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  • Real Estate Advice: Negotiating Repairs

    Posted on August 29th, 2013 acimetta No comments

    So you have fallen in love with a home. You made an offer; the sellers accept it. And now you do your inspections. And you’re shocked by all the things that the home inspector points out that needs to be fixed, replaced, upgraded. All the safety issues; all the concerns.

    First I will tell you to take a deep breath. Every house is going to have its issues. Even the cleanest of homes is going to have some things to deal with. You will sit down with your Realtor and decide how to approach the situation. Here are some of your options:

    You can ask the seller to make repairs.
    You can ask the seller to credit you the cost of the repairs.
    You can ask the seller to reduce the purchase price.
    You can ask for any combination of the above.

    Second, you should know that the seller doesn’t have to do anything. And in the state of California, the seller doesn’t even have to respond to your request. More than likely they will, but keep in mind that they are not contractually obligated to do so.

    Third, be careful in what you ask for. I’ve seen many buyers list every single item on the inspection report. I understand that you want to get as many repairs taken care of as possible, but you may also turn off the seller so much that they don’t want to do anything. Many sellers get so infuriated that they no longer approach the Request for Repairs with an open mind. Or you may risk the seller agreeing to do the items on the list that are least important to you and ignoring the ones that are the deal breakers. It’s important for you and your agent be strategic in your request to get the most favorable outcome.

    Fourth, there’s a trade off with asking for repairs vs. asking for a credit. If you ask for repairs, the seller will take care of the work, but you may not have control over how the work is done. However, what appears to be a minor repair can sometimes turn into an expensive ordeal. The good news here is that the seller has agreed to do the repair and no matter what the cost, they must fulfill their obligation. On the other hand, if you ask for a credit, you are able to do the work yourself. There will be less risk in getting sub-par repairs. However, if you don’t get proper quotes up front and there are surprises along the way, you may not have collected enough of a credit to take care of the repairs. There is risk in both sides; you have to decide which option works best for you.

  • Termite work and your lender

    Posted on August 21st, 2013 acimetta No comments

    When you buy a home, your lender requires a copy of the purchase contract. They want to make sure that all the terms are met and their investment is protected. One of the sticking points is often the termite work. Once you include the Wood Destroying Pest Addendum in your contract, the lender requires that the work is done prior to close, and in some cases, prior to funding the loan. Without the termite clearance – proof that the property is clean – the lender will not approve your loan.

    Typically, in southern California, the seller agrees to pay Section 1 items and the Buyer will be responsible for Section 2 items. Section 1 items are those that must be fixed, i.e., dry rot, termite infestation, etc. Section 2 items are things that are not a problem now, but may lead to a problem later. These are preventative measures. The lender normally is not concerned with Section 2 items, however I have heard of some lenders requiring Section 2 items to be repaired as well. Consequently, I advise my buyers not to agree to Section 2 items so that the lender doesn’t require they be completed. This is as simple as not checking the Section 2 box on the WPA form.

    South Bay – Redondo Beach, Manhattan Beach, Hermosa Beach
    In the South Bay, we do come across some challenges from time to time. Due to the fact that we have many properties that have 2 or 3 attached town homes, but no active HOA, a problem arises when the seller of one of the units has termites and needs to tent for fumigation. In order to tent, they have to tent the whole structure which includes his attached neighbor(s). But what if the neighbor doesn’t agree to tenting? You are forced to do secondary local treatment to eradicate the termites, but the lender might not accept this alternative treatment and the loan, and ultimately the deal, could be in jeopardy.

    This can also be the case with two detached units that share the same gas line. Because you have to shut off the gas during fumigation, the neighboring unit must agree to this. It can make for a very sticky situation.

    If there is no way to convince the neighbor to cooperate with the fumigation, the other option is to remove the WPA from the contract. Once the WPA is not part of the contract, the lender will not require the work. However, as a buyer, you must be comfortable with he fact that the termite work will not be completed and you may need to tent in the future if and when your neighbor is cooperative. You may want to negotiate a credit from the seller for the cost of the fumigation in exchange for removing it from the contract in order to close the deal.

     

     

     

     

  • Chasing the Real Estate Market

    Posted on July 24th, 2013 acimetta No comments

    Typically when Realtors talk about “chasing the market”, we are referring to a seller who has priced his home to high. The property sits on the market for some time without offers, and then the seller decides to reduce the price. This new price may have been attractive when the house was first listed, but now the market has changed – prices have dropped further, and even though the property is sporting a new, lower price, it’s ultimately still overpriced. This can happen again and again… price reduction, wait, price reduction, wait… but with each price reduction the seller never seems to catch up with the changing market, and he ultimately chases the market down hill. This trend is what drives Realtors to recommend to their sellers to price the home right at the beginning. They may be asking for less than what they would like to get for their home, but it will be more money than what they will ultimately make if they start too high.

    But these days “chasing the market” can also be applied to buyers. There has been such high demand in so many markets with extremely low inventory that competition has spiraled out of control. Buyers lament that they went $20, 30, 40 thousand over the asking price and they still didn’t get the house. And after missing out on property after property, they learn their lesson. On the next listing, they come in like gangbusters, make the offer of the century, and blow everyone else out of the water. Ultimately, each home that is sold sets a new benchmark. And the next listing can start at the new level and go up from there. The sooner a buyer gets super aggressive the better, because she will secure her home and get out of the race while prices continue to go up. The buyers that continue to hem and haw and make conservative offers will chase the market up and possibly price themselves out of the market or pay a great deal more money than they would have had to pay just a few months prior.

    As a Realtor, I don’t enjoy having the conversation with my buyer clients that they need to make an offer over the asking price. I’m much happier when my clients feel like we did a good job negotiating and they got a good deal. But not all markets work that way. And when you find yourself in a market that has rising prices, the sooner you are aggressive, the better.

     

    Redondo Beach, CA 90278

    For instance in North Redondo, the price of a 4 bedroom, upgraded town home was selling in the mid to high $800,000s at the end of 2012 and into early 2013. They are currently selling for low to mid $900,000s, and in a couple of cases close to $1,000,000. It’s a big price swing in a short amount of time. If a buyer was aggressive back in January, he could have purchased 2109 Huntington Lane, #B for $829,000 or new construction at 1905 Plant Ave, # B for $859,000. (These are sold prices.) In the past 6 weeks, buyers have paid $998,000 for 1906 Morgan Lane, #B, $960,000 for 2208 Warfield Ave, #B, and $950,000 for 2118 Pullman Lane, #B.

    The key to buyers “chasing the market” is that at any time it can stop. Once buyers decide enough is enough and they feel prices are too high,  they will pull back and prices will come back down again. But until then, the competition is stiff and sellers are in the driver’s seat. And for once they are not the ones chasing the market.

     

     

     

  • Real Estate Advice: I’ve been waiting a week for my prequal letter. Normal?

    Posted on July 16th, 2013 acimetta No comments

    It sounds like you’re actually getting a preapproval letter and not a simple prequalification letter.

    Here’s the difference:

    Prequalification  Letter

    The prequal letter can be done relatively quickly – you could have this within the hour if the lender gets to it right away.  It’s a cursory look at your numbers without an underwriter looking at all your financials. It’s not as reliable as a preapproval. For example, I had a listing a few months ago in which a buyer submitted a prequal letter from Bank of America. I spoke to the lender and he confirmed that the buyer could get the loan. But it turned out that when she eventually handed in all her financial documentation she was, in fact, not qualified for the loan. The initial prequal process involved the lender simply asking her a few questions. He took her at her word and  provided her with the letter. The deal ended up falling through because she didn’t go through the preapproval process up front and she was poorly prequalified.

    Preapproval Letter

    In order to get a preapproval letter, you need to submit all your information which is then sent through the underwriting system. This can definitely take a week. However, the difference is that the preapproval letter is stating that you are pre-approved for the loan. This letter holds more weight with sellers so it’s more valuable to you.

    I would suggest that you call the lender and ask them explain to you exactly what their process is. Ask them to clarify if you will be getting a prequal or a preapproval. Ask them if your file is with an underwriter. If it’s with the underwriter, then try to hang in there a little longer.

    Side Note

    By the way, if you’re not happy with the customer service you’re getting from your lender or you don’t feel like your lender has built a good rapport with you, you don’t have any obligation to work with them. You can always use the preapproval letter, and still get a loan from a different lender. You are free to shop rates.   You should feel comfortable with the lender you are working with. Make sure they communicate well with you because this is crucial during a real estate transaction. Also, if you do decide to talk to another lender, I suggest you get a copy of your credit report from the first lender. They are supposed to send you a copy of it, but if for some reason you don’t receive it,  just ask and they will send it to you. You can then give a copy of this credit report to other lenders so that they don’t need to pull your credit again. The credit bureaus are not supposed to penalize you for pulling your credit multiple times within a 30 day period (I believe) when you’re shopping lenders, but if you can avoid it altogether, I would.

  • Testing the Strength of the Redondo Beach Market Part 2

    Posted on June 6th, 2013 acimetta No comments

    Redondo Beach Home Sales

    To follow up on my blog post on May 16th, the market is continuing to go crazy. All the listings that I earmarked 2 weeks ago: 2500 Ruhland, 2204 Plant, #A and 1933 Gates Ave, #B have all gone into escrow. 2500 Ruhland was on the market for a total of 7 days before it went into escrow. High tension wires not a deterrent; this home will sell for full price or over asking. 2204 Plant Ave, #A is in escrow after 24 days and 1933 Gates Ave, #B sold for $968,000 ($19,000 over asking). More and more 4 bedroom town homes in North Redondo are hitting the $900,000 and higher mark. We’re experiencing a quick and steep increase in prices. Hopefully, it will encourage more people to put their homes on the market in order to meet this pent up demand.

     

    New Listing in Redondo Beach

    1909 Morgan Lane, #A is another test of the market. This is a 4 bedroom detached town home (front unit) that came on the market today. It’s a clean 1992 build with some updates. It doesn’t have the beautiful detailing that some of the newer town homes have. And the bathrooms are not redone; they have the original tile counters. The sellers are asking $811,000. Are buyers so desperate that this second tier (in quality) town home will be bumped into the $800s? Or is there a limit to their madness?! We shall see.

     

    Home Buyers’ Frustrations

    What I can tell you is that many buyers are frustrated because they feel themselves being priced out of the market. I tell my clients who have missed out on a number of properties (and they have been aggressive in their offers) that they just need to stick with it. Everyone is feeling the pain; it’s not just them. It just takes time. The good news is that even though prices are going up, interest rates are still extremely low. And increase in price has less impact on your monthly payment, then an increase in price does. There is also the option to look for properties that may need some more work. You can buy something less expensive and then remodel it to your tastes. And these properties may have fewer people bidding on them since they are not turnkey.

     

  • Real Estate Advice: How do we get our offer accepted with VA financing?

    Posted on May 22nd, 2013 acimetta No comments

    I’ll be honest, it’s challenging in this market to compete with other buyers when you have VA or FHA financing. The reason being is there are so many buyers making offers on properties that sellers naturally gravitate to offers that are all cash or have heavy down payments, and those offers that remove certain contingencies such as appraisal or loan up front. There are two major issues that you are up against with a VA loan.First, the appraisal process can be sticky. If there are issues with the property, the appraiser will red flag these items which will need to be addressed prior to the close of escrow. In most cases, the seller knows that this responsibility will fall on them because someone who isn’t making a down payment, won’t be able to afford the cost of repairs either. Second, sellers equate (whether accurate or not) the size of the down payment to the strength of the buyer.It’s going to be crucial for you to work with an agent who can effectively educate the listing agent to why your offer is a strong offer. And there are things you can consider to make your offer stronger. For instance, you might not be making a down payment, but you can pay your own closing costs. Or if there are problems with the property, you may want to put in the offer that you will take care of these costs for repairs. You also may want to refrain from asking for a home warranty paid for by the seller. Doing things like this will help you structure a stronger offer.You may also want to make sure that you pick a lender with the shortest turnaround times. The time it takes to process a VA loan can be longer than conventional financing which is definitely a down side. With my VA clients, I also like to emphasize the patriotic angle of a VA offer. Veterans are being rewarded for their dedication to this country. They shouldn’t be penalized for not making a down payment. As long as the lender is giving the preapproval, there is no reason why the loan should not come through. I always want to encourage positive feelings with the seller if they decide to accept a VA offer.. it’s like they’re saying thank you for your service.It’s going to be challenging, but it’ s not impossible. You just have to be patient and keep trying.

  • How Low Are Mortgage Interest Rates?

    Posted on April 22nd, 2013 acimetta No comments

    I sat down with Ray Kay of Searchlight Financial today. He reminded me of how low rates are… and I don’t mean the average 3.5% rates. I’m talking about rates even closer to zero. This is how it works. You get an interest rate of 3.5% but you’re in a 40% combined federal and state tax bracket so you get the 40% tax deduction. This calculates out to: 3.5% X .6 = 2.1% after your deduction.
    Essentially you are paying 2.1% on the money you have borrowed!

    Here’s another important perspective that Ray points out: You buy a home for $500,000 with 20% down and that home is worth $750,000 in 10 years. (I think you will agree that this is pretty conservative.) What is your profit? Most people would say 50% because $750,000 – $500,000 = $250,000 which is 50% of the original $500,000 sales price. But this is wrong. You only put 20% of the $500,000 down so let’s see:

    Initial Capitial Investment = $100,000 (20% of $500,000)
    Value of Home After 10 Years = $750,000
    Increase in Equity = $250,000 ($750,000 – $500,000)
    Profit on Your Original $100,000 is $250,000 or 250%
    That’s not a bad investment!

  • Real Estate Advice: Am I Able to do an Inspection before I close?

    Posted on February 21st, 2013 acimetta No comments

    Yes, you should have the option to do inspections before you close. In California, buyers typically have 17 days from acceptance to do their inspections. If within those 17 days, the buyers decide that they don’t like what they find, then they can walk away. If the buyers do their inspections, then remove their contingencies, then they are committed to the property and the deposit becomes nonrefundable.

    It’s extremely important for you to get your inspections done as soon as possible especially if you want to do any further negotating with the seller on repairs, a credit or a price reduction. If your looking at a single family home, I would always recommend a home inspection and a mold inspection. The home inspection will give you a general understanding of the roof, foundation, plumbing, electrical, appliances, HVAC, fireplace, etc. The mold inspection focuses on water/mold issues. So many buyers don’t do a mold inspection, but it’s so important. Water is absolutely damaging to a home and so many times there can be leaks or mold problems that the homeowner is not even aware of. Needless to say, I have all my buyers do a mold inspection. And depending on the age of the home and the existence of large trees on the property, I also suggest a video sewer line inspection which will let you know if there are any obstructions (such as tree roots) or clogging issues. Replacing a sewer line can be expensive and it’s a good idea to know up front what you’re dealing with.

  • Real Estate Advice: how do we make our condo stand out to sell if there are others asking less $?

    Posted on February 14th, 2013 acimetta No comments

    If you think your home has been upgraded or has somthing special that separates you from the rest than asking more money will be okay, but these attributes need to be apparent to the buyers. And if it’s not apparent to you, then for sure it’s not going to be apparent to them. So let’s go over some of the possible features or selling points:
    1.You can talk about the amount of money you spent on upgrades.
    2. Point out any high end features such as granite, hardwood, travertine, updated windows, etc.
    3. Maybe you’re in a great location or a reputable school district.
    4. The floorplan can be a huge selling point.
    5. Do you get a lot of light in your condo? End units and top floor units tend to do better in sales.
    6. Can you put a washer & dryer in your unit?
    7. How may parking spaces do you have?
    8. The other thing to consider is the building. Does it have a lot of amenities? What type of condition is it in? This could add or take away from the value of your unit.

    If you have things listed above that your competition doesn’t have, then you may be able to get the higher price.

    And remember, you need to make sure your condo shows well. Keep it clean; keep it well lit. You could put together a sheet (handout) of all the features of your home that make it worth more money.

    If you haven’t already, you may want to check the recent sales for condos similar to yours. If they’re selling for less than what you’re asking, then you may want to reconsider your price.

  • Real Estate Advice: When I sell my house can I be responsible for code deficiencies that existed before I purchased?

    Posted on February 11th, 2013 acimetta No comments

    No, you will not necessarily be responsible for deficiencies in codes or permits. You should disclose everything you know about the problems or lack of permits. If you don’t tell the buyer, then you could be liable for fraud. If you do disclose, then it will be up to the buyers to decide if they are willing to purchase the property as is, and do any necessary repairs, etc. themselves.The buyer can always ask for you to do the work, but you can refuse. As long as the buyer is aware of the problem, then they are moving forward in the transaction with their eyes wide open.

    On the other hand, if your property is not selling due to the deficiences, then you may want to consider rectifying the problems yourself in order to sell it. And sometimes certain lenders will not give financing on a property that has permit/code problems. FHA is one of those lenders. So if buyers can’t get financing, then you need an all cash buyer or you may want to fix the problems or pull the permits in order to sell.