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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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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Buying Foreclosures Basics
June 4th, 2009 categories: California Property Taxes, Finances, Foreclosures, Home buying
Tips to protect your interests in real estate
Now is a great time to take advantage of buying foreclosures, bank owned homes and even short sales. But how do you lessen the risk of liens and judgments attached to a home? That is one of the many fears buyers have when shopping for a home and another good reason to have a seasoned real estate broker representing you at the table. I’m going to outline the process and highlight some ways you can protect yourself from absorbing the previous homeowners bills.
The typical escrow begins with a preliminary title report which itemizes all the liens on the property. In our region the escrow officer will order the report and the buyer should receive it within 72 hrs of depositing their check with the title company. This report gives a full disclosure of all the liens and judgements on the property and identifies who holds those liens and how much is owed. I cannot emphasize enough that buyers need to carefully review this information.
It is important to understand that the preliminary title report is only good from the day it was printed which is usually 14-21 days prior to the escrow being opened. In other words if you open escrow May 21st then your preliminary title report will show all the activity on that property up to May 1st. This is to allow time for the recordings against that property to show up in the system. The escrow officer will pull another title search just prior to funding the loan to ensure no additional liens were placed on the property between the time the purchase contract was signed and the transfer of title to you.
On this report you will see everything that is attached to the home and if there are outstanding bills like water, sewer or garbage. Most of the banks that I have worked with paid off the utility bills for the short sales that I have closed but it is never safe to assume that they will. I have seen water bills in the $800 range because some utility companies will not close the account out until the final bill has been paid. Even though the homeowner may have vacated the home the monthly cycle continues until the final bill shows paid in full. The escrow officer should follow up to confirm all utilities are clear prior to funding the loan but it doesn’t hurt to ask at the time your sign your paperwork.
Judgements are another issue that can be resolved at the time of closing so long as they are paid in full. They can range from child support to back taxes. The title officer will do a check against all parties social security number to make sure each party is free of judgements. My recommendation is for the title officer to do this early in the escrow so that no surprises show up at the end. I once had a judgement show up for a buyer of $45,000 for back taxes happen 3 days prior to closing the escrow. Fortunately they had the cash to bring to the table but if they didn’t then the entire deal would have blown up.
After all is said and done there is a title insurance policy that is taken out for the buyers to ensure a free and clear title to the property should anything show up after the escrow has closed. Of course the buyers pay for this but it is money well spent especially if a lien shows up or a judgement from some government agency happens without notice. The bottom line is to work with a realtor who has good relationships with title companies…they are your allies and are there to protect your interests.
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Tax Credit for New Homebuyers
February 24th, 2009 categories: Folsom Lake, Home Building, Real Estate, Tax Incentives
New construction offers up to $10,000 credit
Good news for first time home buyers in California. As part of the state budget you can now get up to $10,000 credit or 5% of the purchase price of an owner occupied newly constructed home. This applies only to “have never been occupied” properties. This is a tax credit that is good only from March 1, 2009 to March 1, 2010. There isn’t any information regarding down payments or loan caps but a tax credit works like cash in your account at tax time so those of you who were on the fence it’s time to go shopping.
Currently there is a tax credit up to $8000 for first time homeowners which will expire at the end of 2009 which is an expansion of last year’s tax credit of $7500 with some changes. I don’t know if the credit will be retroactive to last year’s purchases but since tax season is upon us I’m sure more information regarding exactly how this plays out will start to surface.
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Lifestyle Issues and House Buying
January 28th, 2009 categories: Real Estate
How to understand your buying psychology
The challenge of melding tastes and keeping peace is a real art and a good realtor can make the experience enjoyable. Helping clients analyze their styles will take deliberate communication between the buyers to determine what the basic, no negotiation necessities are for comfortable living. Keep in mind your lifestyle and activity level to help you decide if you want to pay the extra to live next to bike trails vs the convenience of being close to shopping. Thinking you’ll be happy in a particular neighborhood simply because it’s well regarded is a bad assumption especially if you find yourself compromising on your natural inclinations.
There are the usual assumptions of style for each sex (she likes large open kitchens, he wants room for his projects) but frustration arises when one person is totally in love with a particular house only to find out their mate wouldn’t even consider putting in an offer. I see this a lot when one party loves the floor plan because it reminds them of the house they grew up in but the other party can’t get past the style of siding on the exterior let alone what’s inside. Hammering out the details can be accomplished in a number of different ways but the point is to have that established as a baseline.
One tip for figuring out what works is to look at the basic personality types of the buyers. Are you a type A and your mate a type B? When I worked in interior design you could always tell the A’s…they were attracted to serene motifs, clean lines, calm colors. The type B’s on the other hand wanted energy from their homes so strong contrasts, lots of accessories and bold statements in furnishings caught their eye. Here’s an interesting link to an article on colors and personality types.
Translating all that into the home environment can help you understand why certain floor plans and styles are more attractive (notwithstanding basic design principles.) Trying to talk someone into liking something that their emotions dislike is like mixing water and oil but the result is a lot of frustration and short circuits the buying process. Taking the time to understand what you want from your home helps all parties and makes the process of buying much easier on your agent.
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What Is Your Home’s Value?
January 25th, 2009 categories: Folsom CA, Foreclosures, REO
Sacramento Valley Real Estate Market Trends
There’s this great website that a client of mine sent me that shows the market trends over the past 5 years in the Sacramento Valley. It’s put out by the Sacramento Bee and you can select any area and see how much the values have changed.
This past week at the Realtors board meeting there was a presentation complete with charts reflecting the decline of our market in relation to the loans people took out on their homes. The best part was that the numbers show that we’ve been through the first wave of loan re-sets and are starting the second which some say could be the last for this buyers market.
According to the recent stats the Sacramento area has dropped to values last seen in 2001. The Folsom area has been hovering around the 2003 price point which upholds the old adage of keeping location paramount. The percentage of bank owned homes in Folsom is about 63% compared to some areas which are close to 100%.
I recently had a conversation with an agent in the bay area where there have not been any fair market sales for the past 6months. According to DataQuick prices are down 50% there and we usually follow the bay area. The upshot is that the investors are starting to come back. It’s not unusual to hear of agents writing a dozen to 20 offers hoping to get 6 houses for their clients.
Right now we have low interest rates, plenty of property to choose from and little competition…sounds like a good time to go shopping. The real key is trying to guage when & where the bottom of the market will be. There are indications that this year will be the last decline and things will begin to level off but you need to remember that there won’t be anyone who will ring a bell to alert us.
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Roseville, CA ranked #90 Best Place to Live
October 9th, 2008 categories: Folsom Lake, Golf, Granite Bay, Roseville
Money Magazine 2008 Winner
Roseville, CA is a great city located along Hwy 80 half way between San Francisco and Lake Tahoe. Situated in the Sierra foothills of the Sacramento valley this up and coming town claims #90 in the top 100 places in 2008 to live in the United States according to Money Magazine.
Historic Roseville has a quaint downtown area with a new civic center, classic movie theatre and local shopping with antique stores and assorted local vendors. They host an Art Walk every 3rd Saturday from spring to fall and there are a variety of street fairs that support charities and special events during the summer months.
Granite Bay is the bedroom community located next to Roseville and was once part of this city. It is similar to El Dorado Hills in that it has a more affluent population and caters to the upper end real estate shopper. The private Granite Bay Golf Club is located in the middle of this lovely area and is available for special events.
West Roseville offers incredible shopping thanks to the Galleria. When this mall opened in the early 2000s, it was showcased as one of the newest concepts in shopping mall design. The expansion has yet to be complete with an additional wing just opening called the Fountains. Located across from the main mall this new center offers Whole Foods as the main anchor.
East Roseville offers a more tranquil setting with established neighborhoods and easy access to Folsom Lake. Homes on acreage are still available and working farms offer roadside produce that get plenty of business from the locals. On the weekends, you will see bicycle clubs riding along Auburn-Folsom Road with both types of bikes sharing the road.
This northern section of the Sacramento valley offers virtually every sport imaginable and is located within 1.5hrs drive to some of the world’s best winter sports in Lake Tahoe. If you are considering a relocation please give me a call and I’ll be happy to get you started.
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