The New Changes in the 2014 California Residential Purchase Contract

As of November 24th, new changes and additions to our real estate contract will be taking place.  This is one of the most significant series of changes, and the largest amount, in many years.  So if you're a buyer or a seller of a condo, house, duplex, three- or four-unit residential property and you open escrow on November 24th or later, you will be using the new form associated with the California Association of REALTORS.  You don't want to be like the little koala and caught unaware of the changes.

Without going into specific detail that would be reviewed completely if you were actively engaged in an offer or a transaction, here is a general summary of some items that would be encountered:

The contract has expanded by two more pages, making a total of 10 pages.

If you're a condo owner, you will automatically be required to pay up front and deposit funds into escrow for the legally required homeowner association documents given to to the buyer.

The parties can no longer spend the entire escrow period submitting their instructions to escrow, but now must submit within 5 days of opening escrow.

The buyer deposit default language now addresses an electronic fund transfer when submitting funds to escrow.  Checks are still acceptable, but the EFTs are now much more common and direct.

Credits given back to the buyer from the seller must now be disclosed to the buyer's lender and cannot exceed the amount allowed by the buyer's lender.

Termite repairs are now considered just that -- a repair to be requested and negotiated between the buyer and seller when other buyer repairs are requested during the buyer investigation period.

The buyer loan contingency default period has been extended from 17 to 21 days.

There are additional forms added to the transaction not previously used, i.e., if the seller stays even just 3 days past the close of escrow, there is now a separate seller leaseback form used to cover that time period.

If you are contemplating buying or selling a property, you should know that the Residential Purchase Contract should be reviewed with consideration.  The ease of digital signatures and emailing of documents has allowed for less face-to-face time with an agent, while the transactional requirements have grown more explicit and careful.  So while convenience is wonderful, not being aware of what you're signing is undesirable. Unless the transaction must be conducted at a great distance between client and agent, personal contact during escrow probably ensures a clearer explanation of documents.

Selling a California Property and 1031 Exchanging Out-of-State

Suppose that today, January 27, 2014, you closed escrow ("sold") your California property due to be part of an exchange in the state where you currently live (not California).  Did you know that the State of California now wants its money, if any is to be made? 

So, effective January 1, 2014, California Assembly Bill 92 now adds a new annual tax reporting requirement for those taxpayers who exchange California property under federal Internal Revenue Code Section 1031 for non-California replacement property.  This means "all individuals, estates, and trusts, and all business entities regardless of their residency status or commercial domicile" must report the amount of the gain (or loss) on the property which is deferred in the 1031 exchange.  If it isn't reported, then the Franchise Tax Board will estimate and decide for you what your amount of income is from the sale of your property, and assess tax, interest, and penalties due it. 

No more taking your property and then avoiding California tax by doing an out-of-state exchange, and then a later sale. Read more here about the new law.

Can I help you decide on the market value of your property? Whether it's one unit (home, condo, townhome), duplex, triplex, 4-units or more, I can help you with an income/expense analysis, plus free information about 1031 exchanges.  Please contact me at 562-896-2609, julia@juliahuntsman.com.

Some New 2014 Laws for California

It's that time of year again, and there are new laws taking effect that will affect a lot of us.  Here are a some of the new California laws that are wise to know about and which are taking effect January 1, 2014:

1.  Public dog parks are not liable for injuries caused by dogs. Assembly Bill 265

2.  Adjoining owners are equally responsible for shared fences and boundaries. "Adjoining landowners are presumed to share an equal benefit from any fence dividing their properties, and unless otherwise agreed in writing, are presumed to be equally responsible for the reasonable costs of construction, maintenance, or necessary replacement of the fence." Read more about the longer particulars on this new law:  Assembly Bill 1404

3.  A seller's Transfer Disclosure Statement to now include awareness of construction defect claims.  This will affect owners in some areas more than others. The "TDS" is a standard form provided in residential property transactions by REALTORS in California, and contains legally required disclosures.    SB 800; Senate Bill 652

4. The Used Mattress Recovery and Recycling Act is to reduce illegal dumping of mattresses to reduce blight and increase recycling.  A recycling program must be set up to handle them. Senate Bill 254

5.  New smoke detector specifications:  "Starting July 1, 2014, the State Fire Marshall will not approve a battery-operated smoke alarm unless it contains a non-replaceable, non-removable battery capable of powering the smoke alarm for at least 10 years." See the new requirements at  Senate Bill 745

6.  Brokers can be suspended or lose their real estate licenses for knowingly tampering with real estate documents in connection with their licensed activities.  This includes directors, employees,  and officers of a corporation.  Senate Bill 676

7.  Brokers who charge a fee for providing rental listings must be appropriately licensed for that pre-paid rental listing service.  Read here for more information, Senate Bill 269

These are just a few of the upcoming laws taking effect in 2014, of which there are approximately 100 new laws in many categories.  Laws that affect real estate transactions are reflected in updated REALTOR forms so that buyers and sellers can be assured that all pertinent disclosures, advisories, and information is provided during the transaction.