Posts Tagged ‘buying a home’
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 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.
Monday, September 19th, 2016
I don’t know if it’s just bad luck, but I have been having MAJOR issues with lenders lately – messing up (and almost killing) escrows at the 11th hour. (I should say that these mistakes are not from MY preferred lenders, but from lenders whose clients are purchasing my listings). Here is what I know: lenders are held to high standards, most importantly they must check all paperwork and needed documentation during the buyer’s loan contingency process. Here are some of the dumb things that I have seen lately from buyers’ lenders:
1. Not checking buyer documentation. I had a lender this past week that on the day of the loan contingency removal deadline realized that there were two parties to a trust for which they based funds going into the loan. Now I have to assume that they had a copy of this trust for 21 days, and that they vetted it to make sure their borrower qualified. However, on day 21 I find out that they “just realized” that there were 2 trustees, not one, and therefore the borrower actually had half of the money to his name instead of the whole trust amount, on which they based approval.
This is unacceptable folks! These are basic inquiries a lender needs to make when processing a loan! How could the lender not have known the borrower’s stake in the trust when it should have had that trust documentation, which clearly identifies trustees and is a vital document when funds are coming from it?! Unbelievable.
2. Sending over loan docs with a change in borrower names. Believe it or not, a lender this past week sent over loan docs to escrow to be signed by the buyers, with closing slated for the following day (which happened to be a Friday so there was no room for screw-ups). The problem was that the docs had DIFFERENT buyer names than the contract/escrow documents – they basically eliminated a buyer! Now, I don’t know about you but it isn’t rocket science -Â it is pretty basic common sense that if you have a contract between parties, you cannot just change or eliminate the name(s) of a party without proper documentation (it also happens to be the law). Lenders KNOW this!
Suffice it to say that in this particular case escrow and I had to jump through hoops and the lender had to re-draw docs at the 11th hour. It was very stressful. This is absolutely unbelievable. The lender has copies of the contracts and all documentation relating to the purchase agreement. For them to do something like this is just crazy.
The moral of my crazy lender scenario week is that there are often problems in a real estate transaction, so prepare for them. But those who are charged with qualifying borrowers need to be much more careful. Things like this should not be happening. This past week was officially named by me “lender screw-up week.” I sure am glad those lenders that I work with are so on top of things, and hope to never work with either of these particular lenders again.
Wednesday, August 31st, 2016
A good real estate agent is golden when it comes to assuring that all your needs are met as a buyer – from searching for the right home to negotiating, to making sure all obligations are met as a buyer and that everything needed from the seller has been provided. It not just about getting to the close of escrow, but also about protecting your legal rights as a buyer and making sure there are no surprises once you do close escrow.
When it comes to the purchase of a new construction home many buyers end up using builder sales representatives, partly because they are there on site and make it easy, and partly because buyers do not know why this can actually be detrimental when it comes to their rights. Here are the top reasons why working with your own real estate agent can help you when purchasing new construction:
1. Dual agency dilemma: When you work with a builder representative, their first allegiance is to the builder. Once they represent you as well then dual agency comes into play. If you are a frequent blog reader you know how I feel about dual agency (click here to read more), and the dangers it brings. In the alternative, it is better if you have your own representation so that the allegiance is only to you – that person can look our for ONLY your best interests.
2. Extra set of eyes and problem solver: Once again, if you have your own representative Realtor to look over the new construction contract then s/he may point some things out to you that you might be able to alter to suit you better. For example, including items that do not come with the home, or extending deposit dates. A good real estate agent is there to assist you and make sure that you benefit. The builder does not care to whom it pays the commission – they just want to get the home sold. Even if you the builder uses its own contract (as opposed to state or local real estate association documents), your agent can still be with you while the documents are presented and help you decipher them.
3. No extra cost to you: Many buyers make the mistake of believing that if they work directly with a builder sales representative, they will save money on the purchase of their new home. This is not true – the builder takes into account the commissions when setting home prices. The builder wants to sell the home, and while it mayÂ (key word – “may”) pay out less commission to an on-site sales rep, most builders do cooperate with brokers and advertise such. A buyer is not going to gain anything by working with an on-site sales rep versus an outside agent. In fact, an outside agent who is a good negotiator may be able to help negotiate perks and price adjustments on your behalf. Either way the builder is going to pay a commission, so why not take advantage of independent representation – someone who has ONLY your interests in mind and not those of the builder. There is no cost to you as a buyer.
When looking at the possibility of purchasing a new construction home, make sure you are well represented. Your interests should be first and foremost.
Wednesday, April 13th, 2016
If you have been paying attention to what is going on in the political circus…I mean arena…you may or may not understand how different candidates feel about certain issues. While some have not made clear statements on many issues, and others have literally changed their minds and don’t appear to have opinions (or don’t care to share them with the American people), some have wondered where the candidates stand on housing.
It is a fact that many people in this country were affected by the crash of 2008-2010. Many lost homes, lost jobs, declared bankruptcy. Although the economy has come a long way since then, as has the housing market, there are many who still distrust putting their money into home ownership for fear of another collapse. The number of renters has skyrocketed since the crash (according to the Huffington Post there are 9 million more renters today than existed a mere decade ago), and renting in many areas (including most parts of California) costs more than home ownership – and rents continue to rise in most areas. But of those who would like to purchase, many cannot afford a downpayment.
So you may wonder what will happen to housing once a new President is elected, and whether the choice of candidate will make a difference. Let’s take a look at party philosophies first to get an idea of what might happen depending on whether a democrat or republican is elected.
Hillary Clinton is the only candidate who has authored a specific plan for housing and home ownership attainment. The plan aims to provide better support and credit for those who wish to own homes. Under a Clinton presidency rentals will be more affordable as well, benefitting lower and middle class Americans. The plan details job creation, apprenticeship and investment in American youth, as well as the creation of job programs for convicts re-entering the work force and investment in small businesses. Where will the money for all this come from? Do your research.Â Click here to read her plan in detail.
Bernie Sanders does not have a specific housing plan, but plans to raise taxes across the board – both for individuals and businesses. This would likely mean salaries will decline, as businesses will have to pass the tax increases along to employees. However, other things would be beneficial to Americans under a Sanders presidency, like free colleges and medicare. As for housing, it will of course be affected by lower wages and higher taxes, so one has to weigh the positives and negatives.
Ted Cruz has vocalized his across-the-board tax plan, which would put everyone in the same 10% tax bracket. Sounds good, especially if you pay a lot more, but he also wants to institute a flat tax on business payroll and profits. This could lead to salary cuts for workers, which would be detrimental to the real estate market (lower salaries mean no new home buyers and many owners that could need to sell to heed their new lower income levels). With the promise to end local and state tax deductions as well American homeowners could get hit hard, depending on where they live.
Donald Trump also has no specific housing plan, but has talked about substantial tax cuts and less tax deductions. The big tax cuts could cause interest rates to rise, which will likely affect mortgages – again, this could make homeownership less attainable.
John Kasich plans to cut the tax rate, but there is not much more about his proposal for housing or direct effects on housing due to his plans.
Housing plays a very important part in our lives as Americans, so make sure to do your research and decide whom has the best plan for your needs. Hopefully whomever is elected will keep housing on track so people to afford to become homeowners in the future and the housing market will continue to thrive.
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.Â 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.Â 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.Â 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.Â 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!
Sunday, June 8th, 2014
In my years as a real estate agent I have learned to value home inspections a great deal. I always advise my buyers to have them, and most listen. Some do not, and that is their prerogative, but I feel very strongly about the benefits of having a good home inspection. However, I must say there are a few caveats. Here is what I think is important when looking for an inspector:
1.Â Experience and background matter. Like real estate agents, there are many inspectors out there and they have varying levels of expertise and ways in which they actually inspect homes. My best advice is to trust your agent – I am very picky about inspectors and there are only less than a handful whom I recommend. These inspectors all go beyond the average home inspection, and most of them have credentials that blow the average guy away (like being a civil engineer and/or licensed contractor). Some inspectors use infared devices too, so that they can look for water intrusion or improper heat distribution issues behind the walls.
Always ask for credentials, years of experience, and testimonials. Ask how the inspector works, and what he does that makes his services stand out. If your agent is not familiar with the inspector I advise calling a few people who used his services and chatting with them. After all, you need to make sure you get what you pay for.
2.Â Not all reports are equal. It is important to find out how an inspector will draft his report. In my opinion you should expect a very detailed report with lots of photos and commentary. I always advise against the “check the box” reports, because honestly I feel they do not have enough information. I also like a summary section that quickly reviews the hazardous issues or those things that are in violation of building standards. It is nice to have an inspector who inspects the roof – granted they are not roofers, but they can tell you if you should call one out for further inspection.
My “proof is in the pudding” story comes from personal experience. My buyers got into escrow on a home that looked very nice, and they offered to pay top dollar to beat out another offer. Low and behold the home inspection turned up major construction defects – so many that it made a purchase very risky for my buyers. Although neither them nor I expected to hear a report like we did, it was a good thing we had an experienced inspector to show us the issues.
Home inspections allow the buyers to see what items need to be repaired or replaced, which allows them to either attempt to negotiate repair requests, ask for credits or price reductions, or walk away where they feel it is necessary.
I believe that a good home inspection offers peace of mind to buyers – don’t hesitate about spending the money and make sure to find a great inspector to help guide you through.
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, January 23rd, 2012
I read an astonishing statistic today: Zillow reported that about 47% of homebuyers think they own a home once they have signed the purchase contract. Not only did this shock me, but it really made me upset. Someone – the agent – is not communicating. This is way too important to not discuss with buyers, and we have to have that conversation with them, every time!
After reading the statistic and tweeting about it, one of my colleagues responded that his clients changed the locks on their soon-to-be new house, before the close of escrow.
I decided to have a look at our residential purchase contract to find language that specifically states WHEN the buyer owns the home for which the contract was written. I could not find any, but there are numerous mentions of escrow and what happens during that period. I suppose those who drafted these contracts either assumed the buyers would figure it out that escrow must actually close before they become home owners, or assumed their agents would explain this.
While I think maybe the contract drafters may want to consider including a layman’s paragraph about actual ownership and and what point that is established, it is also extremely important for the agents to be sure to educate their buyers. Whether or not my buyers want to read it, I briefly explain what is on each page as they are signing, and always suggest they read it.
The lesson to be learned here is that if you are a real estate agent, you need to be candid with your clients. Explain everything, even if you think your clients already know it, or think it is silly you should do so. Buyers: if you do not understand something please ask your agent – that is their job, they have a fiduciary relationship with you and keeping you informed is of utmost importance.
Friday, October 28th, 2011
Buying and selling anything in this economy can be a bit tricky, and that goes for real estate as well. Many buyers, who think they’ll be able to negotiate a phenomenal deal, are often discouraged when they actually get out there in the market and try to do so. Likewise, sellers who price their homes at market value may find it hard to hook an offer, oftentimes having to reduce their price well below comparable value to get it sold. Sellers who do not have to sell are opting not to, which makes for less inventory. Why is it so hard to buy and sell real estate right now?
1. Lender hurdles. Getting qualified for a loan these days is very difficult. Even those who have steady jobs, make sufficient money and have a nice savings on the books are facing troubles. The lenders, who I believe are the main cause for much of the stagnation in the market and the overwhelming number of foreclosures (see previous blogs if you want more detail on this), simply have a death grip on their funds. Anything that is seen as risky, any tiny little thing, gives them cause to deny a mortgage application. This applies both to traditional sales and distressed properties.
If you are a buyer you need to make sure you are working with a mortgage professional who has access to different products, and can help you to figure out which one is best for you.
2.Â Foreclosures/Lender owned properties. Foreclosures have been weakening the market for years, and there is no end in site. The lenders simply have too many properties on their books, the majority of which have not even been released to the open market. Once they are, prices will suffer. This tends to make sellers withhold selling their homes (the ones who can), in order to wait for a “better” time to do so. Buyers, who should be able to reap the benefits from the lower prices, still have to go through the loan qualification process. Many buyers are now also afraid because of recent lawsuits claiming bank-owners did not in fact possess title to the homes. If purchased at auction buyers usually do not have the opportunity to have home inspections or even get inside the property; if the property is sold as an REO (lender-owned, post-foreclosure) the buyer can view the property but is provided no disclosures related to it’s history.
3.Â Short Sales. Short sales should be a no-brainer, as I have blogged about many times. There are willing buyers out there who want to buy homes in neighborhoods they otherwise would not be able to afford, but for a short sale and the lower prices. Sellers of short sales obviously want to and need to sell to avoid the scarlet letter “F” on their credit. Similarly, banks save lots of money selling their properties short rather than going to foreclosure. Despite the end goal being common, short sales as we know can take a long time. The main reason for this is because of the banks, who dilly dally around and take forever to approve them, work off bad BPOs, and often have inexperienced and downright nasty people in their loss mitigation departments.
4.Â Title issues. Another problem plaguing the real estate industry is title issues, especially in homes that have been foreclosed upon. There have been several lawsuits against lenders who have been found to have wrongfully foreclosed on homes – after the home had been sold and new owners had moved in. These types of suits seem to be growing, and there is no telling what will happen to the new owners. If found that the banks did not have the authority to sell (because they did not physically possess title), the sale is rendered void. We will have to wait and see what effect this will have on purchasers, but surely it will may scare some buyers away from these lender-owned properties. For sellers, it is imperative to understand any title hurdles at the time your home is listed
5.Â Appraisal and BPO issues.Â It seems appraisal issues come into play these days more than in times past. This is especially true in areas where there have been a lot of foreclosures or short sales, which bring down comparables. If an appraiser has to look outside a neighborhood s/he may use comps from another neighborhood or complex that really does not compare to the subject home. If the appraiser is from out of the area s/he may not understand the particular nuances of a neighborhood, and that can also affect valuation.
Bad BPOs (Broker Price Opinions – these are ordered by the banks and are typically completed by certified real estate agents, not appraisers) also wreak havoc on short sales. Some properties are hard to appraise/establish value, if they are one of a kind or there are no valid comps in the vicinity, or where the condition of the comps do not compare to the home being appraised. California has hinted at drafting a law about how foreclosure and short sale homes can be used as comps for a traditional sale home. There are problems either way when a home is hard to appraise. Suffice it to say there is a lot of deal-killing going on because of bad appraisals and BPOs. [NOTE: This is not meant to be a degradation of appraisers – most are highly skilled professionals.]
Buying and selling property can be difficult in these troubled times, but the silver lining is that there ARE great deals out there for buyers, and it is possible for sellers to sell their homes as well. One simply needs to know how to best accomplish her/his goals. To do that, you need to start with a great agent.
Friday, July 22nd, 2011
Have you been considering buying a home, maybe for the first time, maybe to move up or down? Have you been waiting for the market to hit bottom, for prices to fall, for loan rates to get lower? Guess what? It is that time. Yes, I am a Realtor, and my telling you this may sound self-serving, but let me tell you why that is not the case:
1.Â Rates are still low. They will get higher – that is something I would be money on. There are a few reasons why. One is that they have been historically low for a long time and it is inevitable. Another reason is that there could be some big changes coming up in the loan industry (see below), which will make them rise.
2.Â Qualifying for a loan is not going to get any easier. Lenders are still reeling from the housing crash and make it difficult to qualify new borrowers (believe me, I have seen it happen to my own clients). If the new rules pass in September, come October 1 loan limits will decrease, meaning buyers will have to put MORE money down in order to qualify for a loan, and limits will be lower so that means less of a loan (buyers will have to buy smaller homes, or maybe even consider different areas/neighborhoods).
3.Â Down payment requirements could rise. If the loan limit rates decline the downpayment amounts will increase. Borrowers will have to pay more money up front to get a loan. This will make buying a home a pipe dream for many Americans.
4.Â There are still some great loan products out there. FHA loans require much lower downpayments and better interest rates. If the new limit restrictions pass they will have an effect on these loans.
5.Â Selling a home could get much more difficult. If the loan rates change it may effect sellers the most, especially in higher priced areas like San Diego county. Buyers who could qualify for a loan to buy a home may no longer be able to afford that much house, so sellers may have a hard time finding qualified buyers. Many homeowners may not be able to sell their homes, which could lead to more foreclosures. Property values will go down, but who will buy these properties? One theory is that the lenders will simply rent them out rather than try to sell.
6.Â It is a great time to negotiate! With the market slower than usual for the time of year, and the many well-priced homes out there that are available (especially short sale and lender owned properties), buyers are in the driver’s seat as far as negotiations are concerned. There are some stubborn sellers out there, but if you encounter that situation you can always find another property that is ripe for negotiation.
7.Â Learn from who is buying now. If you look closely, especially in the attached home market, you will see many investor buyers. As I have said before, this is a sign. It is a sign that now is the time to buy. I am personally working with multiple investor clients right now, and they are getting great deals on short sale and lender owned properties.
I get asked all the time what the market is like, how we are faring here in North San Diego. The market is doing much better than in some other areas of the country, but we are still struggling a bit. Prices have come down, and will likely continue to do so. If the new loan limit reductions pass it will create qualification problems for many buyers and for sellers as well. Right now you can still lock in a very low rate (today’s conforming rate on a 30 year fixed mortgage isÂ 4.5% with no points). There is a decent amount of inventory out there.
So, here is my pledge to you: I will do my best to help you find the right property, at the right price – if you don’t there is no pressure at all. Use me as a tool to help you, because that is what I am here for. I will provide all the information you need about any home we find. You don’t need to sign any agreement, I won’t make any demands on you. I offer you honesty and professionalism, and all you have to do is call me. I will be around all weekend. 760-310-9466