"Mansionization": Which Home is Largest-of-All?

Under discussion for much of this year, the Long Beach City Council's agenda last night finally brought it to the city level. Citizens from neighborhoods such as The Ranchos, Belmont Shore and Belmont Heights have been most vocal about the impact of built-out remodels or rebuilds on the character and "feel" of their neighborhoods. It's not too difficult to find throughout Long Beach (or adjacent cities) many examples of houses which are built out to the maximum in lot coverage with as little setback as possible, in the trend to have the largest home possible in a given amount of space. Where a neighbor saw a tree in his neighbor's yard, he now might be able to reach out and touch the neighbor's new second story wall. As real estate appreciates, so does the desirability of location, location, location, and many owners felt there was an advantage to tearing down the old and rebuilding today's desirable floor plan. So does the owner have all the rights here, or do other area residents who chose to invest in a neighborhood partially because of it's architecture, age, density level (or lack of), and general "comfort" level with the street.

So the City Council last night voted 8-0 on a motion concerning Belmont Shore and Belmont Heights which proceeds which a current interim ordinance limiting construction to two stories (there have been many 3 story remodeled houses in the Shore), and further study reducing the number of variances allowed, the appropriateness of decreased turning radius for cars with homes on alleys, architectural projections, front yard setback, standards for remodels and new construction, using community involvement on design guidelines.

For some owners, just as when some areas voted to become historic districts in the 1980's and 1990's, these guidelines may be viewed as too limiting and an infringement on their property rights and change what they view as "functionally obsolete." It's a valid point--for hundreds of years people have built their homes in a way that fit the social structure of the time, sometimes long after that social structure was gone and "custom" took over. How do people upgrade a floor plan they believe is "functionally obsolete" but then not infringe on their neighbor's privacy? The other question is, do people need as much space as they think they do? I think a big question centers on privacy and desire for personal space especially in metropolitan areas which have seen their populations grow drastically. They're squashed in on the freeway to get home, and now their big plasma TV does not fit in that little 1928 or 1952 living room.

But will this really prevent sales? I don't think so--I think people in these neighborhoods will ultimately find a balance between living in a temperate climate vs. their lifestyle and available resources. (Photo is California bungalow in Alamitos Beach area, the kind of house that some people love and look for, other people think is way too small.)

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California's Updated Property Tax Withholding Laws

California's property tax withholding laws have been revised recently, and below are some basics per the legal counsel of California Association of Realtors.

An important thing for buyers and sellers to note is that the REALTOR is not the person charged with informing the buyer and seller, it is the escrowholder (although it certainly helps if your REALTOR is knowledgeable and prepares you beforehand).

If the escrow officer does not inform the buyer of their requirements to withhold, then the buyer is not obligated to withhold the money from the seller. (This concerns California law only; the IRS also has additional requirements.)

"Buyers must withhold 3 1/3 percent of the gross sales price on sales of California real property interests from both individuals (e.g., "natural" persons) and non-individuals (e.g., corporations, trusts, estates) and pay this amount to the Franchise Tax Board (FTB), unless an exemption applies (Cal. Rev. & Tax Code §§ 18662(e)(1)(A), (B), (2)(A)). Escrowholders must give buyers written notice of these withholding requirements. If the escrowholder fails to give the buyer this written notice, then the buyer is off the hook for the withholding tax liability. ( (Cal. Rev. & Tax Code §§ 18662(e)(3)(B).) Typically, the escrowholder submits both the form and money withheld to the FTB.

The exemptions include:

the sale of property for less than $100,000 (Cal. Rev. & Tax Code § 18662(e)(3)(A)); for individuals,

the sale of a principal residence or a property last used as a principal residence (Cal. Rev. & Tax Code § 18662(e)(3)(D)(i));

the sale of a decedent's principal residence by the estate (Cal. Rev. & Tax Code § 18662(e)(3)(D)(i));

the sale of property by a corporation with a permanent place of business in California (Cal. Rev. & Tax Code § 18662(e)(3)(D)(v));

an Internal Revenue Code (IRC) § 1031 exchange (without any recognized gain)(Cal. Rev. & Tax Code § 18662(e)(3)(D)(ii));

an involuntary conversion under IRC § 1033 (Cal. Rev. & Tax Code § 18662(e)(3)(D)(iii));

the sale of property at a net loss (or a net gain not required to be recognized) for California income tax purposes (Cal. Rev. & Tax Code § 18662(e)(3)(D)(iv));

seller's tax liability, calculated at the maximum rate regardless of seller's actual rate, will be less than 3 1/3% and seller certifies that fact under penalty of perjury. (For tax rate for corporations, see Cal. Rev. & Tax Code § 23151 or 23186; for maximum tax rate for other sellers, see Cal. Rev. & Tax Code § 17041.) (Cal. Rev. & Tax Code § 18662(e)(2)(B).)"

The required amount withheld in escrow must be transmittd to the FTB within 20 days after the close of escrow, and during escrow, the escrow officer should provide the buyer with an instruction form for the escrow officer to transmit those funds.

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Market Activity in East Long Beach 90815 for September 2007

According to residential resale transactions recorded at the Los Angeles County Recorder's office for August, there were 306 transactions in zip codes 90802 through 90815--a decrease of 18% in sales for the same period in 2006 for the same area which shows 372 transactions.

California Association of Realtors reports a 27.8% decline statewide in numbers of sales for August compared to the same period last year, and an approximate 5% decline in median sales price.

Locally, though, it appears that all trends as showing in the Southern California MLS are down except the price:

Taking just the one zip code 90815, generally considered East Long Beach and including the varied housing characteristics of Los Altos, La Marina, Park Estates, Bixby Hill, Artcraft Manor, College Park West, and Stratford Square neighborhoods, 17 single family homes closed in September selling at 95% of the list price at an AVERAGE (probably very close to the median) price of $754,911 after an average of 55 days on the market--a decrease of 23% from September 2006.

The 90815 area for September, 2006, 22 single family homes closed at an average of $711,318, at 97% of the list price, after an average of 74 days on the market

For the 90815 in 2003 there were 39 sales, after 19 days on the market, selling at 99% of the list price at an aver sales price of $497,038. 2003 is the year showing the most recorded transactions from the Los Angeles County Recorder for the 11 zip codes mentioned above in the last 5 years at 423 total transactions.

The 90815 house at the right does not fit the average sale picture above--It features many interior upgrades including kitchen and bathrooms, has an earlier room addition which makes a den or a 4th bedrom, yet remains on the market after a year. The current asking price is $668,950--it's a great house for a young family because it's within walking distance to the elementary and middle schools, near shopping and the airport. If you would like to know more contact me, or find this property (it now has a little tree in the front) here.

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Sales Activity Comparisons for Long Beach and Cerritos

The number of houses selling over $1,000,000 in the 90803 zip code now equal about half of total sales of single family homes during July and August. While there are those who say that this fact skews the overall median price, it's still a fact that there is a market in this price range where it did not exist a few short years ago. In August, the AVERAGE sales price of 17 closed escrows, per the MLS, was $1,283,876 at an average of 64 days on market with the selling price about 91% of the original list price. In July, 25 properties closed escrow after an average of 68 days on the market at an average selling price of $1,408,653, at 92% of the original list price. The lower end of sales in this area was around $600,000, and up.

If these prices shock you, just look at the blue-footed doobie for a minute.

The story for July and August of 2006 for 90803 was almost the same for average price and number of sales (18 for both months), but the average time on market was MUCH longer: 124 days on market in July and 97 days on market for the average sale of $1,175,000 in August.

The story in Cerritos is similar: August of 2006 saw 53 days on the market, July was 42 days on market. August of 2007 was 26 days on the market (half the time to sell from one year ago) and July of 2007 the average sale time was 29 days on the market.

For both years the sale to list price percentage is higher than Long Beach--in July of 2006 it was 97% of the original list price and in July of 2007 it was 95% of the original list price. The average sale price has declined in those two months to $715,789 for August and $747,754 for July of 2007.

If you still want to be in Long Beach near the beach, the house at the right is on the market for $689,900 in Belmont Heights. For more information, call me or go to www.juliahuntsman.com and find 261 Grand on the property search engine.

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Old Saying in Real Estate: "First You Have to Sell It to the Buyer and Then ...

... you have to sell it to the appraiser." In a rising market appraisals are usually not a cause of concern, but the market of the last two years is seeing a return of cautionary words about knowing the appraisal process. This is where sellers are smart to choose agents who provide them with realistic comparables when listing their property, and this is where it's smart for buyers to work with agents who are familiar with their prospective new home.

Sellers who bought recently may not be happy with the actual rate of return on their new purchase, particularly if they've refinanced lately, or took out a home equity line, or had a 100% mortgage to begin with. Sorry, but your equity won't be so great, if any. Furthermore, in the words of a local loan representative who sent me an e-mail on appraisals today:

"The appraisal process often confuses consumers and loan officers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn't always make sense to them or sales staff because there has been so much time and effort invested in the file. It is important to know that the appraiser is completely independent from borrowers, buyers, sellers, and Real Estate Agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules. In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value. The most important feature of a home is location, location, location."

It's not uncommon for sellers to think their lovely home is worth more because of $50,000 invested in certain upgrades, but that depends on the age of the home. Per our friend from Wachovia, "the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal" because much of the total remodel cost usually involves demolition and upgrading of the basics such as plumbing and wiring. Upgrades in a very new home would get a higher return on the investment because they are an addition to the cost of building the new home. The value of those upgrades will depend on the local value of other recent sales with similar upgrades.

If you have an all cash buyer and no lender appraisal is required, you may or may not deal with an appraiser because the buyer may still want a 3rd party opinion.

A most difficult thing in a transaction where the buyer is obtaining a loan is to have the appraisal reviewed prior to closing--last minute questions can delay the closing. The best of all possible worlds is for sellers to realistically price their properties for their area.

(And why is there this picture with the dog? Because I couldn't find a photo of an appraiser.)

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Local Water Use Restrictions

The City of Long Beach has declared a water shortage and issued revisions to the municipal code concerning water use which ought to be of interest to all Southern California cities.

Record low rainfall and an 8-year drought in the Colorado River watershed, used by much of Southern California, along with other impacts such as a federal court Endangered Species Act ruling on August 31st, necessitated new rules for the City of Long Beach:

Washing driveways, sidewalks, parking areas, patios or other outdoor cemented or paved areas with a garden hose, unless it is attached to pressurized water broom;

Irrigating any landscape with potable water between 7:00 a.m. and 6:00 pm;

Irrigating any landscape more than three days per week.

The City imports almost half of its water and states a water supply shortage is imminent without immediate conservation, and is mandating the use of water pressure devices on all hoses. Just click on the link above for complete information.

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New Property Search by Map

Find the latest technology now offered through
our Southern California MLS service. Easy to map, easy to search by zip code, map area, and city. Different ordering sequences allow searching by days on market, square footage, bedrooms, baths, plus more selections.

Go to www.juliahuntsman.com and click on "Pinpoint Map Property Search" where you will find a screen like the one at the right.

Take advantage of other links there, too!

For free e-mail property updates directly from our MLS, just fill out your information on my Guestbook form, and I will set one up that goes directly to your e-mail address. This saves time and allows for very focused searches.

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Know Your Rights if You Are in Pre-Foreclosure

It's an unfortunate fact that certain loan borrowers have been unable to make their payments. On this blog there are many searches about information on foreclosure and pre-foreclosure.

If you're in this situation, please see my earlier post What Happens If You Are In Foreclosure?.

It's important for you to know that certain California statutes regulate the sale of homes on which a Notice of Default has been filed, that if you list your home with a California agent you should make sure your agent is aware of using the Home Equity Sales Contract form when a buyer presents an offer. This form specifically addresses particular issues as required by the California Civil Code Sections 1695-1695.17 which are designed to protect the seller from fraud and deception by unscrupulous buyers. Among other things, a sales contract under these circumstances would include the following language to prevent you from signing over the rights to your home under undue pressure:

"NOTICE REQUIRED BY CALIFORNIA LAW Until your right to cancel this contract has ended, _______ or anyone working for _______ (Name) (Name) CANNOT ask you to sign or have you sign any deed or any other document."

Read the Code sections linked above (they're not that difficult to go through) because they carefully spell out what the equity purchaser (your buyer) must do if you already have a Notice of Default filed on your property. An equity purchaser convicted of fraud under these laws is subject to damages and other penalties including jail time, and the seller has certain rights to bring action. If you are in doubt about someone you are dealing with, or have questions before you list your home, please take the time to get a second opinion from a qualified REALTOR, or seek advice from an attorney who specializes in real estate law and foreclosures.

October 12, 2007 addition from October CLTA News concerning rescission of a sale of a pre-foreclosure property:

"REMINDER --- DISTRESS SALES ARE HIGHLY REGULATED

"Homeowners facing foreclosure and buyers wanting a deal would seem a perfect match. But these matches face obstacles that both buyers and sellers may not fully understand. This is because the California Legislature stepped in a few years ago to crack down on fraud and created a whole new set of laws dealing with the sale of property in foreclosure. The law provides far-reaching protection to homeowners facing foreclosure. Once a notice of default is filed the law applies and sellers have specific legal protections, including the right to cancel a contract to sell up to five business days after signing a contract to sell the property. Not only can a seller cancel the contract before the sale but under certain circumstances the owner may rescind the sale within two years if a court finds the sale unconscionable. In addition, a court may award the seller damages and the purchaser could be criminally prosecuted.

"A representative of the seller is also treated harshly if they do not comply with the law. These representatives must have a valid real estate sales license and a bond. [MY NOTE: USING THE REALTOR'S HOME EQUITY CONTRACT FORM CORRECTLY ADDRESSES THE BOND ISSUE.] Both the purchaser and seller must be given a statement by the representative that they have the license and bond. Failure to comply means the seller may choose to treat the sales contract as void and can seek damages. There is some relief from all of these pitfalls. If a purchaser is going to use the property as their personal residence or the purchaser is the spouse or blood relative of the homeowner then the law does not apply. The bottom line in all of this is that both buyers and sellers and their agents should be aware of the law. With all of the attention devoted to sub-prime mortgages and foreclosures it is likely that the failure to strictly comply with the law will lead to serious title problems."

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Southern California's Hot Weather Breeds Mosquitoes

Last year's news on the West Nile virus is really still with us, so much so that the Department of Public Health for the State of California recently published a bulletin about standing water and green pools. It's mainly directed towards real estate managers and other property managers who might be concerned with vacant properties and unattended pools, but standing water could be a problem in a lot of locations, such as a chronic low point at a street intersection which catches the neighbor's lawn runoff.

"Standing water" in this bulletin is what has been in a pool for more than 7 days, it supposedly takes 7-10 days for "green pool" mosquito eggs to hatch.

It's easy enough to check for tubs or pots or other small containers around your property and overturn them if they are collecting water. Better yet, put them out of reach of falling water. Potted plants that are overwatered are also an ideal site for mosquito breeding--especially in very hot weather.

If a green pool, or stagnant fountain is around you, you can help by calling the number in this bulletin: "You can find your local agency on the California WNV website (www.westnile.ca.gov) on the right side under 'locate your local mosquito and vector control agency' or by calling 1-877-968-2473 (1-877-WNV-BIRD)."

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Can You Buy on $100,000 Income? Yes!

"The minimum household income needed to purchase an entry-level home at $504,080 in California in the second quarter of 2007 was $101,550, based on an adjustable interest rate of 6.29 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $3,380 for the second quarter of 2007." (California Association of Realtors, August 29, 2007.)

With downward changes in the market in some areas, the buyer affordability levels become a little more positive. The percentage of households that can afford to buy in today's market has increased one percent from the 2nd quarter last year to 24%. The index goes up a little more for those who can find that 100% loan that matches their buying profile, or for those who have a larger down payment than 5%.

In today's search in the MLS for just 3 zip codes in downtown, Belmont Heights/Shore, Bixby Knolls/California Heights areas of Long Beach (90802, 90803, 90807), a total of 203 condos and houses over 2 bedrooms came up under the asking price $504,080. On your monthly payment, add in HOA dues which are usually $200 at least for condominiums. For single buyers looking for lower prices in the $300,000 range, this figure does not include one-bedroom condominiums.

I am meeting quite a few people paying $2500-$2800 a month in rent. These are the people balking at paying perhaps a higher mortgage + taxes + insurance payment, but they're receiving no tax deduction benefit and no home equity. Tax deductions include mortgage interest, property taxes, plus other deductions (consult your accountant), according to your current tax margin which for a lot of people is about 35%. What a renter has, in a gradually shrinking rental housing inventory, is a 30 or 60-day notice to find a new home, and no long-term benefits.

Here you have at least 203 opportunities to buy in these 3 zip codes alone--why not search out all of your opportunities while you can look without pressure? It's much easier than the other scenario of limited time and uncertain choices.