Posted on January 28th, 2015 No comments
In southern California where the majority of Realtors use CAR’s residential purchase agreement to make an offer, there have been a number of changes to the contract for 2015. (CAR = California Association of Realtors).
One of the biggest changes – which could potentially restructure how buyers and sellers negotiate – is the removal of the WPA form. WPA stands for Wood Destroying Pest Inspection. It’s basically the form buyers includes with their offer that stipulates that sellers will pay for a termite report as well as any Section 1 items identified on that report. Section 1 items must be fixed prior to the close of escrow (lender requirements) and usually include termite infestation and dry rot among other things. These two are usually the big ticket items. And although these points are negotiable (as is everything in the contract), it was standard practice for sellers to pay for Section 1 items. This was handled up front with the offer. Sellers accepted the fact that this was a standard expense to selling a home. Then when buyers come back with a Request for Repairs, all repairs would be over and above the termite work.
But in 2015, the WPA has been eliminated. Potentially, buyers can still request termite work up front in the offer. And this will probably happen for some time to come. Eventually, however, the process will evolve and termite work will become part of the negotiations for repairs.
The biggest impact from this change is that sellers won’t automatically feel it’s their responsibility to do the termite work, i.e. tent their home for infestation, replace rotted wood with fresh wood. And sellers can simply say they won’t do the work. Of course, they will be more apt to do the work in a buyers’ market and probably less willing in a sellers’ market. These can be expensive repairs and buyers may have to get used to incurring this expense as time goes on.
Posted on January 20th, 2015 No comments
It’s the homes that are all dolled up that sell for the most money. I see it time and again. In this market, buyers are flocking to the properties that are plug and play, meaning they don’t need to do any work. There’s an emotional tug that comes with new floors, custom paint, crown moldings, tastefully remodeled bedrooms and baths. Note to seller: if you’re looking for a higher price, you may want to consider some smart upgrades. For many of my listings, I’ve encouraged my clients to do some minor remodeling. If for every dollar they put in, they can get back $3-4, then it’s worth the effort. It may even be worth it if you can double your investment.Case in point, 1918 Farrell Avenue in Redondo Beach came on the market this week. It immediately got a tremendous amount of traffic. This home was purchased at the end of 2012 (just before the crazy growth) for $661,000. The new owners remodeled the home and re-listed it now (3 years later) for $925,000. And it will probably sell for more. For one, there is still very little inventory out there. Two, this house looks all shiny and new. It’s a quality remodel, the owners definitely improved on the house… and they didn’t have to change the footprint at all. Buyers walked through this home and got a warm and fuzzy feeling. By the end of the weekend, there were multiple offers and although the offer prices were not made public knowledge, I can safely assume that they are at least at the asking price, if not higher.
Note to Buyers, if you want a deal, if you have to buy the ugly house. Or maybe I should say, the ugly duckling. Because with some work, it can be just as pretty, but you probably didn’t have to pay as much money. Now, in crazy seller’s markets, you usually have to pay a premium on everything, but we’ve slowed down a little now in the Southern California. There are homes in Hermosa, Redondo and Manhattan Beach that are staying on the market longer. There could be deals to be had, but you have to be willing to pick up a hammer or pay someone to do it for you.
Posted on January 28th, 2014 No comments
Posted on August 21st, 2013 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.
Posted on March 5th, 2013 No comments
Prices continue to go up in Redondo Beach. Case in point, 1625 Morgan Lane came on the market last week (brokered by KW). This is a 3 bedroom Tall & Skinny in the Golden Hills, close to Jefferson Elementary. It has been nicely remodeled. The kitchen has been redone, There are hardwood floors downstaris. And unlike most Tall & Skinnys, all the bedrooms are upstairs which is a huge selling point. The bathrooms were not remodeled, but are very clean. The biggest down side, in my opinion is that the living space (on the first floor) does not get much light. Anyway, it was priced at $759,000. In a few days, the seller had amassed 16 offers, going well over asking. I can reveal the final price once the property closes. This home is ultimately going to sell for more than it may even appraise at. However, the winning bidder may have removed the appraisal contingecny, eliminating this issue altogether.
A few more examples are:
1641 Ford Ave: Listed at $699,000. Sold at $720,000
1517 Stanford Ave: Listed at $739,000. Sold at $769,000. This was my listing. I had 4 offers and the winning bidder was all cash, no appraisal contingency.
1503 Stanford Ave: Listed at $759,000. Sold at $7990,000
1610 Van Horne Lane: Listed at $825,000. Sold at $840,000.
Buyers are being aggressive. If inventory continues to remain low, this marke could continue to rise. The question is are we creating another bubble?
Posted on February 14th, 2013 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 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.
Posted on June 11th, 2012 No comments
When buying a home, the buyer normallly chooses their own lender. When you buy a home, you should shop lenders and compare their rates. You will decide which lender to go with.
If the buyer is purchasing a REO (a property owned by the bank), the bank can not dictate which lender the buyer uses. However, the bank can require buyers to prequalify with a particular lender. Ultimately, the buyer can use whoever they want to finance their loan, but they will need to get an additional prequal letter from that lender in order to submit an offer.
A non-REO seller (anyone other than a bank), as part of their negotiations, can require a buyer to use a particular lender if they want to buy the property. This is absolutely legal. A seller may choose to do this because they trust a particular lender and they will feel more comfortable that the deal will go through. If the seller does not make this requirement, then the buyer can move ahead with their own lender.
Posted on December 29th, 2011 No comments
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.
Posted on March 4th, 2011 No comments
There has been a recent increase in prices for 4 bedrooms in North Redondo. Two-on-a-lot town homes built within the last 6 years have returned to prices in the mid to low $800,000s. However, 3 bedrooms in the same market have continued to languish in the mid $600,000s. Their climb has been much slower with more stumbling blocks. But in general, there are plenty of buyers out there who are ready to buy. When the right inventory comes along, we are seeing multiple offers.