CALIFORNIA REAL ESTATE PRIMER – Reduce Your California Property Tax

036 (572 x 428)

DISCLAIMER

This article is intended to be a general discussion only and should not be considered legal advice. Your use of it does not create an attorney-client relationship. Any liability that might arise from your use or reliance on this article or any of its links is expressly disclaimed. This blog is not legal, accounting or tax advice, is not to be acted on as such, it may not be current, and is subject to change without notice.

Reduce Your California Property Taxes

If you’re a home owner in California it may have occurred to you that your home is worth less now than the day you purchased it. If so, the next thought which will occur to you is why the devil are you paying property tax based on a market value which doesn’t exist any more?

Well, if you live in California you might be able to find some relief in something called an Informal Assessment Review.

California Revenue and Taxation Code

You might want to take a look at Section 51 of the California Revenue and Taxation Code. This particular code section provides that the assessed value of any real property (located in California) shall not exceed that property’s market value on the January 1 lien date.

This means that if your property’s market value on January 1 is less than its assessed value, as it appeared on the previous annual assessment roll, then you may be entitled to an assessment review!

So if your home’s market value has fallen below what you paid for the property it may be worth your while to obtain a form called a “Request For Informal Assessment Review,” from your county assessor’s office. In Orange County the Assessor’s phone number is (714) 834-2727.

If you do not agree with the roll value resulting from the informal review, you may file an Assessment Appeal form with the Office of the Clerk of the Board of Supervisors from July 2 through September 15. Assessment appeal forms can be obtained from your local library, the internet, or at the Clerk of the Board, Hall of Administration, 333 W. Santa Ana Blvd., Room 101, Santa Ana, CA 92701, (714) 834-2331.

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voice: 949-505-3838

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CALIFORNIA REAL ESTATE PRIMER – Buyer’s Short Sale FAQs

DISCLAIMER

This article is intended to be a general discussion only and should not be considered legal advice. Your use of it does not create an attorney-client relationship. Any liability that might arise from your use or reliance on this article or any of its links is expressly disclaimed. This blog is not legal, accounting or tax advice, is not to be acted on as such, it may not be current, and is subject to change without notice.

Over the course of time, we have fielded a lot of questions from buyers regarding short sales and some of those questions are more frequently asked than others. The questions below are the more frequent ones we’ve been asked:

 1. What is a short sale?

A short sale is the process by which homeowners can sell their home for less money than they actually owe on the mortgage(s). This is accomplished by providing proper documentation to the lender(s) to convince them to reduce the mortgage balance to allow the sale. If the sale is approved, the mortgages lender(s) will actually take a loss on the mortgage.

If a bank approves the discount of a mortgage, the home can be sold for a price lower than the total debt on the property without the seller having to come up with cash to cover the shortfall. The mortgage is satisfied and any foreclosure process stops.

2. Why would a bank or mortgage lender want to cooperate with a short sale?

A common saying is that banks are in the business of lending money and do not want to own real estate. While this is a little misleading, it is essentially true. When banks foreclose on a property it is a long and expensive process and generally means holding the property in their inventory as a non-performing asset. Banks have a limit to the amount of non-performing assets they want to hold. Once this limit is exceeded, they have strong incentives to get rid of the properties at discount prices.

For a lender, agreeing to a short sale avoids many of the costs associated with the foreclosure process. Attorney’s fees, delays from borrower bankruptcies, damage to the property, costs associated with resale, property tax, insurance, etc., must all be paid by the bank during a foreclosure. In a short sale scenario, the lender is able to cut its losses by getting rid of the property faster and at a lower cost.  The most important element in the lender’s decision process is whether or not the property is “underwater.”  If so, then it can’t be sold for an amount equal to or greater than the mortgage and a short sale may be a viable solution.

3. How does a bank determine the price it will accept on a short sale?

Every bank has a specific method of deciding how much they’ll accept on a short sale. Give me a call, Mikey Hall, at 949-887-1625 and I’ll explain it to you.

 4. Can I really get a deal on a short sale home?

Yes, you can, but not every short sale is a deal. You still have to do your research and estimate the current market value of the home. This is one of the areas where a knowledgeable real estate agent’s level of experience really pays off.

5. Who pays the real estate commissions on a short sale?

In a standard sale, commissions are subtracted from the seller’s funds and paid out of escrow to the Realtors. In a short sale, the seller has no funds in escrow which means the commissions end up being subtracted from the monies that would go to the lender. So, the lender ultimately is the one paying the entire sales commission.

6. Are short sales guaranteed to work?

No. All of the criteria must be met before a bank will even consider a short sale. Even then it isn’t easy to convince a bank that the market value of the home is lower than what they are owed.

Even if all the paperwork has been correctly completed it can take several weeks, or even months, only to be denied. If the lender does not approve the short sale, no transaction occurs. The Purchase Agreement becomes void and the listing continues. There are, however, ways to put a time limit on the lender’s time to issue approval.

In a rising market the delay in a short sale approval runs against the buyer for at least two reason 1) The buyer’s purchasing power decreases as prices increase; and, 2) there is no guarantee the lender will approve the sale and the delay may cause the buyer to be priced out of the market.

A falling market has just the opposite affect because a buyer’s purchasing power increases as prices decrease.

7. How long does a short sale take to complete?

From a few weeks to several months.

8. What if the house I want needs repairs.

Remember, when an owner short sells their home it’s because they are suffering a financial hardship. This means there is no money for repairs and as a buyer you can’t reasonably expect the seller to do much in the way of repairs. The good news is we have had some success convincing lenders to repair termite damage and to make reasonable repairs relating to safety. But, this type of cooperation is dependent on the expense involved, the nature of the repair, the purchase price being paid and the direction of the market.

9. What if the house I want has liens on it?

Liens can complicate matters because the owner will not have the financial capability of removing them. Depending on a number of factors, including the real estate market and the purchase price, the lender might be persuaded to clear the liens. Or, sometimes the lien holders themselves might be convinced to reduce their liens. A short sale in this circumstance will take substantially longer.

10. I’m an investor, can I buy a short sale?

The simple answer is yes, you can. However, there can be serious complications.

11. Can I buy the short sale for the price stated in the listing?

An experienced Realtor can quickly tell you whether or not the property is priced unusually low. If so, the home was probably intentionally priced that way to attract offers which might prompt the lender into letting the Realtor know what price it will accept. In which case, the chances of buying the property at the asking price may not be very good.

On the other hand , the property might be priced correctly and your chances of getting the property at the asking price will be reasonably good.

12. How long will it take to get bank approval of my offer?

The answer to this question depends on the expertise of the listing agent, which bank is involved, and how many loans are on the property. Once approval is obtained, the property can go into escrow which takes no longer than a standard sale.

14. Will the banks negotiate on price?

Yes.  More in down markets and less in up markets.

15. Do I get title to the property when I buy a short sale?

Yes, title is transferred to the buyer at the close of escrow, just like in a standard sale.

16. Are my property taxes based on the amount of debt that was on the short sale property?

No. In California, your property taxes are based on the purchase price of the home.

17. Can I transfer my property tax base to a sale short?

Possibly, depending on whether or not you meet the requirements. You might want to read our article entitled, “Transfer Your Property Tax Base Year Value To Your New Home“.

As the housing markets recover, fewer and fewer homes will be underwater until finally the short sale will again become an unusual event.

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“ASK MIKEY”

http://www.AskMikeyHall.com

AskMikeyHall@gmail.com

voice: 949-887-1625

fax: 866-764-6325

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OTHER INTERESTING AND INFORMATIVE INFORMATION SOURCES

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voice: 949-505-3838

fax: 866-764-6325

CALIFORNIA REAL ESTATE PRIMER – Mortgage Forgiveness Debt Relief Act

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DISCLAIMER

This article is intended to be a general discussion only, and should not be considered legal advice. Your use of it does not create an attorney-client relationship. Any liability that might arise from your use or reliance on this article or any of its links is expressly disclaimed. This blog is not legal, accounting or tax advice, is not to be acted on as such, it may not be current, and is subject to change without notice.

 

THE MORTGAGE FORGIVENESS DEBT RELIEF ACT

Recall that in our article, “Short Sales From The Seller’s Point of View,” we mentioned that the tax implications, of a short sale, for the borrower can be significant and are relatively complex. In very general terms, mortgage relief (i.e. a discount on the amount owed) is viewed as income, and will be reported to the IRS by the lender, and must be included in the borrower’s gross income. Having said that, on December 20, 2007 President Bush signed into law a measure giving tax breaks to homeowners who have mortgage debt forgiven on their family residence.  This law was part of the “Bush Tax Cuts” you may have heard about.  Note: The Bush Mortgage Debt Relief Act applies only to Federal income tax.  State income tax rules are set by each individual state and which state laws might apply to you is another subject best covered with your tax advisor.

With the passage of “The Mortgage Forgiveness Debt Relief Act of 2007“, a taxpayer did not have to pay federal income tax on debt forgiven for a loan secured by a qualified principal residence. This tax break applies to debts discharged from January 1, 2007 to December 31, 2009.  Qualified principal residence indebtedness is debt incurred in acquiring, constructing, or substantially improving the primary residence (up to $2 million for refinances).  The December 31, 2009 date was the date the law was initially set to expire.

Then in 2009, The Emergency Economic Stabilization Act of 2009 was passed.  This law extended the Bush exclusion of income for qualified debt relief.  This extension of the law was set to expire on December 31, 2012 and applied to discharges of qualified indebtedness occurring on, or after January 1, 2010.

On December 31, 2012 , at the 12th hour, congress passed yet another extension of the federal Mortgage Forgiveness Debt Relief Act through December 31, 2013.

Unfortunately, California did not renew its mortgage debt relief law.  In response, the California Association of Realtors has said it will sponsor California Senate Bill 30, introduced December 3, 2012, by Senator Calderon, D-Montebello.  If passed and signed into law, Senate Bill 30 will exempt mortgage debt forgiven on a principal residence as taxable income.  Until that happens however, it appears that in California mortgage debt relief from the short sale of a principal residence will be treated as taxable income.

On January 10, 2013, Senate Bill 30 was referred to the California Senate Governance and Finance Committee.

The following is a set of a set of IRS FAQs which may be helpful in understanding the nuances of the law:

What is the Mortgage Forgiveness Debt Relief Act of 2007?

The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.

“What does that mean?

Usually, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principal residence from income.

“Does the Mortgage Forgiveness Debt Relief Act of 2007 apply to all forgiven or cancelled debts?

No, the Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes.

“What about refinanced homes?

Debt used to refinance your home qualifies for this exclusion, but only up to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified.

“Does this provision apply for the 2007 tax year only?

It applies to qualified debt forgiven in 2007, 2008 or 2009.

“If the forgiven debt is excluded from income, do I have to report it on my tax return?

Yes. The amount of debt forgiven must be reported on Form 982 and the Form 982 must be attached to your tax return.

“Do I have to complete the entire Form 982?

Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.

“Where can I get this form?

You can download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.

“How do I know or find out how much was forgiven?

Your lender should send a Form 1099-C, Cancellation of Debt, by January 31, 2008. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982.

“Can I exclude debt forgiven on my second home, credit card or car loans?

Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion.

“If part of the forgiven debt doesn’t qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?

Yes. The forgiven debt may qualify under the “insolvency” exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent. A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982.

“Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?

There is no dollar limit if the principal balance of the loan was less than $2 million ($1 million if married filing separately for the tax year) at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982, page 4.

“Is there anything else I need to know before filing?

Yes. Because the Mortgage Forgiveness Debt Relief Act of 2007 was passed so late in the year, the software systems used by tax preparers and at the Internal Revenue Service need to be updated to accept the revised Form 982. The IRS expects to be able to process the new Form 982 electronically on March 3, 2008.”

Before a short sale is contemplated, it is strongly recommended that the borrower seek the advice of a professional tax advisor.

The information contained herein is deemed reliable, but must be independently verified.

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“ASK MIKEY”

http://www.AskMikeyHall.com

AskMikeyHall@gmail.com

voice: 949-887-1625

fax: 866-764-6325

DRE #00792478

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OTHER INTERESTING AND INFORMATIVE INFORMATION SOURCES

OC Property Management & Sales, Inc.

DRE Lic# 01886215

www.OCPropMgmt.com

OCPropertyMgmt@gmail.com

voice: 949-505-3838

fax: 866-764-6325

DISCLAIMER

This article is intended to be a general discussion only, and should not be considered legal or real estate advice. Your use of it does not create either an attorney-client or broker-client relationship. Any liability that might arise from your use or reliance on this article, or any of its links, is expressly disclaimed. This blog is not legal, real estate, loan, accounting or tax advice, and is not to be acted on as such, it was outdated the moment it was written, and is subject to change without notice.  If you are dealing with a potential problem with your investment property you are advised to retain the appropriate licensed professional.

 

CALIFORNIA REAL ESTATE PRIMER – Tips For Buying REO Properties

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Tips For Buying REO Properties

The acronym REO stands for the phrase “Real Estate Owned.” An REO is a lender owned property, meaning it has been acquired by the lender as the result of a foreclosure.

Buyers attempting to buy foreclosed properties will need to understand a few basic principals, because the competition on a well-priced REO can be intense. A well-priced REO will draw multiple offers and your competition may well include professional investors. The key to a successful conclusion is to be organized and to have the ability to move quickly.

Some helpful tips include:

1. Realistically establish your maximum down payment, your maximum affordable mortgage amount and your maximum purchase price. You need to be ruthless about these limits.

2. Get yourself either pre-qualified or pre-approved with your lender so that you can move quickly when the time comes.

3. Be prepared to pre-qualify with the selling bank and to allow the seller to run your credit scores should it be requested.

4. Understand that REO properties (that haven’t been destroyed by the prior owner) aren’t gifts. They are generally no more than 10% to 15% below other properties. A corollary to this is the fact that banks are skilled at understanding the market and assessing the market value of a property. As a result, low ball offers are almost never a productive activity.

5. If the property was priced right in the first place you can expect experienced, skilled competition.

6. If an REO property has been sitting on the market without drawing offers, a bank owner will usually not be shy about adjusting the price to move the property. Banks are not in the business of managing property and are generally pragmatic about their pricing.

7. To make your offer more appealing you might want to consider getting your mortgage from the bank selling the property. This tactic might make your offer more appealing, assuming the seller’s loan terms are reasonable.

8. Remember, REO properties are sold “AS IS” and it will be your responsibility to inspect the property and to determine how much money it will take to repair the property and bring it back up to condition. Don’t forget to factor this cost into your purchase limit, as well as the value of the property.

9. Get the most experienced Realtor you can to represent you. Look for a Realtor who is interested in understanding your situation and working toward your goals.

 

If ever there was a time to use a skilled real estate agent this would be it.

1 Mikey & Pixey Best 1

“ASK MIKEY”

http://www.AskMikeyHall.com

AskMikeyHall@gmail.com

voice: 949-887-1625

fax: 866-764-6325

DRE #00792478

Return To The Table of Contents

OTHER INTERESTING AND INFORMATIVE INFORMATION SOURCES

OC Property Management & Sales, Inc.

DRE Lic# 01886215

www.OCPropMgmt.com

OCPropertyMgmt@gmail.com

voice: 949-505-3838

fax: 866-764-6325

DISCLAIMER

This article is intended to be a general discussion only, and should not be considered legal or real estate advice. Your use of it does not create either an attorney-client or broker-client relationship. Any liability that might arise from your use or reliance on this article, or any of its links, is expressly disclaimed. This blog is not legal, real estate, loan, accounting or tax advice, and is not to be acted on as such, it was outdated the moment it was written, and is subject to change without notice.  If you are dealing with a potential problem with your investment property you are advised to retain the appropriate licensed professional.

 

CALIFORNIA REAL ESTATE PRIMER – REO Properties

036 (572 x 428)

REO PROPERTIES

The acronym REO stands for the phrase “Real Estate Owned.”  In the real estate trade, an REO is a lender owned property, meaning it has been acquired by the lender as the result of a foreclosure.  In California, this latter fact can be important, because it means  the lender has acquired “clear title” to the property.  This might not be the case if the property was acquired by a Deed in Lieu

Short Sale

In the normal course of events, a distressed home moves through a series of stages which are many times confused by the general public. In the beginning, when the homeowner is trying to sell the home for an amount less than the debt owed on the property it is called a Short Sale.

Foreclosure

Foreclosures begin when the Trustor (borrower) stops making the monthly payments to the Beneficiary (Lender). The first missed payment is a technical default, but in practical terms, most Beneficiaries do not begin the process until the third payment is missed. During this time period the property remains classified as a short sale.

When the owner becomes 90 days late on the mortgage payments, Beneficiaries typically record a Notice of Default (NOD) and the Foreclosure Process begins. The property is now called a Foreclosure and is sometimes typified as “being in Foreclosure”, however it is still a Short Sale.

REO

A trustee sale date is set for about three months after the NOD is recorded. On the sale date, the property is offered for sale at auction. The successful bidder must pay cash for the property. If no one purchases the property, title is transferred to the Beneficiary (Lender) and the property becomes an REO.

The Lender now has title to the property. The Lender will establish a market value for the property, then assign it to an inhouse Asset Manager (generally an outside company) which specializes in the handling of REOs. This company, in turn, will assign the property to a local real estate broker who will list the property for sale on as “AS IS” basis. This means generally there will be no repairs.

It must be remembered that the lender is an owner who has never “lived” in the property. That means there will be very few, if any, disclosures from the Lender. The burden will be on the buyer to determine what’s wrong with the property and how much it’s going to cost to fix it. Moreover, most lenders either use their own purchase contract instead of the CAR approved contract or require their own contract addendum. Many Lenders will also require the buyer to pre-qualify with them, and some will even require the buyer to submit FICO scores. In this case however, the effort might be worth it.

Typically, the Realtor who gets the REO listing will be responsible for evicting anyone who is squatting on the property, re-keying the property, turning on the utilities, adding a lock-box, and bringing the property up to some minimum saleable condition. In variably the REO listing agent will advance these costs out of their own pocket.

For some reason Lendors will habitually assign REO properties to a limited number of Realtors.  While this might be good from a proceedures point of view it can, and many times has, resulted in the concentration of large numbers of REO listings with a single agent.  As the number of REO’s listed with an agent increases, that listing agent’s available time disappears and the entire process becomes mechanized and unresponsive to the buyer.  As a result, REO buyers must be on top of their game.  There will be no listing agent to answer questions, chat up the property or even show it.

The Pipeline

It is extremely difficult to predict how many homes will move completely through the pipeline to the final REO stage. Some owners will “cure” their default, others will manage to sell their properties before the trustee sale. Some of the homes will be sold by the trustee, and what is left will finally become an REO. The whole process can easily take six to twelve months.

It is not unusual for only 10 or 12 homes out of 80 or 90 to become REOs. For example, in Aliso Viejo, California in May of 2008, there were 85 short sales, and only 14 REOs.  At that time, this was not an unusual ratio.  As markets improve and become more healthy, the number of REO listings decreases.  In a healthy real estate market driven by low unemployment the REO listing will become a rarity.

Are REOs Really A Good Deal?

REOs can be a great deal, but they aren’t necessarily so. While the price may no longer include any owner equity, the property may still be priced at, or even above, the market. On the other side of the coin, REOs priced below the market tend to draw multiple offers. Since Lenders are aren’t in the business of managing REO property, the multiple offer scenario is preferable because it tends to drive up the price on a quick sale.

In addition to a possible price discount, REOs (unlike short sales which require lender approval) provide an opportunity to deal with a single owner. REO purchases tend to be straightforward affairs. The caveat here is that the property is virtually always sold on an “AS IS” basis without the benefit of a Transfer Disclosure Statement.  Moreover, in California, the lender is exempt from certain statutory disclosures regarding the property.  If there’s a problem you must find it yourself.

If ever there was a time to use a skilled real estate agent this would be it.

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“ASK MIKEY”

http://www.AskMikeyHall.com

AskMikeyHall@gmail.com

voice: 949-887-1625

fax: 866-764-6325

DRE #00792478

Return To The Table of Contents

OTHER INTERESTING AND INFORMATIVE INFORMATION SOURCES

OC Property Management & Sales, Inc.

DRE Lic# 01886215

www.OCPropMgmt.com

OCPropertyMgmt@gmail.com

voice: 949-505-3838

fax: 866-764-6325

DISCLAIMER

This article is intended to be a general discussion only, and should not be considered legal or real estate advice. Your use of it does not create either an attorney-client or broker-client relationship. Any liability that might arise from your use or reliance on this article, or any of its links, is expressly disclaimed. This blog is not legal, real estate, loan, accounting or tax advice, and is not to be acted on as such, it was outdated the moment it was written, and is subject to change without notice.  If you are dealing with a potential problem with your investment property you are advised to retain the appropriate licensed professional.

CALIFORNIA REAL ESTATE PRIMER – Selecting Your Buyer

SELECTING YOUR BUYER

036 (572 x 428)

Recently, we wrote an article listing the six most common seller mistakes.
Number five on that list was carelessly selecting your buyer. In some respects, the selection of your buyer can be more difficult than setting the initial price on your home. Selecting the wrong buyer can be a time consuming, costly, and frustrating mistake. While it is always possible to make a mistake, hiring an experienced realtor and being frank with him or her will put you a step ahead.

Before we start, let’s get away from the concept of selecting your buyer on the basis of personality alone. Everyone would like their home to be enjoyed by nice people, however that by itself says nothing about the probabilities of closing your deal.

Let’s also set aside the idea of simply taking the highest offer. Purchase price, like personality, won’t necessarily close the deal.

For purposes of discussion we can separate the types of issues into two broad categories, those that are reflected on the face of the documents and those that don’t necessarily appear on paper.

Issues On Paper

The standard California Residential Purchase Contract is eight pages long and has 33 numbered paragraphs. A number of these paragraphs deal with issues potentially critical to your deal. In addition to the contract itself, there can be contract addendums and counter offers. There is really no limit to the number of possible additions and modifications to the contract.

No matter how confusing, this mass of paper becomes, it defines your “deal.”  And, the issues your deal presents, in the context of the marketplace and your own wants and needs, should all be carefully considered in your selection of a buyer.

Some examples of these considerations are purchase price, good faith deposit, down payment, financing conditions, contingencies, length of escrow, etc. and etc.

The combinations of these factors define the buyer’s profile. The objective in a multiple offer situation is to decide which of the buyer profiles best fits your needs. For example, in a down market, a buyer with a lower purchase price, but a large down and no contingencies is probably preferable to a buyer with a high purchase price and a deal which is contingent upon the sale of their own home. Why? Because in a down market the buyer who has to sell their home before they buy may not find a buyer or may not get enough from their sale to make their purchase.

Buyers’ wanting long escrows may, or may not, be as desirable as buyer’s requesting a short escrow. A pre-qualified buyer is good, but maybe not as good as a pre-approved buyer.

Issues Off Paper

The off paper issues can be just as complex as the technical terms of the deal. And, this is where you must be candid with your realtor. What are your wants and needs? Do you have your replacement property already in hand, or do you need time to find and purchase it. Should a rent back be considered on your place or do you need a short escrow..

Is there a lot of deferred maintenance on your home, or is the property pristine and ready to go? Do you need an “AS IS” deal? Can you afford to make repairs if they’re requested?

As if that wasn’t enough there’s more. What’s the market doing? If it’s going up, the buyer’s purchasing power is disappearing and if the market is going down the buyer’s purchasing power is increasing and your negotiating position may be becoming weaker. In other words, is the marketplace driving the deal in one  direction or another?

There’s more. Was your original asking price realistic? Will the property appraise? Will the lender lend on it and if so, how much? What type of loan is the buyer getting? If it’s an FHA loan are there section 1 repairs that will have to be done? If your property is a condominium, has the project been FHA approved? Do you have HOA issues? Is there an assessment coming? Are the HOA dues low or high for the neighborhood? Do you pay Mello-Roos? And, if so, how much?

After saying all of that, here’s some pointers you can take away from this welter of information:

1. Avoid the temptation to leap at the highest price;

2. Avoid the temptation to sell to the most likeable buyer;

3. Use an experienced Realtor and be frank with him or her’

4. Pay attention to the elements of the buyers’ offers;

5. Try to list your own important needs;

6. Be aware of what the market is doing around you; and,

7. Tally up the characteristics of each of the competing buyers and try to match those characteristics to your own interests, as well as, the market forces at play.

If you’re thinking about listing your home for sale and would like to get a free comparative market analysis do not hesitate to give me a call.

1 Mikey & Pixey Best 1

http://www.AskMikeyHall.com

AskMikeyHall@gmail.com

voice: 949-887-1625

fax: 866-764-6325

DRE #00792478

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 OTHER INTERESTING AND INFORMATIVE INFORMATION SOURCES

OC Property Management & Sales, Inc.

DRE Lic# 01886215

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OCPropertyMgmt@gmail.com

voice: 949-505-3838

fax: 866-764-6325

DISCLAIMER

This article is intended to be a general discussion only, and should not be considered legal or real estate advice. Your use of it does not create either an attorney-client or broker-client relationship. Any liability that might arise from your use or reliance on this article, or any of its links, is expressly disclaimed. This blog is not legal, real estate, loan, accounting or tax advice, and is not to be acted on as such, it was outdated the moment it was written, and is subject to change without notice.  If you are dealing with a potential problem with your investment property you are advised to retain the appropriate licensed professional.

CALIFORNIA REAL ESTATE PRIMER – Common Seller Mistakes

COMMON SELLER MISTAKES

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Over the years we’ve seen a lot of seller mistakes. Some of these mistakes are more costly than others, and some are repeated more often than most. Virtually all of them are unnecessary, and each and every one is a good reason to have an experienced Realtor working for you.

 1. Setting The Price Too High

Setting the price too high is a classic seller mistake. This very common mistake happens for a number of reasons. Sometimes the cause is pride of ownership, but more often the seller is setting a price based on what he or she needs out of the sale, as opposed to the market value of the home. If the price is set too high it will discourage offers.

Moreover, in a down market, an inflated price on day one of the listing is even more inflated after a week or two have gone by. Not only is the asking price not tracking the market it’s becoming more out of line as each day goes by. Most sellers though refuse to set their initial asking price at a level which will invite offers and is representative of the market.

A home which stays on the simply because it’s over priced will quickly become “stale” and difficult to sell even if the price is subsequently lowered.  The solution is simple.  Always get a comparative market analysis before you set the asking price.

This leads us into mistake number two.

2. Refusing To Lower The Asking Price On A Reasonable And Timely Basis

Sellers who have set their asking price above the market value, will also invariably fail to adjust their price appropriately. Instead of pricing to sell, these sellers will only grudgingly reduce their asking price and never by an amount large enough to make their home a worthwhile buy. As a result they find themselves chasing the market and never getting a serious offer. In the end, this seller will loose more money than if they had simply priced their home correctly in the beginning. It may sound trite, but the market really does set the price.

 3. Rejecting The First Offer

 Too many times a seller will be suspicious of the first offer they receive. We’ve all heard statements like “I must have priced my home too cheaply” or “If I hold out I’ll get more money.” or “I just listed my property, and I don’t want to take the first offer.” These reactions and others similar in nature, generally cause the first offer to be rejected. In down markets this is a clear mistake. Each day that passes the buyer’s alternative choices are increasing and the seller’s bargaining position becomes weaker. In times of rising interest rates the buyer’s purchasing power is decreasing as times passes.

Assuming the home was priced correctly in the first place. The plain fact is the first offer is more often than not the best offer. Think about it this way. A home which has just been listed can more easily be perceived as a desirable “discovery” by a serious buyer than a home that’s been on the market for weeks.

The longer a property sits, the less desirable it appears. In fact, a buyer’s first question usually is, “How much?” and the second question is “How long has it been on the market?” If you get a first offer, at or near your asking price, it’s probably because you’ve priced your home correctly. If you feel the need, recheck the comparable sales, but don’t reject the offer out of hand. Which brings us to the next common seller mistake.

4. Becoming Offended By Low Offers – Refusing To Counter

It’s surprising how many people will become so offended by a low offer they refuse to counter. There are a couple of good reasons why this is a mistake. If a seller has “an offer on the property” they are by definition in a stronger position with other potential buyers. The property is seeing action and there is the potential of getting a “buzz” started. Used properly, even “low ball” offers can instill a sense of urgency.

Moreover, a low starting offer may be the buyer’s way of testing the market and may not say anything about what the buyer is actually willing to pay. A seller is rarely hurt by responding to an offer.  Low ball offers are not unusual following a down market, especially a down market that has lasted for any significant length of time.

 5. Carelessly Selecting A Buyer

 It’s important to pay attention to the buyer’s ability to complete the purchase. The buyer should be pre-qualified by his lender, and should have a reasonable down payment. Between two otherwise equally qualified buyers, the buyer whose offer is contingent upon selling their own property represents more risk than the buyer without contingencies. This is especially true in a down market where the buyer may not be able to sell his home for the price he wants.

6. Not Presenting The Home Effectively

 A cluttered home or a home which needs repairs or paint fails to communicate desirability and in some instances can even signal to the buyer to reduce their offer. Fresh paint (neutral colors), clean windows and clean floors and carpets can work wonders. Cut the grass, and pull the weeds. A few flowers inside and out always seem to help.

When it comes to furniture, a little less may be better. Less furniture will cause a room to look and feel larger. That’s a good thing. Some agents dislike using a home stager, but the results can be really good, so long as the stager has some talent and the cost isn’t too great.

If you’re thinking about listing your home for sale and would like to get a free comparative market analysis do not hesitate to give me a call.

1 Mikey & Pixey Best 1

http://www.AskMikeyHall.com

AskMikeyHall@gmail.com

voice: 949-887-1625

fax: 866-764-6325

DRE #00792478

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 OTHER INTERESTING AND INFORMATIVE INFORMATION SOURCES

OC Property Management & Sales, Inc.

DRE Lic# 01886215

www.OCPropMgmt.com

OCPropertyMgmt@gmail.com

voice: 949-505-3838

fax: 866-764-6325

DISCLAIMER

This article is intended to be a general discussion only, and should not be considered legal or real estate advice. Your use of it does not create either an attorney-client or broker-client relationship. Any liability that might arise from your use or reliance on this article, or any of its links, is expressly disclaimed. This blog is not legal, real estate, loan, accounting or tax advice, and is not to be acted on as such, it was outdated the moment it was written, and is subject to change without notice.  If you are dealing with a potential problem with your investment property you are advised to retain the appropriate licensed professional.