Archive for the ‘Home purchase’ Category
Wednesday, November 15th, 2017
Most people know that escrow is the party that handles the money, paperwork and closing details of a transaction in California (and other states – the remaining states use attorneys for closings). But many do not know that escrow and escrow officers can fall under two regulatory categories, and that this could have an effect on their duty to remain a neutral party to both sides of a property sale.
2 Types of Escrow Companies in California
Independent or licensed escrow companies are independent companies that are licensed by the California Department of Business Oversight (DBO), which are governed by strict regulations designed to protect consumers.
Some of the requirements of independent escrow companies are that they are subject to management and bond requirements, are trust fund insured, are subject to annual financial and procedural audits and Department of Justice investigations of all employees, as well as escrow license requirements.
Controlled, or non-independent, escrow companies are nonlicensed businesses owned by third parties, such as real estate brokerages, attorneys, banks or title companies. These controlled companies are regulated by different licensing and regulatory authorities, which can vary amongst jurisdictions and are not governed as strictly as independent escrow companies.
Escrow officers have a difficult role in that they need to represent both parties in a property sale transaction while remaining neutral. An independent escrow company is the best choice, in my opinion, for real estate parties and clients, as there is more protection offered and there is not the threat of compromised neutrality.
Tuesday, October 17th, 2017
Many people have been on the fence about selling this past year, due to the fact that inventory is low and they are concerned they may not find replacement housing right away – I personally have been assisting multiple sellers with such concerns. That of course keeps the inventory stagnant and prices high – a perpetual Catch-22. However, there are some conditions that make the market right now the BEST time for sellers to sell…so if you are considering selling, consider the following:
Inventory is still low and prices high. Normally at this time we should see a 6 month inventory supply, but there is only a 4.2 month supply on the market according to the National Association of Realtors (this number has even dropped since this time last year). Although we have seen homes dropping prices quite often in the last few months here in San Diego County, as well as longer market times, it is still a great time to get the best price for the sale of your home as long as you are realistic. Homes that are not priced far above comparable value and offer positive qualities can still sell at strong (higher than average) prices. But this may not be the case as we head toward the end of the year and into the next year, depending on several factors.
Buyer Demand is Higher. Compared to this time last year, buyer demand for homes is higher. Historically low interest rates and sustained job creation fuel the demand, but inventory levels prevent many from finding the right home. How long these buyers will remain in the market is hard to say, but many have decided to rent because they could not find homes, thus taking them off the market for at least a year in most cases.
Natural Disasters Will Help Fuel Buyer Demand. Due to the recent wave of hurricanes in the south many homeowners have been displaced and may soon join the ranks of buyers in other areas, making the demand even higher, OR they could become renters and take rental inventory off many markets – causing purchases to become the only option for many looking for places to live. There is a possibility this could push prices up in some areas.
Proposed Tax Changes Could Effect Demand. There are several proposed tax changes that could effect the buyer demand levels, including changes to real estate deductions. If this happens there is the possibility that sellers may elect to stay rather than move up (to save money), OR buyers may decide to rent to avoid higher tax bills. This remains to be seen but it is something to consider.
If you are considering selling it is important to get an idea of what is going on in your specific market area. Talk to a real estate area professional and crunch the numbers. As always, the real estate market will fluctuate with the ebb and flow of many factors, but if you want to get a high price for your home now is a great time to do your research and prepare to sell.
Thursday, September 28th, 2017
If you own a home or are thinking about purchasing one, you need to be aware of how the new proposed tax reforms could effect you and the effect they may have on the real estate market. Here are some of the proposed changes:
Tax Increases/Doubling of the Standard Deduction. Taxes could increase for hundreds of thousands of California homeowners, and this will hit the middle class hard. It would also put homeownership out of reach for many buyers.
Recently the National Association of Realtors stated that increasing the standard deduction and erasing others would “effectively nullify the current tax benefits of owning a home” for the majority of people. This could reduce housing demand and home values.
Elimination of State and Local Tax Deductions. These deductions make home ownership more affordable. This could include property taxes, and if implemented homeowners could see a rise of up to $3000 annually, leading to plummeting home values. Potential buyers may not be able to afford property tax increases, pushing them into lower price ranges. Homeowner equity would suffer.
If these new tax laws are implemented it will be a big hit to the housing market, with home purchases slowing or even grinding to a halt; more importantly, we could face large foreclosures waves heading into the future, which of course could have big implications for the mortgage and banking industries.
Hopefully we will soon see some clarification regarding these proposed changes. Write your Congressional representatives and express your views on the new tax laws. Unless you exist in the 1% of the uber-wealthy you will not likely benefit from the expected changes.
Thursday, August 3rd, 2017
It is usually typical for the real estate market to slow as summer winds down, but many people ask me if I think the market will continue on it’s current path – rising prices and lack of inventory. This subject is discussed on a daily basis in the media by real estate agents, economists and buyers and sellers. I read a lot of it – from those claiming that the market will continue on it’s path, others predicting a bubble, and all sorts or in-between predictions. So how is one to know where the market it really heading?
First of all, no two markets are the same. So while right now in Los Angeles there are still bidding wars going on in some neighborhoods, here in San Diego it really varies as to price, neighborhood and type of property. Investors are still out there trying to pick up good deals, especially in the attached market under $600,000 and with 2-4 unit properties. Many 2-4 unit properties that were sitting for a long time are suddenly entertaining multiple offers.
Attached homes – Townhomes and condos are still “hot” here in San Diego County, especially those in nice areas close to highways, beaches and shopping/dining/transportation. Those priced under $600,000 still seem to be going fast. For example, in Carlsbad (North Coastal San Diego), in the month of July the average market time for sold condos and townhomes was 32 days, with 39 of these properties in escrow now. There are currently 48 active condos/townhomes listed on the market in Carlsbad that are priced under $600,000. 9 condos/townhomes sold in July with an average market time of 32 days. The average sold price was $428,533.
Detached Homes – There are currently 78 detached homes for sale in Carlsbad that are priced under $1 million. 57 homes went pending in July with an average market time of 22 days and an average list price of $842,000. Only 5 homes under $1 million sold in Carlsbad in July, with an average market time of 16 days and an average sales price of $802,000. Of the active listings, average market time so far is 37 days, with 19 of those properties having been on the market less than 10 days. Of course, this “detached homes” field includes all 4 zip codes in Carlsbad and multiple types of detached homes – varying with location, age and upgrades/amenities.
Homes located in certain neighborhoods seem to sell much faster. For example, the Mar Brisa neighborhood of Southwest Carlsbad (with the exception of one listing that has not sold for over 60 days and has dropped price several times) tends to sell very quickly, oftentimes in days or even before hitting the MLS. So location is a big factor, and many buyers are willing to pay over asking price to get into neighborhoods with little to no active listings.
As I always say, if you are in the market to purchase or sell residential or 2-4 unit income property, it is important to contact a skilled area agent who can provide you with a complete, detailed analysis of the specific area on which you are focused.
Crystal Ball Predictions – The question I am asked the most is “what will happen in the real estate market in the next year?” I usually chuckle and say that if I had a crystal ball I would be a very rich person! But I do believe that while prices will not shoot down drastically, that we are entering a “correction” period. I think we will see prices stabilize and the market very slowly start to revert to a buyer’s market. That means that prices will not likely rise much more, but of course there may be some highly desirable areas that do still see rises for a short time.
Many buyers are getting frustrated with the high prices and low inventory and are thus deciding to put property searches on hold, opting to rent until the market changes. While interest rates will likely rise that does not seem to be enough of an incentive for buyers to jump in when facing high prices and multiple offer situations. So in my opinion I believe we will see prices drop slightly, maybe more for properties that are not selling. Higher inventory levels would help keep demand filled and prices a bit more stable, so hopefully we will see that happen as we head into the later part of this year and the year to come.
Thursday, March 16th, 2017
As many in the real estate industry anticipated, the mortgage interest rate has been raised, and predictions are that rates will go up again, possibly multiple times this year. What does that mean for home buyers, sellers and the real estate market in general?
1. Inventory will likely remain low. Since inventory in most markets is already low the rise in rates could keep it that way. That is because home sellers who were considering selling may choose to stay in their homes. Those who have low mortgage rates currently may decide not to make a move if their new rates will be higher – it will all depend on numbers for many sellers. OR – there is always a chance that rising rates may cause some to sell quickly in order to prevent being locked into their homes for potentially years to come…it will remain to be seen.
2. People may be priced out of markets. If there are fewer homes on the market then home buyers will have a more difficult time finding homes due to high demand and low supply, which normally creates higher prices. As competition heats up, some buyers – likely many first time home buyers – will be priced out of the housing markets in many areas. Unless home builders supply the market with new inventory there could be a stall ahead.
3. Cash buyers will continue to play a role. In many markets, especially condo and townhome markets priced at $650,000 and under, I believe cash buyers will continue to be out in force snatching up these properties. Many first time buyers will have to contend with these cash buyers, and usually that is a losing game for the buyer who is getting a loan (since cash buyers do not require appraisals and can close more quickly; not having to rely on a lender to get the sale closed is a plus to many home sellers).
4. Rental market will continue to be saturated. If the above holds true then the already saturated rental market will continue to be busy – landlords will be able to make good money and raise rents because there will be plenty of renters needing homes who will pay the higher prices if current tenants cannot. This point correlates with the increase in cash buyers that we have seen lately in the “lower end” markets – many of them have been purchasing the lower priced properties for income potential, and it is a great time to make money in the rental market.
5. Real estate industry could see changes. With less inventory real estate brokers and agents could see a big change in the industry. Much like the exodus of sales people during the foreclosure crisis of 2008-2011, I predict many agents will again leave the business because they will not be able to survive in such a tight market. I also predict agent commissions will go down if there are fewer homes which sell faster.
The bottom line is that the real estate market in many areas, at least here in San Diego County and others in California, is still “hot,” but it is getting more difficult for people to get into it. This could affect future home ownership rates and the real estate industry as a whole.
Sunday, February 19th, 2017
The real estate market in Carlsbad is strong but there is still a shortage of inventory. Although Zillow reports that market is currently a buyers’ market, I do not agree (at least not in certain price ranges), as we are still seeing multiple offers in some ranges. Higher priced homes seem to be accruing slightly longer market times than “starter” homes (condos and townhomes from about $650,000 and under).
The median attached home list price in Carlsbad is currently just over $549,000. Home sellers are in a great position at this time, as the market still favors a strong seller advantage, with no change in average asking price per square foot (average of $379). Average market time was 76 days and 22% of properties had a price decrease last week. From my position in the trenches with buyers I am finding though that many properties under $650,000 are literally going into contract in a matter of days, often with multiple offers.
Single Family Homes:
The median list price for single family homes is currently $1,049,900, and the 199 homes in Carlsbad (as of last week) have been on the market an average of 90 days. Pricier homes (those over about $1 million) seem to take longer to sell than those under $800,000 – one Carlsbad neighborhood that typically sells in the high $700,000-low $800,000 range can’t keep inventory on the market more than a week, and homes are selling over asking price with multiple offers in days. Although inventory and market action has been trending downward, inventory is sufficiently low to keep the market labeled a seller’s market.
Sale values have risen in some Carlsbad markets 7.5% over the last year and are predicted to rise 2.7% in the next year, according to a study by Zillow, making it a great time to be a seller.
Monday, November 28th, 2016
If you have been looking for a home recently you may realize that doing so has become tougher: there is less inventory out there and when a great home lists there are often multiple offers. So how does a buyer get ahead to secure a home when many others are in the same situation? Here are some tips.
Hire a great real estate agent. This is above all the number one way to find a home in a tough market. Not only can your agent give you advice about what price and terms may get you that house you love, but they are also locally connected, which can make all the difference in the world.
Here is an example – After losing out on a few multiple offer situations I found buyers a home through my connections with other local agents – one that had not gone on the MLS yet. In another situation, I notified buyers of a home that was about to come on the market (they lost out on purchasing my listing in the same neighborhood), and they got into contract prior to the home going on the MLS. Some say this is unfair for the other buyers out there as they never had a chance to see or bid on the home, but many real estate sales work this way. Those of us who work particular areas often stay in touch and know when there is a listing coming up. Having that on your side as you search for a home is priceless.
Be Paperwork Ready: There is no better advice than to be ready to make an offer. This means you need to be preapproved with a lender (the lender should have all your paperwork so s/he is ready to go once you write an offer, and you should have a preapproval letter). Have a copy of your latest bank or investment statement showing proof of funds for your downpayment, in order to submit with your offer. Your offer should be as strong as possible so speak with your agent to determine what needs to be in there and what may be left out in order to avoid a multiple offer situation.
Know what you want: Often this is difficult when one is focusing on multiple areas or neighborhoods, but if you really know those you prefer, including floorplans and other amenities, you will be able to act quickly to see the home and make and offer. Even if multiple offers do come in, being first to present can often be helpful. Start looking at areas and homes before you are ready to purchase – the more information you have the better and more prepared you will be when the time to buy is right.
All in all, buying a home in a low inventory market can be tough. With interest rates rising every day counts – if you can lock in a rate prior to another rate increase that is great – and it just means you need to be ready when that right home becomes available. Of all the above tips, having a great buyer’s agent is the best advice I can provide. Many people think they can find a home without an agent, but a good agent is worth her weight in gold when it comes to finding the right home.
Happy home shopping!
Monday, April 6th, 2015
For the last few years buyers have been able to search on their own for properties for sale in any area via third party websites – the biggest being Realtor.com, Zillow and Trulia, among thousands of others. Recently Zillow and Trulia merged (Zillow acquired Trulia), and that set in motion some big problems with MLS downloads to such sites (Realtor.com is NOT affected, as it is controlled by the National Association of Realtors).
How third party sites get listings from the many MLS sites has always been an issue, and there are even brokers who choose not to have their listings advertised on such sites (a shame though, because the consumer likely is not aware of this and may be missing out on some active listings…a very good reason why all buyers should have an agent representing them – but I digress).
One of the largest suppliers of information to the third party websites was not able to negotiate with Zillow and therefore will no longer be sharing syndicated MLS information with Zillow and Trulia starting April 7. There are other means by which brokers can have their listings shared on these sites, but they have to opt into them and many are either not aware or have not done so.
What does this mean to the millions of people who use these sites to search properties? It means that searchers may not see ALL the listings in the areas they are searching…which means that they may miss out on properties that they may have been interested in seeing and/or purchasing.
This mess might work itself out in time. But the best advice I have for anyone shopping or following the real estate market is to HIRE A LOCAL AGENT. He or she can set up a search for you directly through the corresponding MLS, so that you get listings sent to you directly from the MLS as soon as they list (which will be quicker than you would receive them via any third party site anyway). If you want to search the MLS listings yourself, make sure to use either your agent’s website (they usually sync directly from the MLS), or Realtor.com – that way you won’t miss out on seeing any listings.
Thursday, March 19th, 2015
There are many buyers out there who do not know how to read and understand recent comparable sold properties (there are also many agents in the same boat, so if you are a buyer do not feel bad). Of course, if you are working with a real estate agent who is familiar with the neighborhood(s) where you are focusing your home buying search, then that agent will be able to help you understand how to sort through the comps and come to a valid price so that you can write an offer.
The problem is that oftentimes agents may not be intimately familiar with a neighborhood (i.e. they do not themselves know why some homes have lower sales prices than others), so it is up to the agent to really do some research. Here are the steps to follow so that you know whether that asking price is in fact valid:
1. Print out all recent sales in the last 6 months in the area. If there are none then your agent will need to go outside the neighborhood to find similar homes – those that have amenities and other features that are comparable to the home you are thinking of purchasing. If there are still none then s/he will need to find some that may have more or less to offer, and then weigh the factors to come to a reasonable price.
2. Speak with the listing agent. Every agent should place a call or visit to the listing agent whenever there is a question about value. The listing agent is the one who listed the home at that price, so the best place to start is with that person. Your agent needs to ask what comps were used to decide on a list price (in cases where it is not obvious – if you are looking in a tract neighborhood and there are 5 homes that have all sold in the same range then it is usually clear). If the listing is in a neighborhood where homes have sold across a wide value range, then you need to understand why.
3. Call the listing agents who sold the comparable homes. You can often get even more information this way that you may never have been able to see in photos or a virtual tour. For example, I just listed a home in a neighborhood where there is a discrepancy amongst recent comparable prices. I happen to know the neighborhood well (I live there), but a potential buyer’s agent called to ask me about the comps (I had sold a few of them) and I happen to know a lot about them and why they sold at the prices they did. I drafted an analysis on all the sold properties, and this was a big help to the agent and his clients. When I am representing a buyer in that same situation I ask for the same thing – at least a verbal analysis if someone is not willing to draft one (I of course take notes and then draft it up for my clients).
4. Understand that “price per square foot” is not the sole focus. If you look only at price per square foot and there are comps all over the place, you may be under-or over-valuating the home you are considering. There are many factors that need to be taken into consideration – location, upgrades, condition (even upgraded homes can be poorly maintained, and vice versa), amenities, views, lot size, and negative factors (noise, high traffic areas, hazard zones, etc.) Even two identical homes in the same community can have vastly different prices depending on the factors mentioned. You really need to get more information to understand the discrepancies before progressing. Always remember that every home has it’s own resume and story to tell, so just because another model match sold for a particular price does not mean that the same price applies to the home you are considering.
5. Make a chart or comparison table to understand the comparable properties. You can include features that are positive and negative, and you can then compare them to the subject property (the one you are thinking about purchasing). Seeing it on paper can really help many buyers to understand differences and feel better about making an offer that will appraise (if you are getting a loan), and that makes sense in light of the other homes that have sold nearby.
In the end it is common knowledge that those who have more information are better informed to make big decisions. Since buying a home is one of those big decisions it is imperative to do your homework. Find a smart, experienced agent in the area(s) you like and use them to help you get to the point where you feel comfortable with the values in an area by heeding the above advice. That is their job. Happy house hunting!
Saturday, March 7th, 2015
All the predictions about the Spring real estate market indicate that it is going to be a busy one. Focusing on my own North San Diego market, I agree and I am getting excited about several upcoming listings of my own. There is a buzz in the air amongst my local colleagues, and many have indicated they have listings coming up as well. With interest rates still low and inventory about to get a boost, it is a good time for buyers to make a plan for finding and purchasing the right home.
Here is how a buyer can be ready to jump once s/he finds the right house this Spring:
1. Get preapproved. Make sure that you have preapproval from a lender so that you know your budget and can be ready to make an offer when you find the right home. This will save you a lot of time and could prevent you from losing a home you really like to another buyer who was ready to go.
2. Find a real estate agent in the area(s) you like. Having a skilled local agent on your side is the best assurance that you will be able to view new listings quickly. Another advantage is that many agents hear of “pocket” or upcoming listings before they hit the MLS, providing you with an opportunity many buyers may not have.
3. Be ready to schedule a showing on listings that meet your criteria when they list. Get into those new listings as soon as you can. If you like the home you can strategize with your agent on how to make the most appealing offer to the seller; in doing so you may be able to avoid multiple offer situations.
4. Understand the market(s) you are searching. Study recent closed sale prices and understand values in different neighborhoods. This will help you in your search. Your agent can assist you in preparing market analyses for you, and you can look at the photos of the homes to see what features may have (or have not) contributed to the sales price. You will feel much more comfortable when you make an offer if you are armed with all the right information.
Happy house hunting!