Posts Tagged ‘home sellers’
Monday, August 7th, 2017
Many of you know that I have written often of the perils of dual agency. Case in point: I received a phone call today from a woman whose sister is working with an agent to purchase property. The agent also represents the seller.
Apparently the buyer and seller executed a contract. The seller, four days later, realized a mistake was made and they should have asked for a higher price. The agent let the buyer know that they were to sign an addendum for the higher price. The buyer did not agree and was fearful that the seller could cancel the contract. Her initial deposit money is already in escrow and escrow is open.
I do not represent this person and have not seen the contract. I did not provide legal advice but rather told the caller what right a buyer has under basic contract law – unless of course there is a clause in the contract giving a party more rights or altering the general rules.
Here is the bottom line: as a buyer in a real estate transaction, where there is a fully executed contract and no party has breached, and where there have been no alterations of contractual obligations pertaining to rights to cancel or amend, as long as a buyer performs his or her duties under the contract on time the seller does not have a right to cancel the contract. Parties of course CAN mutually agree IN WRITING and signed by all, to alter material terms, but if a buyer does not agree to do so it does not generally give the seller the right to cancel if the buyer is not in breach of contract.
Once again this problem is a result of dual agency- how can an agent who has a fiduciary duty to the seller (who wants to change a material term), also fulfill a fiduciary duty to the buyer (who does not agree)? This is a big pitfall of dual agency and a big reason for real estate lawsuits. I advised the caller to contact the agent, contact escrow, and if necessary contact an attorney.
Thursday, August 3rd, 2017
It is usually typical for the real estate market to slow as summer winds down, but many people ask me if I think the market will continue on it’s current path – rising prices and lack of inventory. This subject is discussed on a daily basis in the media by real estate agents, economists and buyers and sellers. I read a lot of it – from those claiming that the market will continue on it’s path, others predicting a bubble, and all sorts or in-between predictions. So how is one to know where the market it really heading?
First of all, no two markets are the same. So while right now in Los Angeles there are still bidding wars going on in some neighborhoods, here in San Diego it really varies as to price, neighborhood and type of property. Investors are still out there trying to pick up good deals, especially in the attached market under $600,000 and with 2-4 unit properties. Many 2-4 unit properties that were sitting for a long time are suddenly entertaining multiple offers.
Attached homes – Townhomes and condos are still “hot” here in San Diego County, especially those in nice areas close to highways, beaches and shopping/dining/transportation. Those priced under $600,000 still seem to be going fast. For example, in Carlsbad (North Coastal San Diego), in the month of July the average market time for sold condos and townhomes was 32 days, withÂ 39 of these properties in escrow now. There are currently 48 active condos/townhomes listed on the market in Carlsbad that are priced under $600,000. 9 condos/townhomes sold in July with an average market time of 32 days. The average sold price was $428,533.
Detached Homes – There are currently 78 detached homes for sale in Carlsbad that are priced under $1 million. 57 homes went pending in July with an average market time of 22 days and an average list price of $842,000. Only 5 homes under $1 million sold in Carlsbad in July, with an average market time of 16 days and an average sales price of $802,000. Of the active listings, average market time so far is 37 days, with 19 of those properties having been on the market less than 10 days. Of course, this “detached homes” field includes all 4 zip codes in Carlsbad and multiple types of detached homes – varying with location, age and upgrades/amenities.
Homes located in certain neighborhoods seem to sell much faster. For example, the Mar Brisa neighborhood of Southwest Carlsbad (with the exception of one listing that has not sold for over 60 days and has dropped price several times) tends to sell very quickly, oftentimes in days or even before hitting the MLS. So location is a big factor, and many buyers are willing to pay over asking price to get into neighborhoods with little to no active listings.
As I always say, if you are in the market to purchase or sell residential or 2-4 unit income property, it is important to contact a skilled area agent who can provide you with a complete, detailed analysis of the specific area on which you are focused.
Crystal Ball Predictions – The question I am asked the most is “what will happen in the real estate market in the next year?” I usually chuckle and say that if I had a crystal ball I would be a very rich person! But I do believe that while prices will not shoot down drastically, that we are entering a “correction” period. I think we will see prices stabilize and the market very slowly start to revert to a buyer’s market. That means that prices will not likely rise much more, but of course there may be some highly desirable areas that do still see rises for a short time.
Many buyers are getting frustrated with the high prices and low inventory and are thus deciding to put property searches on hold, opting to rent until the market changes. While interest rates will likely rise that does not seem to be enough of an incentive for buyers to jump in when facing high prices and multiple offer situations. So in my opinion I believe we will see prices drop slightly, maybe more for properties that are not selling. Higher inventory levels would help keep demand filled and prices a bit more stable, so hopefully we will see that happen as we head into the later part of this year and the year to come.
Wednesday, June 28th, 2017
As those who watch the real estate market know, here in Southern California it has been a bit crazy over the last year or so. Despite some reports to the contrary it has been a seller’s market, especially here in San Diego County. That means that prices have risen and it has basically been a great time to be a seller. Low inventory and high demand give sellers an advantage.
BUT, there are some signs that the market may be changing. Let’s have a look at how:
1. Buyers getting priced out of the market. Many buyers cannot afford to live in areas in which they were able to afford a short time ago – in some markets just a year or less! With the choice of moving to completely different areas some are deciding to rent in their preferred areas instead, hoping that prices will drop down the road.
2. Interest rates rising. The interest rates have risen a few times and then dropped. The Feds are trying to sustain the market by making home sales more desirable, but buyers still have to deal with the higher prices and, in many cases, multiple offer situations that raise them even higher.
3. Buyers getting frustrated and putting searches on hold (many opting to rent instead). Many buyers are tiring of the raise in prices. I just showed a condo to buyers (second home purchase) that is priced over $100,000 higher than the model match that sold in January – this is crazy!! I have had several buyers tell me they are just going to wait it out, as they do not want to pay “ridiculous” prices for homes.
4. Home sales are slowing down. May was the third straight month for declines in home sales. Sales listings dropped 8.4% over the last 12 months, due to higher prices and fewer options for buyers.
5. Summer selling season won’t last long. The “hot” selling season that is summer won’t last forever, and many buyers with families want to get into a new home before schools start up again in late August/early September. Those who cannot find homes will be forced to rent, which could take them out of the market for likely a full year, possibly longer. Also, many out of area buyers – a larger percentage here in San Diego which come from tourists – may not be able to find anything to purchase due to low inventory, which means they will be going back home empty-handed. Many of these buyers typically become second home or investment buyers and tend to focus on condos and lower priced homes.
It is evident that the market is causing issues among buyers, and the solution is to inundate the market with more listings. But until the sellers feel they can find replacement property many are electing to stay in their homes, creating a vicious cycle that had no clear end. Ironically, this is typically the best time to sell, so those who want to take advantage of the great seller’s market will need to take a risk and have a Plan B (such as renting in the interim).
Tuesday, May 30th, 2017
People are always asking me how they can save money on home purchases and sales, and legislation under California Propositions 60 and 90 is one of the best ways to do just that. BUT, you have to meet certain qualifications.
Proposition 60 and 90 help home sellers transfer their current residential tax base to the purchase of a new home, saving potentially thousands of dollars in taxes. Proposition 60 is for intra-county transfers (between the counties of San Diego, Orange Los Angeles, Riverside, Alameda, El Dorado, San Bernardino, Santa Clara, San Mateo, Tuolumne and Ventura. Proposition 90 allows for the same advantage with inter-county transfers.
This all sounds great, right? Here is the fine print…in order to qualify:
1. The home owner (only one of them) must be at least 55 years of age. Co-owners cannot both qualify.
2. The home being sold must be a principal residence
3. The present home must be sold and the new home must be equal or lesser market value to the original property
4. If the property is held in a trust the seller will need to be the beneficial owner of the trust, not merely the trustee
5. The replacement property must be purchased or built within 2 years (before or after) of the sale of the current property.
6. “Your original property must have been eligible for the homeowners’ or disabled veterans’ exemption either at the time it was sold or within two years of the purchase or construction of the replacement property.”
As an example let’s say you purchased your home many years ago for $400,000 and it’s current market value is $800,000. If you sell this home and purchase a home that is $800,000 or less, should you qualify under Proposition 60 or 90 you will be able to take your current tax basis (tax on the $400,000 home plus the increases that have accrued over the years) to a replacement home that is purchased for $800,000 or less. This is a huge savings because most counties tax about 1-1.25% on real estate purchases.
For more details on eligibility requirements to take advantage of Prop 60 or 90, click here.
Monday, May 22nd, 2017
Today Zillow announced that it has test-launched a new program called Instant Offers, which it claims will help home sellers and agents. But upon close inspection this program is full of legal caveats for home sellers and agents alike.
The new program claims to offer options to home sellers so that they can avoid traditional marketing such as open houses and photographs. Here is how it works, according to what I read: a seller decides to use the program, which offers 3 options –
1. Sell directly to investor buyers: Without placing the home on the MLS it is offered to investors for purchase – almost like a For Sale by Owner listing. The investors can make an offer. At that point the homeowner can decide whether to take the offer or list on the MLS with an agent the traditional way (Zillow will recommend the agent). Zillow will benefit financially from the agent referral as more agents will want to advertise with Zillow). It is not clear how Zillow will benefit financially when sellers do not want to work with agents, but maybe there will be some kind of agreement between it and the investors.
2. Sell to investor buyers and use an agent recommended by Zillow to assist with the sale: If the homeowner wants to list their home Zillow will recommend one of it’s “Premier Agents.” These are agents who pay Zillow for advertising. Zillow wins here (like above) because 70% of its revenue comes from these agents who advertise.
3. Reject offers and list on the MLS with an agent: Zillow will of course recommend one of it’s Premier Agents (note that Zillow is NOT a broker, rather these agents achieve this status by paying Zillow money to advertise their names and services).
Ok…so you may think this is good – it gives home sellers options. But here are the other points to consider for all home sellers:
1. Potential lower sales price – investor buyers typically do not pay high prices – they offer a quick sale but the catch is that they want to save money. For those who have to sell quickly this could be a good thing, but for those who want to realize top dollar this is not the answer. If you have a home that is a true fixer upper an investor buyer is great as well, but there may be competing investor buyers out there on the open market and you could end up getting more if you have multiple offers, so choosing the Zillow program really puts your back against the proverbial wall.
2. High Fees – People always complain about high fees for selling homes. This program appears to charge a 9% service fee to those who choose to sell to one of the Zillow partner investors.Â Rather than pay such a high fee for a likely lower net sales price, it’s better to interview professional skilled area agents. Standard commission rates in CA are around 5% but commissions are negotiable.
3. THE LEGALITIES – Selling a home is a legal transaction, with contracts, paperwork and deadlines that are imperative to get right in order to prevent a lawsuit down the road. Although Zillow says it will recommend the seller work with an agent to get through the paperwork process with the new program, sellers have the option to forgo this. This is problematic, to put it mildly.
If I can give you one piece of advice only when it comes to selling your home, it would be this: have a lawyer review all your paperwork, including seller disclosures. If you do not want to hire a lawyer, make sure your agent has a good broker and have that broker review all your paperwork (or better yet, find an agent/Broker who IS an attorney). There are also many highly skilled agents who know what they are doing – find one.
4. Errors and Omissions insurance and lawsuits – Every broker (at least here in CA) must carry errors and omissions (E&O for short) insurance. It protects them in the event of a lawsuit brought by a party to a real estate transaction. Here’s the biggest problem with Zillow’s new program – Zillow is NOT a broker. If a home seller opts into the program and elects not to work with an agent, who is going to assume liability for contractual paperwork? What happens if disclosures are not filled out correctly, or if there is a problem with the home that is discovered after closing? The seller is put in a very bad position.
Agents could be hurt by this new program if they do not advertise with Zillow, as they will not be recommended by the company program. This is a lose-lose for hard-working professional agents everywhere who do not choose to pay money to Zillow, as home sellers in their areas may not even come across those skilled agents if they opt for the Zillow recommended agent.
These and many other questions do not have clear answers and as an attorney I say this program is fraught with potential problems for home sellers. So while Zillow may think the Instant Offer program is a great new “thing,” in my opinion, or until I see otherwise, sellers should steer clear. This program is in a test phase right now and is only available in Las Vegas NV and Orlando, FL.
For more information on the legalities of selling your home please contact a skilled attorney or broker in your area, or feel free to contact me with any questions by responding to this post.
Tuesday, May 16th, 2017
Appraisals are causing problems again for buyers and sellers for the first time in many years. Many appraisals are not coming in at value, despite comparables that support contract prices, leading to problems between buyers and sellers.
Prices have come up quite a bit in many areas in the last few years, San Diego County included. That means that when an agent goes to list a home there are usually comparables to support a higher price. But I keep hearing stories about homes that are not appraising, and it just happened to my buyers as well (even though the offer we wrote and had accepted had comps that supported our price).
So what is a buyer or seller to do if the appraisal does not come in at value?
1. Renegotiate. The first thing to do is to try and renegotiate the contract price. I had a home that appraised $8,000 under contract price (which was completely ridiculous given a smaller home had sold for more just months before). We tried to get the seller to drop the price to the appraised value, or at least meet us in the middle but he would not. He had received multiple offers and there were buyers waiting in the wings who would still move forward with the higher price.
2. Buyer contributes the cash difference. This means that the sales price will remain the same, and the buyer will have to put the difference between it and the appraised value on the table (come up with more money) in order to close. The bank will only lend on the appraised value, but this option allows the buyer to move forward and purchase the home.
3. Challenge the appraisal. This can be done only when there is information that the appraiser did not take into consideration that could alter the evaluation, such as comparable homes that were not reviewed, or maybe a comparable sale that closed immediately after the appraisal was issued which had a higher price, or a sale that closed which was not on the MLS. Or, there may be upgrades to the home of which the appraiser was not made aware. But a challenge needs validation, so the fact that parties do not agree with the appraisal is not a reason for a challenge.
4. Cancel the contract. This is the buyer’s right when an appraisal does not come in at contract value. However, it is important to take into consideration the status of the market – if inventory is low and there is a lot of competition it may be smart to stick with the sale, since getting another contract accepted could be difficult and the buyer could wind up paying even more money for the next opportunity.
In my buyers’ situation they decided to stick with the contract price (after the seller would not negotiate) and pay the cash difference. Since it was only an $8,000 difference this was the smart choice, as they ended up with a beautiful home that likely would have sold for even higher than their contract price had they canceled.
It is important to discuss options with your real estate agent and tax adviser or financial planner if needed. Every situation is different and buyers have to feel comfortable in their decision. But it is tough out there in certain price ranges for buyers right now, and inventory is low, so oftentimes it makes sense to stay the course.
Thursday, April 13th, 2017
If you are a listing agent or a seller who has hired an agent to sell your home, this is an important rule that is often ignored by agents – and it can cost home sellers a sale. It is not written down anywhere and is not required, but it is necessary in order to assure smooth closings. What is this rule? Listing agents must prepare reports for appraisers.
As long as I have been listing properties I have been preparing reports for appraisers. The appraiser, who is sent out by the buyer’s lender to evaluate a property that is in escrow, may not know the neighborhood well or even be from the immediate area. He or she also may not understand why a similar home sold for more or for less. Since the buyer’s agent is not allowed to communicate with the appraiser it is in the best interest of both parties that the listing agent take this advice to heart and come prepared.
I have had many appraisers tell me that they did not need me to meet them at the property or prepare anything, but I still do both and I have to say that almost all of them end up spending at least a few moments at the end going through my report with me.
Here is what I include in my appraiser reports:
1. A brief but concise analysis of all comparable sold properties – usually within the last 6 months, comparing and contrasting them to the subject property. I also let the appraiser know if there were multiple offers, as this can attest to the fact that many thought the property value was accurate.
2. A list of any upgrades or improvements in the subject property
3. Analysis of any pending sales, including prices I can usually obtain from the listing agents to help
4. A comparative market analysis sheet that lists all the comps and the pending subject property
5. All relevant listing sheets (for each property analyzed)
6. Any relevant sales statistics graphs for the area, and
7. A listing flyer
I have never had a listing that did not appraise.
Every listing agent should be sure to include this report as one of their duties. It is the duty of a listing agent to represent their sellers to the best of their abilities, and this simple step – which usually takes about an hour (more for tricky comparable listings) could make a difference in getting the buyer and seller to closing.
Sunday, February 19th, 2017
The real estate market in Carlsbad is strong but there is still a shortage of inventory. Although Zillow reports that market is currently a buyers’ market, I do not agree (at least not in certain price ranges), as we are still seeing multiple offers in some ranges. Higher priced homes seem to be accruing slightly longer market times than “starter” homes (condos and townhomes from about $650,000 and under).
The median attached home list price in Carlsbad is currently just over $549,000. Home sellers are in a great position at this time, as the market still favors a strong seller advantage, with no change in average asking price per square foot (average of $379).Â Average market time was 76 days and 22% of properties had a price decrease last week. From my position in the trenches with buyers I am finding though that many properties under $650,000 are literally going into contract in a matter of days, often with multiple offers.
Single Family Homes:
The median list price for single family homes is currently $1,049,900, and the 199 homes in Carlsbad (as of last week) have been on the market an average of 90 days. Pricier homes (those over about $1 million) seem to take longer to sell than those under $800,000 – one Carlsbad neighborhood that typically sells in the high $700,000-low $800,000 range can’t keep inventory on the market more than a week, and homes are selling over asking price with multiple offers in days. Although inventory and market action has been trending downward, inventory is sufficiently low to keep the market labeled a seller’s market.
Sale values have risen in some Carlsbad markets 7.5% over the last year and are predicted to rise 2.7% in the next year, according to a study by Zillow, making it a great time to be a seller.
Tuesday, January 31st, 2017
The new housing report was released yesterday by Case-Shiller, indicating that U.S. home prices are still rising. Of course this is really area dependent, but if you are a potential buyer or seller you might feel worried, and justifiably so. Keep reading for important information and advice.
The report covers major metropolitan cities and states that prices in these areas rose by 5.27% in November – above expectations of economists, and also up from the previous month of 5.1%. What does this mean for buyers and sellers? Let’s take a look at some important considerations.
Local markets: Of course these studies are general and tend to focus on big cities, so it is important that you contact an experienced real estate agent in your local market to see what is going on in the area. But, the thing to take away from this data is that prices are not easing up. Combine that with the next factor…
Inventory is still very low: Again, your local market must be studied to get an accurate glimpse and set expectations (your real estate agent can help with this), but using my local North San Diego market as an example I know that this is painfully true. I have buyers who simply cannot find homes, and multiple offer situations in some categories – like properties under $600,000 – are still the norm. With low inventory and prices staying put or rising, a buyer does not benefit from waiting to purchase, especially considering the next factor…
Springtime is coming: Traditionally the “hot” season for housing, spring and summer are just around the corner. But in my view we are already in the heat of things. Hopefully more inventory will pop up as we head into that “busy” season, but honestly I think the entire last year and especially this Fall and Winter, can be considered busy in housing – at least here in San Diego. Waiting until Spring could put buyers in even more of a quandry, bringing anÂ increase in the buyer pool: more competition can drive prices up again.
The National Home Price Index also rose by 5.6% annually – up from 5.5% the previous month. High demand is causing these prices to continue on an upward trend. It is important to note, as some doubters or “bubble-talkers” as I call them, may believe, that these trends are NOT similar to those that occurred prior to the last housing crisis in the early 2000s.
How is this market different than that prior to the last crash?
1. Factors driving prices are not the same. Prior to the crash people were driven by speculation and anticipation of growth. Instead, healthy market factors like a strong job market and low mortgage rates are driving this market.
2. Lending is stricter. Lending requirements are not as loose as they were during the time prior to the last housing crash, so not everyone can qualify for a loan.
3. Demand is high but supply is not. Prior to the last market crash, there is a much lower supply of inventory in most areas. It is not so easy to find property to purchase. Many would-be sellers are afraid to sell, as they don’t know where they will move if there is such low supply and so much demand – so it’s a great time to be a seller if you have the time to wait it out on a subsequent purchase.
The moral of all this information is that if you are a potential seller you are in a great position. But if you have to buy after selling you need to have a “plan B” in place – e.g. stay in a furnished month to month apartment or temporarily move in with a relative or friend will put these people in ideal situations to sell and wait for the right home. But buyers have it a bit tougher – the best advice I can give is to BE PREPARED. Get preapproved, start looking at everything in your price range and desired area – even those homes that may not be as upgraded as you like or in the exact neighborhood you wanted. Do your homework and be ready to pounce once you find that “right” home.
Monday, January 2nd, 2017
San Diego is definitely a desirable place to live, and as one of the most visited places in the United States it’s no wonder why – we have the best weather, beautifulÂ beaches, great food and nightlife, culture, incredible places to walk and hike, and so much more. There is nowhere else I’d rather live!
As we head into the new year here are some of the happening stories highlighting San Diego and the local real estate market.
San Diego Ranked 5th “Hottest” Real Estate Market in U.S. – Realtor.com ranked San Diego as the 5th “hottest” real estate market in the country. This is great news for the local market. The story pointed out that demand has especially grown since the election, likely due to increasing mortgage interest rates, and that the low supply levels heading into the new year will keep prices high – great news for sellers. Median sales time is 53 days in San Diego county, compared to 88 days nationwide.
San Diego Remains Top Destination for Foreign Buyers – We still rank as one of the top places for foreign buyers, especially those from China and Canada. San Diego is up there with Los Angeles, Orange County and San Francisco as the top places to purchase property in California. Speculation that this trend will continue in 2017 as many feel the US economy and the dollar will strengthen.
San Diego Home Sales Could be Protected by State Supreme Court Ruling – I have blogged about “dual agency” many times, and my position has always been that real estate agents should not be able to represent both the buyer and seller in a real estate transaction. The reason for this is that I feel it is virtually impossible to exercise a fiduciary duty to both parties – it can create too many conflicts of interest. The California Supreme Court seems to be coming closer to agreeing with this sentiment.
In November the court ruled that “a listing broker has a fiduciary responsibility to the buyer and the seller when his brokerage firm is representing both, setting a significant precedent for obtaining and sharing information in residential and commercial transactions.” While there are currently disclosures required which allow such situations, this ruling could be paving the way to no longer discontinuing them in the future…stay tuned for more.
If you need any information about property in the San Diego county area please feel free to contact me. Happy New Year!