When negotiating a contract on a home, everything must be agreed on or you don’t have a fully executed contract. Well, actually almost everything. There is one clause in the contract that if one party initials and the other party does not, you still have a deal. This is the Arbitration Clause. If there is a dispute between buyer and seller, they have agreed, per the contract, to go to mediation. If mediation fails, then there is the option to go to arbitration. If both parties agreed to the arbitration clause in the contract, then you are required to go to arbitration if mediation fails. Arbitration is binding whereas mediation is not binding and is usually an effort to come to a mutually agreed upon compromise. I have heard different things about arbitration. It may or may not be more expensive than going to court. The key is if you don’t sign the arbitration clause, you can always decide to go to arbitration later if there is a dispute. But if you do sign this clause, then arbitration is mandatory in the event that there is a dispute and mediation fails. If you don’t sign, you leave your options open for later.
The upfront insurance premium charged on FHA-insured mortgages for home purchases will increase from 1 percent to 1.75 percent on April 9, and the annual FHA mortgage insurance premiums will rise by one-tenth of a percentage point.
Not only is it a good idea for buyers to check the permit history on a home before they buy, but sellers are wise to check the permit history on their homes before putting them on the market. This way, they can correct any permit issues before the listing goes public.
Some cities require building reports to be pulled on properties before they are sold. There is a cost to pull the report, but it should be under $100. Normally, the seller pays for it, but like everything else, it’s negotiable.
I just had a situation where the building report was delayed. When we finally got it, we were a week away from the close of escrow. The report indicated that there was a permit for use of the frontage of the property. Apparently, the city owned the first 20 feet from the street onto each lot. Each homeowner had to pay a permit for permission to use this footage. This permit was required to be transferred from one owner to the next at the cost of $700. Fortunately, the buyer and seller agreed to split the cost of the permit so they could close escrow.
2023 Voorhees Avenue went to public auction (a trust sale) this past Saturday. It’s a 3 bedroom, 1 bath on an approximately 4,500 sq. foot lot with a detached garage. A fixer to say the least, but it’s in a great neighborhood. 25-35 people showed up but only 4-5 parties placed bids on the property. Listed on the MLS at $549,000, but there were no takers at this price. Bids started in the $300,000s and ultimately sold just under $400,000.
All Inclusive Trust Deeds were big in the 80s and 90s. They are starting to see a resurgence today. Bbut there are some major downsides to AITDs that you should be aware of. Here’s a little background on it. In the 80s interest rates reached incredible highs up to 18%. It was so expensive to get a loan that many buyers and sellers found a way to work around the high interest rates. The buyer would take on the seller’s loan (which was at a much lower rate) and then they would get a second loan to cover the difference between the 1st mortgage and the sales price. The 2nd loan was wrapped around the first hence the term “wraparound mortage” or AITD. The title would transfer to the buyer, but the seller would remain on the first loan; the buyer would just make the payments. In the 90s, banks responded by including a “due on sale” clause in their loan documents. This clause stipulated that if there was a transfer of title, the bank would have the right to “call” the loan or in other words, require the borrower to pay the loan in full.
In the past several years, interest rates have been so low that there hasn’t been a need for buyers to do a wraparound mortgage. However, today we have more and more sellers who are underwater. They don’t want to short sale, but they don’t want to continue to make huge mortgage payments either when they have lost so much equity in the property. Voila, the return of the AITD. A buyer can come in and take over the current loan. Again, the title is transferred but the seller remains on the mortgage. It sounds like a win-win for everyone. But so many things can go wrong. The buyer may decide he doesn’t want to make any more payments. The seller then is on the hook for the mortgage and he doesn’t even own the house any more. Or the lender could do a random check (which they do) and notice that there is a change in title. The “due on sale” clause kicks in. The bank can decide to call the loan. The bank will come after the seller for the money, and ultimately the the bank can foreclose on the property. An AITD sounds like a great way for a seller to remove himself from a mess, but if anything goes wrong, and there are so many different scenarios not discussed here, that I would recommend to stay far away from AITDs. If you do consider one, please consult an attorney.
I am putting a house on the market after the holidays. It’s a single family in the Hill Section of Manhattan Beach. 4 beds. 2 baths built in 1960. It has 1,958 sq feet and is on a 40×144 lot. It’s priced at $1,350,000. This is an incredible opportunity it get into the Hill Section. It’s a mid-century modern house or a “post & beam”. It has great lines and offers a fabulous footprint to refurbish. To top if off it has spectacular city views. Please call me if you would like to see this property. I can set up an appointment even before it’s officially on the market.
I previewed a town home last week in North Redondo that I really liked. It’s in an 8 unit complex at 1917 Nelson Ave. It had a couple of nice features that made me slow down and pause in an otherwise fast paced, blurry afternoon of Brokers’ Opens. First, there was a window seat nestled between two large windows on the on the staircase landing between floors. It was such a lovely way to use the space. I could sit there and read for hours. Second, the master bedroom had a small alcove. The space was defined by the hardwood floors (the rest of the bedroom was carpeted) and again looked out to the greenery. The home turned small spaces into warm, inviting environments that make a house a home. (This listing is Brokered by RE/MAX Palos Verdes.) But I can still get you in to see it!
One of my other favorite activities in Hermosa is the firemen’s breakfast on Sunday morning. Go meet the local firemen as they make you pancakes, sausage, fruit and coffee to help raise money for multiple charities. Location: Hermosa Beach Fire Department at 540 Pier Avenue.
Come enjoy Fiesta Hermosa from May 28 – 30th from 10 am to 6 pm. Live music, food court, Wine & Beer Garden, tons of vendors & Kiddie Carnival! Parking is difficult to say the least so if you are a local, ride your bike. Hermosa offers free bike valet from 10 am – 6:30 pm. My favorites are the tri-tip, fresh lemonade and chocolate covered strawberries (if available).
I will be holding 1713 Wollacott in Redondo Beach open this Saturday from 2 – 5 pm. It’s a 2 bedroom, 1 bath beach cottage. Come by and check it out!