When inspecting a home you are buying is a bad idea?

IMG 44401 200x192 150x150 When inspecting a home you are buying is a bad idea?

Home inspection

Are you in a market to buy an older home in Silicon Valley?  Are you going insist on a home inspection report before you close?  Well,we just lost on a $1.5M offer this past weekend even though our buyers were not ordering any inspection and had a cash offer to close in 1 week!

This means, that you have to consider the need for inspection strategically before you sign the buyer’s inspection waiver against the advice of your broker or real estate agent.  But what are your options as a buyer when it comes to buying your California dream home?

As buyers you are protected by California law which allows you to order any and all non-destructive inspection.  From Roof, Foundation, Water Quality, Electrical, Plumbing, Mold you can indeed order them all if you are not comfortable with the condition of the property.  Naturally, these inspection will be on your dime and not the sellers.

However, if the seller has already performed any inspection you as the buyer are entitled to get copies of such inspections.    As a matter of law, the seller’s agent has to provide you with copies of all the reports on the property.  So, you have a choice to accept the seller’s inspections or order your own which would mean you have to pay for them since the seller has already furnished their inspection reports to you.

The challenge you will face is that if you sign the buyer’s inspection waiver and you discover problems after the close of escrow, you will typically have no recourse to seek remedy.   For instance, if you discover after you have moved into the property that you indeed have Mold problem then you are on your own if you accepted the seller’s inspections and no such defects were discovered on that inspection.

So, consider the the need for inspections strategically.  If you are buying a home that’s 50 years old, odds are very good that there are lots of maintenance and repair needs you will will discover.  In fact, it comes with the territory.  Buying an older home comes with such problems.   Do you need an inspection then if it will weaken your offer and removes any chance of you buying the house?

Tell us what you think.

 

What’s the settlement process when selling your own home

Marketitsold 150x150 Whats the settlement process when selling your own home

From MarketItSold

So, you have gotten an offer and have accepted the offer.    But before you pack your bags and plan to spend the equity money, you need to check a few things to make certain that your transaction in on smooth sail towards the close.

1) Escrow:  Your Real Estate agent should have opened an escrow for you and your real estate agent need to make sure that the buyer’s earnest money deposit is received at escrow.  The default time period for the escrow is 3 days.  If the funds are in the form of a check, then your escrow officer and agent should check back in a few days to make sure that the funds were indeed made available to the escrow account and that the buyer’s check has cleared.

2) Contingency Removal:  If the buyer of your home has inspection and loan contingencies, your real estate agent need to monitor the contract and the activity associated with the removal of these contingencies.  Believe me , you do not want any surprises since if

3) Escrow Instructions:  Your agent needs to meet with the escrow officer and review the escrow instructions to make certain non of these could become potential inhibitors to your close of escrow.    For instance, if your buyer is a corporation or an LLC, the escrow should require legal documents as proof that the buyer is indeed authorized to act on behalf of that LLC.

4) Title Search:  Your buyer is buying the property with the assurance that they will get clear title to the property.  So, Title Search is part of such process and your agent will be notified if there are any title issues with your property.  However, these types of problems typically surface when you open escrow and receive what’s called a Prelim which contains your home’s legal description, boundaries, easement and other requirements.   w

5) Final Inspection:  Your agent should schedule with the buyer’s agent a time to do a final walk-through and get the buyer to sign the condition disclosures that shows every appliances, switches, plugs, water heater, AC are all in working order.

6) Loan Funding:  If your buyer is buying the home with a loan from a lender, there is one more step for your real estate agent to worry about which is the funding.  In some cases, if the property does not appraise to the value of your offer, your buyer has to cover the balance which could easily cancel your transaction.

7) Record of Title:  Once the title is recorded, then you are safe to hand over the keys to your agent for delivery to the buyer’s agent.   Avoid the temptation of providing access to your buyers prior to recording cause if the house catches fire when they are inside, their insurance company will not cover it since it’s still legally your home!

What you should know about buyer’s home inspection waiver?

IMG 44401 200x192 150x150 What you should know about buyers home inspection waiver?

Home inspection

Are you in a market to buy an old home? Are you going order a property inspection before you close?  Well, you have some decisions to discuss with your Real Estate agent or broker since in some silicon valley markets the homes are still selling so fast that there is no time to order inspections.

But let’s see what your option are when it comes to inspection prior to buying a home.  Buyers are protected by California law which allows a buyer to order their own inspection prior to close of escrow.  However, if the seller has already performed any inspection you as the buyer are entitled to get copies of such inspections.    As a matter of law, the seller’s agent has to provide you with copies of all the reports on the property.

So, you have a choice to accept the seller’s inspections or order your own which would mean you have to pay for them since the seller has already furnished their inspection reports to you.

The challenge you will face is that if you sign the buyer’s inspection waiver as the buyer, if you discover any material problems after you have closed on the property, you might not have much recourse to seek remedy.   For instance, if you discover after you have moved into the property that you indeed have foundation problem then you are on your own if you accepted the seller’s inspections and no such defects were discovered on that inspection.

Bottom line is requiring inspection contingencies make your offers much weaker in a seller’s market.  In fact, we just lost on a $1.5M offer this past weekend even though we have no inspection requirements and were offering cash to close in 1 week!  This property was in Los Gatos fixer upper and we will lost it.    Just imagine if we insisted on a 10 day inspection period.

So, evaluate the need for inspections strategically.  If you are buying a home that’s 60 years old, odds are that there are tons of deferred maintenance issues that you will discover.   Do you need an inspection then if it will make your offer weaker and removes any chance of you buying the house?

Tell us what you think.

 

How to analyze investment properties on your iPad

Inspect5 How to analyze investment properties on your iPad

Investment Evaluation

ROI analysis is the most critical piece of success with investment properties.  In fact, most industry veterans make money when they acquire property and not when they liquidate it.  So unless you are buying investment properties for cash the ROI analysis will be the difference between making money or losing money.

That’s why we like a neat iPad or iPhone App called Property Evaluator  from Wasatch Digital Media Inc. This app offer Purchase Analysis, Buy and Hold Strategy.  

Once you enter the specific property information, this App offers a maximum of 3 Expense categories to for ROI analysis for a 5 year old period.  The category of expense for the Free Version are:

  1.  Cleaning & Maintenance (0.8% of the purchase price)
  2. Insurance (0.5% of purchase price).
  3. Taxes (1% of purchase price)

The app has an Assumption sections has the following information which can be modified:

  • Appreciation Rate:     2%
  • Vacancy Rate:              7%
  • Income Inflation:      3% (We had to change this one since incomes have been stagnant for the past 10 years)
  • Expense Inflation:      3%
  • LTV for Refinance:     70%
  • Closing Costs:
  • Currency:
  • Area Units:                            Sq Ft
  • Compounding Period :      Monthly

We tested this app with one of our rental properties in Los Gatos for a purchase price of $1,000,000 with an equity of $250,000.   The app offers 1st and 2nd mortgage input that users can add for the purchase of purchase analysis.

The best part of app was the Buy and Hold Projections that in 20 years with a projected Rental Income of $5,000 per month from this Los Gatos home, the market value of the property would be $2,257,339 offering the buyer an equity of $1,784,387.   This is valuable information to have on each property for an investor who is interesting in holding a property for rental income.

Let us know if you have used this application and what your experience has been.

 

Can you qualify for a HAFA Short Sale in Silicon Valley?

ShortSale3 Can you qualify for a HAFA Short Sale in Silicon Valley?

Hafa Short Sale

Can you qualify for a HAFA Short Sale for your home in Silicon Valley?  The short answer might be no, but it requires some investigation. Despite the huge rise in home prices, 28% of home owner’s values are lower than their mortgage balance.   We do meet a lot of owners whose home value’s have appreciated enough that the balance of the 1st mortgage is covered, but the 2nd loan is still under water.

For some of these home owners Short Sale is still an option, but not a HAFA Short Sale.  Here’s why:

HAFA (Home Affordable Foreclosure Alternative) was introduced to help home owners with underwater mortgages.   The advantage of a HAFA Short Sale is that it offers the home owners a fresh start since they can ditch their bad loan and literally buy a home that has equity.   But not every borrower and every loan will qualify for a HAFA Short Sale since there are restrictions associated with the program.

HAFA guidelines which were revised in 2013 were designed to minimize the negative impact of a Short Sale on home owners credit.   Let’s examine them closely:

1) Loan Balance:  HAFA guidelines applies to the 1st liens with the balance NOT to exceed $729,750 for Single Family Homes.  So, if your sale will cover your 1st lien amount then you will not qualify for a HAFA Short Sale.  This does not help the high-end home prices in California which are above this limit, but with the median California prices at less than $500,000 the program has some merits.

2) Purchase Loan:  HAFA short sale only applies to purchase loans.  This means that if you have replaced your original purchase loan with a refinance then you will not qualify for HAFA Short Sale despite the fact that your current loan is under water.   You will need to apply for a regular Short Sale.

3)  Loan Origination Date:  Your mortgage should have been originated on or before Jan 1, 2000.  However, if you have refinanced your mortgage then you will not qualify for a HAFA Short Sale.

3) Property Type:   Commercial properties do not qualify for HAFA Short Sale even if the loan is underwater.  But both owner occupied and 1-4 unit rental homes qualify for HAFA Short Sale.

4) Short Sales Applications:   If you have applied for a Short Sale in the last 12 months but refused the offer from your lender to close that Short Sale, then you can not apply for a HAFA Short Sale for until 12 month have passed from that application date.  There are no exceptions to this rule, even if your loan might have been sold to a new lender.

It’s smart to contact Department of Housing and Urban Development (HUD) Home ownership Help site to see what other options are available to you.  And feel free to Contact Us to see if you qualify for a HAFA Short Sale since ideal way to unload the bad debt from your credit history and move on.

 

 

 

Top 5 disclosures if you are selling your own home

FSBO Top 5  disclosures if you are selling your own home

For Sale By Owner

Are you a do-it-yourself home owner who want would be interested in selling their own home?  That’s no surprising given the commissions savings could add up to $80,000.  In fact, 59% said yes to the question of selling their own home  in a recent survey of Marin County home owners.

But most home owners are unaware of the challenges with legal, contract, pricing and negotiations that would help them fetch the highest price for their home.

Here’s the of the information that you would need to disclose to your home buyer if you are planning on selling your own home:

1) Are you (seller) aware of any water intrusion into any part of the property, leaks from or in any appliance, pipe, roof, slab or drainage, standing water, flooding,  underground water, moisture, water-related settling, slippage that could affect the property?

As you can see this is exhaustive list of problems related to water that you as a seller have to disclose to the buyers.

2) Is the seller aware of any alterations, modifications, remodeling, replacement or material repairs on the property ?

In this case, “material” means any detail information that could cause the buyer to change their mind about buying your home.

3)  Is seller aware of any on going or recurring maintenance on the property?

On this question, if you have a drain that clogs every few months, then that is considered material information that you will need to disclose to your buyers.

4) If the home is a pre-1978 Property, were any renovation (Sanding, cutting, demolition) of the Lead-Based paint surfaces completed in compliance with Environmental Protection Agency (EPA) guidelines?

5) Are you (seller) aware of any infestation of  mold, mildew,fungus or spores, past of present on the property?

As you are aware mold could cause huge respiratory problems for children and adults and has be professionally treated.    You are therefore required to disclose any information regards mold to any potential buyer.

So, Contact Us if you have any question about these requirements.

 

 

 

Top 5 steps to prepare your home for sale

Marketitsold Top 5 steps to prepare your home for sale

From MarketItSold

Selling your home could appear to be an intimidating process, but our team has experience in developing the right strategy and plan that reduces the stress of sale to manageable tasks.  Below are top 5 steps that we use to make the task of selling your home much simpler for you:

1) Determine your needs and priorities:

Moving is stressful process and deciding to sell your home could be an integral part of that decision.    In this step we will discuss and evaluate your future housing requirements.  If you are planning to purchase another home, we develop a plan and initiate a search agent to give you feedback about the school, homes and neighborhoods that will suite your future needs.

If your sale proceeds will subject you to capital gains tax, we will recommend you contact your CPA or tax professional to minimize the impact of this sale.  We can also refer you to our Defer Sales Trust specialist who can devise a plan to defer your Capital Gains.

2) Confirm Sale decision with all principals on title:

At this stage of the process we will notify and engage all the parties on property title to and educate them about the plan to prepare the property for sale.  Needless to say that if one of the parties on titles is not cooperating the sale process would stop till that parties objections to the sale are resolved.

3) Determine agency and select appropriate working model:

We will review the Agency relationship with the principals and have them sign an agency agreement that would authorize us to represent your property for sale and interface with buyer’s agents.   There are several agency and listing types that can be appropriate depending on your requirements.   Since we have an exhaustive list of qualified buyers, we could find you a buyer very quickly.

4) Develop marketing plan and pricing strategy

At this sage, we will develop a Competitive Market Analysis (CMA) to determine the ideal pricing strategy for your home.  We will make adjustments to this CMA of recent sales based on size, age, floor plan, amenities to develop the pricing strategy that will fetch the highest possible price for your home.

Ironically, we have worked with banks on REO sales which was an amazing lesson in creating multiple offer conditions by pricing the property a tad lower than recent sales.  Off course, this pricing strategy will not work with every market condition and we will review the market trends.   In fact, this strategy could backfire if we are in a declining market.

Needless to say that the condition of your home will play a role in this strategy development since we need to determine if we are going to sell the house as-is or we will do some repairs.

5) Discuss home improvement recommendations (repairs/staging)

Our experience with pricing homes for banks, educated us about the strategy to market a home as-is vs as-repaired.  For instance, if you have a fixer upper home that will need to be torn down, there is no reason to spend money on repairing the home unless there are safety concerns that might hamper the sales campaign.  However, if your home will fetch much higher dollars with small kitchen or bathroom remodels, we will discuss these options with you.

In 2010 we remodeled a bank-owned REO for Wells Fargo who spent more than $70,000 to repair a los gatos home which was damaged by the previous owner.  Even after the remodel, Wells Fargo spend $1,000 per month to stage this home for sale.

The results was a huge success where the bank recovered more than 100% of the repair dollars spent on the property and avoided the as-is sales which would have only attracted cash buyers and investors.

Contact Us if you have any questions about selling your home.

 

 

 

 

 

 

Even for sale by owner homes require Repair Disclosures

FSBO Even for sale by owner homes require Repair Disclosures

For Sale By Owner

In a recent survey of Marin Home owners more than 59% of the owners expressed interest in selling their own home!  That’s no surprising given the commissions savings could add up to $80,000!

But how will you know if you are up to the challenge?  Do you have the legal,  contract and negotiation experience to deal with the buyers and their agent’s on your own?

Well, here’s the 4 Repair and Alteration questions that sellers must disclose to any potential buyer even if you are planning on selling your own home:

1) Are you (seller) aware of any alterations, modifications, remodeling, replacement or material repairs on the property  (including those resulting from Home Warranty Claims)?

You will have to understand the meaning of “material” in order to answer this question properly.  In this case, “material” means any information that if disclosed could change the buyer’s mind about buying your home.   Fore example, if you have installed recessed (canned) lights in your entire house without permits; then your buyer might opt to change their decision to purchase your home or make a lower price.  This is considered material information critical to buyers and not disclosing it, could come back to bite you since the buyers could force you to cover the cost of getting these repairs approved or code-compliant even up to 5 years after your sale.

Bottom line is that if you done any minor alteratinos to your property, you are well advise to disclose as much detail as possible and allow the buyers to make an informed decisions about the risks associated with buying your home.

2) Is seller aware of any on going or recurring maintenance on the property?

On this question, if you have a drain that clogs every few months, then that is considered material information that you will need to disclose to your buyers.

3)  Are you (seller) aware of any part of the property being painted in the past 12 month?

This question goes hand in hand with the question on Lead-Based paint disclosure where for homes built prior to 1978.   Granted no such paint is being sold in California, but if you have painted the home in the past 12 months, you are required to identify the location of the application and add that to the Lead-Baaed paint disclosure if you suspect any such paint might have been used.

4) If the home is a pre-1978 Property, were any renovation (Sanding, cutting, demolition) of the Lead-Based paint surfaces completed in compliance with Environmental Protection Agency (EPA) guidelines?

Questions 3 and 4 go hand in hand with the Lead-Based Paint disclosure that is also required to be disclosed to any buyer.   That Your inability to answer any or all of these questions could create challenges for your For Sale by Owner transaction.

So, Contact Us if you have any question about these requirements.

 

 

 

 

Top 10 legal questions that For Sale By Owners must answer

FBSO1 300x207 Top 10 legal questions that For Sale By Owners must answer

For Sale By Owner (Source; theprovince.com)

Are you planning on selling your own home?  Are you prepared to deal with tons of disclosures required by State of California?

Well, here’s the 10 Statutory and Legal questions that you must disclose to any potential buyer even if you are planning on selling your own home:

1) Are you (seller) aware of death of an occupant within the last 3 years upon the property?

2) Is seller aware of any order from government health organization identifying the property as being contaminated by methamphetamine?

3) Are you (seller) aware of the release of an illegal controlled substance on or beneath the property?

4) Are you (seller) aware whether the property is located in or adjacent to an “industrial use” zone?

5) Is the seller aware if the property is affected by a nuisance created by an “industrial use” zone.

6) Are you (seller) aware whether the property is located within 1 mile of a former federal or state ordinance location.

7) Is the seller aware whether the property is a condominium or located in a planned unit development or other common interest subdivision?

8) Is the seller ware of any insurance claims affecting the property within the past 5 years?

9) Is the seller aware of matters affecting Title of the property?

10) Are you (seller) aware if material facts or defect affecting the property not otherwise disclosed to buyer?

Your inability to answer any or all of these questions could create challenges for your For Sale by Owner transaction.  So, Contact Us if you have any question about these requirements.

 

 

 

What for sale by owners need to know about Carbon Monoxide Detector law

FSBO What for sale by owners need to know about Carbon Monoxide Detector law

For Sale By Owner

Are you selling your own home?  Are you among the ranks of do-it-yourself homeowners who wants to take on such a challenge?

Well, you should be prepared to develop a mountain of disclosures about you home which is required by State of California. From Megan’s Law Database Disclosure to Lead-Based paint the ever changing law requires more and more material information to be disclosed to your buyers and exposes sellers who want to sell their own home to potential suits if they ignored.   Another one of the most recent requirements in Carbon Monoxide Detector law.

The Carbon Monoxide Poisoning Prevention Act was signed into law in 2010.  It requires carbon monoxide detectors installed in every “dwelling unit intended for human occupancy.”   The California legislature also modified both the TDS (for residential one-to-four unit real property) and MHTDS (for manufactured homes and mobile homes) to include a reference to carbon monoxide detector devices.  

So, how will this law affect you?  Glad you asked.  Every owner of a “dwelling unit intended for human occupancy” must install an approved carbon monoxide device in each existing dwelling unit having a fossil fuel burning heater or appliance, fireplace, or an attached garage.

Here are some FAQ and their answer that should help you comply with this law:

Q: How many devices should you install?  

A: For minimum security, a CO Alarm should be centrally located outside of each separate sleeping area in the immediate vicinity of the bedrooms.  The Alarm should be located at least 6 inches (152mm) from all exterior walls and at least 3 feet (0.9 meters) from supply or return vents.

Q:  re there any penalties for noncompliance with this law? 

A: Yes. A violation is an infraction punishable by a maximum fine of $200 for each offense. However, a property owner must receive a 30-day notice to correct first.  If an owner who receives such a notice fails to correct the problem within the 30-day period, then the owner may be assessed the fine

Q: Can a buyer of a rescind the sale if the home does not have the necessary carbon monoxide detectors?

A: No.  However, the buyer may be entitled to an award of actual damages not to exceed $100 plus court costs and attorney’s fees

So, if you are selling your home by yourself, then at least make certain you have all the disclosures documents developed by a Real Estate agent just in avoid any future headaches.

Contact Us if you have any questions about these disclosures.