Archive for the ‘Home purchase’ Category
Tuesday, November 11th, 2014
The final walkthrough is a necessity for buyers purchasing a home, but many buyers do not understand the purpose of the walkthrough and there are many important aspects to getting it completed correctly in order to protect their legal rights.
First of all, it is important to understand that the final walkthrough is NOT a contingency to the sale, so in other words if a buyer discovers something at the walkthrough and all contingencies have been released the buyer does not have the right to cancel the contract at that point – doing so may put the buyer in breach of contract.
The purpose of the final walkthrough is threefold:
1.Â Make sure the home is in the same condition as when the offer was made
2.Â Check to see that any negotiated repairs were completed as agreed
3.Â Make sure seller has completed any other obligations under the contract
Of course, it is possible that things will be discovered during the walkthrough that give the buyer certain rights against the seller. If this occurs, there are 2 things the buyer needs to do in order to preserve her legal rights against the seller after closing.
How to preserve your legal rights after close of escrow when issues are discovered at the walkthrough:
1.Â Indicate on the walkthrough form (which in California is called the Verification of Property Condition, or VP for short) specifically what the issue is (e.g. seller did not make __ repairs as specified in the contract).
2.Â Have an attorney write a “right to reserve” letter to the seller and his agent, specifically identifying the issue(s) that were neglected. An agent can do this as well, but since most agents are not attorneys the agent needs to make sure he or she does so correctly. The California Association of Realtors has a library with examples of these letters. Make sure the agent runs it by her broker for approval before submitting it.
If the buyer has completed the above steps then s/he will be able to pursue legal action against the seller after closing. Of course, the first things that should be done is for the agent to discuss any issues with the listing agent – many times the seller will simply take care of them. Make sure to still complete step 1 above just in case.
Buyers have many legal rights when purchasing property, especially in the state of California (a pro-buyer state). It is important for all buyers to understand each and every part of a real estate transaction, and how it will affect his or her rights. Staying legally protected is not hard if you start off with a smart and savvy real estate agent who can help steer you through the process from beginning to closing.
Monday, August 25th, 2014
When buying a home most buyers have a contingency period, a standard 17 days under the California Residential Purchase Contract (RPA), but negotiable by contract for longer or shorter periods. This time is meant for the buyer to conduct investigations and inspections in order to discover information about the home that may affect ownership or present hazards. Buyers can then ask for credit or repairs, or choose whether to remain bound by the terms of the purchase contract if things are discovered that may alter the value of the home. (Check your area contracts and consult with your real estate agent to understand your rights)
Let’s look at some of the types of inspections and investigations that are important during this time:
1. Home inspection. Most buyers have home inspections during the contingency period, and I always recommend them. If buyers hire a skilled inspector, he or she will be able to point out potential problems, issues or hazards that may not be obvious. I have sold homes before that looked to be in fantastic shape, only to learn of issues that needed to be addressed via home inspectors. Inspectors will not only point out possible issues or hazards, but will also recommend the buyers contact specific experts whose expertise goes beyond that of an inspector (for example, if the inspector detects high moisture readings in a room he may recommend a mold specialist).
2. Civil engineer inspection. A civil engineer is a necessary person to call out for certain types of homes, such as those built on cliffs, or where a cracked slab has been noted. If your inspector advises a call to an engineer, or if there is information in the seller disclosures that warrant doing so, I highly recommend taking the advice.
3. Roof inspection. Some home inspectors do not check the roof. Depending on the age of the roof, and any signs of leakage or information indicating such in the disclosures, a roof inspection may be a smart move.
4.Â Contractor inspections/estimates.Â If your home inspection reveals there may be repair issues needed to the structure, or if there is information in the seller disclosures that warrant, you may want to have a licensed contractor come out for an evaluation and estimate; if you are planning on any future additions or structural changes this is also a good idea, so that you are aware of any possible restrictions or code requirements (also see #6 below).
5. Other specialist inspections/estimates – plumbers, electricians, HVAC specialists, etc. A good home inspector will alert you if s/he thinks there is something that needs further evaluation. I highly recommend taking the advice and calling a specialist. If you are planning on asking the seller for help with repairs or replacement, you will know the cost of doing so, so that you can make sure you ask for the correct amount of credit or repairs.
6. Investigate permit issues. This is an issue of which many buyers and agents are unaware. If the home you are purchasing has had any alterations or additions in the past, you need to see if permits were pulled. Usually you can do this easily with a visit to the County or City offices, or wherever building codes are enforced and records are maintained.
If you know of any past alterations or additions that should have been permitted, but cannot find permits filed, you need to understand your liability down the road – and this can vary depending on local rules and regulations. For example, if there was an addition that wasn’t permitted and down the road you decide to apply for a permit to do some other additions or work, the inspector can site you for the previous additions when s/he comes out to inspect your current project. This means that you could be liable for getting any past unpermitted work up to code. This could cost you a lot of money, so make sure you know what you are up against before you buy.
The importance of the contingency or investigatory period is great. Buyers should exercise discretion and listen to suggestions made by their home inspector and real estate agent on which experts may be needed, as well as pay close attention to what is revealed in seller disclosures. Paying a bit extra for peace of mind that you are buying a sound home (or knowing what issues may be present if you are purchasing a fixer-upper) is well worth it.
Monday, May 12th, 2014
A new study was just released that named San Diego, Carlsbad and San Marcos the #1 toughest housing markets in which renters can purchase homes. For every 100 homes available for purchase, there are slightly over 5 renters who can qualify to buy the home (according to research firm SNL Real Estate).
The recent market increase has made it more difficult for people hoping to purchase homes, pricing many out of the market. Prices in San Diego county rose 19.4% year over year as of January 2014, resulting in a rise in the median home price, to just under $477,000. Today’s buyer needs to earn overÂ $81,000 to purchase a median-priced home.
While many economists and real estate experts believe the price increase is cooling off, there are other factors in play that could continue to make it difficult to afford a home here in San Diego county:
Low inventory still plagues many parts of the county, so that many buyers are competing for the same properties…which of course could have the effect of actually increasing prices but we will have to see.
The ability to obtain financing is still very challenging for many would-be buyers. Lenders are not making it any easier to obtain loans. Plus, with new reports showing that 1/3 of home sales are paid for in cashÂ (click here for more on this statistic), this also presents a challenge for a buyer who needs to obtain a loan – most sellers will obviously opt for a cash buyer over one who has to qualify for a loan.
If you are a renter looking to purchase, there are a few things you should do to get ready, so that once you find the right home you are able to make a solid offer:
-Â Get preapproved. It is very important to speak with a mortgage professional so that you know exactly how much mortgage you can afford. I highly recommend a formal preapproval, where the mortgage professional analyzes your earnings, debt and other factors to come to an accurate assessment of your ability to purchase.
-Â Find a great real estate agent. You need to find someone who has experience, patience, and really is an expert in the areas in which you wish to hunt for properties. Your agent needs to be on your team, whether you like to search for properties on your own or have her/him do so for you. He or she can help educate you on different areas/neighborhoods, etc., so take advantage of their expertise. It costs you nothing, but will be a big benefit to you if you have someone who can answer questions provide further information, and walk you through all the paperwork and legalities.
-Â Stop spending on any big ticket items. If you are in the market to purchase a home, it is imperative that you stop spending money on any big items, like furniture, cars or trips. Lenders scrutinize all spending during the loan approval period, so just to be safe it is smart to stop spending from the start.
The bottom line is to not be discouraged if you are a renter looking to purchase a home. In fact, in March of this year 30% of homes were purchased by first time buyers, so it can happen! Just make sure to get all your ducks in order so that you are in the best position to make an offer when you do find that perfect home.
Friday, March 21st, 2014
You may have read lately that here in Southern California home prices continue to rise. You may also have noticed that there do not seem to be many homes listed for sale. Combine that with the fact that there are definitely buyers out there looking for homes to purchase, interest rates are still historically low, and it’s no wonder some people are concerned.
Spring officially started yesterday, and with it comes the expected home selling season, which usually lasts into mid-summer. This is the time that those who are planning to move start seriously looking at homes, and those planning to sell get ready to do so. There have been new listings in my area, but it feels like a lot less than normal for this time of year. Where are the sellers and why are they not stepping forward to list their homes?
The main reason is that there is low inventory of homes on the market in many areas. Most sellers sell and simultaneously buy another property. If there are no homes on the market for them to consider they will likely hold off on listing their property until that changes, creating a Catch-22 situation. This keeps the cycle going and in turn causes housing prices to rise, as buyers have to compete for the little inventory that is on the market.
Another reason for lower inventory could include lack of sufficient equity in the home to purchase a replacement property (although many homeowners have come out of negative equity situations in the last year or so due to price increases).
Hopefully the sellers WILL soon step up and put their homes on the market. When this happens we will see a few things:
-Â Lots of interest from buyers
-Â The possibility of multiple offers
-Â A likelihood of higher prices as a result of the above
Hopefully more sellers who are not buying replacement properties (such as 2nd homeowners, investors, or those moving out of the area) will step forward soon to give the market some momentum. It is a great time to be a seller right now.
Sunday, March 2nd, 2014
Thursday, October 10th, 2013
Buying a home is one of the most challenging and emotional processes – with such a big purchase of course buyers want to make sure they are making the right decision, but oftentimes that is difficult to do. Let’s look at some of the things to consider when looking for the “right” home (in no particular order).
Location. Of course this is a big ticket item when buying a home. Location takes into consideration many things – proximity to work, school or loved ones, or to highways and public transportation, airports/train stations. It might be that someone wants to live by the beach, or far from it. People may wish to be away from power lines or noise, or may want to live where all the action is. No matter what the location issues might be, a buyer needs to identify them and then focus on the properties that are in the right locations. Many buyers end up changing their minds and expanding searches to other locations, so the searches can mold into different shapes as the search progresses (and a skilled agent can help you with this as well).
Amenities. Whether you want to be close to transportation or have personal or community amenities like a pool, spa or tennis courts, this is an important part of your decision. Focusing on properties that will meet your specifications will help you find the right property.
Schools. For families with children or planning to have them, schools are very important. Many buyers have definite ideas as to which districts they want to live in, and that will help narrow the search. If you are a family (or plan to have one) moving into an area from out of town, it is important to research local schools and districts – visit them, speak with staff and families whose children go to the schools, research the test scores and other relevant information so that you can feel good about the schools in the neighborhood(s) in which you are looking.
Affordability. Of course price will always be a factor in home shopping. It is important to get pre-approved with a lender and to know how much mortgage you can afford before home shopping. This may also have an effect on the areas you search.
Gut Reaction. I don’t know about you, but I am a big believer that my gut instinct is always right. The few times I have decided to go against my gut I have always realized down the road – whether sooner or sometimes later – that I should have trusted my gut. As a Realtor I can often tell when a buyer finds the “right” home, and usually I can see it very quickly, even if they are not yet sure. You won’t always know right away what home is “the one,” and sometimes they actually grow on you, but if you do have instincts listen to them.
Get Help From Your Agent. Another key factor to finding the right home is to make sure you are working with a local agent who not only knows the area and different neighborhoods, but can really understand what you are looking for. S/he can guide you in your search, and even point out some things you may not have considered that could broaden or narrow your search.
Note that there may be challenges even if you find the right home, such as financing issues or appraisal problems. All you can do is be prepared to deal with these should they arise; for example, if your “right” home does not appraise, you can try several things – click here to read about dealing with appraisal challenges. Just stay informed and work with your agent to try and anticipate challenges, and hopefully by doing so you will be able to overcome them.
There is a “right” home for every buyer, sometimes even many that can feel right. The best way to know if you have found “the one” is to do your homework before you start looking at homes – research neighborhoods, amenities, different areas and the proximity of desired places. Study comparables and floorplans, drive around neighborhoods before going inside any homes, chat with people who live there. Once you have identified those areas that have the right characteristics you will feel great about looking at homes in those neighborhoods. Trust your instincts, get help from your agent, and you will find a wonderful home.
Monday, July 8th, 2013
One of the biggest questions in real estate right now is whether the market will continue to see rising prices. Many areas, including San Diego county, have seen price spikes over the last 6 months or so, anywhere from 10% to over 20%, depending on the neighborhood. We know that one of the main reasons for this is the lack of inventory combined with the time of year and low interest rates…but what will happen if those rates go up and as we head into Fall and Winter?
Inventory: Inventory will continue to play a big part in the market recovery, as well as help determine whether prices will continue to rise and the response thereto. It is a unique time right now because it is summer – the time when many buyers think of purchasing, and sellers think of selling. The demand is still very high in North San Diego, and I have agents calling me long after I close listings, asking if I have any others coming up in the neighborhood – AND if I have listings coming up in other places, so there are still buyers out there looking, with little to choose from.
There are several schools of thought as to what will happen to inventory levels moving forward, and how this might effect the market. As I always say, this will be determined by the specific market area, but as long as inventory remains low and there is a demand for properties I do not suspect we will see a drastic slow down in price increases; however I do think that as we coast through the remainder of the summer we will likely start to notice a leveling off, due to the factors below.
Interest Rates. If you have looked at the news lately you have seen that interest rates have risen in the last month, several times, and are expected to continue to do so. Some people fear that it will be the end of the housing recovery if they do in fact rise substantially, but as long as there is demand – and there still seems to be a great deal of it in San Diego – I do not think we will see a big drop in sales despite rising rates…after all, if you look at the rates from a historical perspective slight rises will still be considered low interest rates!
Interest rate effect on new inventory. One interesting thing to ponder is what effect rising interest rates will have on would-be sellers: those who have been thinking of selling but have been waiting (most for prices to continue to rise, many who are underwater and are waiting for the break-even point so they can get out from under there hefty mortgages). If we continue to see a spike in interest rates it is possible we may see a surge of inventory hit the market, created by a fear that buyers will no longer choose to purchase should the rates spike. This could be positive news for local markets, as the supply would be welcomed and met by the demand.
Another idea to consider is that those who have been searching for homes, getting outbid and frustrated with not finding homes, may decide to sit back should rates rise; the more probable scenario is that these buyers will want to jump into a purchase even quicker, and may step up their searches and even increase their range and criteria, in order to get into a home before the rates go up even more. It will be interesting to see the effect this has on the market, but I do not think it will be negative, at least not right away.
Distressed inventory. Over the years distressed and bank owned inventory has had an effect on home prices, playing a big role in gains. However, these sales have decreased in the last year, with REO (bank owned) sales decreasing by more than half. Radar Logic reports that from February of last year to April this year, REO sales declined from 26 percent of all home sales to 11 percent. This causes prices to increase more quickly than normal. If we see a return of these types of properties it could have an effect on prices, but I do not believe such would cause prices to go down, rather I think we would see a slower gain period moving forward.
Call it what you will, but a rise in interest rates could be a boost to local markets, at least those that have been climbing out of the doldrums of the crash and appear to be healthy and competitive. If you are thinking of buying or selling, this could just be the perfect time to do so, especially if you are now able to get out of an underwater loan and break even. Remember, after the market crashed many kept waiting for prices to “hit the bottom;” some people waited too long and missed out on purchasing property at the lowest levels. I do not believe prices will drop in San Diego, but rather I forsee a stabilization, combined with a “normal” annual rate of growth moving forward starting in 2014.
If you are interested in a detailed market analysis of your or other San Diego neighborhoods, please let me know.
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 requestÂ 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 3rd, 2013
Many real estate markets across the country, including here in San Diego County, are currently experiencing seller’s markets, due to low inventory levels and increased demand for homes. Many homes receive multiple offers and are priced over neighborhood comparable sales values, and there are also many situations reported where buyers will remove appraisal contingencies in their offer (meaning they are willing to pay any value over the appraised value so that their offer has a higher chance of getting accepted).
With higher sales prices in many neighborhoods it is hard to make sense of the comparable sold properties, which may show values that are lower than the asking price of a home that buyers want to purchase. It is often difficult even for agents to counsel buyers on how to handle some situations, because no one wantsÂ to see her buyer overpay for a home, but at the same time we do not want to see our buyers lose out on home they love. What should buyers and their agents make of all this, and how do they know what to offer in order to get their offers accepted?
1. Comparable sold properties. Obviously the first place to start is with the comparable sold properties. If there have been recent sales in a neighborhood the task of coming to the right sales price is easier, because one usually will see an upwards trend in prices over the last several months or since the start of the year. As agents we really have to compare the recent solds to the subject property to see what similarities and differences the properties possess, then we need to balance them out and add on for price increases. Sometimes this is not as easy as it seems though, and we really need to dig in and do our homework.
For example, on a recent listing we asked for a price over comparable sold value in the neighborhood, but we knew there were a few homes pending in there for prices higher than what showed on the MLS, and those homes were never placed on the MLS, so the appraiser would not have seen them pending. We had to explain this to both the buyer and the appraiser. So sometimes you have to go beyond what is listed in the MLS and have a title representative pull listings that are being sold by owner or by out-of-area agents who might not have put the home on your local MLS.
2. Area Increases.Â If there are no recent sales in the immediate area, and no recently sold similar properties nearby, then the focus should be on older sales, taking into consideration price gains in the area or in the county. If you can show that prices have increased substantially in the area, say 10%, yet cannot find comparable sales in the immediate neighborhood, you can still apply the increased percentage in value to the home that you are trying to purchase.
Here in San Diego many areas have increased abut 10% since prices started rising, but there are specific neighborhoods where prices have increased more that that…it is important to get a good understanding of what values are doing in the neighborhood in which you wish to purchase a home.
3. Appraisals. Appraisers seem to be “with the program” lately. At the beginning of the year when prices were just starting to climb, many appraisers were not appraising homes with increased sales prices, or they were making it more difficult for buyers to move forward with the purchase because appraisals were not coming in at value. Now however, there generally are enough recent sales within or surrounding a community that allow the appraisers more room to see the growing values.
If an appraisal does not come in at value there are obviously choices – the buyer and seller can either renegotiate the sales price, or the buyer can choose to pay the difference between the sales price and the appraised value.
It is definitely not an easy task to find value in a home where there are no significant recent sales comparables, but it can be done and you can get your appraisal to come in if you do your homework.
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.Â 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.Â 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.Â 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.