is nice to have the brokerage on your side to help you.
6. Other warnings. It is very important to note that if you are delinquent in your mortgage and are trying to do a FSBO, BEWARE. This is not something you should attempt on your own. You need to find a local agent who is experienced in delinquent properties so that you can discuss your options. If a short sale is an option I advise you to not even contemplate attempting one on your own. There are people who are experienced with short sales who can help you, providing a much stronger chance of approval.
Issues Buyers Must Consider When Purchasing a FSBO
1. No representation = Possible Legal issues. As discussed above, if you are a buyer purchasing a FSBO without an agent to represent you, you need to be very careful. If the owners do not fill out paperwork correctly and fail to disclose something, which later becomes an issue, you could be stuck with a legal dilemma. If you have an agent on your side to review all documentation and make sure you are legally protected, you will be in a much better position.
2. Escrow is a neutral party. It is important to know that the escrow officer can help you in some ways, telling you what paperwork you need. But keep in mind that escrow is a neutral party, and cannot give you any legal advice – they do not represent the interests of any single party to the sale.
3. Pricing. Make sure, if you are purchasing a FSBO property, that you have a copy of recent sold comparables in the area, and that you understand the prices and reasons for them. You obviously do not want to overpay for a home. This is not something you have to have an agent to do, but local area agents are usually very in touch with area sales and could explain to you why a particular home sold for more or less than the comps, and in doing so figure out the “right” price for a home you are thinking of purchasing. Most FSBO owners are savvy and know the neighborhood comps, but it is still important to study them yourself, especially if you are purchasing the property with a loan – lender scrutiny is rigid, and if the home doesn’t fit in with the recent comparables your loan will be denied (unless of course you renegotiate price with the seller at that point…something you need to be prepared to do well).
4. Must-Do’s in Buying FSBOs. If you are a buyer contemplating a FSBO purchase, it is imperative you do the following: get pre-approved with a lender first, get a good comparable market analysis – CMA (which you may be able to get from a local area agent even though they are not representing you), make sure you connect with escrow to understand what paperwork is needed, and have a home inspection.
Thursday, November 8th, 2012
The election is finally over…thank goodness, because all the negativity and blaming was getting annoying. I actually found it hard to log into Facebook or turn on the television. So now we are faced with an important task, no matter who you voted for: moving forward and healing this country. Most importantly, it is time to stop bitching and griping, because that won’t help anyone – there is no easy button to push.
Here are some things we can learn from the election to help us become better Americans and better people:
1. Decide to be a do-er, not merely an observer. People like to complain and place blame on others when things don’t go their way. This is just human nature, and some folks are louder than others. It’s ok to voice your opinion, and we are lucky to be able to do so. But those who do nothing but complain need to take heed: things will never get done if you just sit back and watch (and complain). I think this is a very good time for every American to ask, “how can I help?” Jump in there and make a difference. If you don’t think you can, then you may not truly understand what it means to be an American.
2. Listen. When we get upset we tend to not listen. You can be upset about election results, but what you do from there will determine your happiness. The key is to LISTEN. Listen to other solutions, suggestions, and theories, then think of ways to put a plan into action.
3. Compromise. You cannot change results most of the time, but what you CAN do is use your great ideas and share them, in the hopes of making things a little bit better. Oftentimes you will need to compromise, so do not let that stubborn voice prevent you from making positive changes…you have to sometimes start small, remember? Don’t go into things with an “it’s my way or the highway” attitude. SHARE, LISTEN, and then see how you can help in a positive way by giving in a bit.
4. Start making a local difference right away! (this goes hand in hand with number 1) If you feel there are simply too many things that need to be changed, you need to pick one and get started. See how you can help in your hometown. Upset about school issues? Volunteer and help create new programs for students. I have done that in the bullying realm, even though there was a lot of resistance at first, and boy did it feel great to bring such an incredible program to our district and students. Sometimes you have to start small and focus on one thing at a time, but don’t let people say you can’t make a change!
Finally, if you are unable to learn anything of value from the election, you may want to move out of the country, because there are those of us who want to make America strong and vibrant again…your negativity just creates too much interference. The problems we have today cannot be put on the shoulders of one person, or one administration. We need to get moving in the right direction again, and every one of us can help to do so.
If you still want to move out of the country after all the above advice, please keep in mind that if you live in San Diego, I can help you sell your home! [Hopefully I made you laugh!]
Tuesday, October 16th, 2012
It is almost here: the dreaded end of the federal short sale tax breaks, also known as the Mortgage Forgiveness Debt Relief Act. Come December 31, sellers who have not yet closed escrow on their short sales will no longer escape the capital gains tax on the difference between the sales price (of their home via a short sale) and the amount owed on their mortgage…UNLESS the tax breaks are extended. Will this happen, and if not, what will happen to short sales?
First of all, I have to say that I think the tax will be extended. It simply does not make sense at this critical economic time to not extend the tax break. Doing so wreaks all kind of havoc, including surges in foreclosures and bankruptcy filings, which neither the government nor the banks want to see.
Failure to extend the act would undermine everything that is improving in the real estate market and cause us to jump many steps backwards. The fact that an extension has not yet been announced makes people nervous, but due to the Presidential election and other important issues on the proverbial table, I think it has been put on the backburner for a short time.
Lets take a look at the main arguments for not extending the tax break:
1. Too costly. There are some who believe that the law will not be extended, as they feel the alleged $2.7 billion it will cost to do so is not justified due to the deficit. To this I would say it will be a lot more costly if millions of homes go into foreclosure again, as people find they have no other solution and cannot afford to stay in their homes. The lenders will be stuck with tons of inventory that they have to sell, many that will be trashed, and the market will drop again, creating another real estate nightmare. Just when we are coming out of the bad market is not a good time to cause it to dive again.
2. Easy escape for homeowners – ? Another argument in favor of not renewing the tax savings is that doing so encourages people to default on their loans. In other words, if people know they can short sale their homes and walk away without financial ramifications, it makes it easier than staying in a home they cannot afford and trying to make it work. I do not agree with this argument, as I think the stress would just lead to more bankruptcy filings and foreclosures, which in the end is even worse for the lending institutions (not to mention for millions of families).
It remains to be seen what will happen come the end of the year. The bottom line is this: if you are contemplating a short sale and your house is not yet listed on the market, or if your home is listed but you have not yet sent any offers over to your short sale lender, it is a good time to discuss your options with both your agent and a financial adviser, CPA and/or attorney. You must understand your options and what could happen if the law is not extended, because it could effect your decision whether to close your short sale.
If you are in the middle of a short sale and you have obtained or are soon to obtain lender approval, you need to make sure that the lender(s) release you in writing from any financial liability once escrow closes, if it is to close after December 31.
[Note that regardless of when your short sale is closing, you should ALWAYS make sure the lender approval letter has language to this effect...most lenders automatically state such in the approval letters, but if not you need to have your agent or negotiator ask that it be included]. You also need to check your state laws to determine state tax liability with short sales, as laws do vary. For more information about short sales you can visit my website.