Thursday, March 28, 2013

Should I Remove The Contengencies In My Offer?

It is almost April of 2013 and the housing market out here in Los Angeles has become very competitive. There is a larger difference between the number of houses on the market and the number of buyer out there. Some of the areas I specialize in are getting large numbers of multiply offers on homes that are marketed well and buyers are needing to step it up if they really want a particular house. So what are some of the things that I'm seeing buyers are doing in hopes to get their offer accepted? Well, there is the almighty all-cash-king. This one seems to help the sellers accept an offer pretty frequently. But there aren't a lot of buyers out there that can buy a house with all cash, so what are the rest doing to gain a seller's interest? Well, quite frankly, some buyers are removing some or all of their contingencies on an offer to keep themselves in the running for owning a home. So what does removing contingencies really mean and is it something I should do in order to get a house? Well folks, this is a very slippery slope I'm about to discuss here.

First off, there are three major contingencies in a Purchase agreement, or an offer. There is the loan contingency, an appraisal contingency, and an inspection contingency. According to Merriam Webster's dictionary, the definition of contingent is-dependent on or conditioned by something else. 
These contingencies are put into the contract to protect the buyer from unknown obstacles that can occur during the purchase. Buyers are not 100% guaranteed that they will be able to get the loan they were pre approved for on any house. There are a lot of factors that determine whether or not a lender will actually give a loan. Therefore, there is a contingency for obtaining the loan. Same goes with an appraisal which is directly tied in to getting the loan. A lender needs to know that the value of the house is there before they give that amount of money out for a loan on a home. So, same thing again as before...that is why there is an appraisal contingency. And so on with the inspection contingency as well.

So, let me say it again...the contingencies are there to protect a buyer.  Just as a deposit is there to protect a seller. And guess what is at risk if you remove contingencies? guessed it. Your deposit.  But let's say that you've heard that if you remove a contingency that there are still time periods and other things in the contract that are there to protect you as a buyer. Well, yes and no. These decisions of removing contingencies should only be considered on a case by case, person by person situation. I would not feel comfortable as a Realtor just suggesting to anyone of my clients that they do this without fully explaining what it means and what the consequences could be.  And I surely would not throw this out blanketly as a strategic maneuver to get an offer accepted. Try to imagine like this: When purchasing a home you place your deposit in a box behind three brick walls. And lets say those walls represent those three contingencies.  If you start off your offer with one or more of those walls missing, that is the level of protection your deposit has left.  Now this way of going about writing an offer can work out very well for the right person, but please have this talk with your Realtor and get all the facts you can before moving forward with these options. And, just so you know, there are other ways of getting your offer accepted in this competitive market. After all, in the past month, I have had two offers accepted in a multiply bid situation and neither of them removed any contingencies and neither of them were the highest offer. I'm not going to give away my secrets here but if you are out looking to purchase a home right now, maybe you should give me a call!


Wednesday, March 27, 2013

Buying and Selling a Condo and The Hidden Challenges

No matter what you are thinking of buying or selling, there can be challenges. But condos hold different challenges than single family residents do. If you are looking to sell your condo, there are some key questions your Realtor should be asking you that are huge factors regarding a buyer being able to qualify for a loan to buy the condo. Here are a few things we need to know:
1. How many of the units are rented and not owner occupied?
2. How many owners are delinquent on their home owner's dues?
3. And if an investor owns more than one unit in this complex, how many do they own?

These things can create some challenges when it comes to selling your condo. And anyone looking to buy a condo needs to be working with a lender that is aware of these issues from the start so that you don't get yourself half way through the transaction just to find out that you can't get the loan. There are more things regarding the units we are going to be asking about but the ones listed above seem to be the ones that are most easily overlooked that can create problems. Please feel free to call me and ask about how to sell your condo and how to overcome some of these issues.

Here is a great site with some information on this subject that you may find very helpful

Tuesday, March 26, 2013

Bob's Big Boy is Hosting Tip-a-Cop

This is a great fundraiser held at Bob's Big Boy in Sun Valley. Money raised goes to support the Jeopardy Program for at-risk youth. It will be held on April 4, 2013 from 11AM-7PM. Come bring family and friends and support our community. It really is a great event!! Find out more info at this link   Tip-A-Cop

Monday, March 25, 2013

How Can I Tell What My Home Is Worth?

So you are selling your house and you want to know what the comps (comparable sales) are so that you can get an idea of what your home is worth? Or maybe you are looking to buy and a comp would help you better know about the price range of the house or houses in a certain neighborhood. Well, there are certain internet sites (that will not be named here) where people do their own research on comps...and they are very inaccurate sources. I personally, do not recommend my clients use these internet sites because for the most part, they get their information by using property tax records of recently sold homes near by. But let me tell you about the things that matter when looking for a comp and why these sites don't work in the real world. In most of Los Angeles most of the time, we will look for recently sold homes, typically these days ones that sold in the past 2 months. And then we will look within a mile radius of the house. Looking for a home that is similar in square footage, about 20% more and less than the subject home. But here are some factors to consider once you find these recent sales:
Upgrades and improvements: Has this house recently been remodeled? If so, what type of materials did they use? Maybe laminate floors or hard wood? Tile counters or stone? New double pane windows or a new roof?
Number of rooms: Sometimes this matters, and other times not. Here is when it may matter. If you have one house that is a 3 bedroom at 1,500 Sqft that is just fine. But what if the house you are looking at is 1,500sqft and has 5 bedrooms? Well, that might make some of the rooms about the size of closets and, for most people, unusable. This would leave someone needing to probably knock out a wall or two in order to make the bedrooms usable.
Lot Size: So you are thinking that you have a large lot on the house your are interested in huh? I mean 10,000 sgft is a good deal of land in LA. So you are looking at another similar house that also had a large lot too. BUT, here in LA, we also have hills. And the house you are looking at, while it may have 10,000 sqft, most of it is on a steep slope and completely unusable.
Location, Location, Location: All other things being equal about a house, if your home is on the corner of a busy street, it will not be comparable to another that is in a quiet cul-da-sac. Just as if your home is on a street with other nice homes, it will not be comparable to one that is next to apartment complexes. If you are looking at a house on the boarder of a city, you may not want to use the home sales from the other city, even if it is just a few blocks away. Some cities have higher rated school systems than others and that can make a home's value change.
Amenities: A home with a pool will have more value than one without. If you are looking at condos, a private attached garage will help the value over a condo that has a community parking area. Having a fenced in yard may increase your value over no fence at all.

So, when looking at what a comparable property is to one you may currently own or are looking to buy, I can assure you that the online sites will not be your best source of information for that. Ask your Realtor for a better idea since they have the experience and knowledge to inform you about this very thing.  And feel free to call me if you are curious about your home's current value and we can go over this together. 

Friday, March 22, 2013

Real Estate Lingo In Layman's Terms

Do you find yourself listening to someone about real estate and just nodding your head when certain terminology is used just so you don't feel silly about asking the real question on your mind: "What in the world is this person talking about?" below some of the most frequently used terms in real estate and what they mean.

Broker's Open- typically during the week real estate agents will hold an open house for other real estate agents to come see what is new on the market. This is a great time for us to be able to get into the houses and see what they look like in person and become familiar with the homes for sale in our area. As a buyer, don't be shy to walk into these if you see an Open House sign out front. After all, this is all ultimately for you.
Caravan- This falls under the "Broker's open" category. When we go out to see these houses that are open for brokers to see during the week, sometimes we simply say we are going on caravan.
Under Water- this is when someone owes more on the loan than the house is currently valued at. For example: John Doe owes $500,000 on his loan but his home has been appraised at the value of $450,000
Short Sale- If a home is "under water" or someone owes more money on that home than it is worth and the house needs to be sold, it would be called a "short sale". In this type of sale the lender may accept less than the amount owed on the property.
Over, At, or Under Asking: This is just a short way of referring to an offer put on a house. If the person selling the house is asking $500,000 and he received an offer of $510,000 it is said to be "over asking"

Vesting- You may here this when someone is asking you how you would like your title to be held. This refers to your name being put on the title and "how your title will be held"  which refers to things such as "a single woman", "an unmarried man", "joint tenancy" and other similar terms. This will be something your escrow officer will ask you but for tax purposes, you should ask a CPA how you should do this before you buy a home. 
Escrow- Here in California we use Escrow companies as a neutral party to help during the transaction of buying a selling property. Escrow companies hold funds (such as deposits) and handle all the paper work involved with a transaction. You may hear terms such as "In Escrow" which, simply put, means the time between when an offer is accepted and when the transaction is complete and the sale is made. (don't forget, not all states go about a real estate transaction the same way so if you don't live in Southern California, this may not be a familiar term to you.)
Dual Agency or Dual Representation- This is when both buyer and seller are represented by the same real estate agent. I wrote an entire blog on this subject. To find out more, read Dual Representation: Good or Bad? 
Held In Trust- This is something that everyone should find our more about! If you own property, and you pass away, there are a number of things that could happen to your property. One of the things that could happen is referred to as "probate".  Probate involves lawyers, courts and a lot of money and time.  To avoid probate, property owners will create a Living Trust and then transfer their property's title under the name of this Trust. I know this is the most simplistic explanation of a very large subject but, I hope, if it's not something you are familiar with, that it's something you research more.  
Free and Clear- when you hear someone say that a title of a home is "free and clear" this can mean that the person who owns the home does not owe any money for a loan on that home. It should also infer that there are no liens on the house but all of these matters should be looked into by a title company to truly know whether these things are correct.
Lien- Well, first off, if you have a mortgage or loan on your home, you have a lien on your home. A lien is a document used to secure a payment if you are in debt to someone. If you have a loan, then you are in debt to the bank where you got the loan. There are other types of liens though as well. Mechanic's Lien- if someone does work on a home and doesn't get paid in full, they can put a mechanic's lien on a home
Judgment- this can get complicated but, if it is decided in court that one person owes another money, someone can formally file a judgement against the person who owes the money.  This judgment can become a lien on the person's property that owes the money.
Tax Liens- if someone owes the government taxes, the government can put this type of lien on a home
Wet Signature- In this modern day of computers, we use online programs that allow our clients to sign documents over the Internet. Sometimes we need them signed with a pen instead and this is called a wet signature.
Contingencies- You will hear this term mostly used when referring to a Purchase agreement, or an offer. There are certain things in the sale of a home that must happen in order for the sale to go through. These things are known as contingencies. An example of one is: if John Doe is buying a home and using a loan to do this, he needs to be able to secure this loan. The sale of this home is said to be "contingent" upon John Doe getting this loan.
Equity- This can be looked at like a math equation. The value of a home minus the money owed on it equals equity. So if you have a $500,000 home and owe $300,000 on that home, then you have $200,000 in equity.
At-Value appraisal- This is a very misunderstood term and many people interpret this term at face-value (no pun intended...okay, just kidding, pun intended) If you hear that the appraisal of a home came in "At-value" this does not mean that it is valued at the exact dollar amount of the accepted offer. It simply means the value of the home is at or above the accepted offer amount. You may or may not hear the exact amount a home is valued at unless that amount is less than the accepted offer amount.
As-Is I actually wrote a whole blog on this term that you can read below.
But what the term is meant to imply is that the home is being sold in the condition that it is currently in. This term can go a lot deeper so for further explication, please read my other blog about this Sold As-Is

I hope this helps and if you are thinking about buying or selling your home and don't understand the lingo or terms that you may hear your agent say, please ask what they mean. An important part of our job is to help you understand as much as you need to know about the process of buying or selling. If you have questions regarding a loan or terms referring to loans, feel free to call Michael Razak. He is an excellent loan broker and can help you understand about that part of a transaction.

And if you can think of any other terms you hear that you may not be familiar with, I bet you are not alone and I would love to hear from you so that I can add them on here.


Wednesday, March 20, 2013

Tax Deductions With Home Ownership

I just saw this article and I thought I would add it on here. These things are very important to remember around tax season and they can really put more money back in your pocket if you remember to include them in with your taxes. Some of the most forgotten home related tax deductions are:
1. State sales taxes, including on major home improvements
2. Refinancing points -- including previous refi points when you re-refinance
3. Energy-saving home improvements
4. Charitable donations
5. Moving expenses to take your first job

                                               You can read the full article here 


Tuesday, March 19, 2013

Sold As-Is

Have you run across a house where the agent tells you that the house is sold as-is? Or maybe you are marketing your home and saying it is sold as-is? What does this mean as a buyer and what should everyone expect with an as-is home sale? Well, just to get right to the root of this, on the Residential Purchase Contract that we use here is southern California, there is a section called "Condition of Property" where is states the home will be sold in it's present physical "as-is" condition...So to have someone say they are selling their house "as-is" is really just reiterating what is already stated. But does that mean that we, as buyers, can not ask for anything to be fixed or monies for repair?

Here is the answer to both buyer's and seller's questions when it comes to "as-is" and asking for things after an inspector gives you a report: As a buyer, you may ask. The seller is not obligated to do any repairs or give credits or money. As a seller, you can advertise that your house is being sold "as-is". This does not mean a buyer can not make requests. Don't forget that any buyer who sees your home, is looking at is from a non-professional-inspector's point of view. They can only see things in your home that are noticeable and only make educated guesses about what those things may be. But when an inspector comes in and gives their professional report on a home, things may be discovered that a buyer would have no way of knowing about previously. And that can affect a buyer's opinion of whether or not this home is still a good purchase. Your best bet as a buyer and seller is to give a little wiggle room on both sides. If you think that, as a seller, you can put your foot down and say that you will not make any repairs, you risk the chance of loosing your current buyer, as well as others that come after. And as a buyer, if you think that the seller should absolutely make repairs or give you money, you risk loosing a home and having to find another. So my advice is, to both buyers and sellers, do not go into any transaction with a hard-fast stance on how you intend to go about a sale. Things change, discoveries are made, and people change their minds. So try to work with knowing these things and your home buying and selling process with go a lot smoother.

Wednesday, March 13, 2013

Remodeling: Cost VS Value in 2013

Are you thinking about making some changes to your home? Have you been wondering what changes will bring the most value to your home? Well I just found this great article and website that gives a lot of information on the cost vs value in today's market. When you look at the chart, under the type of project, you can click on that name, such as "kitchen" and it even breaks it down even further into different high or low yielding layouts and materials. Check it out!


Saturday, March 9, 2013

Southern California Home Price Surge

If you are interested in this article, it is because you have been aware of the recent surge in home prices. When comparing a home's value in some areas, you can no look back any further than one month for comparable sales because the market is changing so rapidly. Here is a great article from the LA Times with an interactive map that shows the median home price increase within any certain neighborhood. This is great! Check it out....

Wednesday, March 6, 2013

Open House Schedules in Spring & Summer 2013

While the days are shorter, we here in the valley typically hold our open houses from 1-4PM on Sundays. After the time change coming this week which will be on March 10, 2013, open houses will return to 2-5PM.  So come out a little later in day and see what we have for you to buy this Spring!

Permitted VS Non-Permitted Work

Have you ever wondered what the big deal is about getting a permit when doing work on your home? Or why sometimes you hear someone say the work is not permitted but it is up to code? What does this all mean and how does it affect you as a buyer or seller?
Well, first let me tackle the phrase "not permitted but up to code". This could be a big No No folks. This basically means that the people who did the work on your home, whether it be a new shower, new kitchen or a whole new room, are telling you that all the work they did, according to them, complies with the current code laws and restrictions. But you can never be sure of that until you have someone look over the work that was done and give you a permit for it. While the work that was done may be "up to code" if something happens to your home, like a fire, if you did not get a permit, it is possible you could be held liable on criminal charges.
But aren't there a ton of homes out there that have had work done on them without getting permits, and if so, why? Yes, a lot of people do work without getting permits. This is very common. Some people think if they are just re-doing a kitchen to make it more modern, that they don't want to pay the government money to do so. But there are risk factors involved with doing this. Like I said above, there is the chance that something could go terribly wrong in your home and if someone gets hurt because of un-permitted work, well, that is just scary. But also, lets say your local fix-it man moves your water heater somewhere else in your home and when he does, the size of the pipes he installs are not correct. In fact, they are only 1/4" too small. Well if that water heater breaks or leaks and causes damage to your home, the insurance company that you call to help you fix all this damage may deny helping you since the work was not permitted. Ouch!
And here is the big one that a lot of people run across. Someone expands their home to add on a new room and make the house bigger but they don't get permits to do so. For example, Mr. Smith had a 1,200sq ft house and added 400sq ft to make his home a total of 1,600sq ft.  Well years down the line, Mr Smith wants to sell his home and he lists it so that the price of the home is comparable to other homes near that same size. Then Mr. Buyer comes, makes an offer and starts the process with getting his loan for this home. Because this extra space is not permitted, appraisers can only base their appraisal of his home off other comparable home sales that are around 1,200sqft and not 1,600 sqft. And when an appraiser determines the value of Mr. Smith's home, he then has to tell Mr. Buyer's loan officer and if the value of the home is less than what they accepted the offer at, then the loan people won't give Mr. Buyer the full loan he asked for. So Mr Smith will either have to reduce the sale price of his home to be comparable to smaller house close to 1200 sq ft or they will have to look into other options that may not include getting a loan for this house.  There are also limits on how close to your property line you can actually build out to. Another bad scenario is that you build out and it's too close to the lot line and your neighbor's property. Well, your neighbor Bob has always had a nasty way about him and he doesn't like you. All Bob has to do is call the city and they can come make you tear it all down. Another Ouch!
So, yes permits can cost us money, but in the long run they could actually save us a lot more money and certainly a lot of headaches. 

Here are a couple of links to some local Building and Safety departments that can help you find out more about permits.