Archive for the ‘for buyers’ Category
Monday, May 20th, 2013
Deciding whether to purchase or sell a home is possibly one of the most important and expensive financial/emotional decisions you will make during your lifetime. It is one that has not only financial consequences, but also legal ramifications. If done correctly it can be the catalyst for your future – during your lifetime, for your retirement, and to take care of your family after you are gone. That is why choosing the right real estate agent is so important. So how do you do that?
I was inspired to write this article after an ad I saw in my local paper by a real estate agent. The ad focused on the quantity of sales he has completed this year, inferring that the quantity makes him a great agent with whom to work. I realized immediately that this is the mindset of the average buyer or seller – let’s find the agent who has the most sales, because s/he must be very experienced. Personally, I think there is a big gap here so I thought I’d break it down.
Sure, there are agents out there who sell a LOT of properties, many of whom are very skilled at what they do, and likely have many happy customers. Personally, I have had MANY calls from buyers and sellers who have worked with mass-production agents (2 just this month), and I hear a very different side of the story. Many of these people tell me they were treated like a number, that they rarely (if ever) got to speak with the agent after initial contact, and that they were not satisfied with the overall handling of their purchase or sale…these people wanted QUALITY treatment and did not feel they received it.
When choosing an agent to work with, here are some things you may want to investigate:
1. Contact person: Will you be dealing directly with the agent throughout your purchase or sale, or will there be others involved? Make sure you know who will be your contact person, and if it is not the agent then make sure you meet that person(s) before you start working with the agent (assuming you are ok with not being able to deal directly with the agent).
2. Workload: Ask the agent how many clients s/he is currently working with; if the agent has a multitude of clients you can follow up with setting your expectations throughout the course of the transaction, and finding out how the agent will be able to dedicate time to you and your needs.
3. Referrals: Get the names/contact information for at least 3 past clients, and find out how they rate the agent on communication, availability and overall quality of service
I do not have a personal goal to be a mass producer. My theory is to provide excellent service, so that my clients keep coming back and send all their friends, relatives and neighbors to me. This quality of service is more important to me than selling a higher quantity of homes. But there are agents out there who handle a multitude of clients at a time and are successful. It really comes down to what makes you feel comfortable, and finding the right agent to meet your needs.
Some people may like the quantity agents, and for them that is great (and you may even be able to find one who provides both quality and quantity). I believe the most important characteristics in a real estate agent are not only their experience, knowledge and ethical standards, but also the quality of their work and the way they treat their clients.
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!
Friday, March 22nd, 2013
I decided to write this post because of the crazy antics I have seen in the real estate profession, especially lately. I want to preface this by saying that there are many wonderful, experienced and knowledgeable agents out there, but unfortunately there are even more who are not. Every week I see examples of contracts that are not properly executed, comments that are made that are incorrect, and even blatant misrepresentation of clients and agents giving legal advice (which is usually incorrect)…not to mention the plethora of ethical violations that happen on a regular basis.
If you frequent my blog you know that I always try to write things in a positive light, but I just don’t have a better way to say this: it is extremely beneficial for buyers and sellers to work with a broker who is also an attorney, OR if they want to work with their current agent, to have an attorney review their legal documents. I say this because it can help avoid litigation, and we all know that it is a litigious society in which we live.
Here are some of the things that I see happening all the time, which can be avoided by either working with a broker/attorney or having an attorney review your paperwork:
1. Agents drafting addenda to the contract without having it looked over by an attorney or broker (only attorneys can draft contracts, as they are trained to understand the legal ramifications. Since addenda are part of the contract they should not be drafted by people who are not attorneys…or in the LEAST their broker should review any drafted document before it becomes part of the contract).
2. Agents giving legal advice (only attorneys are allowed to give legal advice)
3. Failure to fill out the contracts correctly (omitting information, checking the wrong boxes or writing in language that could create legalities)
4. Trying to negotiate tough situations that could have legal ramifications (including short sales and tricky resale situations) – lawyers are professionally trained negotiators (again, other real estate agents CAN be good negotiators, but if you have a difficult situation you may want to consider having an attorney get involved).
There are many other ethical violations that continue to inundate our profession, and most of them do not depend on whether or not one is an attorney; however, an attorney is usually better able to recognize an ethical violation, especially when one is cleverly couched. This is perhaps the thing I see most often and, sadly, many of the agents committing offenses have no idea they are doing so. What does this mean? The real estate profession as a whole NEEDS to have better training standards and stricter license and license renewal requirements.
Some people think that real estate agents do not work hard – I know this is not true. The skilled and good agents work their tails off. In fact, I work longer hours as a broker than I did when I practiced law. If you have an agent who is not working hard, than you are working with the wrong agent. Please check into an agent’s credentials before signing up to work with one. Check into not only their real estate industry experience, but their education and extra certifications. Don’t be afraid to ask!
If you have an experienced agent he or she can tell you if a situation arises that is beyond the scope of their training or abilities, and oftentimes their broker can intervene and help straighten things out. If you do not have an agent and are thinking of buying or selling, there are several broker/attorneys out there who possess skills many do not, and the best part is…you pay no extra money to avail yourself of their legal skills if your agent is also an attorney!
The bottom line is to be aware so you can make sure you are getting the best representation possible when buying or selling real estate.
Tuesday, February 26th, 2013
Wednesday, February 13th, 2013
Is Fannie Mae hurting the real estate market? Those following the practices of this government lending giant know that as of late, Fannie has been accused by many in the industry of price fixing and falsely inflating the real estate market. What is going on, and how can this happen at this time, after the housing market is finally on the road to recovery?
The majority of lenders and those who guaranty loans seem to be cooperating recently with foreclosure avoidance, opting for the less painful option of short sales. They claim that not only do they want to ease the homeowners’ pain, but that they do not have a desire to own property, and would rather take a loss sooner than have to go through the foreclosure process – one which has a hefty price tag.
There is one exception to this rule, and real estate agents are baffled. Fannie Mae – a government agency, who along with it’s cousin Freddie Mac guarantees and purchases loans, and owns or controls about 31 million U.S. mortgages – has been implementing some strategies lately that go against this notion, despite statements of intentions to help:
1. Price Fixing? One of the claims expressed most frequently as of late by real estate professionals is that Fannie is engaging in price fixing. Here’s how it works: instead of opting for short sales, it is choosing to proceed with foreclosures. Then, once the home is ready to list, it’s selected agents list the property for over comparative market value, under Fannie’s Homepath program. No appraisals are needed, as Fannie is the largest provider of mortgage credit. Buyers are jumping in and paying over market value for these properties, and are closing escrows.
Initially this looks like a win-win, as the buyers get their home and do not have to go through the appraisal process, and the area comps are raised with the closing of the property at a value higher than any other recent sales, thus increasing comps for the next seller. Sounds good, right? Not so fast.
The downside of this tactic is that the buyers are literally moving into their new homes as UNDERWATER homeowners. Their homes have no equity – they own the most expensive property in the neighborhood because Fannie has falsely inflated the home values. Appraisers will not look solely to the most expensive home that sold, but will include it with the other comps…thus leading to the next problem:
As a result, future sellers will not likely benefit from the most expensive neighborhood sales (for more on this click here.). Appraisers will include the most expensive sale in their analysis, but they will not focus solely on that one sale; thus the next home to sell, even in better condition and with more to offer, will be evaluated by appraisers based on the combination of recent sales. What seller in their right mind, who did not have to sell, would choose to do so in such a situation? This will keep homes off the market, sustaining low inventory levels.
2. Countering short sale offers at prices higher than comparable sold properties. Another tactic that is being used by Fannie when they DO agree to short sales, is to counter offers received higher than comparable sold properties. Again, this is crazy! These homes will not appraise, but still there are buyers willing – and doing it! – to pay cash over and above appraisal value in order to close escrow. Again, these new homeowners move into their homes in negative equity positions. This tactic also prices many homebuyers out of the market.
I’m not sure how to explain what is going on, but it scares me. Our market is healing right now, and if prices are falsely inflated and comparable sold properties ignored, we will see large market increases in short time periods. If you remember, this is what led to the last market crash. Please share your thoughts.
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)
Wednesday, January 30th, 2013
San Diego is not included in the following infographic, but entry level home prices here are between $200,000-$300,000.. However, note that it may vary greatly by area. If you would like information on a specific area please let me know and I will be happy to provide it.
Wednesday, January 23rd, 2013
An investor client called me a few weeks ago and told me that the county assessor sent him property tax bills for an amount higher than the standard 1.25% on his recently purchased property. He didn’t understand why the taxes were higher, and needed advice on what he should do.
Most real estate agents correctly tell their buyers that property taxes in California are approximately 1.25% of the sales price, give or take a little depending on the specific location of the property. Normally this is sound advice. But what some agents do NOT know is that the assessor’s office has discretion to raise the property tax on your newly acquired property if it feels that you paid a low price. So your “great deal” may not be reflected in your taxes.
In all my years of selling real estate this is the first time I have seen this happen, which tells me that the assessor’s office is either starting to heavily scrutinize sales and related comparable sold properties, or that my client was very unlucky. One of his purchases was really an amazing buy, but the other fell in line with comparable sold properties.
Under California state law, Proposition 13, property is reappraised only when there is a change in ownership, or upon completion of new construction. Aside from these two situations, property taxes cannot be raised more than 2% annually. The tax rate in California is 1%, plus the costs of any additional fees, bonds, or special charges (thus the reason why agents tell their buyers taxes are “about” 1.25% – some areas/neighborhoods may have slightly higher or lower tax rates, depending on the additional fees, such as mello roos taxes, bonds, etc.).
Once a property changes ownership, the assessor determines whether the property needs to be reappraised. If an appraisal is ordered and comes in higher than the value the new buyer paid, the taxes will be assessed based on the appraisal. Note that a transfer between husband and wife does not require a reappraisal for property tax purposes, including those transfers resulting from death or divorce, nor does a refinance.
So what can a homeowner do upon receipt of a higher than anticipated property tax bill? The homeowner can appeal the value of his new taxes. Go to the assessor’s website and find out the steps for doing so, then get started. Keep in mind that it can be a drawn out process, but do not give up. Be sure you have all related comparables, and can show why those properties do or do not compare to yours – extra photos can help. Be prepared to really compare each one – I advise you use your real estate agent to assist you with this.
For further information on this and answers to related frequently asked questions in the San Diego county area, click here.
Friday, December 28th, 2012
There has been a lot of speculation as to what will happen in the real estate market as we head into a new year. Here is my take on real estate market resolutions for 2013:
Home prices will rise, slowly. Based on the current market and the rise in prices in 2012, especially toward the end of the year, I believe that prices will continue to rise, although at a very slow pace. People who are thinking they should wait to sell in order to make a big profit will be waiting a long time, but those who see the opportunities – demand, low inventory and continued historically low interest rates – have the chance to sell in what will slowly become (if it’s not already) a seller’s market. Those homes that show very well and are well-maintained will garner the most interest and could set trends for neighborhood comparables.
Interest rates will remain low. Because of continued uncertainty with the economy interest rates have to remain low. If the feds raise them at this volatile point, when Americans are just beginning to feel comfortable spending again, albeit cautiously, it would be devastating. I do not believe that such a risk is healthy and thus I think rates will stay low for some time.
Inventory will rise. This one is hopeful, but I truly believe that due to the fact that markets are becoming seller’s markets, more people will decide to list their homes in the coming year. 2012 was a difficult year for inventory in most areas, and San Diego county was no exception. Multiple offer situations on the first day properties listed were not uncommon, and many buyers ended this year without the new homes they so desired, feeling frustrated. I think savvy homeowners will see the silver lining in selling their homes as we head into the new year.
Distressed sales will slow. Many lending institutions and federal and state governments vamped up programs in 2012 to assist troubled homeowners, and the numbers from many of these programs indicate that they are working. There are still many more people who need assistance, but I believe that we will see fewer foreclosures. Most banks seem to have warmed to loan modifications and short sales, bypassing the rush to foreclose.
More underwater homeowners may be able to refinance in the future. There is finally a rumbling about extending refinancing programs to those non-equity homeowners who fall outside of the Fannie Mae/Freddie Mac loan requirements – this could be HUGE and prevent a slew of foreclosures and even short sales down the road…this will be the real estate story at the top of my watch list in 2013.
All in all, the housing market it improving. It is important to mention, as I always do, that every market is different. If you want specific information about your area/market, consult with a qualified local agent before making any decisions about buying or selling real estate. One more caveat – keep in mind that market improvement is relative. The above analysis is based on numbers that show improvement in the local San Diego market, as well as reports from trusted sources and personal experience working in the local market.
I think 2013 will be a great year for real estate. Please let me know if I can provide any information about your San Diego home sale or home search, and have a very happy New Year!
Monday, October 8th, 2012
Many real estate agents, mortgage professionals and economists have been saying it: “now is a great time to buy.” In fact, those cries have been echoed for the last year or so. Interestingly, there ARE many ready buyers out there, but inventory is so low and it is very difficult to be the lucky one whose offer is chosen, as many homes that are listed on the market obtain multiple offers, often in the first day or two.
So what makes now such a great time to buy real estate? There are 3 main reasons:
1. (Still) historically low interest rates. The interest rates are still at unprecedented lows. Part of this reason is because there is little inventory in most markets. As prices climb, inventory will rise (because sellers will see a good reason to finally sell again) and in turn interest rates will likely rise. It’s a Catch-22, but if you want the best rates, the end of a long downturn is a great time to take advantage.
2. Prices are rising in many markets. Many buyers have been waiting, some for a long time, until the market “bottomed out.” Well folks, we have reached that point and are now on the upswing. Prices in north county have risen, homes are receiving multiple offers, and the condo market is officially a seller’s market. Single family homes are soon to reach that level as well. If you are a buyer who has been “on the fence,” now is definitely the time to climb off and start looking, lest you find yourself facing higher prices and more competition as we head toward the Spring/Summer selling season.
3. Distressed inventory is down. Foreclosures have slackened off since the start of the summer, mostly in part to lenders embracing short sales and other programs, like loan modifications or sales to third party investors that help people stay in their homes. With less distressed inventory prices can continue to rise at a steady, “normal” pace. Note that even if you live in an area where there are still a lot of short sales, the jump in averages prices in those neighborhoods will cause lenders who hold paper on the distressed properties to seek prices that are more in line with the comparable sold properties, and since many lenders are trying to close short sales quicker and are being stricter with prices they will accept, it is likely such sales will not have a substantial effect on comparable properties.
4. Rents continue to rise and rentals are harder to find – great for investors, not so great for those seeking to rent. Rents have risen over the past year and are at a 10 year high, according to research reported in the Wall Street Journal. One study by Trulia even found that it is cheaper to own rather than rent in many markets. Not to mention the rental market is so hot, that it requires much luck to even find a rental and be chosen as a renter, since there is so much competition. I have had renters call on all my listings over the past year, asking if the sellers were willing to rent instead of sell – people are desperate. One of my investors just leased out a newly purchased property – the same floorplan I sold last year to a different investor – and he was able to obtain a monthly rent almost $100 higher per month than the first investor.
5. Low inventory. Low inventory in most markets means much greater competition amongst buyers. How, you say, is this a reason to buy now? Well, since competition is so high and prices are rising, if you are lucky to be the chosen buyer on a property you will likely end up paying less than when there is more inventory. There is only less than a three month supply of inventory on the market now in San Diego. If the many buyers out there looking cannot find a home to purchase now, and hold off until there is more inventory (usually after the holidays), there will also be more competition, as you will also get the buyers at that time of year who want to make a move after school gets out for the summer. Also, you will likely get a lower interest rate if you buy now rather than down the road, as many economists predict interest rate increases as inventory rises.
Do you need a few more reasons? How about this: housing statistics have been and continue to be on the rise. Building statistics are up in many areas, and many markets are becoming seller’s markets. So remember that “now is truly a great time to buy” may sound like an old cliche, but truly makes sense right now. If you are serious about buying now, make sure you understand the importance of writing a strong offer – click here for some great tips. Happy house hunting!