Real Estate Q & A
By: Sam Richards
October 3, 2012
Real Estate Q & A
October 3, 2012
WATERFRONT?
Q. I was pre-qualified for a 100% purchase to $300k, but, when I tried to buy a home, I needed $15k in closing costs, twice the first estimate. I couldn’t come up with that amount, so I lost the deal. I still don’t under¬stand why it cost so much in closing costs. D.D. Rio Vista
A. Closing costs are a “catch-all” for any fees on top of the purchase price re¬quired to make the purchase happen. First, there will be any inspections or repairs billed to escrow during the sales transaction. They become part of the closing costs, and the person re¬sponsible to pay is defined in the sales contract. Sec¬ond, there will be Escrow and Title fees; like the cost to use the escrow service, then, the title insurance fee to guarantee the grant deed is transferable and clear of problems. Third, loan fees, which will be dependant on your credit and the strength of your purchase. Loan fees on your deal would also require Mortgage Insur¬ance, (PMI) with 100% financing, the first year paid in advance, with monthly impounds to collect for the following year; usually 3 impound payments in ad¬vance. Fourth, impounds for recurring costs like taxes, insurance, PMI, and any bonds on the property.
A good faith estimate is given prior to purchase, but some things can change day to day. For instance, loan rates can fluctuate causing a change in fees and PMI; insurance cost could be higher if flood is required, or the condition of the home is in question.
One solution to your problem is to raise the purchase price enough to cover your clos¬ing costs (having the seller refund the additional to cover closing costs), or, find some¬one to gift you some money. It would certainly be a shame to be so close to a purchase and lose out. Check with your agent for options.
Q. I’m looking for land, preferably with waterfront where I can build, but I can’t seem to find a real¬tor with any listings of this type. Is this something that comes up for sale from time to time or not? E.S. Rio Vista
A. I get calls daily from buyers wanting waterfront property; most wanting some¬thing for under $200k. I try to gently educate people that besides being a water sport paradise, this is principally a farming community with agricultural zoning.
In Solano County, AG zoning is A160; meaning no subdi¬vides below 160 acres, and only 1 home per 160 acres. In Sacramento, there are AG plots from 40 acres and up, still 1 house per the acreage designation. If there are mul¬tiple homes on the property “grandfathered” in, all must convey on 1 sale. There are some smaller plots, and yes, there are some waterfront lots and homes; but, the prices start at $300k and up.
The greater Delta net¬work of sloughs consists of 55 islands, each with a levee around the island. On most waterfront property, the home is on 1 side of the levee with the boat dock on the other side, and many times on top of that levee is a public road. If this is an older home, then it’s built on the ground (not raised above the flood plain), meaning there is no view of the water and a road has to be crossed to get to the dock. On new construction, the home has to be raised above the flood plain, which does afford a view. Those few developments where the home is direct to the water are in high de¬mand; the prices going up according to that demand.
There is, by the way, only 1 island of that 55 that has never flooded, and homes can still be built at ground level: and that is Grand Island.
Waterfront and Delta spe¬cialists; call 707-374-6491 or visit www.richards-real¬estate.com
March 21, 2012
HOUSES AND CARS
Q. As I unpack and move in to my home, I’m noticing lots of small and probably not that important things that are either broken or in need of some repair. It doesn’t seem fair that anything would need to be done based on what you have to pay for a home today. I had the home inspected prior to purchase, but these things were not addressed. What is my recourse? D.D. Rio Vista
A. I had some bodywork done on my car recently, and while at the body shop, I overheard a comment from a gentleman having some complaint about the finished paintwork on his truck. The repairman looked him straight in the eye and said “shucks, you complain about one little run in the paint on your truck, but you pay $400k for your house and let the painter slap the paint on with a brush”!
The point is that everyone has a different perspective of when a something looks 100% right. When you had an inspector view your prospective purchase, I’m sure the thrust was for systems operation, that everything worked, and that safety issues and codes were met. When it comes to a loose hinge on a cabinet or a cracked switch plate, or maybe some over paint on a baseboard, these are things that can be done easily and cheaply; and are usually grouped in a category of minor cosmetic issues.
The ultimate responsibility on purchase is yours alone, unless you can establish the seller intentionally concealed material facts about deficiencies that they were hiding from buyers. Any home purchased today has a myriad of disclosures that are required, and new ones being added often enough that we don’t buy forms anymore, we take them daily from the Realtor internet site so the latest legal language will be included.
Once that home records in your name, you own it. Any recourse would require some breech of the sales contract or damage by the seller on their move out. Even then you would probably have to sort it out in small claims court.
You already summed it up, it’s probably not that important.
Q. The house next to mine used to be a rental, but the landlord has recently sold the home. When the renters moved out, they took everything except a junk car that’s a real eyesore. When attempting to move the car, the new owner tried to contact the renters who left no forwarding phone or address. The prior owner says it’s not his car so there’s nothing he can do. How do we get rid of the car? V.B. Isleton
A. The new owner should have never accepted the property until the car was moved. The purchase offer should have cited there not be a close until all personal property was removed. The problem now falls on the new owner to bear the cost of towing away the car. Had the car been left on a public street and been determined to be abandoned, then the city would tow the car. A call to the police would help determine if the car is registered and who the owner actually is. If no one claims the vehicle, it could be possible to have a wrecking yard come and get the rusting hulk. If the car has parts resale value, a wrecking yard may tow for free and even pay a little something for the car. If that fact becomes known to the car’s owner, they may be incented to come and deal with it, if not, the new owner still gets rid of the car.
Once it’s gone, property values will go up.
Not sure what’s important when buying? Call the experts at Richards Real Estate, 707-374-6491 or visit our Web site: www.richards-realestate.com
March 14, 2012
SMOKE SIGNALS PREDICT FUTURE
Q. Every year I read about predictions of an improving economy, yet the housing market stays stalled. For 2012, I’m reading again that the market will heal and become active. Are all these predictions just so much smoke blowing in our faces? J.M. Rio Vista
A. I’ve read as well that borrowing for a home loan could be easier this year, but when does that start? My last deal spent 15 days with the underwriters to get funded, and that part of the process used to take 48 hours.
There are many ingredients to make a brisk market, like low prices and interest rates, low inventory, and abundant buyers, and we have all those. We could see multiple offers bidding up prices. The stock market is the strongest since 2008, and loans are in place for low or nothing down. Even short sales could get streamlined; there are 2 bills being presented to speed up the short sale process which currently takes 4 to 9 months on average. One bill would demand completion in 75 days, with only 1 lender extension for 21 days, and a lender fine of $1,000 for violation of provisions of the Bill. The other Bill is similar but allowing only 45 days. Since the majority of homes in our area are worth less than people owe, this would speed up the process and retain potential buyers who are getting tired of waiting and walking away, forcing the seller into foreclosure.
All the things mentioned here could certainly help our market start moving, but wait, there may have been a light wind blowing through those smoke signals; we’ll have to wait and see if we’re getting the right message.
Q. I live in an HOA community, and I’ve learned that even changes in landscaping have to be approved by a committee. This seems like overkill, doesn’t it? R.M. Rio Vista
A. Statistics show that communities with Home Owner Associations (HOA) and Codes, Covenants, and Restrictions (CC&R’s) hold their value better than neighborhoods that have no guidelines or HOA’s. The balance to strike is what you need to make the home feel like your own, and what the HOA allows. This should be evaluated prior to purchase since these limitations are not uncommon.
Not all HOA’s do this, but Trilogy in Rio Vista transfers documents to the buyer prior to close of the sale for buyer review. After purchase they hold an orientation and answer questions, and they point out the architectural committee is where you must submit your changes.
I recently was turned down on a project by the architectural committee, but I was offered a review by an executive committee that gives the applicant the opportunity to review the decision and seek clarity, and possibly overturn the denial. I was still denied, but the process is a democratic application of the interpretation of the intent of the CC&R’s. The decision was made according to guidelines as to the intent of how the community should look and be maintained.
I cover this aspect with clients looking to purchase there so there are no surprises after they move in.
Call with your questions to 707-374-6491 or visit www.richards-realestate.com
January 25, 2012
Loan Maintenance
Q. In 2005 I took out a purchase loan that offered flexible payment plans. If you took the interest only option, they locked the rate for ten years. The problem is that after the tenth year is up you have to roll over to a fully amortized loan. This new payment schedule is based on the remaining 20 years of the loan, so basically I have the purchase price plus interest, taxes and insurance based on a 20 year schedule! My plan was to refinance for a new 30 year term, but now I owe more than what the home would sell for. How do I get out of this? The new payment would be $1000 more than I am paying now! M.G. Rio Vista
A. That was a popular loan when prices were growing so fast that interest only made sense. Most people sold to capture profit long before the note came due, but today, prices have dragged down values and prohibit loan changes since an appraisal for a new lender would show a lower value than when purchased.
You have 3 options; the first would be a loan modification from your lender to make your home affordable based on household income. Failing that, the second would be a short sale to rid yourself of the debt and move on. A short sale will punish your credit for about 2 years, and then you could even purchase another home. The third would be to walk away and let it go to foreclosure. On this one your credit would suffer for 4 years before you could purchase a home again.
In any case, your housing would change from owning to renting, but only until you could heal your credit. The loan you had then is no longer offered, and the loans today are more defined.
For example, acceptable to underwriters would be a fixed rate 30 year loan, and could be FHA with 3.5% down, no down with VA or USDA, or conventional with 20% down. Loan programs used to depend on the rate of appreciation more than the qualification of the buyer. That has all changed; today the buyer has to qualify as well as the home and neighborhood. The rigid rules on loans today are not unreasonable considering how many people were put in to homes they really couldn’t afford.
Home loans are available; the difference today is you actually have to be able to prove you can pay it back.
Q. I always see interest rates for 3 and 4 %, but I don’t know anyone that has received a rate that low. How do you qualify for those rates? D.D. Rio Vista
A. Advertised rates are mostly marketing ploys to draw you in; once you have submitted all the qualifying information and had your credit looked at, people are reluctant to move to a different lender and they’re counting on that.
A lower rate can be had with a cash buy down, usually 1% of the loan amount. For conventional (20% down), it will vary, since any interest rate reflects the degree of risk for the lender. I’ve seen variable rates for as low as 2.5%, but you need 20% down, and the rates adjust up the first year.
When shopping rates, look for the annual percentage rate (APR), and it reflects the total load for fees and buy downs, and is usually higher than the advertised rate.
Better yet, go to an independent loan agent for counsel as to what you qualify for, and what your monthly payments would be. We do that for people every day.
Call 707-374-6491 or visit www.richards-realestate.com
January 04, 2012
Real Estate Q & A
HAPPY HOLIDAYS
Q. I have a home in escrow, and the buyer keeps delaying the close. His lender says he is well qualified and the delays are with the underwriters that fund his loan. Seems like everyone is passing the buck, meanwhile our contract is about to expire. I have called my Realtor, the buyer’s Realtor, and the buyer’s lender. All I hear is we are in line for documents. I don’t think the buyer is serious, or something in their application is flawed. How do we get this to close? I have bought and sold 13 other homes, none of the deals were like this. K.D. Rio Vista
A. The first thing I tell clients is that a “close” date is a projection that may change, an estimate of the time it will take to transact the deal. The contract to purchase expires on the “close” date, so an extension must be signed to continue the deal beyond that date. There are many 3rd party inputs that can affect the length of the contract, such as the appraisal, inspections, repairs, move out dates, and your favorite, underwriter delays. Underwriters; they are the people that control whether or not the loan will be given, and if the file satisfies their requirements and all their conditions for those requirements have been met. Underwriter requirements vary from bank to bank, and could be different for private lenders or investor groups. This is an area that is handled by your loan agent, but since 2008, the rules have tightened up and the requirement list has become longer.
For instance, not only does the buyer have to qualify, so does the house and the neighborhood! Some underwriters may require cash reserves while others may not, and the list goes on. A new one recently was if in an age 55 or over community, are you old enough to live there and proof must be provided.
Mostly your lender does not know from deal to deal what the final conditions will consist of to make funding the loan happen. It’s always a scramble at the end to put the pieces together; then the title company can slow it down once again if they are busy.
We are definitely in a “tight money” market, and if you are selling, you can be assured there will be some hair raising requirements to fulfill.
If you haven’t bought or sold in the last 24 months, then you know absolutely nothing about what it takes to sell a home. Your last 13 sales mean nothing by today’s standards. Real Estate today is being re-learned daily by diligent Realtors, striving to make your transaction smoother.
You, meanwhile, have violated agency law by calling the lender without the buyer’s permission, and talking with the buyer’s Realtor. All your communication by law should be through your Realtor and your Realtor only.
An uncooperative attitude like yours is usually born from a need to get ahold of the money, or it could be that the flaw here is just you.
Direct your inquires to: 707-374-6491, or visit www.richards-realestate.com
Sam Richards: Richards Reality
December 28, 2011
Real Estate Q & A
NO GLOVES FOR CHRISTMAS
Q. My Realtor has an offer on my home, and the buyer so far has had two BPO’s and an appraisal, a pest inspection, roof inspection, and a house inspection. They’ve looked at everything, and I guess I understand the nature of all these inspections except the BPO. What is that? G.S. Rio Vista
A. Inspections are recommended, and all that your buyer is doing will deliver a product to them with no surprises, and relieve any liability you may have had. The appraisal and 2 BPO’s, however, are for the buyer’s lender. You know that an appraiser sets a price value on the home, and a BPO does the same thing. The lender is just trying to save money.
The appraiser is charged to the buyer, but the BPO is paid by the lender.
BPO is an acronym for Brokers Price Opinion, a value set by a licensed Realtor and supervised by a Broker, or done by the Broker. This price opinion is done using the same data as the appraiser, but a BPO is only an opinion and not usable to get a loan.
The lenders purpose here is to make sure the appraiser is not “puffing” the value, and by using BPO’s instead of hiring a second appraiser, there is a significant savings for the lender.
With an unsteady market and values being uncertain, this is just one safeguard lenders are taking to insure they are not over financing.
Q. Are homes selling, and are values still going down? R. N. Rio Vista
A. There’s no straight answer to this; so first, let’s look at a couple of statistics: this time last year we had in the range of 115 homes for sale, and today we have 55. For the last 6 months anything below $200k has drawn multiple offers. This tells me we are hitting bottom on pricing because anything that draws multiple offers has a chance of bidding back up. With diminished inventory, the buyer has less of an advantage on price negotiation, but a good deal of price structure depends on if the home is a “short sale”, an REO, or seller owned.
The next problem encountered is the buyer’s lender. It’s harder than ever to get qualified; both the buyer and the house have to satisfy the lender. The smallest glitches will stall or even kill a loan. Rare is the buyer with perfect credit, loads of down payment, and buying a home that doesn’t need anything done to repair it.
This just represents the fear of lenders that were to loose with loans in ’04 and ’05, and didn’t care because escalating house values would always show them a profit if they had to foreclose.
When the market collapsed, the lenders panicked, and now we’re back to the kind of lending that was available in the 70’s.
So, to answer your question, homes are selling but many have to sell multiple times because buyers keep getting shot down by lenders. Values seem to have flattened, not going up or down; it seems like the market is on a wait and see what government programs can initiate to spark fresh lending and shake loose this stalled market.
So, if you want Santa Claus to bring you a home for the New Year, be prepared to go into a little room with your lender where the lender will put on plastic gloves and inspect every aspect of who you are so they can feel better about getting paid back.
Personally, I always thought the credit score was enough to go on. The snap of a rubber glove always has me looking over my shoulder.
Direct your inquires to: 707-374-6491 or visit www.richards-realestate.com
November 16, 2011
Real Estate Q & A
BUY AND BAIL
Q. What’s to stop me from buying a house like mine for half what I paid, then just walking away from mine? S.A. Rio Vista
A. Did you say you were formerly with Bear Stearns? Aside from all ethical and moral issues, here’s what to expect: you have to qualify for the 2nd home while your payments are current on the 1st one. If you are saying yours will become a rental when you move, then the new home needs to be larger and nicer. You must show a deposit from a committed renter. If that isn’t possible, then the second home will be looked at as an investment property and you’ll need 20% down plus closing costs and cash reserves.
Now, keep in mind you have to qualify for both homes, so abandonment of the first home might look a little like fraud.
It’s true that the loan is secured by the property, and if it sells for less than you owe it normally would still satisfy the debt, but the bank has to agree to a short sale. They would need to know why you can no longer afford the first home when you just qualified for a second home.
There is no law stopping you from doing a “buy and bail”, really it’s qualifying that holds people back.
The market has tortured us all, but there are glimmers of hope of a market that wants to recover when loan restrictions settle down.
Hang in there, recovery will be sooner than you think.
Q. So, how is the real estate business? Will there be changes in how homes are sold? J.M. Isleton
A. Everywhere I go, instead of “how are you” or “good to see you” or even a simple “hello”, it’s “how’s business”! People are just trying to make small talk I guess, but I tend to answer when I’m asked a question, and today the answer to “how’s business” is not a simple answer. Real estate has different strata that move at different rates within that category, and vary again within different classifications, and again from area to area. There is no one catch all phrase to define the state of the market today. We can see locally in Rio Vista/Isleton and the east bay that values are down and homes are hard to sell, but San Jose to San Francisco shows a brisk market where sales are impressive.
The homes here sell if priced right, but getting a loan is another story. Lenders have made it so difficult to qualify that 3 of 4 buyers are being declined due to not enough down, marginal credit scores, or amount of debt owed. The lending rules have changed at a blistering pace and reduced interest rates have not helped with nervous lenders afraid the values may go down; and buyers that are willing to walk away from their obligations.
Lenders are looking very closely at past credit performance, the home and neighborhood, and often ask for more than one appraisal.
But, the good news is that we seem to have hit the bottom, that is, homes are selling fast (some with multiple offers) if priced aggressively. All the market really needs now is a cash infusion from lenders to make it a little easier to get loans.
As far as how home sales will be affected ongoing, the real estate business is ever changing and updating with customer demand. The process still involves more than a homeowner should try to handle on their own; so, a Realtor will be necessary to get a sale done properly, and values can no longer be solely determined on what your neighbor sold for making a competent Realtor even more critical.
So how’s business? Like wiping the dirt off a wagon wheel, there’s just no end to it.
We are SHORT SALE and REO experts, call for information. 707-374-6491 or visit www.richards-realestate.com
November 02, 2011
Real Estate Q & A
CREDIT RECOVERY
Q. What can I expect on my credit rating if I do a short sale, and what if I let my home go to foreclosure? B.M. Rio Vista
A. Your credit score (FICO score) is a formula that takes into consideration your personal profile by breaking down your score to the following: 35%=payment history, 30%= total debt showing, 15%= length of credit history, 10%= type of credit, and 10%= new credit accounts and number of inquires.
When doing a short sale, the total elapsed time averages 4 months during which time you have probably ceased making your house payment. Once the sale is complete, your credit will start to rebuild, and you become lendable for another home in 2 years.
If, however, you quit making payments and let the home go to foreclosure, that process my take up to 18 months, and looks bad because you did nothing to mitigate the debt such as selling. You are at least 4 years after a foreclosure before you become lendable again.
Keep in mind, becoming lendable means that during the period that you have not made your house payment, you did make any other payments on time. This is critical to raising your credit score.
I had a client with an 800 credit score, and after a foreclosure he dropped to 640. You can rent with a score as low as 550, to purchase a home you need 620 or better, and to qualify for all the great finance deals you need 700 or better. There are some tricks to bring your score up, such as credit cards, don’t pay them off, pay them down by half.
Having good credit will affect your credit card rates, insurance costs, and your ability to get emergency cash for those things yet unknown.
If you go to an all cash basis, that is as bad as a low credit score; you need to demonstrate you can satisfy the terms of a payment contract, even if you open an account, make payments for 6 months, then pay it off, at least it will show a credit history.
So, no deed in lieu, no foreclosure, do a short sale and protect your future.
Q. I keep seeing low advertised loan rates of 3.25%, are these real? N.R. Rio Vista
A. They could be, but keep in mind the interest rate you pay is a reflection of the risk involved in lending to you. Each person stacks up a little different, and a rate like 3.25% is most likely a teaser. You apply with high hopes only to find out that your loan will be 4% or 5%. The low rates normally require a credit score of 750 or higher, and even then are offered as a buy down; that is, you pay to get that rate.
There are some exceptions on federally sponsored lenders like FHA and USDA, or VA. These could be 4.25% with a score as low as 640.
October 19, 2011
Real Estate Q & A
EVERYONE HAS A BOSS
Q. After listing my home, my agent came up with a buyer, so she represented both of us (dual agency). We had a couple of counters on the buyer’s offer, then went in to contract, and expected a quick close since it was a cash deal and the buyer said there would be no contingencies. My agent presented the buyer with disclosures and returned them to me. After all this the buyer cancelled for no apparent reason, and I have discovered that my agent never opened escrow or deposited the buyers good faith money, my disclosures were returned to me with no signatures from the buyer, and my agent never presented a contingency release form. Now my agent wants me to sign a release to cancel the deal. Should I sign? A.M. Rio Vista
A. It doesn’t matter if you sign or not; you never had a completed contract without the deposit of the good faith money.
Your agent dropped more balls than a Tampa Bay wide receiver. To properly represent both parties, she wasn’t done with you after finding a buyer; she needed to get that buyer into contract by opening escrow and depositing the good faith deposit, and THEN proceed with disclosures, and having the buyer sign the disclosures is real estate 101, basic to the deal. Since the buyer indicated no contingencies, you need that in writing, and there is a 1 page form that your agent neglected to have signed.
Buying a home is a big investment, and buyers often go from elation to buyer’s remorse and want to back out. No one can force another to buy, but if all the above mentioned things had been handled properly, it would’ve given the buyer pause as to if they should quit after being in contract. Sometimes a gentle nudge is all a buyer needs; and sometimes buyers quit. You never had an opportunity to negotiate this buyer back into the deal because of your agent’s inability to complete anything.
I would call the Broker at your agent’s firm and demand a meeting as to what your agent did wrong, which is plenty. You may be entitled to compensation, but not from your buyer, perhaps the agent.
In any case I would report the agent to The Real Estate Board: www.dre.ca.gov
By the way, I would list with someone else.
Q. My agent does a good job, but she is often curt with me and seems very crabby most of the time. I am evaluating if I should continue to put up with her. Any suggestions? B.M. Rio Vista
A. Part of being good in sales is good personal interaction even if you are having a bad day. Not only should you change, you should make sure she understands why you are changing, and it should be brought to the attention of her Broker or Manager. And yes, you should make a big deal of it because she’ll never get better if she always has people putting up with her tantrums and bad days.
When we have an agent bring a buyer to one of our listings, our policy is to treat them with professional respect and the same courtesy we would like in return. We often have to deal with agents that think being mean will get something for them, usually anger gets anger back. Some deals can have stressful difficulties, and it always goes smoother if everyone works together.
For a good Realtor, call 707-374-6491 or visit www.richards-realestate.com
October 19, 2011
YOU’RE FIRED!
Q. I made an offer on a home that is a short sale 3 months ago. I understand this type of sale can take a long time, but I want to be informed of the progress, and my agent does not return my calls. Since I have an offer in place, it is it possible to change to another agent? I don’t want to mess up an opportunity to buy this home. J.W. Rio Vista
A. On rare occasions you might find yourself being asked to sign a “Buyer /Broker” agreement, and there are three different varieties with only one getting your Agent paid no matter what. If you haven’t signed anything to that effect, then your agent is an “at will” employee and you are the employer. You could call the agent’s Broker to see if someone else in the agency could be assigned, but if that is not possible, just fire the agent. It should be in writing, and an acknowledged email will suffice, plus a phone call to announce your intentions. Worst case, you could send a registered letter, or anything that requires a signature of receipt.
Once the agent receives this, they will have to withdraw your offer; don’t despair, you can re-submit with your new agent right away.
Do a little homework on selecting your new representative: make sure they are a designated Realtor, with a capitol “R”. That means they are a member in good standing with the local board of Realtors, the California Association and National Association of Realtors. Make darn sure this person has done and understands short sales, and it doesn’t hurt to ask them a few questions, in your case one of which will be how often do you return calls? Is this your career or do you have another job?
I just love these voicemails I get when trying to reach an agent that say “I will return your call in 48 to 72 hours at my earliest convenience”. At their convenience? Imagine working for someone and the boss asks for something, and you answer you’ll do it when it’s convenient?
In this day of electronic communication, there is no excuse not to return calls. In my office we observe “customer urgency”, that is, if a client walks in, everything else stops to service the client. That continues with calls to be returned within 10 minutes. If you can’t return a call, you better be off shore on a cruise and have designated a fill in agent to cover for you, and your client knows that as well.
If your agent doesn’t wanted to be bothered with your questions, then fire the bum!
Q. I have a cash offer on my home, and my Realtor keeps bringing forms for me to sign. I don’t understand why anything else is necessary since the buyer has made an offer and I have accepted it, and it is all cash. Why all the formality? I told the Realtor I will not sign anything else, take or leave it. B.W. Isleton
A. Imagine this if you will; you are standing before the Judge and being sued by the buyer because things went wrong on issues you did not disclose. Then you will answer to the Judge that, yes, your Realtor put those forms before you but you thought they were silly and refused to sign.
You alone will stand responsible for State mandated disclosures that you refused to fill out. All your Realtor has to have for their file is a note on each form of the date it was presented and that you refused to acknowledge it with a signature. Keep some money aside from the sale; you’ll need it for legal fees.
Send your inquiries to www.richards-realestate.com or call 707-374-6491.
August 10, 2011
Real Estate Q & A
ALARMING HEADLINES
Q. I read an article on the internet that says you can do anything an agent can, so why pay one? A real estate license can be had in 2 weeks according to the story. R.S. Rio Vista
A. If you read it, it must be true, right? After all, what I hear is the only difference between a real estate license and a driver’s license is that some people can’t get a drivers license!
I want, however, to give you a best case timeline on getting a real estate license. Let’s use August 1, 2011 as the date you decide to get your license. You have to pass 3 college level real estate related courses to apply, even if you have a degree. You can take the courses at your local junior college or faster is home study. So, home study will not allow you to test to pass the course until you have had it for 3 weeks; so lets say you are a study whiz and take all three at once, pass first try and submit to the study course for your certificate of completion which will take a week to arrive. You are now 1 month into the process and you can now apply to take the state exam. You must mail in your application and course completion information and wait for the state to assign a test day. This usually takes 4 to 6 weeks, but let’s say that because of the current soft market there are fewer applications so your date is assigned in 3 weeks. That is just an assignment, and the actual day you test will be another 3 weeks (usually 4 to 6 weeks).
Of course, you pass on the first test (failure rate is 35%). Once you have been notified that you passed (48 hours), and before your license is issued, you have to get live scan fingerprinting, for which you will have to make an appointment with a sheriff’s deputy. More waiting, let’s say 2 days. Then your license is issued, usually in 3 weeks. It’s now the second week of November.
Ok, so far we’re 13 weeks and 4 days into a fast track to get a license. Of all the agents I’ve been involved in training and others I’ve talked to the time line is more like 6 months to one year.
If you want to be a broker, you need an additional 5 college level real estate related courses, plus a degree, or compensating time spent as a salesperson of 2 years (failure rate on this all day test is 60%).
A license is good for 4 years, and to renew requires 45 hours of additional education. With the ever changing market and pressure of a commission only income, it’s a wonder any agents last more than a year.
And, by the way, once licensed you are expected to join your local board, the MLS, pay to promote yourself, stepped up automobile expense, advertising expense, and sign costs just for starters. You are spending thousands each year whether or not you sell anything.
Your ongoing education costs are on you as well.
There are over 200 different documents you will become familiar with, and learn which ones apply to which deal, and over 100 different steps you will take for each listing and each sale. There are state requirements for each deal that without a real estate education
You simply would not be aware of; the kinds of things that could get you sued later.
A license in 2 weeks? It simply is not true.
Do it yourself? Sure, build your own house, defend yourself in court, fix your own car, and so on. It never gets done quite right, does it.
The news media should be held accountable for publishing such trash for the sole purpose of filling space and drawing readers with alarming statements with no substance.
Call 707-374-6491 or visit www.richards-realestate.com
August 03, 2011
Real Estate Q & A
TIMING ISSUES
Q. Since the summer is upon us, and slow winter months to follow, when is better to put my house up for sale; March or April? G.G. Rio Vista
A. Well, let’s look at this dilemma; March it’s still raining, April has Easter and school breaks, graduations and weddings in May and June, and so on.
Believe it or not, we sell houses every month of the year. Statistics for the last 5 years show our largest number of closings have been in June and December, and a respectable consistency in the remaining months.
The opportunity to sell is not limited to seasons, but rather how the home is priced and marketed. The biggest problem with lingering listings is a seller wanting to “try” a high price to see if they can snag an imbecile, then reduce the price later to get it sold. Here’s the problem with that: buyer’s today are knowledgeable, and if they aren’t, their agents are. They have run the comparables and can see your home in not in the price range, so they offer on someone else’s home. After a couple of months with no action, you reduce your price. By then your listing is stale and buyers figure you are now desperate, so offers come in ridiculously low.
The first two weeks are critical to establish your home’s position in the marketplace and to develop feedback from broker tours and at least 1 open house. From this feedback you adjust and comply, with selling your house as a result.
No buyer is going to forsake all other homes to camp out in your yard and wait until you decide to bring your price into focus. It’s the principle of substitution; that you will not pay more for something you can find for less elsewhere.
You should chart the 12 months of sales prior to your listing date and determine the rate of decline, then build in automatic price reductions with your marketing plan.
Q. I have a friend who is an agent in Discovery Bay, he told me the market will recover to previous levels this spring. Based on that I think I should take my house off the market until spring. What do you think? N.B. Isleton
A. What I think is that Discovery Bay is suffering from the largest real estate depression it has seen since its inception 30+ years ago. Inventory there is quadruple of normal and agents are quitting right and left. We are all hoping for a fast market recovery, and opportunists tend to surface to feed during these times. When prices are falling and homes are just not selling in most areas, it would be easy to predict a better market to gain favor and possibly a listing he would not otherwise have had.
I have to go with Data Quick, a national real estate statistical analysis firm that reports regularly on this market. From standing inventory of homes, rate of new listings coming on the market, rate of sale, average price on sold homes, and number and amount of reductions to achieve sale tells them that 2011 could experience another drop in prices due largely to foreclosures. The market is not dead in all communities, and it could be entirely possible that Rio Vista/ Isleton could get the better or worse of it.
What we are seeing here is that inventory is staying level and sales are moderate. As of today, we are still in a buyer’s market with double digit appreciation only a memory. Our home prices have fallen back to the 1999 level, but eventually will creep back up.
The time to sell is now, price it with today’s values, and remember where ever you buy you’ll get a reduction as well. The margins stay the same.
Confused about real estate values? Call for answers at 707-374-6491 or visit www.richards-realestate.com
Mayor’s Corner 7-28
June 1, 2011
TIME LINES
By Sam Richards
Q. We are on out third extension to close
escrow. The buyer keeps having loan
delays, and our 30 day deal is now approaching
45 days. Our agent says to be
patient. Once a close is set, shouldn’t
everything fi t into that timeline? M.F. Rio
Vista
A. I once had a 4 way domino deal that
encompassed 6 different agents; the complications
were like terrorist acts driven
by stupidity on the part of the agents. No
one wanted to work together, all were
working independently. It makes a good
case why some sellers won’t accept an
offer when the buyer has a home to sell.
We were 3 1/2 months getting that done.
When your buyer wrote
the offer to purchase
your home, on page 1
of the contract the basic
terms were spelled out
such as the price of the
home, good faith money,
loan arrangements,
pre-qual letter, and
the number of days to
complete the deal. When
you are dealing with 3rd
party issues like loans,
appraisals, inspectors,
repair people, and so on,
it becomes very diffi cult
to defi ne the time needed.
The agents involved
become project coordinators
that try to fi t
everything in the specifi
ed period. If things
move slowly, it certainly
would make sense to
extend a few days rather
than throw away the deal
and start over for what
could be an even longer
escrow on the next sale.
The close is a good faith
estimate at best, and I
refer to the close date as
a “soft date” due to the
number of things that
can go wrong, it frequently
gets extended,
because all the pitfalls of
advice can be attributed
to trying to be an expert
when you are not.
Your agent might suggest
some cosmetic changes
like paint, carpet, hedge/
tree trimming, furniture
arrangement, and knickknack
placement, but
that’s about all. All else
is strictly one individuals
opinion. Let’s say
that you feel your roof
could be marginal. It
doesn’t leak, so you ask
your agent if you should
replace it or just let it slip
past a buyer. The agent’s
answer should be to get
a roofer’s opinion and
bid, and make the report
available to the buyer,
then let the buyer make
that decision. That way,
no one gets mad later.
All potential repairs
should be addressed by
the proper trades person,
and all results made
available to the buyer.
Your agent is savvy and
is keeping you both out
of court.
Nervous about buying or
selling? Call the experts
at Richards Real Estate,
707-374-6491 or visit
our web site at: www.
richards-realestate.com
and occasionally the deal
closes prior to the close
date.
What your agent needs
to fi nd out is if your
buyer is truly qualifi ed
and can complete as
promised. You would
not be out of line to have
your agent inquire to
the exact nature of the
holdup. If things look
bad, your agent can seek
backup offers.
Q. Before putting my
home on the market, I
was hoping my agent
would advise me on
repairs to be done to
help the home sell. He
just keeps referring me
to professionals in the
trades; why would he
not want to advise on the
needs of the house? D.E.
Rio Vista
A. Oooooo, it makes
me shiver just thinking
about the lawsuits. I’m
constantly preaching to
our agents: don’t advise
on construction unless
you have a contractor’s
license, don’t give legal
advice without being
a member of the Bar,
because all the pitfalls of
advice can be attributed
to trying to be an expert
when you are not.
Your agent might suggest
some cosmetic changes
like paint, carpet, hedge/
tree trimming, furniture
arrangement, and knickknack
placement, but
that’s about all. All else
is strictly one individuals
opinion. Let’s say
that you feel your roof
could be marginal. It
doesn’t leak, so you ask
your agent if you should
replace it or just let it slip
past a buyer. The agent’s
answer should be to get
a roofer’s opinion and
bid, and make the report
available to the buyer,
then let the buyer make
that decision. That way,
no one gets mad later.
All potential repairs
should be addressed by
the proper trades person,
and all results made
available to the buyer.
Your agent is savvy and
is keeping you both out
of court.
Nervous about buying or
selling? Call the experts
at Richards Real Estate,
707-374-6491 or visit
our web site at: www.
richards-realestate.com
May 18, 2011
FLEX SPACE
By Sam Richards
Q. I want to rent a home with a garage, 2
car or larger. Why is that so hard to fi nd?
L.H. Rio Vista
A. Supply and demand; the homes with
garages represent larger homes or newer
homes, and have more appeal to renters
for the amenities they offer, so they rent
much quicker. The average 3 or 4 bedroom
home is in demand for families, and
the time on market to rent is often less
than 2 weeks, compared to a much longer
marketing period for less than 3 bedrooms
or no garage. Along with renting
quickly, they command higher rent.
In this market, you can
buy and have a payment
for less than you would
pay for rent. There are
still a couple of zero
down home loan programs,
so if you found a
house for, say, $150,000,
your payment with principal
and interest, taxes
and insurance, and PMI
would be $1,088/month.
An older 3 bedroom 2
bath with a 2 car garage
would be $1300/month
rental, so not only is
your payment less, you
have the interest and
tax deduction off your
income tax as an owner.
Since you have to have
decent credit to rent, you
may as well take a stab
at buying.
Q. I want to turn my
garage into a bedroom,
and I wonder if a permit
is required? I didn’t want
to ask the City in case I
decide to build it anyway.
L.H. Rio Vista
A. Any modifi cation
made to your home
requires a permit, and
my wife said a worker
ran in the house and told
the others the building
inspector was across the
street on an inspection,
whereupon they rapidly
abandoned the jobsite.
It was at that point we
realized the contractor
had not bothered to get
permits.
Not only does that
disrupt the job, it can
cause fi nished work to
be demolished to prove
adherence to code. Life
is much simpler when
you play by the rules,
and your home is much
easier to sell when there
is nothing to hide.
The City of Rio Vista
was offering amnesty
for “garage enclosures”,
all people had to do was
step up and report to be
grandfathered in. In the
future, however, be prepared
to do it the proper
permitted way.
If buyers see an alteration
to a home, the fi rst
thing they ask is “was
that permitted”? It is always
best to have copies
of those permits ready.
Questions? Call 707-
374-6491 or visit: www.
richards-realestate.com
usually will require a
drawing of some kind
with measured lengths,
widths, and heights, and
where windows, doors,
stairs, plumbing, electric,
and location of HVAC if
applicable. This includes
patio covers as well. Not
only do you suffer the
cost of the permit(s),
your house taxes will go
up as well.
If you become a renegade
builder with no permit,
you might get away
with it, but on sale your
improvement will not
show as added value, and
if the building inspector
catches up with you, he
may have you tear it out
so it can be inspected for
code compliance.
Be advised that once a
building inspector is on
your property, he may
identify other areas of
code violations and ask
that they be resolved as
well.
I had a new kitchen being
put in when I lived
at Oxbow Marina, an
May 04, 2011
Real Estate Q & A
STALLING FORECLOSURE
Q. I want to purchase a home to use for rental income, but at the area prices versus what I can get for rent, I would lose money each month. Everyone tells me a rental would be a good investment, but I don’t see how. M.R. Rio Vista
A. It’s true that in some areas the cost of purchasing is so high that the rental income won’t pay the mortgage, or the taxes, insurance, or repairs. In a rent control community it would be even worse, but investors continue to purchase. Why? You need to look at the broader scope of the investment and break down the advantages of owning a rental. The money used as a down payment to purchase the property becomes growth capital through equity gained over time. The tax deduction for interest paid on the loan is another distinct advantage, plus depreciation on the home is another tax advantage. Any repairs or improvements reduce the taxable income amount should you sell the home. None of the things mentioned give you weekly income, but it would certainly give you a strong equity position with hefty tax advantages, letting you keep a lot more earned income at tax time.
With seasoning on your ability to manage a rental, a leveraged loan could be obtained to purchase another rental, and you could go on from there.
The equity growth and tax advantages far offset any negatives to being a landlord. The biggest problem is renting to someone who will care for the property and pay the rent, but that’s not even a problem if proper screening is done prior to renting.
Screening could be accomplished through a property management company for a one time fee, or for a percentage of the monthly rent, they’ll handle the whole process on an ongoing basis.
Q. My home may be going to foreclosure due to a divorce; neither of us can make the payments without the other’s income. I don’t think we have time to sell, is there any alternative? M. K. Rio Vista
A. I guess moving back in to help with the payment while you’re soon to be ex is there with their new significant other is out of the question. From the time you stop making payments; you have about 4 months until you are sold in court to the highest bidder. The downside to this is twofold: the loss of all equity in the home, and having a foreclosure on your credit. Being late on a payment can usually be explained, but walking away and letting it foreclose will haunt your credit for years, and could stop you completely from any new home loan for some time to come. Even when a loan would be granted, your interest rate will be higher than any one else’s.
A better solution would be to either have one of you buy the other out and keep the home, but if that’s not possible, sell. Do you have time? Of course you do, right up to the foreclosure sale date. Your lender is not interested in being in the real estate sales business, they just want to lend and get paid with interest. If your Realtor has connected with a qualified buyer, odds are good the foreclosure sale date would be extended to let you get the home sold. Have your Realtor intervene with the lender to get a postponement.
I do this with lenders frequently, and I am yet to be turned down. The key is to make sure all the pieces are in place for a sale prior to calling the lender.
Want to know more about foreclosures and short sales, and how to save your credit? Call Richards Real Estate at 707-374-6491 or visit www.richards-realestate.com
March 02, 2011
Q. I have heard there are loan programs that can help first time buyers with down payment and closing cost assistance, but I don’t see it advertised anywhere. Is it for real? B.C. Rio Vista
A. These types of programs have come and gone in the last 5 years, but mostly gone. In 2008 and 2009 the only incentive program was the tax credit for purchase, but today a number of programs have started to re-appear.
Since we are in a rural community, one such loan is through USDA with ZERO down, and does not require mortgage insurance (required if you have less than 20% equity on most loans), and it can use the best credit. For instance, a husband might have a subpar credit score while the wife is ok, so you don’t need both.
Another program bound to gain traction is grant money for down payment and/or closing costs up to 3% of the sales price, and allows you to negotiate an allowable 6% back from the seller to cover the rest. This loan has income limits and is structured according to where you live and if you are under the allowable income. For Solano County it is around $85k, so that should make a lot of buyers eligible.
CALFHA has a new income qualified program that offers first time buyers a 4.125% interest rate with a silent second at 3.25% interest for 100% to purchase. Income limits apply, and the second is not used to qualify!
So, which loan is best, and do you qualify? You will need a 620 credit score minimum, and need to fill out an application for underwriter review to determine which program is best for your income and credit. Don’t let a cash shortage stop you from buying a home; if you are renting, your house payment will be the same or less than you are paying now.
Q. I was contemplating buying a home for investment purposes, and it seems that with all the people coming out of foreclosures and short sales that rentals would be in demand. Is that true? B.P. Rio Vista
A. This community has always been less than a 5% vacancy rate, meaning homes rent quickly here, especially if it is 3 or more bedrooms with a garage. We had a glut in Trilogy in 2006 and 2007, but today I don’t have one vacancy to offer, buy I do have rental inquiries for Trilogy.
With banks paying a mere pittance to use your money, and fluctuation in the market, consider that real estate is priced at an all-time low, but rents are only down by 10%. Your return on investment pays generously every month and your money is secured by real estate, not to mention tax deductions.
The only challenge to this scenario is finding a dependable tenant and meeting all fair housing requirements in advertising and screening. For this part I highly recommend a property management service, and since there are no industry standards you should interview them regarding their screening process. Typically your property manager will not handle evictions, this is usually referred to a para-legal service, but if the screening is done properly it is not likely you will have to deal with evictions.
Your questions answered, call 707-374-6491 or visit: www.richards-realestate.com
February 16, 2011
The Bankruptcy Alternative
Q. I have been following a home I’d like to make an
offer on; first it was listed, then last summer went to
foreclosure. Now it is just sitting there, not a for sale
sign, no number to call. Someone told me the owner
filed bankruptcy, but the bank owns it so why isn’t it
for sale? C.I. Walnut Grove
A. Not being an attorney, I’ll probably give you a
bad answer, but it won’t cost you anything!
When the homeowner filed
bankruptcy, he gave control
of disposition of his assets,
liquidation or retention, to
a court appointed referee
who will decide how to
best pay those people he
owes, or if they get paid
at all. Depending when he
filed, and how that may affect
clear title on the bank
ownership, the bank may
not be able to dispose of
that property until title is
cleared.
How fast this all happens
also depends on the
bankruptcy chapter filed;
reorganization or liquidation,
and what assets will
be affected. Under chapter
13, he may be able to make
a deal to keep the house, so
that could be the hold up.
In any case, it will take 6
to 9 months to get through
a proceeding, so if he filed
last summer, he could be
coming close to signing
off.
More than likely, though,
this is just another repossession
that the bank is
slow getting on the market.
The bank has to hire an
asset management company
who will in turn prepare
the property for sale, and
choose a Realtor to transact
the sale. Believe this, when
the Realtor gets the assignment,
no time will be wasted
putting up a sign! So I
would imagine the bank is
making sure all their chain
of title is correct and it will
come up for sale soon.
Q. I’m doing a short sale,
and I have a first loan and
a second that is a line of
credit. Will both loans be
absolved at time of sale?
R.R. Rio Vista
A. The first loan is on a
trust deed, and that is classified
as a non-recourse
loan. When the home sells
for less than you owe, the
bank absorbs the loss and
you are not charged. The
bank has to agree to do
this, and would be convinced
by your hardship
letter explaining why you
no longer can afford the
home, and your financial
documents to back up this
claim. If you’re second was
on a trust deed, it would be
the same story as the first
loan, but a Home Equity
Line Of Credit (HELOC) is
handled more like a personal
loan, and IS a recourse
loan. So, when the home
sells, you will still have the
HELOC to deal with, and
hopefully you can negotiate
them down to a manageable
payoff, or a payment
schedule you can live with,
but the HELOC will have
to be paid.
If your finances are such
that paying this loan is not
possible, then the only way
to get rid of it would to file
bankruptcy to be absolved
of all unsecured debts. If
you do this filing before a
short sale is complete, then
the sale would be cancelled
and the home would proceed
to foreclosure.
If, however, you can manage
the HELOC and do
the short sale, your credit
will recover in just over 2
years, while a foreclosure/
bankruptcy is more like
4 years before you could
buy again. The good news
is the market will not have
changed much in 2 years,
so you could still get a
smokin’ good deal on a
house.
We can get you a loan, so
buy now! 707-374-6491
or visit: www.richardsrealestate.
com
January 26, 2011
SUFFERING LENDER ABUSE
Q. Being laid off at work,
my Wife was struggling
to make payments and we
fell behind on our house
payment. Our lender offered
a loan modification
with a reduced payment,
and if we made that
payment on time for 3
months, then they would
make that be the payment
I made from then on.
Instead, after I made the
reduced payment on time
for 3 months, they decided
I didn’t qualify and
told me I had to make up
the difference of the new
payment and original, plus
late fees and penalties.
That came to $7k which
I don’t have, so now they
are going to foreclose!
What was the point of all
the modification
nonsense? J.W. Rio Vista
A. The federal government,
in an effort to slow the rate
of foreclosures, initiated the
Making Homes Affordable
program to force lenders to
work with home owners.
Before they can foreclose,
if you are still living in the
home, they must offer a loan
modification. Mostly what
is happening is the lenders/
Banks are using a “check
that box” attitude toward
loan modifications. As long
as they can show they attempted
a modification, then
they can move on to a short
sale or foreclosure. The rate
of successful modifications
has to be less than 5% of
applicants. Your lender is
simply going to look at the
most profitable aspect of
your loan, and usually that
involves selling and moving
on. Unfortunately, the
process raises your hopes
and sets you up for a big
letdown at the end, and
it seems to me the lender
should be made more accountable
for stomping on
your emotions and sending
you into anxiety with fear
of being homeless. There
are no solutions to this
horrible misuse of the good
intentions of the Making
Homes Affordable program,
and the federal government
cannot force evaluation
policy on lenders and
banks, so they do
what is required and then
foreclose.Some tips for the
time after you have moved
out and your lender if finished
abusing you, protect
as much of your credit as
possible. Don’t give up and
just stop paying everything.
You will probably have
to rent, so you will need
enough credit to pass a
screening. Pay everything
you can, especially utilities.
A credit score as low as 550
can still put you in a rental,
so mediate credit cards
and anyone else you owe
for smaller monthly payments
and be on time every
month. When you get back
to work, you can recover
your higher credit rating,
and after 2 or 3 years even
buy another home.
Q. My home is being sold
on a short sale. I haven’t
been able to make my
house payment, but I could
make a rental payment
which is about a third as
much. My problem is bad
credit from inability to
make the house payment,
and rental companies keep
turning me down. Is there
any solution? T.V. Rio Vista
A. Trying to rent through
property management companies
will be more difficult;
typically they manage
but do not own the property,
so they must meet owner
guidelines on qualifications.
What you want to
look for is a “for rent” that
is direct from the owner.
They will be more concerned
about ability to pay
rather than credit. Often
they don’t even pull the
credit, so don’t go to them
saying how bad your credit
is! Be honest if asked, but
also be advised that every
time your credit is pulled,
your score drops 8-23
points. So, if you are applying
direct to homeowners go online and get a
copy of your report and
keep it handy for review
if needed. Call, we can help.
707-374-6491 or visit www.
richards-realestate.com
January 19, 2011
STAGING FOR SENIORS
Q. My Realtor stated that in
