Silent destroyers of your home
December 31st, 2009 categories: Folsom Lake, Folsom Lake Homes, Home buying, Home Selling, Real Estate
The condition of a home is something people pay close attention to when purchasing ,and sometimes try to ignore when selling, so it’s prudent to keep a close watch on the condition of your property. This time of year offers a great opportunity to observe the condition of your home from an up-close perspective as you hang your Christmas decorations. Of the many things that are investigated it’s the silent destroyers that cause the most harm, but can be prevented with some simple maintenance. Here’s a brief punch list of things to watch for when putting up the decorations so you can start budgeting time or money to take care of them after the holiday.
Water is the most intrusive element known to man and gutters are a wonderful invention to control it around your house. They function to keep the water from pooling at your foundation but aren’t effective if they’re clogged with leaves and debris. I once paid to have a client’s gutters cleaned on a home she was purchasing since I knew she would never sacrafice her manicure. Pine needles are especially toxic since they leech acids which rust and gutter guards don’t completely prevent their intrusion. There are many handyman companies that will clean them but make sure whoever you hire to check out their insurance policy…it could be a very costly mistake should they not carry one.
Most people think of getting pest inspections done just prior to listing their home for sale but did you know it is recommended to get one every 5 years? I never thought twice about getting one until I isted my 17 yr. old house for sale. Since maintenance is something I’m very attuned to I didn’t think I’d have any issues until the inspector found Borer beetles. Fortunately for me the beetles had a terrible sense of direction and made a right turn upon entering my trim board on the corner of my home. I guess it’s their natural inclination to go up, which saved me from having to tent my house. That saved about $6000 which is the average cost of tenting a 2 story structure.
Another critter that loves to live with you is the dreaded termite. My neighbor was sprucing up the house for the holidays and as she was wiping off the window sills noticed some holes bored through. The pest inspection found a colony of termites had infested her walls due to the Oak trees on her property. Apparently termites like to switch it up and find Doug Fir a nice diet change from Oak. Since her home was on a slab foundation she had to have holes bored into her concrete and poison injected under her foundation. The fun didn’t end with that becasue she had to wait 3 months to see if it took…which it didn’t. After a second application had to be done she finally received a clear report . Her new carpet was not exactly the Christmas present she was hoping for.
These are just some of the horror stories I hear from clients regarding deferred maintenance. So take some extra time to tune up the exterior while taking down the decorations and save yourself some serious money this new year.
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Real Estate Holiday Slump
December 12th, 2009 categories: Home buying, Home Selling, Investors, Real Estate
The myth that homes don’t sell during the holidays is just that, so why don’t people take advantage of the natural marketing that occurs during this time of year? It might seem like a good idea to take your home off the market or hold off from putting it up for sale altogether, but here are some reasons why keeping that For Sale sign up can work to a seller’s advantage.
Black Friday signals the beginning of decorating to impress friends and family and this is a natural segue way for selling a home. Colorful lights and pleasant smells all create the “ideal home” which translates into open escrows and closed sales. New holiday towels spruce up the house and keep the decorating budget in check. Take advantage of the emotional connection your home offers and don’t forget the cinnamon spiced pinecones on the entrance table.
Initially, getting the house ready can create a sense of orderliness but having to leave every time someone wants to see the house grows old quickly. Holiday shoppers are serious, pre-qualified and ready to buy. Having showings at this time of year reduces the number of “tire-kicker” showings. You can also get away with restricting the showing times, as most people are more respectful for family gatherings.
Did you know that January is the biggest transfer month of the year? Transferring employees use the holidays to shop for their new home and feel pressured to find a home by the end of the year. Additionally, as Dec. 31 draws closer buyers want to have some time for family so make the extra effort to finish inspections quickly. Not only do you have a pool of committed buyers but they start to panic knowing they have to close by yearend so tend to be more agreeable.
Investors are another group of buyers that focus on quick closes at the end of the year. I had one client who didn’t want to face his CPA until he closed escrow and with the limited time frame was willing to soften on some of his demands. These serious buyers do not have enough time to start their search over so are more willing to negotiate.
Many sellers hold off listing their property until the spring due to family obligations and entertaining. This means less competition during the winter months, therefore less for a buyer to choose from. So take advantage of the slow down and showcase your home with your favorite holiday décor, you might be pleasantly surprised by how convenient it is to sell during the holidays.
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Real Estate “deals” …are there any left?
November 21st, 2009 categories: Home buying, Real Estate, Sacramento
It’s been three years into this market and the inventory is starting to look like Wal-Mart’s shelves after black Friday. Have we seen the bottom yet, is a constant refrain in my conversations with clients. Congress extended the tax incentive and expanded it to include principle owners, and seller’s are seeing multiple offers on choice homes. Does that mean all the deals are gone? Glad you asked.
Some economists think we’re bumping along looking for a place to land and others fear we’re in for another down hill ride. One thing is certain; it’s a good time to buy a home. The trick is knowing what a deal looks like and writing an aggressive offer. Real estate has certain break points that are obvious to those of us who look at houses all day…not so much for the novice. Each tier offers a certain level of ”deals” to be had and I’ll attempt to define the differences so you can recognize the trends.
For obvious reasons price determines the location but within each area there are grades of desirability. The homes that are typically the lowest priced are bank-owned (REO). They can be damaged and stripped of appliances or have half-completed projects and are usually priced at the bottom of the neighborhood price scale. The banks usually respond quickly but don’t do much in the way of repairs. They can be good deals in the lower priced neighborhoods but when it comes to the better zip codes you’ll find the competition stiff.
Coming in at a close second are the fixers, which by definition need work to some degree. The nice part about buying a fixer is that there are loans (FHA 203) specifically designed to include the repairs and offers the potential owner their choice regarding those repairs. So if the house needs new carpet, the buyer gets to choose the color and style. Again location, location, location since these homes are much sought after by contractors who have lots of time to work on them.
Next is the much-dreaded short sale. Depending on the skill of the listing agent, these homes can be a great deal but you have to have the patience of a saint. Buyers need to be clear about the waiting period for short sales. Each bank has a different process and some manufacture delays by the methods they demand for submission of offers. Currently I have a short sale that requires submitting the entire package via snail mail, not very efficient given today’s technology. These properties are deliberately priced low to attract offers quickly to get the process going. Of course, the bank will send out their appraisers to determine value but if priced right you will find they will accept a solid offer to avoid foreclosing.
The last tier is the forced sale due to some misfortune and the fair market sale, which represent about 25% of the current market. Varying value structures but all are based on the assumption that within a given radius each home would be of equal value given the same degree of interior upgrades, lot size and age of bldg. The bottom line is that every sale that takes place in that neighborhood affects the next sale good or bad, so the deal you buy today might not be the last one found in your neighborhood.
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Three Tips for Finding a Good Realtor
August 27th, 2009 categories: Folsom Lake Homes, Home buying, Real Estate, Sacramento
How to avoid the used car salesman
High school was a great learning experience for me because I learned how to trust my gut. High school is the first time you get to choose which teachers you have for each class. I soon found those that I enjoyed I learned a lot from, and those I endured didn’t learn much from. By my senior year walking out of a class after the first day and heading to the counseling center to re-schedule wasn’t a big deal. I wasn’t intimidated and didn’t make excuses…if I didn’t like a teacher on the first day, it wasn’t going to get any better.
Searching for a real estate agent is similar to finding a good teacher. You want to find someone who will teach you the ropes and who you can trust to give you good information. After all, a home purchase is statistically the biggest purchase you will ever make. This video makes a humorous point about intimidation when it comes to real estate agents but unfortunately some agents still use these tactics…
Professionals Teach -
My attitude has always been to get the information to my clients in order for them to make an intelligent decision. The Realtors Code of Ethics requires that I offer my clients the utmost in service, and intimidation shouldn’t be part of the package. If you feel uneasy or that your requests are not being heard, find another agent who will take the time necessary to help you find your home. Referrals are a good start but don’t stop there. Interview at least three agents and get an idea of their approach. Some agents don’t work weekends, and others only work business hours, so if you want to go shopping after work, or need to list your house after dinner, you’re out of luck.
One of my clients purchased a house from me a few years ago, sight unseen. He worked for the government and had only one week to find a home. The market was hot and my client put in three offers before he left to go back to his job but none of them panned out. He had used up all his vacation time and decided to trust me to find him a home. He said he felt he could trust me because while we were previewing homes he heard me comment on everything he was concerned about. If the house was located on a busy street, I commented on that. If the house had a smaller than average master bedroom, then I commented on that. I didn’t ignore the obvious, nor did I pressure him into making a decision…I simply gave him the information and let him decide. He found he could trust my information and that enabled him to find a home that he eventually re-sold at a tidy profit.
So to bring it all together trust your gut. If the agent seems to be something other than what they appear, you’ll probably find proof to support your intuition once you get to know them, so don’t waste your time. Secondly, make sure they listen to you. If you say you only want to see single story homes and they show you two stories, then realize they are not looking out for your best interests. And finally, if you feel pressured into a purchase and don’t feel you have enough information don’t be afraid to ask for more. If the agent counters with more pressure then you know he is only looking to make a sale. Remember this is a decision that you only make about once every seven years, so enjoy the process. A good agent removes the pressure and intimidation from the process…they don’t create it.
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Home Shopping Goes Back to the Future
August 24th, 2009 categories: Finances, Home buying, Real Estate
How Much House Can You Afford?
In this last market it wasn’t unusual for buyers to tell me they were qualified for a home that was well beyond what they could comfortably afford. My next question was geared towards getting them to think realistically about those monthly payments and was something along the line of, “So you can afford to eat every other day?” We all know how that shook out and are now facing unprecedented challenges in our economy.
This brings up the idea of housing affordability and reminded me of the movie Back to the Future. Word on the street is the banking industry is starting to revert to the old 28/36 rule when qualifying consumers for home loans. This tried and true method allows up to 28% of your income to be spent towards housing and caps all debt at 36% to include the PITI, insurance, car payments, credit card debt, etc. Given some statistics showing that up to 12% of all Americans spend up to half their gross income on housing costs it’s no wonder the banks are tightening their belts.
Financial advisers all agree that you need to outline your life style and figure out your living expenses prior to shopping for a home. The magical thinking of re-financing out of a too high housing loan into a more affordable traditional 30 year fixed has back-fired and caused a lot of pain. So do the hard work of sitting down and itemizing every necessary expense vs. those that vary from month to month. Should finances get cut you can eliminate that expense and apply the funds towards your mortgage.
Down payments, taxes and reserves are the main elements lenders look at when determining how much house you can afford to purchase. Traditionally 20% down showed the banks you had skin in the game and they rewarded consumers with preferred rates and no additional mortgage insurance. FHA and VA offers buyers the ability to get into home ownership without the big down payment but with the added expense of mortgage insurance. These costs are fixed and most new homeowners set up an impound account to collect these funds on a monthly basis. When the tax bill or homeowner insurance bill comes due the funds are ready to be dispersed from the impound account making the process painless.
Home ownership is the American dream and after we get through the nightmare created by the creative financing of the past six year perhaps we will embrace the fundamentals we were taught with higher regard. Being house poor isn’t much fun but living beyond your means creates stress so don’t disrespect the numbers. If you would like to know the difference between your rent vs what you could purchase let me know. Now is a perfect time to buy with interest rates AND prices down so let me know if it’s time to go shopping.
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Buyers: Who’s Got Your Back?
August 5th, 2009 categories: Finances, Home buying, Real Estate, Tax Incentives
As usual, I was holding an open house this past Sunday afternoon hoping to find some buyer’s who had not found an agent to work with yet. A young couple came in and we started to chat about their dream home and I asked them if they had contacted a lender yet?
They looked a little uncomfortable and then said rather sheepishly yes, “and you know what he advised us to do?” “You see,” the wife said, “we just got married and we haven’t finished up the paperwork yet so I still have my maiden name. I already own a house that I bought while in college…my parents helped me. The lender suggested that my husband buy a house in his name, even though we’re married, but not tell the bank so he could take advantage of the $8000 tax credit.”
Did I see red lights flashing or what? Loan fraud by any other name is still loan fraud!
First time buyers are vulnerable to whatever the lender tells them and the temptation to commit loan fraud is apparently alive and well. Just remember that if the lender finds out that you have committed fraud they WILL foreclose and take back your home so when shopping for a lender or real estate agent make sure you check their integrity credential.
Another scenario to be wary of is when a property is being flipped by a seller without every recording the sale. Here’s how it works. Seller A is in dire straits and needs to sell his home. Mr.Realtor lists the home for sale and conveniently has a buyer who is also an investor. He encourages the seller to sell the property to his investor but continues to advertise your home for sale.
Buyer Bob comes along and and writes an offer higher than what Seller A is selling the home to the investor for. That difference is not disclosed to him and the lender isn’t aware of it either. So who benefits here? Does the seller…no…because he doesn’t get a dime from a short sale. Does buyer Bob…no…because he is paying top dollar. The investor and the realtor make bank because the spread covers the double commission for the agent and give the investor a great return for tying his money up for a couple of months. Non-disclosure is risky business and not worth the trouble it causes.
Real estate agents can offer referrals but if they are working with lenders like this one their advice is just as toxic. They might lose their license to sell real estate but YOU will lose your HOME if loan fraud is committed. Working with ethical people will never hurt you. You won’t have to deceive anyone and can be assured they have your back.
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Why Use a Buyer’s Agent?
July 24th, 2009 categories: Folsom Lake, Home buying, Real Estate
A buyer who represents himself has a fool for a agent
Buyer-broker representation in the purchase of a home is one of the smartest things you can do for yourself. One of my pet peeves is finding out, after the fact, that someone purchased a home from the listing agent because they thought they would get a better deal. My question is who got the best deal?
First, let me explain what I mean by a buyer-broker. According to California real estate code we, who sell real estate, are required to explain who we represent in any given transaction. This is called an agency disclosure. So, if you hire me to list your house, my job is to bring buyers and I am a listing agent. If you hire me to help you find a house, my job is to show you homes that meet your criteria and I represent the buyer as his agent.
A buyer-broker agreement adds to the usual agency duties and requires that I work exclusively for the buyer to find a property that meets his criteria. For example, if I see a home that is For Sale by Owner (FSBO) then I need to contact that owner and ask them if I can show my client the home. If the seller says they will not pay a commission to me then I am still bound to show my buyer. Typically the buyer-broker agreement outlines the compensation to the agent. In most cases the buyers agent is paid from the proceeds of the sale, but technically the buyer is responsible for the commission.
So back to my pet peeve. If you call me about a property that I have listed and you tell me you have an agent, I am required to respect that relationship. Failure to abide by that simple rule results in well over 50% of the complaints received by our board of Realtors. The problem arises when the listing agent alludes that he can get the buyer a better deal for the house by dismissing his agent. Actually, the California Association of Realtors (CAR) boiler plate listing agreement shows the amount of commission to be offered to the selling (buyer’s) agent. So, if the broker doesn’t have to split the commission he gets to keep the whole amount. Do you think that motivates the listing agent to find a buyer who isn’t represented? As Sarah Palin says….you betcha!
This happened in once instance when I was representing a buyer a few years ago. My buyer had a budget that she could not exceed and the market was still going crazy. In the heat of the moment she walked into an open house, told the agent (who also happened to be the owner) that she had a buyer’s agent. He persuaded her to cancel the contract she had with me on another house. He then said he would reduce the price of the home to the amount she told him she was budgeted for.
Do you think she was represented well? The owner/seller wanted out in a big way and exploited her ignorance. We see this a lot in hard markets such as now with investors buying and flipping properties as fast as possible. As if this wasn’t unethical enough, after the escrow closed she finally read her paperwork and found various things wrong or misrepresented. She called me to see if I could offer her counsel. The saddest part was that because this real estate agent was not a member of our local board, and only joined the MLS, there was nothing the board could do to help this consumer.
The lesson is two-fold. One, make sure you understand your agency relationship and if you want single representation (no dual agency) then tell your agent. Buyer broker agreements require that you will be responsible for paying your agents commission. IF you default on your agreement and do what my client did, then not only do you risk owing the commission, but you open yourself up to unethical agents. It’s funny how more green on the table causes failure to highlight items easily missed on reports or disclosures.
And two, hire a Realtor…this is a trademarked designation to be used only for agents who are members of the local, state and national boards of realtor’s. IF they do something unethical you have some recourse and can make their work life very difficult until they resolve your complaint. I’ve always maintained that you can’t teach ethics…people either have them and live by them or they don’t. One thing I do know and that is, that nothing stands in the way of what unethical people think they deserve.
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Who has the Advantage? Buyers, Sellers or Lenders?
July 20th, 2009 categories: Finances, Home buying, Real Estate
Getting Your Offer Accepted
I read an interesting article recently that outlined the differences between a buyers market and a seller’s market but added the newest player…the lenders. Yes, it’s true that prices have dropped significantly and interest rates are hovering around 5%, and it would appear that the buyer’s have the advantage but it’s really the lenders that seem to be calling the shots.
It’s easy to see the truth of this when you realize that the banks have a shadow inventory of about 2/3 of the current inventory on the market. Lending requirements have been tightened to the early 1990′s standards (10% down) with only FHA or VA alternatives. Additionally, they disregard the time frames and procedures regarded as standard operating procedure for the real estate industry as a whole. It’s no wonder the buyers get frustrated and walk away from offers. Some real estate agents refuse to show short sale properties even though they represent 75% of the current inventory on the market.
So what is the solution for buyers eager to take advantage of the situation? The first rule of order is to get your finances organized. Once you have your paperwork in hand and can sit down with a lender, they will be able to qualify you for a loan. I always tell my buyers to make sure this is done first BEFORE you go shopping. Once you find that perfect house you don’t want to feel as though you’re being held hostage to the lender, so get the financing out of the way so you are confident in your offer.
Always get a Good Faith Estimate (GFE) from your lender because this is what you can use to shop around for the best rates. Once you decide on who you are going to work with get a Desktop Underwriting (DU) approval which is considered gold when it comes to offer submission. Remember that once an offer has been accepted the seller is required to show the home as pending sale and cannot continue to offer it for sale. You want to reassure the listing agent by submitting your offer with a DU so they can tell the seller with confidence that you can complete the transaction.
Now that the financing is in order and you know what you can afford, determine which neighborhood you want to live in and work with someone who is familiar with the area. I once had a listing in Rocklin that a buyer’s agent recommended to her clients from the bay area. They bought it as an investment but didn’t see the property until 5 days before we closed escrow. When the agent finished showing her clients the property she called me to ask why I didn’t tell her there were numerous rentals on the same block. I countered that I had done my job in selling the home but she didn’t do her’s in telling her clients about the community. Always work with someone who you trust to be your eyes and ears…if all they are interested in doing is pushing you to sign a contract then realize who’s interest they are truly representing.
Finally make sure you understand what your obligations are when you sign your purchase offer. Too many times buyers assume they can walk away from their contracts without penalty. I recently had a seller who kept the buyer’s deposit due to her agent’s negligence. Remember that the final decision is your responsibility and as the saying goes you can delegate responsibility but you can never give it away.
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Folsom and El Dorado Hills Housing Statistics
July 8th, 2009 categories: El Dorado Hills, FHA, Folsom CA, Home buying, Real Estate
Folsom July 2009
Current Statistics 07/08/09
Single Family Homes Available 625
Short Sales Available 213
REO’s (bank owned) 20
El Dorado Hills
It seems that even though most people say they want to get a deal from the bank, once they actually see the inventory they elect to spend more up front rather than after they purchase. Traditionally, bank owned homes are in need of repair or renovations and that is where FHA loans provide the perfect remedy to an ailing house. The 203k Streamline home loan offers up to $35,000 towards renovations without having to hire a contractor. In fact, Home Depot, Lowes and other major retailers have been approved for this program, which “streamlines” the process and gets the repairs done quickly so buyers can move in without delay. Repairs include everything from new appliances to roofs and gives the new buyers the opportunity to select which finish they prefer. Once the home closes escrow the repairs start immediately but have to be finished within 30 days which is not usually an issue.
Another thing to notice between Folsom and El Dorado Hills is that although Folsom has a much larger population than El Dorado Hills it has less inventory. Currently Folsom has 270 single family residences on the market and El Dorado Hills has 355 yet Folsom hovers around 67,000 people and El Dorado Hills comes in around 42,000 population. Current stats also show the extreme lack of activity in the higher end (above $700,000) market which contributes to the glut of inventory in El Dorado Hills.
Overall, it appears that the lower end market is fueling the fire and frankly, I’m delighted to see young people who have lived here their entire lives be able to purchase a home. It should prove to be much better for the entire community as the next generation puts down roots vs. what my generation had to do which was relocate in order to afford to live. I’m sure the baby boomer grandparents are enjoying their grandchildren living closeby…I know I am. If you would like help finding a home in either community please email me and I’ll be happy to help you get started.
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Credit Scores and Home Buying
July 1st, 2009 categories: Finances, Home buying
Five points to fixing your credit
A couple of months ago a friend was telling me about some financial difficulty with their business and remarked how fortunate they were to have their credit line on their home available for backup. I advised them to check with their bank to make sure their credit line was still available. Unfortunately, I was correct because their credit line had been closed without their knowledge.
Another client called to ask about buying a home and when I asked about their credit history they said they were trying to pay down some credit cards only to find that once the amount due was paid the bank reduced their limit.
The first basic in credit scoring is to understand what the numbers mean. FICO or the Fair Isaac Corporation is the company that for the past 53 years has offered a measurable number by which creditors can determine your credit worthiness. Credit scores range between 200 and 800. Scores above 720 are considered desirable for obtaining a mortgage. They have determined five main factors will affect your score…things you ultimately have control over.
1. Your payment history. Whether you paid credit card obligations on time.
2. How much you owe. Owing a great deal of money on numerous accounts can indicate that you are overextended.
3. The length of your credit history. In general, the longer the better.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay promptly.
5. The types of credit you use. Generally, it’s desirable to have more than one type of credit—installment loans, credit cards, and a mortgage, for example.
There are some variations on the theme but the basics itemize your scores and more importantly indicate how you can improve your scores, which in turn, improves your life.
I spoke with Linda Ferrari who has a FREE ebooklet called: “Save Your Credit, Save Your Life” which is a 10 step action plan to help clean up your credit. She offers great advise starting out with only ordering your credit report when you visit the various agency websites. Apparently even the credit agencies are trying to sell additional services that you may not need. Another point she makes is that everyone is entitled to one FREE credit report each year and to be sure you order only from www.annualcreditreport.com …all other sites offer paid services so don’t be fooled.
Another option is to pay a credit repair company to “scrub” your credit. Typically this is done once you have a complete copy of your credit report from the three main agencies: Experian, TransUnion and Equifax. Thoroughly examine your report, line by line, and be ready to prove any incorrect information. Once you challenge any information they are required by law to look into and correct anything false. If you find you are having trouble this is where a credit repair service can come in handy.
First time buyers need to understand that they didn’t get into their situation overnight and it might take just as long to correct the situation so don’t despair. There is gold in those hills and it’s in the form of tax credits BUT they are due to expire Nov 30th 2009 so NOW is crunch time. Making the effort to improve your credit will pay big dividends and could ultimately result in home ownership…don’t let this market pass you by.
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