Posts Tagged ‘real estate’
Thursday, September 28th, 2017
If you own a home or are thinking about purchasing one, you need to be aware of how the new proposed tax reforms could effect you and the effect they may have on the real estate market. Here are some of the proposed changes:
Tax Increases/Doubling of the Standard Deduction. Taxes could increase for hundreds of thousands of California homeowners, and this will hit the middle class hard. It would also put homeownership out of reach for many buyers.
Recently the National Association of Realtors stated that increasing the standard deduction and erasing others would “effectively nullify the current tax benefits of owning a home” for the majority of people. This could reduce housing demand and home values.
Elimination of State and Local Tax Deductions. These deductions make home ownership more affordable. This could include property taxes, and if implemented homeowners could see a rise of up to $3000 annually, leading to plummeting home values. Potential buyers may not be able to afford property tax increases, pushing them into lower price ranges. Homeowner equity would suffer.
If these new tax laws are implemented it will be a big hit to the housing market, with home purchases slowing or even grinding to a halt; more importantly, we could face large foreclosures waves heading into the future, which of course could have big implications for the mortgage and banking industries.
Hopefully we will soon see some clarification regarding these proposed changes. Write your Congressional representatives and express your views on the new tax laws. Unless you exist in the 1% of the uber-wealthy you will not likely benefit from the expected changes.
Wednesday, 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.
Friday, 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.
Thursday, 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. Facts and details. 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. 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. 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. 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.
Friday, 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.
Monday, 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.
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, with 39 of these properties in escrow now. There are currently 48 active condos/townhomes listed on the market in Carlsbad that are priced under $600,000. 9 condos/townhomes sold in July with an average market time of 32 days. The average sold price was $428,533.
Detached Homes – There are currently 78 detached homes for sale in Carlsbad that are priced under $1 million. 57 homes went pending in July with an average market time of 22 days and an average list price of $842,000. Only 5 homes under $1 million sold in Carlsbad in July, with an average market time of 16 days and an average sales price of $802,000. Of the active listings, average market time so far is 37 days, with 19 of those properties having been on the market less than 10 days. Of course, this “detached homes” field includes all 4 zip codes in Carlsbad and multiple types of detached homes – varying with location, age and upgrades/amenities.
Homes located in certain neighborhoods seem to sell much faster. For example, the Mar Brisa neighborhood of Southwest Carlsbad (with the exception of one listing that has not sold for over 60 days and has dropped price several times) tends to sell very quickly, oftentimes in days or even before hitting the MLS. So location is a big factor, and many buyers are willing to pay over asking price to get into neighborhoods with little to no active listings.
As I always say, if you are in the market to purchase or sell residential or 2-4 unit income property, it is important to contact a skilled area agent who can provide you with a complete, detailed analysis of the specific area on which you are focused.
Crystal Ball Predictions – The question I am asked the most is “what will happen in the real estate market in the next year?” I usually chuckle and say that if I had a crystal ball I would be a very rich person! But I do believe that while prices will not shoot down drastically, that we are entering a “correction” period. I think we will see prices stabilize and the market very slowly start to revert to a buyer’s market. That means that prices will not likely rise much more, but of course there may be some highly desirable areas that do still see rises for a short time.
Many buyers are getting frustrated with the high prices and low inventory and are thus deciding to put property searches on hold, opting to rent until the market changes. While interest rates will likely rise that does not seem to be enough of an incentive for buyers to jump in when facing high prices and multiple offer situations. So in my opinion I believe we will see prices drop slightly, maybe more for properties that are not selling. Higher inventory levels would help keep demand filled and prices a bit more stable, so hopefully we will see that happen as we head into the later part of this year and the year to come.
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).
Wednesday, June 14th, 2017
We are in the middle of the busy home selling season and many people ask me how the market is faring. You will likely not be surprised to know that we are still low on inventory. Here are how the numbers look at this time.
There are currently 313 total active listings in Carlsbad as of today, 184 detached and 103 attached homes (this includes condos, townhomes, rowhomes, twinhomes and condos). There are 29 active mobile or modular homes (included in the detached category). As you can see from the graph above, which showcases the last 3 years of sales, there was more inventory in both categories at the same time last year.
Multiple offer situations continue to be a norm in many areas, especially those properties under one million dollars (and most specifically those under $700,000). Below is a graph showing total inventory for the last 5 years.
There are currently 170 detached homes and 77 attached properties with pending sales (properties that are currently in escrow). As we continue to head through the top time of year for buying and selling properties, it is clear that supply is not meeting demand. This will continue to drive up prices in many areas. Interest rates just rose slightly today so that will also spur some buyers to get out there and join the search party.
If you have any questions about inventory in a specific part of San Diego please feel free to contact me for a detailed analysis. Otherwise find a competent and professional agent in your desired area before deciding to buy or sell a home.