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 â€“ 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.
November 1st, 2017
As a home seller it is imperative that you make sure you do everything you can to avoid lawsuits from your new buyers. Failure to disclose has been one of the most litigious causes of action in real estate law. Upon selling property, sellers must disclose all they know about the property according to state mandated forms â€“ this usually includes past insurance claims, any upgrades or improvements, damage to the property, repairs, noise issues, and many other questions. Sellers must answer these questions to the best of their knowledge, and provide explanations and any necessary receipts to verify the claims. But what happens when other people who work on your home make a discovery that could render the home undesirable?
The most recent case, RSB Vineyards, LLC v. Bernard, was upheld by the California Court of Appeals. The court ruled that a seller must have had ACTUAL KNOWLEDGE to be held liable for non-disclosure, and a contractorâ€™s knowledge is not imputed to the seller. In lay terms, this means that if a seller hires a contractor to do work, and the contractor discovers something about the property, the seller cannot be held liable unless the seller was made aware of the problem by the contractor.
In the lawsuit the contractor had converted a residence into a wine tasting room on vineyard property that was later found to be structurally unsound â€“ the buyers found out after they purchased the home and had to demolish the structure. They sued the seller for failure to disclose. The contractor was found to have known about the problem but there was no â€œactual knowledgeâ€ by the sellers.
In many areas of disclosure here in California, the seller CAN be held liable for items about which they should have known. For example, if the sellers notice water stains on a ceiling of a room and do nothing about it, then have the ceiling painted prior to sale, without disclosing the stainâ€¦this would likely render the seller liable for failure to disclose, as the water stains obviously indicate some kind of problem. Note that had the seller disclosed the stain and not painted over it, s/he would not be liable. It would then be up to the buyer to investigate and ask for repairs if problems were discovered.
If you are selling a property it is very important to answer ALL questions on the disclosures to the best of your ability. Back up any claims with receipts, documentation, etc. I always tell my clients it is better to over-disclose. Put everything out there so that you do not have to worry about liability down the road. If you are made aware of any issues by a third party, make sure to include that in your disclosures so the buyer can look into it further.
If you are ever unsure of whether or not to disclose something, the rule of thumb is that you should do so. However, I suggest obtaining legal advice…or if your real estate agent happens to be an attorney that could help too 🙂
October 23rd, 2017
In the last few years it seems that some real estate agents or brokers have jumped on the phone calling spam bandwagons. They call your home phone, often using canned recordings, or text messages to your cell phone. These messages tend to be about how they can help you buy or sell property. There have recently been several class action lawsuits filed against brokerages for do-not-call/auto dialing violations.
The federal Telephone Consumer Protection Act (TCPA) prohibits a brokerage from using an auto-dialing system. Brokerages can easily violate the law even when the calls are ultimately transferred to a live agent.
The TCPA prohibits:
- Prerecorded voice messages to landlines.
- Prerecorded voice messages to mobile phones without consent.
- Auto-dialed calls, and text messages to mobile phones without consent.
Have no fear â€“ there is something you can do to prevent these. First of all, make sure your numbers are registered with the Do Not Call Registry. Click here to do that. Then, if you continue to get such calls or texts you can report them. The caller will be fined and the calls/texts should stop.
Damages can be substantial: $500 for each call placed negligently and $1500 for each call placed willfully. Although this seems like small change to a big brokerage, the total claims can rise quickly since damages are uncapped and per call, and importantly, multiplied by the number of calls for each class action plaintiff.
In order to report a violation you need to wait 31 days after you register your number. There are also some types of organizations that are allowed to call you without penalty, such as debt collectors , charities, political organizations and telephone surveyors. To see the list you can look on the website. To report a violation click here. We all need to be vigilant if we do not want to be bothered by unsolicited calls and texts.
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.
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 â€œeffectively nullify the current tax benefits of owning a homeâ€ 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 slowingÂ 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.
September 20th, 2017
Flat fee brokerages have been around for a long time, and recently there have been a few additions to the real estate flat fee brokerage world. For those who do not know about these companies, they attract home sellers by promising to list homes for a set fee that is lower than what the average real estate agent will charge for the same work. This sounds great right? Many sellers agree and sign listing agreements excitedly, without considering the facts.
Here are some reasons to truly investigate flat fee brokerages prior to signing on the dotted line:
1.Service. There are new flat fee brokerages out there that promise to provide the same great service as traditional agents who charge more commission to do the same work. Make sure you understand what you are getting for the price you pay.
Flat fee agents tend to have a LOT of listings. I know from much personal experience that one listing alone requires a lot of my attention and availability. Personally servicing multiple listings will jeopardize service.
Also keep in mind that flat fee agents do not get paid much per listing – they make up for that in volume. Will that lead to lack of attention to your listing? You need to figure that out.
2. Paperwork. Many flat fee brokerages charge such low fees because they do not actually handle paperwork or showings. There are those who promise full service, but MAKE SURE you get an explanation of exactly what that means – if you have it in writing and the agent cannot deliver you should be able to fire him or her (see number 3).
3. Check the contract thoroughly. Many flat fee brokerages have clauses in their contracts that sellers may not understand, such as agreements to purchase replacement property only with the brokerage (remember, flat fee brokers make more money from buyer sales than from listings since they get paid full commissions for those), to only use affiliated mortgage companies, or to forfeit money if you cancel the contract. Be careful and make sure you fully understand what you are signing. It is also very important to make sure that you can fire your agent/brokerage if you are not satisfied – at any time – without being penalized or trapped in a contract. If you need help deciphering these contracts, seek legal counsel.
4. Check the brokerage client satisfaction history. It is always important to check testimonials and stories from clients who have used the services of any broker. Spend time researching not only the broker’s own site and third party sites (like Zillow or Yelp), but also check news stories online. You may be surprised at some of the negative press you find on the brokerage.
5. Legalities. Keep in mind that selling a home is a legal transaction – if you do not have someone to guide you it could be dangerous. In order to avoid being sued it is always a smart idea to work with a real estate agent who can help you with paperwork and deadlines, as there are many of both in every real estate transaction. Not to mention, brokerages have insurance to protect against many issues that may arise, IF they were representing you. Flat fee brokerages that just list your home on the MLS and have you do all the work may set up situations that are ripe for breaches of contract and non-disclosure issues, among others. Make sure you have someone guiding through the sales process, or hire an attorney to look over all your paperwork.
There are some new flat fee brokerages out there that are trying to change the way the flat fee business is handled by promising stellar service. This is a great intention, but if you are a seller make sure that you understand the contract you sign, as well as your rights. You may want to speak with traditional agents to compare services.
The bottom line is that commissions are not set in stone, but you do get what you pay for in most cases so make sure you understand to what services you are entitled for what you are paying. If you are not happy, you should be able to fire the agent.
September 8th, 2017
Believe it or not, there are MANY homeowners who are underwater, still, years after the mortgage meltdown. According to Core Logic, 6.1% – 3.1 millions homes – of all mortgaged CA homes have negative equity, as of the first quarter of 2017. Short sales are also increasing recently as many variable mortgages that were obtained back in the heyday before the crash recently reset.
If you are underwater, delinquent with your mortgage payments, or about to be, or if you are making payment on a loan(s) that reset and the increased payments or rates are a struggle, you need to be proactive, and act sooner rather than later.
Here are some options to help you start thinking and researching:
1. Call your lender(s). If you are late on payments or are about to be, you need to call your lender asap. They can help you figure out a plan. They likely will start with the possibility of a loan modification, where your payments can be reduced if you qualify.
Note here that depending on how much your payments are and how deeply underwater you may be, a loan modification may not make sense, but it is still important to go through the motions as a first step to try options.
2. Refinance. This is great in theory but if you are underwater and there is no equity in your home it is not possible. If there is at least 10% equity in your home then definitely find a good mortgage professional (call me if you need a referral) and go this route.
3. Sell the house if you have enough equity. This will allow you to move on and make a smart purchase that fits into your budget, or rent. Of course if you are underwater chances are you do not have equity in your home so this would not be an option for you. But if you can sell your home and make a little money to pay down some debt and get into a rental or inexpensive replacement property, it is best to do that sooner rather than later.
4. Short sale. This is a great option if you are underwater and the loan modification does not work or provide enough financial relief. It will effect your credit but not as badly as a foreclosure. Make sure you speak with a real estate agent who is familiar with short sales and knows how to negotiate with the bank(s), and that you really understand the process and consequences – click here for more information on short sales. There is a timeline for short sales that can help you figure out how long it might take before you would have to move out – click here to access the timeline for California.
4. Other options. If a short sale is not right for you for whatever reason, there may be other options (such as a deed in lieu of foreclosure and possible lender or government programs – there are also specific programs for military members and possibly others so you need to do thorough research) that could work depending on your circumstances. Again, it is important to find an expert who can provide appropriate counsel that will allow you to make informed decisions.
4. Foreclosure. This is a final option if you have exhausted others and there is no relief in sight for getting out of your mortgage obligations. Make sure that before you go down this road you have investigated other options that may apply to you. Foreclosures can seriously affect your credit scores for years.
6. Credit counseling. If your debt issues extend to other areas or credit, such as high credit card balances or trouble paying bills, you should seek counseling to help you get back on track so you can pay down your debt and move on. Don’t focus on the trouble you have, but on improving it so you can be sure not to make the same mistakes again down the road. There are some amazing credit counseling programs and helpers out there – I know of a wonderful attorney who handles this so let me know if you need the referral.
The bottom line is that if you are in trouble with your mortgage and other debt, do not wait until it is too late. The door for other options could close on you, forcing you to foreclose on your home. If you act early you can usually come to a better solution that will allow you to move on without taking such a hard hit to your credit score.
August 31st, 2017
I’ve seen a lot of changes in the real estate industry over the last 14 years, and one of the biggest has been the increase in the number of “teams.” A team is a group of real estate agents who work under one broker. For example, say John Smith works for Real Estate Company, and he forms a team of 10 agents. They all work for Real Estate Company, but they work together with John Smith as his team members; multiple agents may work together with a client during a home sale or purchase.
Many people wonder how a team can benefit them if they are a buyer or seller, and whether it makes more sense to hire a sole agent or a team. Needs and opinions will vary, but here are the reasons I feel that working with an experienced sole agent, rather than a team, can truly benefit buyers and sellers:
1.Â Facts and details.Â As a sole agent, my clients know they are working with ME. They will not have to deal with a slew of other agents, assistants, secretaries or other people. If they have a question, they will be able to reach ME. I always answer my phone and if I am with another client or in a meeting, I call back quickly. My clients love this, because I know what is going on at all times in regards to their sale or home search. In turn, it benefits me because I do not have to check in with someone else to find out what is going on before calling or visiting a client.
2.Â Relationship. I have ALWAYS said the real estate is not just about selling property – it is about forming a relationship with the person who is entrusted to handle a legal transaction on your behalf. Buying or selling a home or investment property is fraught with legalities – you need to know that the person you select to help you truly has your back. I believe (and my clients confer) that it is easier to form a relationship with one person who is dedicated to serving you.
3.Â Connections. Team members often claim that they provide superior service because they have a bevvy of “exterior” (not agents) experts – loan officers, escrow officers, title people, contractors, etc. Well, guess what? Sole agents have those too – in fact, I have a list with many kinds of referrals that I have compiled over the years, and my clients reap the benefits.
4.Â Numbers game. As a sole agent my goal is to be there for my clients. I don’t focus on how many sales I can make, but rather on how I can best serve each individual to the best of my ability. If I cannot then I will not take on new clients. The key is dedicated service, not a numbers game.
People have different opinions on how their needs can best be served when it comes to real estate transactions, and that is great. If you are planning on buying or selling real estate, it is important to figure out what you expect from your relationship with your agent or team, and to make that clear up front. Most importantly, make sure you find an area expert who has experience selling homes. A large percentage of agents have secondary jobs and do not think of real estate as their career – find one who is a professional.
August 18th, 2017
The real estate market is going CRAZY…well, at least in my local area. After over a year of increased prices and low inventory, multiple offers and crazy shenanigans so that people can get into homes, there are some strange things going on all of a sudden – since the start of August.
Here is what I am seeing in the San Diego market:
Longer market times – Many homes are taking longer to sell compared to those that sold just within the last few months. Even neighborhoods where homes were literally receiving multiple offers on the first day on market are sitting now. Many eventually reduce and on the average I am seeing some homes take around 60 days just to go into escrow.
No more multiple offers in most cases – You would think that the continued lack of inventory would make multiple offers a common occurrence still, but many homes are sitting on the market and reducing prices before they finally go into contract.
Lots of price reductions – I am seeing this all across the board – from condos to single family homes to 2-4 unit income properties. Sellers continue to hit the market with high prices – at comparative sales value or higher – only to have to reduce after 30 days or so due to lack of offers.
Buyers are making low offers – This is for real folks, so if you are a seller be prepared! It is happening all over. I think buyers are tired of rising prices and competition for homes, and they are starting to feel that if a seller won’t take a lower offer, they won’t buy. This is also true with short sales, even though banks no longer accept crazy low offers like they once did years ago.
Escrows are cancelling – I have seen this first hand with my own listings and I have heard from other agents as well – buyers are cancelling escrows at what seems to be a higher rate than we have seen in a long time.
I have reached out to other agents and escrow officers and it seems I am not the only one who feels the market is in such an interesting place. Many agents feel that August has always been a slow month for real estate sales – the end of summer with last vacations prior to kids returning to school, visitors leaving the city, etc. (here in San Diego we have a LOT of summer visitors!)
But there are some who think that this change is indicative of what is to come. Many buyers who were unable to purchase homes due to lack of inventory and multiple offer situations, have decided to rent and wait until the market drops or until there is more inventory available (which really goes hand in hand with prices dropping or at least stabilizing).
I will reiterate my belief, as stated in many blogs, that I do not think we will have a bubble burst or a housing crisis in the near future, but I do think tides are changing. A buyer’s market is starting to blossom and at some point it will flourish. If inventory picks up it will only fuel the change.
August 14th, 2017
Here we go again…short sales seem to be hitting the market once again, due to rates resetting on adjustable interest rate loans. Back in the heyday of the housing market meltdown these types of properties were often times great buys, so long as a buyer had the patience to wait.
For those not familiar with short sales, they occur when a home is valued for less than what is owed on the mortgage. As a condition of the sale the lender must approve the contract and terms in order for the sale to proceed.
The bad news is that short sales are still anything but “short” in so far as timing is concerned – I still have not figured out why this is the case, but if I were the bank I would try to get through them a lot quicker in order to avoid losing more money. But I digress.
Aside from taking a long time, in most cases, to be approved, short sales are not quite the bargain they once were. Lenders used to accept lowball offers in order to get the short loans off their books, rather than face foreclosure (which typically costs a lender about $20,000). Faced with so many short sales it was easier for the lenders to accept low offers.
Once the supply ran out, the housing market started to recover, and short sales were fewer and farther between, most lenders wised up and refused low offers. Now, although most of them would rather save the money and approve a short sale over a foreclosure, they tend to be tougher when it comes to offers.
Lenders want to see that an offer is close to comparable value. So if the homes in the neighborhood are all selling for $1M and a buyer offers $950k on a short sale, chances are the lender will counter the price as a condition of acceptance. The best way to get a “deal” is to make an offer that is slightly under comparable values in order to avoid a lender counter offer.
If you are a buyer contemplating a short sale purchase, make sure your agent really does his/her homework on comparables and talks to the listing agent. I do believe you can get a decent price on a short sale, but they are not the “deal” they used to be.