How to deal with low ball offers for FSBO sellers

FSBO How to deal with low ball offers for FSBO sellers
For Sale By Owner

Are you a FSBO seller?  Are you selling your own home? Are you hoping to get a cash offer for a quick close?

Well, you must prepare yourself for unqualified buyers, wholesalers and in some cases lowball offers.  The challenge with some of the For Sale by Owners is that they get insulted when they receive a low offers from a buyer.

Keep in mind that a lowball offers could be a negotiating strategies.  After all they are still valid offers and just because these buyers are not coming near your asking price; that does not mean they are not interested in your property.

So, check the following items on these lowball offers and counter them based on:

1) Offer Price: Wholesalers often offer 5-10% below your list price since they need to create room for their commission when they flip the contract.  So, watch out for low ball offers from these wholesalers.

2) Funds Source:   Real Estate wholesalers often use funds that are typically sourced from an LLC that these Wholesalers have obtained with a fee.  And since these kind of letters are issued to many wholesaler and are not worth the paper it’s printed on.

3) COE:  Close of Escrow (COE) is another strong indicator that you are dealing with wholesaler since they often ask for 30-45 days to close.

4) Deposit:  Wholesalers often offer less than 1% of their offer price as their initial deposit.   Since they only want to risk very little money in case they are unable to flip the purchase contract.

Finally, according to National Association of Realtors, 28% of the homes sold by their owners were under-priced which is a huge loss. So, Contact Us if you need help with your Silicon Valley home sale.

Is your Silicon Valley home not selling?

Cash Home Is your Silicon Valley home not selling?
Home Worth?

California homes sales declined by 13.5% in August 2014.  So, the bloom is off the California Real Estate.  And if your home is not selling you are not alone.

In fact, the number of homes sold in August 2014 declined to 34,269 homes.  We are spotting some Los Gatos homes which are not selling.  The home located at the corner of Englewood and Kennedy Road was listed for $2.8M dollars.   This listing was cancelled after 97 days on the market with no offers.

But all things being equal, if you Silicon Valley home is not selling, you need to consider the price compared to homes that are within 2 miles radius of your home.   You should only consider Sold Comps that closed with the last 60 days that are within 300 square feet in size.  The age difference between your home and these sold comps should be 5 years.  So if your home  is 15 years old, the comps selected should be between 10 to 20 years old.

However, the most reliable way to find your home’s value it to work with a local Realtor who can develop Competitive Market Analysis (CMA) on your home.  Your CMA will include qualified sold comps.  But the neat part of CMA is that the sold prices can be adjusted for:

  • Size
  • Age
  • Lot Size
  • Amenities

You could use sites like Zillow, Trulia or Redfin to find sold homes in your zip code.  But these sites will not allow you to adjust the prices as you could do with a CMA..

Contact Us if you need help with a CMA.

California home sales decline 13.5% in August 2014

Market Decline California home sales decline 13.5% in August 2014
Home price gains slowed

In comparison to August 2013 where 36,614 homes were sold in California, in contrast to  34,269 sold in August 2014.  On a regional basis, over the past 12 months sales are down 15.7 percent in the Bay Area, 16.7 percent in Southern California, and 18.8 percent in the Central Valley.

One explanation for the decline could be the disappearance of distressed properties available for sale.  In August 2013 24.0 percent of sales were distressed properties compared to 16.7 perecent of total in August 2014.

The August 2014 median price of a California home was $390,000 unchanged from July.  This was the clear sign of the median home price gains have indeed stopped for the time being.

In fact, in Los Gatos we are seeing some homes pulled off the market after being over-priced and staying on the market for at least 90 days.  The implications are that the market is no longer hyper active where you can anticipate 10-15 offers.   So, it’s extremely critical to price you home right in this market or you will be chasing it.

Another elephant in the room is the climate of rising interest rates where some home buyers will not qualify for a mortgage.  And the rates will continue to rise in 2015 with the FED’s announcement that they will stop buying mortgages.

So, if you are selling your home, you will need a more calculated plan to get the highest price possible.   Contact Us if you have any questions about the current market.

Interior design app for ipad to help with small kitchen remodel?

Home Remodel Interior design app for ipad to help with small kitchen remodel?
Home Remodel, (image source brekkeconstruction.com)

Do you have a small kitchen remodel coming up?  Are you wondering if you can use your iPad to plan or design your remodel?  Well,  you can use an iPad app called House Plans which allows for designing Floor plans .

The app comes with tons of icons for kitchen appliances, furniture and walls that you can use to define a layout for your floor plan.    The app offers the users the ability to share their final design using Facebook or Twitter or simply print.  The missing piece from this app is cost estimates which would have been a great feature for the app.  ese projects include.

The iPad version of the app was updated more than year ago in 2014 which is not a very good indicator of the developers commitment to add new features.   Also, the app itself only creates the floor plans and can NOT be used to creating Lighting, Electrical, Mechanical or any other plans that can be incorporated into the users design.  The app supports iPhone 4, iPhone 4S, iPhone 5, iPod touch (3rd generation), iPod touch (4th generation), iPod touch (5th generation) and iPad. Requires iOS 5.1 or later.

But the app is lacking any design tool integration and we are not sure if you are lacking any other tools.  We also don’t like the fact that the users can NOT create any Mobile content beyond what the are able to do using the standard tools that comes with a Smart Phone out of the box.

Have you used this app!?  Let us know what you think?

What is the difference between REOs and Short Sales?

REOs What is the difference between REOs and Short Sales?
Bank Owned (REOs)

Are you a cash investor looking to buy homes in Silicon Valley?   Are you targeting distressed homes to buy?

It might be worth exploring the major difference between buying Short Sales vs REOs since each of them have it’s own risks associated with it.  But before listing the major differences between REOs and Short Sales, lets understand what they are.

REOs  are bank-owned homes which are sent to a Trustee Sales or an Auction as part of a

ShortSale3 150x150 What is the difference between REOs and Short Sales?
Short Sale Homes

foreclosure proceeding.  When a home is not sold to a 3rd party investor at the auction or court house steps, then the back becomes the owner on title hence the name REO.

Short Sale on the other hand is a sale transaction where the home owners are still on title and banks could have a stared foreclosure proceeding.

Now let’s explore the differences between REOs and Short Sales as far as investment opportunity and risks are concerned:

1) Ownership:  Since the ownership of REOs are transferred to the bank, you are working with a business owner who has a great appreciation for time value of money.  They are keen on liquidating the property and getting it off their book since it clears reserves requirements from the FEDs.   For instance, if an REO home has a $1M value, typically (not always) a bank might have to set aside twice as much money to services that bad debt.

And that’s where the motivation of banks comes from since if they remove this $1M non-performing asset off their books, they will be able to free the $2M in reserves and lend it again.

But with Short Sales, the owners are still in the home and they could easily back out of a transaction.

2) Timing:   REOs are listed for sale and the listing agents have 90 days to sell an REO home or it will be sent back to an auction.   So, again there are more motivated folks in the food chain to sell these home vs a Short Sale where the owner might have different motivations.

3) Condition:  REOs are often neglected and need more repair work compared to owner occupied Short Sale homes.   So, if you are in the market for fixer upper, then REOs are better bets than Short Sales.

4) Restrictions:  REOs purchases could come with deed restrictions where you might not be allowed to re-sell the home prior to 120 days.   Banks also might attempt to put a cap on your re-sale profits.   Yes, it’s an absurd attempt to interfere with market forces, but banks have done it to our investors, so you might see it as well.

Short Sales have no such restrictions since you are buying it from a home seller with the bank’s approval.  As long you are not related to the home seller, you are fine.

So, feel free to Contact Us if you are in the market for Silicon Valley opportunities since we are working on some Los Gatos fixer uppers.

Are you spending too much on rental insurance?

Insurance Are you spending too much on rental insurance?
Home Insurance

Are you paying too much insurance on your rentals?  Does the cost of insurance eating into your rentals ROI? So here are some recommendation to cut your Home Owners insurance costs without risking coverage:

1) Maximum Deductible:  Raise your insurance deductible to the highest possible bracket specially since majority of home repairs would cost you much less to accomplish than your deductible insurance company.

2) Combined Policy:  Buying all of your policies from the same company can save you money.  the policies from one carrier.  Most companies will offer you incentives to bundle Auto, Life and Home polices to get you to buy everything from one company.  For instance Geico which aggressively promotes Auto Insurance policy in California does NOT offer home owners polices above $750,000 dollars.   In these kind of cases make sure you can NOT buy cheaper policy directly from Traveler’s.

3) Tenant Screening :    Most insurance policies have riders for aggressive pets like Snakes, Dogs that will cause your insurance rate to increase.   So, screen your tenants carefully to make sure they don’t have these kinds of pets.  If their Dog or Snake hurts a neighbor, you could be liable as well.

4) No Replacement Cost :  You should decline replacement cost coverage because it’s way too expensive for the amount of coverage they offer.  For instance if you have a 1,000 sqft living space and you are confident that you can re-build by spending $100 per sqft, then you don’t need to buy more than $100,000 of coverage.  Anything above that amount is a complete waste of money.

5) Safety Equipment:   Your insurance company should offer you discounts on any anti-theft investments you make.    In addition, States like California now need Smoke and CO2 detectors which would cut your cost of insurance coverage.

Finally, be ready to negotiate and don’t accept the 1st quote the agent provides you.  Shop around and make sure you read your policy and understand how in case of a fire, flood how quickly your insurance company can help you get back on your feet.

Building wealth with cash flow rentals in Silicon Valley

Cash Home 150x150 Building wealth with cash flow rentals in Silicon Valley
Cash Flow Rentals

It was not that long ago that buying rental properties in Silicon Valley was not a wise investment since the rents never cover the debt service.  Boy things have really changed in the past few years thanks to the massive increase in rents.

For the fist time in years Single Family Homes and Condo can generate enough rental income to cover the debt and then some.  In fact in 2011 we sold a San Jose bank-owned (REO) home to an investor who purchased the home for cash for $320,000, despite the list price of $260,000.    Her rational for paying such a high price was that she could rent the home to a family for $2,200 per month and within 15 years the home would be hers for free and clear.

But before you jump into the rental home ownership you need consider a few items:

1) Financing:   Unless you are purchasing these properties with Cash, you will need to have  30-40% down payment for investment property financing.  If you are financing these properties it’s smart to get pre-approved with  a Direct Lender such as Wells Fargo and Bank of America.  These banks will complete underwriting your purchase loan and it will only conditioned on an appraisal once you find the property.

2) Where to Buy:   Market selection for your investment property is extremely critical in Silicon Valley and rest of the country for that matter.  Most investors believe that the best investment opportunities are within 2 mile radius of their own home, which is not true.   Your guide in selection of the location of your investment property purchase is where you will get the Highest  Return on your Investment (ROI).   MSN Money report identifies Top 10 cities for Rental properties which includes Orlando and Colorado Springs.

3) Property Management :  Now that you have smartly decided to buy your rental property where you can get highest ROI, then you will have to concern yourself  with property management.   You then will need to select a Property Management company based on the services that they are offering you.

We have writing blogs on Tenant Screening which could be helpful to you.

Top 5 tips to reduce your insurnace cost of your rentals.

Insurance Top 5 tips to reduce your insurnace cost of your rentals.
Home Insurance

Are you paying too much insurance on your rentals?  Does the cost of insurance eating into your rentals ROI? So here are some recommendation to cut your Home Owners insurance costs without risking coverage:

1) Increase Deductible:  Raise your insurance deductible to maximum possible specially
since majority of home repairs would cost you much less to accomplish than your deductible insurance company.   In fact, in most case you won’t rely on the coverage to address the minor repairs.

2) Screen like Hell :    Most insurance policies have pet riders so screen your tenants like crazy to make sure you avoid aggressive Dog, Snake, …etc that would increase your coverage costs.  These kind of pets also expose you to additional risk if your Dog or Snake hurts a neighbor.

3) Avoid Replacement Cost :  Most home owner policies have replacement costs coverage which in most cases is not sufficient to cover your re-build.  So, don’t pay for it. For instance if you have a 1,000 sqft living space and you are confident that you can re-build by spending $100 per sqft, then you don’t need to buy more than $100,000 of coverage.  Anything above that amount is a complete waste of money.

4) Combine Auto, Home, Life:  Buying all of your policies from the same company can save you money.  the policies from one carrier.  Most companies will offer you incentives to bundle Auto, Life and Home polices to get you to buy everything from one company.  For instance Geico which aggressively promotes Auto Insurance policy in California does NOT offer home owners polices above $750,000 dollars.   In these kind of cases make sure you can NOT buy cheaper policy directly from Traveler’s.

5) Install Safety Equipment:   Your insurance company should offer you discounts on any anti-theft investments you make.    In addition, States like California now need Smoke and CO2 detectors which would cut your cost of insurance coverage.

Finally, be ready to negotiate and don’t accept the 1st quote the agent provides you.  Shop around and make sure you read your policy and understand how in case of a fire, flood how quickly your insurance company can help you get back on your feet.

Why you should stage your Los Gatos house before selling.

2008 08 25 1030 0151 Why you should stage your Los Gatos house before selling.Are you selling your home?  Is the house now vacant and empty of furniture?

Well, majority of home buyers struggle to imagine how they would best use an open space.  So, staging could be the right decision to market your home to these kinds of buyers.

However, before you decide on the need for staging, you need to consider some factors to see if the need for staging can be justified with the cost.  In addition to the cost, selection of staging vendor, furniture and other fixtures can be time consuming.

The 1st criteria most sellers consider is cost of staging.  To estimate the cost of staging you need to estimate the Average Marketing Time for the “KIND” of property you are selling.    For instance, in a tech fueled housing market of Silicon Valley, there is literally no need to stage homes that are priced under $1M.  After all these homes are selling in one weekend with multiple offer.

Here are some factors to consider before you decide to stage or not:

1)  Competition:  Will your home be in competition with mostly new or remodeled homes?  If the answer is yes, then you need to seriously consider staging since your home will leave the wrong 1st impression without being staged.

2)   Size:  How big is your home?  Is your home size has more than 2,000 sqft of living space?  If your home is smaller than 2,000 sqft, then the need to stage is not as critical as larger homes.

3) Vacant Rooms:   If you are leaving more than 3 bedrooms vacant, then you might be taking chances with your showing.    So, consider staging if you have more than 3 bedrooms.

4)  Staging Cost:   Can you afford to spend $1,000-3,000 per month on Staging costs?  If you could justify the cost based on the marketing window you have, then you should consider it seriously.   We even staged a Bank-Owned (REO) home for a national lender in Los Gatos at the cost of $1,500 per month since the bank was convinced the higher sales price justify it.

5) Curb Appeal:  Does the home have any curb appeal?  What will the 1st impression of the New buyers will be when they drive by?

If the answer to these questions is a resounding Yes, then you might want to consult a  Home Staging Company to get estimates on how much it would cost to stage your home during the marketing period.

But it never hurts to start with a Free eBook on your Home Value before you list since you might not need staging after all.

 

How to avoid taxes on your Short Sale?

ShortSale3 How to avoid taxes on your Short Sale?
San Jose Short Sale

Are you considering a short sale?   Are you wondering if you could owe taxes on the forgiven debt that the lender could report to IRS and your State as income?

We strongly recommend our clients to meet their CPA or Tax Planner to discuss the tax consequences of their Short Sale.   But suffice it to say that most the forgiven debt that gets reported as income to you and you could receive a 1099 from the lender who is approving your Short Sale.

However, home owners are generally protected against a deficiency judgment  after a Short Sale.   The Mortgage Forgiveness Debt Relief Act of 2007 provides an exception from Federal taxation if  the Short Sale of your home meets the following conditions:

1) Primary Residence:  If the home subject to a Short Sale has used as a “qualified” principal residence then you might be exempt from income taxes on your Short Sale.  IRS Rules defines primary residence as the home where you must have lived there for the past 24 moths.

2) Home as Collateral:  Your loan for the home that is subject to short sale must be secured by the residence.  This means that loan will show up on the Property Profile with the lender as the beneficiary.

3) Income Limits:  Your income is capped at $1,000,000 for married couples filing separately and $2,000,000 for all others income categories.

4) Loan Term:  Loan is discharged after January 1, 2007 and before January 1, 2013.

But the State income taxes for the forgiven debt might be different in the State where your home is located.  In fact, the odds are that in 2015 most states will require income taxes on the Short Sales since there are far fewer people affected by the foreclosure crisis.

Bottom line is that you are well advised to Dept of Housing and Urban Development  to discuss the tax implication of your Short Sale in the State where your property is located.

And Contact Us if you have any question on your Short Sale.