Repairs Before Selling

The year is almost over, and sellers should be thinking ahead if they are planning a springtime sale.
One question many home sellers confront is what repairs, if any, to make before beginning to market and sell a home. My clients have their property inspected before placing it on the market in order to have time to make any needed repairs. If time for repairs is not factored in, home sellers may find themselves forced to lower the price to account for damage.
According to Inman News, failing to plan ahead this way may force a home seller to push back the marketing timetable while repair work is done, thus slowing the pace of the home selling process. While some may have the time, home sellers who need to move into their new home, or who are dealing with a new job, may find the complications difficult.
One expert recommended to Inman that home sellers who need repair work done consult multiple contractors to get competing bids, and look for those who guarantee work for buyers and are willing to complete any additional work discovered in the course of repairs at no additional charge.
According to the Federal Trade Commission (FTC), the best way to find a good contractor is to ask friends, family and co-workers who have had work done about the expense and quality of work they received. One way to check on a contractor's work is to ask not only for references, but to see jobs currently in progress.
Contacting current and past customers can provide a clear sense of whether previous clients are happy with the contractor's work.
Another way to ensure professionalism is to ask what permits the work being discussed might require, and to check that the contractor has any licenses required.

Why I usually Avoid Short Sales

The negotiator from the bank came back to us with an inflated appraisal that was $50,000 higher than the listed price. Fortunately, my client is "hanging in there" while we submit new comparables, and collect estimates on the work required in our professional property inspection. The big question is what position the bank would be in if they allow this all-cash transaction to fail. If the property goes into foreclosure, the condo could easily sell for less than we are offering, and it would take many more months to achieve that result. Frustration for the seller, the buyer, the agents...and a loss to the bank. Meanwhile, we wait.

Short Sale Tips

While my client and I were waiting to hear from the bank,in response to our short sale offer, I received the following useful pointers for Short Sale buyers and their agents, provided by Trulia.

Roughly forty percent of the homes for sale on today's market are short sales and foreclosures! Distressed properties are well known for their value (a reputation which is sometimes accurate, and sometimes not), but they also have a reputation for causing buyers to become distressed too. Transactional snafus, last-minute surprises and long, drawn-out escrows that never close seem to be par for the course.
Instead of avoiding these properties altogether, get educated about the most common dramas that go down in these deals, and how you can avoid falling victim.
When you’re buying a home (or selling one, for that matter), time is absolutely of the essence, but banks don’t have the same sense of urgency individual home sellers do, and while a standard sale from an individual seller to an individual buyer might take 45 days from contract to closing, a short sale can take anywhere from 45 days to 6 or 8 months after the seller has accepted the contract to get the deal closed.

Most Common Complaints of Short Sale & REO Buyers
Run-on (and on, and on) escrows
Avoid the drama by expecting your escrow to run long, and being pleasantly surprised if it doesn’t. Expectation management is everything. Make sure you take these extended timelines into account when you’re working with your mortgage broker on the issue of when to lock your interest rate, and how long your rate locks will last. You might even need to plan on and/or set aside an allowance for the cost
of extending your low interest rate if rates are rising rapidly during the time you’re waiting for the deal to be done.

Banks owe their shareholders and investors a duty to get as much as they can for these properties. Just because you see it’s on the market and listed as a short sale or a foreclosure doesn’t mean they’re going to give it to you for a fraction of its worth. The bank’s goal is to get a purchase price as close as possible to the home’s fair market value, as determined by the recent sales prices of similar, nearby homes, with some adjustments made for the property’s condition. Fact is, many banks
would rather see the listing agent reduce the price by a moderate amount, and wait to see what offers come in, than to accept an offer 30 percent below the asking price just because there are no other offers on the table.
Avoid the drama by working with your agent to make a realistic offer, based on recent comparable sales in the neighborhood, not just on what you think you can get away with.

These transactions have an uncanny way of being delayed at the last minute - or never going through at all, through no fault of the prospective buyer. If you’re in contract on a short sale, you should take the point of view that you don't have a firm deal until you get the bank’s approval of the transaction. Make an offer on a normal home and you’re likely to know what the outcome will be within a few
hours or a few days, at the outside. If things take longer because the seller is out of town, the listing agent tells you that, and you at least know what’s going on.
Make an offer on a bank-owned property or a short sale? It could be days, but could also, easily, be weeks or months before you know what’s going on. No amount of calling, pleading, prodding or nudging is likely to get you much information on how your offer or the seller’s short sale application is being handled or what (if any) progress is being made. That “black box” into which your offer disappears at the bank level can be very frustrating.
Realize that working with the bank on the bank’s terms is unavoidable when you buy a
distressed property. Then, go into the deal with realistic expectations - including the expectation that the bank will drag its feet, despite expecting you to keep every deadline - and you’ll be less frustrated, and less likely to make poor decisions out of frustration. Also, make sure you do respond in a timely manner to the bank’s requests and your obligations under the contract.

When the Value is In the Land

Potential clients called this week asking about the value of a double lot on a busy street in Sunnyvale. The house on one of the two plots is quite run down, and the other is vacant. The magic comes from the school district...being located near some of the top Cupertino Schools will make this property valuable to a contractor who wants to tear down the existing house and build a large new home.
Coincidentally, my son Dave sent this photo of the autumn view from his patio in Michigan today. Earlier this year, they bought this lakefront property consisting of 10 acres and a huge older home for under $400,000. With their extensive remodeling, the value would be about a million dollars. In the Bay area, it would be priceless...if such land existed. Well, at least we don't have snow.

My Short Sale

Funny that I had written my last entry about problems in short sales, and here I am, handling one. Fortunately, this sale should be simpler. Most of my business at this point of my career is from client referrals, but an all-cash buyer had contacted me this summer from my website, looking for an investment property. I saw a good deal in a Sunnyvale townhouse, listed as a short sale, but before we could write an offer, the property was in contract.
Around a week ago, the listing agent called me. We knew each other from way back, and she asked if my client might still be interested. The first sale had fallen through when the offer reached the bank's negotiator. Typical for short sales, it had taken two months to reach that point.
My buyer and I went through the townhouse, and re-read the disclosures, and quickly wrote an offer. The package is on its way to the to the bank, and I have scheduled a property inspection to eliminate any surprises down the road.

Short Sale Fraud--Trash for Cash

In the world of real estate, there's always something new under the sun. There also seem to be new types of fraud and scams developed with each change in the market. Now the scam artists have discovered short sales and foreclosures.
If you’re thinking about working with a financially distressed seller and the house he wants to sell is trashed, make sure he didn’t trash it himself. One of the types of short sale fraud that Fannie Mae is seeing these days is “reverse staged” houses. In these cases, owners trash their house to knock down the property value. There are photographs on broker price opinions that actually show cupboard doors missing, appliances pulled out, and graffiti or trash on the counter tops. Because there are actually websites where you can get repair bids, they can submit false repair bids for the work that needs to be done. A buyer with whom the owner is colluding then comes in with a low-ball offer, buys it and fixes it back up, then flips it for its real market value. That seems like a brazen scheme, but mortgage fraud by its nature is a brazen activity.
Kim Ellison is a Fannie Mae senior industry relations manager for the mortgage fraud program. She also sees a lot of illegal flipping and non-arm’s-length transactions. The non-arm’s-length space is a smaller percentage, roughly 9 percent. Usually the delinquent home owner is selling the property to a family member or a business partner without disclosing the relationship. It’s really an effort for the owner to stay in the home. Instead of making payments to the mortgage company they’re making payments to the family member, as rent. They’re hoping to clean up their credit and reapply for a mortgage down the road.
Selling to a related party isn’t illegal. It’s just the lack of disclosure. The loan servicer may waive the non-arm’s-length requirement, but there have to be compensating factors, and story has to make sense.
These are just a couple of the fraudulent schemes out there. No wonder Fannie Mae is in trouble.

Finding those Files

My friend Lynn Gross-Cerf, who is a great organizer, just sent an email reminding me that Sept 19-23 is "National Love Your Files Week". (There seems to be a week or day for anything and everything.) This event was created to demonstrate that a good filing system is a powerful asset.
It was apt timing because I had just been out to my garage searching for an escrow file. My associate, Judy, is the listing agent for a property that I sold in 2004. In that earlier sale, I represented the sellers, who have since left the area. Her clients wanted to know what termite work the sellers had completed....The recent inspection found old pellets, and needed to know if these were "souvenirs" from the previous sale. Naturally, the buyers had not kept these records, and neither had the termite company.
I moved the freezer that sits in front of the filing cabinet in the garage where I keep the really old records, and then I hit a snag. There was a box neatly labeled 2004, and another labeled 2004-2005, but neither would budge. I plugged the freezer back in, and called Judy. If they really want that file, they will have to come and retrieve it...and no, Lynn, I do not love my files.

New Agents

Last week, I was contacted by a young woman who lives in Old Orchard, an area that I contact regularly with mailings about the market. She had recently passed her real estate license test and wanted advice on how to get started. I remember from many years ago that schools such as Chamberlain and Anthony's prepare a future Realtor to take the State exam, but provide no direction beyond that. The basis college classes are not much better preparation for the actual world of real estate sales.
She came into my office and we talked for some time about time management, juggling a home, young children, and this business.(Been there, done that) Then she spoke to Nina, my manager about training and costs.
Coincidentally, My grandson is in his last year of a business degree, and is also seriously considering a sales career. I plan to mentor him as he begins.
With an aging Realtor community (see my post:Real Estate Agents are Aging:Saturday, November 13, 2010), it is a pleasure to have young people choosing what can be a challenging but potentially lucrative business.

Balancing Work, Play and Volunteering

August should be a month for vacations, but having been away for more than a week in late June, I am playing "catch up" at the office, and fitting in a few added demands on my time.
Thousands of local Realtors are taking part in a lock box and key exchange this week, along with the juggling involved in making this happen smoothly. As expected, there are glitches in the system, even though both boxes and keys were Beta tested. This morning, I lugged seven extremely heavy lock boxes to a well-coordinated exchange at DeAnza College, and carried out a set of even heavier replacements. I also picked up a new key that will need to be used while the stragglers replace their old boxes, hopefully within a month. The exciting part of all this is that eventually, when all the bugs are worked out, my Android phone will...at long last...serve to open the boxes when I show property.
Next week begins the volunteering segment. Our office is holding a breakfast and auction to benefit Habitat for Humanity, and I'll help out as sous-chef, runner and dishwasher. This is just the first of several events we have planned.
So when do I manage to play?...Whenever I can.

Summer Real Estate Market

The Bay Area housing market usually picks up in March, April and May and then slows down over the summer for vacations, graduations, weddings and other activities. But this year it seems like that’s being reversed.
After a rather slow spring, the local housing market has been heating up this summer with strong sales in June and even into July in many areas. Sales activity has been especially busy in the higher end of our markets, which is over $1 million in much of the Bay Area...but even the mid-level market was surprisingly active
There is an interesting trend in last month’s sales figures: In most of the Bay Area, we had the highest level of million-dollar home sales since the summer of 2008, just before our economy went into a tailspin.
Certainly, the Bay Area’s relatively strong economy...especially in the tech sector... ­is playing a key role in our housing market. Inman News wrote in a Friday article, “Tech is back -- and tiptoeing along behind it, at least by some measures, is the San Francisco-area real estate market.”
This doesn't mean that the housing market is completely out of the woods, because real estate is very much a local business. While many of our markets are on the mend, others are still softer than they were a few years ago, and there are still distressed properties coming on the market as bank owned REO sales in the months ahead.
With the national and state economies still fragile, we are fortunate to live and work where we do. Limited housing stock, a diverse job base and great weather are all factors that help home buyers focus on these terrific home values and low mortgage rates.
The best homes are getting lots of offers, and in our Cupertino office, the majority of sales are with multiple offers. Seems like we are having a delayed spring.

A Tale of Two Transfers

When I returned from Michigan, I was contacted by two families transferring from out of state to Silicon Valley. The first referral was through a company I had worked with before. Their new CFO, his wife and son, were moving from the Midwest and needed a house rental. In a normal market, a 2500 square foot house in a good school district would be easy to find, especially for stable family willing to pay up to $5000 a month. After talking to a few reliable rental agents I know, I discovered that not only is the local rental market tight, a good rental house of that size is nearly nonexistent. With new jobs come new problems, and the search continues.
The second challenge is a small family from Colorado. The husband is already here, and has begun a high paying job. He is renting a condo in Santa Clara for $2500 a month, and their quandary is: Do they give up the large house they love...only 12 years old, in an excellent school district, with a large yard and valued at $400,000...and buy something here for more than double that price and with fewer amenities? Or does that family remain divided, and perhaps invest in a condo so that the husband can move out of the rental? I have my in-house lender working with them on qualification, but neither solution sounds perfect.

Back from Michigan

What a contrast from the real estate market in California! I expected to see depressed areas in Detroit, and although the bus tour drove through the best sections of the city, the tour guide admitted that a large percentage of the city's residents had left the city along with the jobs. Even in these tree-lined streets of beautiful homes, values had dropped by nearly half, and we passed occasional houses with boarded up windows and for sale signs in their front lawns.
We were there at the beginning of the River Walk celebration at the Renaissance Center, and the families enjoying the water views, lunching on ribs, and listening to music had a positive attitude that a down economy couldn't erase. We were there for a convention, and people saw from my badge that I was from California. More than one person stopped me and said to tell folks back home that they haven't given up and still love their city.

Let's Take a Look at the Local Market

Now, more than ever, I'm reminded of how much real estate is about location, location, location. Things are far better here in the Bay Area than nationally. The overall market is much more stable than elsewhere in the country, and in some ares, it’s fairly robust. We continue to have multiple offers in all our offices. Not every property certainly, and not all multiple offers are well over the asking price. But there is a strong indication of Bay Area buyer demand that most of the nation is not experiencing today. We hear different variations on a common theme from our local Coldwell Banker offices: “It seems I get one of two results; either a few multiple offers within first 7 to 10 days, or I’m getting a price reduction 30 days later.” Thoughtful and strategic pricing, combined with staging interior and exterior of property are key elements to having the best chance at multiple offers....no surprise there.
The momentum seems to be slowing a bit in Cupertino. The best properties are still getting lots of attention, but there is less of a sense of urgency for the majority of the market as inventory continues to increase. The market is doing particularly well in the good school districts and in single-family homes, while condo sales remain slow.
We are continuing to see a high influx of buyers coming from the Pacific Rim with large down payments looking for good schools. There is still a lack of good inventory for buyers, especially in the entry-level markets. Palo Alto remains an extremely strong market with multiple offers in excess of 10% to 20% over list price, in many cases.
The bottom line... when a well-priced, beautifully stage listing comes on the market, it can probably expect multiple offers.

Real Estate Headlines Can Be Deceiving

At this morning's office meeting, we had several hand-outs. The headlines from various newspapers ran the gamut from "Good News in the Real Estate Market" to "Is This the Beginning of Another Bubble?" and everything in between.
I was amazed at the attention the Case-Schiller housing study received last week. It covers only 20 markets, and that is just one of its many flaws. Yet many consider it “the be-all-and-end-all” economic indicator that defines our entire national housing picture. As we know, all real estate is local, and it is unfortunate that the reporting on a 20-city “national” index can have such a jarring impact on otherwise rational people.
Look at some of the headlines the other day:
“Home prices at lowest point since 2006 bust”
“Home values continue downward churn”
“No relief in sight’ for falling home prices”
And even in paradise – Maui- the front page headline in the paper screamed “Crash Spreads.” And Maui isn’t one of the 20 markets. In fact the nearest market covered is San Diego, a mere 2500 miles away!
For those who don't panic at any change in the wind, this can be the smartest time to buy a home if you have the lifestyle reason, financial stability and viability to do so.
You might just be surprised that the end of the world isn’t here yet … at least until next month’s report.

More Real Estate Control is Not the Answer

I understand that both federal and local governments are deeply in debt, but the bills aimed at generating funds by attacking the already precarious real estate market are misplaced.
There is a proposal before government regulators to require a minimum of 20 percent down on all residential transactions. If allowed to take effect, the rule would put home ownership out of reach for middle-income Americans. It would take the average family 14 years to save up the down payment to buy a home.
Steve Kim, from our in house lender, Princeton Capital, recently sent me information on another obstacle to the housing recovery. On October 1 of this year, the top limit for conforming loans is set to drop from a temporary $729,750 to the general $625,500, in our higher cost housing market. Since conforming loans are eligible for sale to Fannie Mae and Freddie Mac, they generally have the lowest rates. When this limit drops, borrowers who want a bigger loan will have to get a jumbo, which includes both higher interest rates and tighter guidelines.
According to a recent Harris study, 54% of Americans do not expect to see a healthy housing market until at least 2014.
We just don't need more hurdles to cross in this slowly evolving real estate recovery.

Updates on Prop 90

I like Larry Stone, our county assessor, and think he's doing a fabulous job, but every couple of years the 'powers that be' get the idea that they will help to make up a shortfall in the Santa Clara County budget(55 million dollars) by eliminating Prop. 90...and with it, Prop.60. By doing this, they estimate a savings of $50,000.
If you've forgotten, these propositions allowed seniors and the disabled to keep their existing property tax base when they moved to a less expensive residence in the county, and also welcomed home buyers from other California counties into ours with those rates.
What they seem to forget is that retaining those homeowners and bringing in new ones also adds an infusion of buying power to the county. It also frees up large houses for young families to purchase...homes where seniors would otherwise be trapped in order to keep their tax base.
Presently. there are only 8 Prop. 90 counties in California: Alameda, Los Angeles, Orange, San Diego, Ventura, and locally, Santa Clara and San Mateo. El Dorado County was recently added to the list.
Let's not be penny wise and pound foolish...We need Prop.90!

May Flowers...and Real Estate Sales

As we head into the heart of this year’s spring season, I thought it would be helpful to share what we are seeing from a national perspective in the housing market and point out a few reasons for optimism in the months ahead.
Bruce Zipf, president and CEO of NRT, our national parent company, said this week that our overall business results have managed to exceed expectations, thanks in large part to a surprisingly resilient high-end market, especially here in the Bay Area.
Normally, we judge the strength of the housing market by looking at current sales volume against the same time last year to gain a sense of how things are improving. But we couldn't properly compare data from this March and April due to the artificial stimulus effects of last year's Home Buyer Tax Credit. In May, these effects should lessen and give us our first true glimpse of the market's strength, if we continue to see improvement in our market as we head into the heart of the spring buying season.
Our Cupertino office is seeing growing momentum from buyers looking to take advantage of mortgage rates while they’re still low, as well as prices that remain affordable. In fact, we continue to have more qualified buyers than listings. This is resulting in multiple offers for many attractive homes. Buyers are coming in with a lot of cash or all cash to win out the competition. Because obtaining loans and appraisals is on ongoing problem, these all-cash offers usually take priority. We are back to having the majority of our sales involve multiple offers. A very original fixer-upper was listed for $988k, got 11 offers, and was bid up about $100K
This is not to say that every market around the Bay is experiencing the same strong buyer demand. Certainly a number of communities have more balanced markets, and some homes continue to sit while others sell briskly. But in general, we’re seeing well-presented, well-priced homes selling much better today than they did a couple of years ago.
Another reason for optimism is that mortgage rates are likely to remain affordable for some time to come. I know a lot of market-watchers were concerned that the Fed could raise interest rates soon in response to inflation fears and the end of the government’s bond-buying program. But Fed Chairman Ben Bernanke largely put those fears to rest in his press conference this week.
So as we look to May and the upcoming summer season, there are many reasons to be encouraged that our housing recovery will continue to gain traction – especially here in the Bay Area.

Why I'm Still Selling Real Estate

Mostly because I love it....and also because it can be so satisfying.
A while back, I wrote about handling a home sale where the appraisal came in very low and all parties had to work together to facilitate a close of escrow.
This email just arrived in my box:

Bobbie, sorry it took so long to get back to you. Jan and I want to thank you for all of your help in the selling of our home. It was a complicated, emotional and difficult situation to deal with and you handled it very professionally. Without your help we would not have gotten our price. Coldwell Banker should be very proud of you, I know I am. Thanks again for everything. You made the impossible possible.
Jan and I love it up here at Sun City Lincoln Hills and we have a guest bedroom just waiting for you to enjoy it. So.....come on down! I should say up.
Best personal regards,
Richard Martinez
Jan Martinez

The best endings are happy ones.

Finally, A new Season

Officially, Spring began on March 20th, but the headlines in today's Mercury News heralded the true start of the season for Realtors. Home sales in March were the highest in four years in Santa Clara County...not quite at their all-time high, but moving up, especially in the high end of the market. Last year, people in the business mourned the end of the first-time buyer tax credit, but that loss doesn't seem to have effected our local area at all.
Inventory, which has been extremely low, is finally starting to rise, although Sunnyvale sales are brisk, and we're still seeing multiple offers on most properties. But buyers also have good news...the economy is keeping interest rates extremely low which translates to lower payments.
With sunshine nearly every day, flowers in bloom, and warmer temperatures on the way,
I expect that open houses will be busier than ever.
This promises to be a season to remember.

Who Pays What?

Over the years, I have received offers from buyers' agents on Santa Clara County properties that included unusual terms. The closing costs established by custom can be flexible, but in most cases, local Realtors know that in our county, the seller pays title and escrow fees, and "across the border" in San Mateo County, the buyer is expected to cover these costs.
The poor buyers selling in San Jose and buying in San Mateo can be hit by a double whammy, whereas someone selling a house in Belmont and buying in Sunnyvale makes out like a bandit regarding closing costs.
If an agent doesn't know these area guidelines, he or she can cost the buyer a premium in escrow. For instance, a San Francisco broker once handed me an offer that had his buyer paying all the closing costs on a house in Cupertino...perfectly legal, but an unexpected bonus for the seller, just because the agent didn't do his homework.
Cornerstone Title recently sent out an updated information sheet of the customary expenses in all the Northern California Counties that my readers should find interesting.

Debunking Real Estate Myths

A recent article on Trulia described widely-held myths about the real estate market. Here's my take on it.

1. Myth: Buyers with bad credit can’t qualify for home loans.
Even though requirements have tightened up considerably, recently, they seem to have relaxed a bit. A couple of the largest lenders of FHA loans announced that they’ve dropped the minimum FICO score guideline from 620 to 580, which is actually a fairly low score, but they are expecting a 5-10% down payment with these lower scores.

2. Myth: The Mortgage Interest Deduction isn’t long for this world.
The National Commission on Fiscal Responsibility and Reform caused a massive wave of fear when they recommended Mortgage Interest Deduction (MID) reform, which would dramatically reduce the size of the deduction.
Fact is, the Commission made a huge set of recommendations to Congress, but only a few are likely to be adopted. MID reform is not one of them, since economists and industry groups are convincing Congress that MID reform any time in the near future would handicap the housing recovery.

3. Myth: It’s just a matter of time before loan guidelines loosen up.
It’s possible that loans are as easy to get as they’re going to get. Zero-down mortgages won't be coming back anytime soon. If you want to get into the market, the time to get yourself ready is now!

4. Myth: If you don’t have equity, you can’t refi.
If your loan is held by Fannie Mae or Freddie Mac, they will actually refinance it up to 125% of its current value, assuming you otherwise qualify for the loan.
My niece and her husband recently refinanced their "underwater" Florida home.
If your loan is not owned by Fannie or Freddie, you might be a candidate for the FHA “Short Refi” program. While most mortgage workout plans are only available to people who are behind on their loans, FHA's Short Refi program is available to homeowners who are current on their mortgages and need to refinance up to 115 percent of their homes’ value.

5. Myth: If you’ve lost your job and can’t make your mortgage payment, you might as well mail in your keys.Until recently, this was essentially true, but there are some new funds available in the states with the hardest hit housing and job markets, which have been designated specifically for out-of-work homeowners.

The Hesitant Buyer

USA Weekend magazine had an article today by Annalisa Burgos, called "6 Myths of Buying a Home." It was aimed at first-time buyers, and contained common sense advice about treating a home purchase as a business transaction.
These suggestions may be easy to give, but having worked with many new buyers for more than three decades, I know that they are common concerns for what may be their largest financial decision.
So much of this process is emotional that it is nearly impossible for home buyers to narrow it down to "strictly business." The easiest advice to accept is her most sensible:
Realize that you should verify the information given in the listing by checking the details yourselves.
Don't stretch to buy as much house as you can get...not in today's market and in light of the current economy. And realize that your home's value may not increase very soon.
Some of her advice was reassuring for those suffering from "Buyers' Remorse."
As long as you were comfortable with the offer you made, don't be concerned that the seller accepted your offer right away. A purchase should be a win-win situation.
I found the two comments about buyers expecting to find the perfect home, and waiting for the house to "speak to them" to be the most familiar. In one of my first posts, I compared the home search to the search for a spouse. In housing or in love, finding the one that fills most of your needs may be as good as it gets.

My Taxes are Done

Another successful bout with Quicken and Turbotax, and my Federal and State Taxes are completed for another year.
With the government at every level hungry for more tax dollars, our Real Estate lobby is fighting to hold the line on the home mortgage deductions.
Tara at Trulia had some great pointers for homeowners filing their taxes this year.
Ask a roomful of homeowners what's so great about owning versus renting, and you'll hear them holler in unison: "the tax deductions!"
That means that if you're in a 28% tax bracket, Uncle Sam effectively subsidizes about a third of your borrowing costs or more, making your home more affordable or allowing you to buy a larger home than you could have otherwise. Also, big chunks of your closing costs are tax deductible, and hundreds of thousands of dollars of any profit (or capital gains) that you realize when you sell your home are exempt from income taxes.
Remember: You Have to Itemize Your Return to Claim Your Deductions.
During the recent debate on Capitol Hill about whether the mortgage interest deduction should be eliminated, it came out that nearly 40% of homeowners lose out on their major tax advantages every year when they fail to itemize their income taxes.
Another Point to Remember: Tax Relief for Loan Modifications, Short Sales and Foreclosures Is Only Around Through 2012.
2011 is projected to be the peak year for foreclosures during this market cycle. Distressed homeowners who are on the brink of a short sale, loan modification or foreclosure should be aware that normally, any mortgage balance that is wiped out by one of these outcomes is taxed as what the IRS calls Cancellation of Debt Income, or CODI.
The IRS is currently not charging income taxes on CODI incurred through a loan mod, short sale or foreclosure on most primary residences through 2012. But as I've mentioned before, banks are taking many months, or even years, to work out mortgages in any of these ways. If you foresee any of these outcomes in your future, don't put things off. Do what you can to get to closure on your distressed home and loan, ASAP, while you won't have income taxes to add as the insult on top of your significant housing injury.

A Long Delay in an All-Cash Sale

Closed another escrow, finally. This one should have been a snap. It was the Sunnyvale house that had five great offers. Because of all the difficult appraisals and recalcitrant lenders recently, the seller chose an offer that was all cash, and higher than the listed price. The only contingency was on the close of an existing sale of the buyers' residence. All inspections had been completed on our listing, and the buyers were willing to do any repairs and termite work on the reports, so it was also an "as-is" sale. As-is and all-cash...It should have been easy.
The first delay came from the buyers' agent a couple of weeks later. Most of the funds needed to close the buyers' house in Los Altos were coming from Japan, and only $50,000 a day was allowed into the U.S. We signed a week's extension. Meanwhile, the Los Altos buyers' loan documents had expired and had to be redrawn by their lender in the Midwest...another delay. The new closing papers were sent to the Los Altos buyers, but a long holiday weekend intervened. Meanwhile, the termite company was threatening to place a mechanic's lien on the Sunnyvale property, if the escrow didn't close soon. I had to remind the manager of our long business relationship, and personally guarantee the funds.
As we reached the end of a month long delay in closing, I also arranged a cash bonus for my seller to repay her for some of the interest she lost on the proceeds.
Another "all's well that ends well" saga. The buyers love their new house, the seller is delighted to finally live near her daughter, and I celebrated by buying new red boots!

The Escrow is Closed

I waited until this sale was a "fait accompli" before writing about it. If you remember from an earlier post, this private townhouse sale was a win-win for all parties, and it seemed like smooth sailing until the closing date. The buyer was motivated and fully preapproved by her lender. The sellers were packing and had found the perfect rental property in the community of their choice, and the other agent and I made sure that all paperwork was in and completed.
And then the appraisal came in $90,000 under the selling price!
A reappraisal brought it up to $65,000 under, and a third, independent appraiser came up with the same figure. The obvious question is "why did this happen?" especially since all parties felt that the price was right on. The reason is that following the sub prime loan debacle, lenders and appraisers have a whole new set of rules. These include the number of comparable sales needed, the distance from the subject property, and how recently the other sales occurred. Because there were so few townhouse sales over the holiday season, the appraisers had to do some creative comparisons, adjusting the values of dissimilar properties.
What finally happened? The sellers reduced the price somewhat, the buyer came up with more cash, and we recorded today....a happy ending for some very nice people.
...and I received some beautiful roses from my clients!

A Happy Home for Lovers

I'm writing this on Valentine's Day, and I have to admit that nearly every couple that I work with to find the perfect home has different requirements. That is why I have them make up a "wish list" to bring to our first meeting. Trulia recently did a study of 1200 American couples, married or living together, and asked them to name the top 11 items in a home for enhancing their relationships. Some surprised me, but many did not. Here they are in order:
#1 Was a bedroom big enough for a king sized bed...18% of men and 19% of women chose this one first.
#2 Was storage space. It's not a surprise that more women wanted big closets...21% of women versus 13% of men.
#3 Bright and airy spaces. 16% of men and 14% of women picked this first.
#4 Water view of sunrises or sunsets. Men came out more romantic on this one, 16% of them with only 10% of women choosing this one. (Guess that closets were more of a priority!)
#5 A large kitchen island...both sexes picked this one equally at 12%.
#6 A Jacuzzi tub for two...9% of men, 6% of women.
#7 A Fireplace...not the most popular...6% of men, 5% of women
#8 The ever-popular "Man Cave" Maybe this is seen more in areas where they build with basements...7% of men and only 2% of women picked this one.
#9 Dual Closets...Surprisingly, only 2% of men and 4% of women chose this. Maybe they had already covered it in the storage question.
#10 Dual Sinks in the master bedroom. 2% of men and 3% of women picked this first.
and #11...A Sewing or Crafting Room 2% of men and 1% of women.
The requirements I most often see are: a good neighborhood, quiet location, excellent schools, private yards, enclosed garage, large rooms, open floor plan, remodeled kitchen and baths, and hardwood floors.
Either Bay Area buyers are more practical, or Trulia didn't consider these items "sexy" enough.
Happy Valentine's Day!

Why I Use a Professional Photographer

Recently, Theresa Boardman wrote an excellent blog about Realtors who attempt to photograph their listings by themselves, and what a foolish idea this can be.
I hire a photographer/videographer to take the still and motion pictures of my listings for the MLS and advertising. Potential buyers can see the best features of these homes, and often purchase them.
I find it hard to believe that a professional real estate agent would be satisfied with pictures taken with a cell phone. Years ago, before the days of digital photography, I bought an excellent camera with a wide angle lens, but the quality of the pictures I took didn't come close to the results that a professional can achieve today.
These virtual tours become marketing pieces that help today's buyers decide which homes they want to see in person. One of my recent sales was photographed on a gray, rather dreary day last month. The photographer met me in the late morning, and I was concerned that the home, which was usually light and bright, would not show at its best, but we had a time limit for placing the house on the MLS before the open houses, and rain was expected to most of that week. The videographer told me not to worry...that his equipment would provide all the light we needed...and he was right! The open house was packed, and the house sold that week.
No one wants to admit that they have taken poor listing photos for their listings, but everyone agrees that there are plenty of examples of bad property photos in every MLS in the country.
Penny wise is indeed pound foolish.

A Positive Spin on Real Estate

Dr. Steve Sjuggerud wrote an article recently with a much more positive spin on real estate, and which reflects what we're really seeing in the market. He showed graphs compiled by Global Financial of real estate data that literally goes back centuries.
The first proves that interest rates are the lowest they have been since 1900.
The last time mortgage rates were even close to this low in the past was just after World War II, and that was the precursor to the greatest postwar boom in housing prices – by far.
Mortgage rates bottomed in the mid-1950s, and house prices bottomed about the same time. Then the greatest boom in home prices in our lifetimes started.
Today we have record-low mortgage rates. And another thing in our favor is that homes are more affordable than ever. This information is based on the 40-year history of the Housing Affordability Index. "Affordability" takes three factors into account: home prices, your income, and mortgage rates.
Home prices have crashed, mortgage rates are at record lows, but incomes (nationwide) haven't fallen nearly as much… So homes are now more affordable than ever.
These graphs were an eye-opener for me. With all the negative press around, it was nice to read something positive on the subject.

Real Estate "Farming"

Second sale of the year on Friday night. I have been sending monthly mailers to the Old Orchard area for over thirty years, and the sellers of this Old Orchard townhome told me that they felt as if they already knew me, and that I would represent them when they decided to sell.
So many agents try "farming" a neighborhood, and give up after a few months of seeing no results. A good percentage of my business has always come from mailing a newsletter or card to a couple of my favorite areas in Sunnyvale. In the beginning, they were typed and copied monthly market updates, with a recipe and a contest included. Then as technology changed, they became more professional looking...computer generated, but still personal...following the market up as it went from $100,000 to a million dollars for single family Sunnyvale homes.
My monthly contact is now a large postcard that connects potential sellers with an online link to the current value of their individual homes. My personal opinions on the market are here in this blog.
All parties in the sale the other night(including the buyer's 83 year old mom) ended the evening with hugs and champagne. No wonder I don't retire...I'm having too much fun!

First Sale of the Year

I promised to follow up with the results of my New Year's listing. The house was listed on January 3rd, and there was almost no competition on the Realtors' tour. I actually ran out of brownies for the first time in my more than 30 years in the business! There was also a non-stop parade of potential buyers at both of the weekend Open Houses, and on the day we scheduled offer presentation, the seller had five good offers to choose from. The four bedroom house, located in westside Sunnyvale with Cupertino Schools, sold well over the listed price. The accepted offer was all cash and in as-is condition.
Even after that date, I am still receiving calls from interested buyers who missed bidding on the property.
I expect to see more inventory as we head into the Spring selling season, but for now, our real estate market is as hot as I predicted...perhaps more so.

2011 Should Be Spectacular

Unless the local news reports are exaggerating, the future for Silicon Valley may be a lot brighter than it has been in the last couple of years, and real estate may lead this change. A good test will be the listing that I'm putting on the market this Monday. If it sells in a week or two as others in that neighborhood have in the recent past, we'll know that things are looking up. I'm excited! Except for writing the MLS and advertising comments, all the prep work is completed. The keybox, basket of shoe covers, (to protect the new carpets) and flyer holder are ready to take to the house, open houses and tours are scheduled, and the video and photos are on the computer. Not too much left to do...just baking brownies for Realtors' tour.