Prices Continue Up for June in Many Cities, But Sales Volume Way Down

Average single family home prices in June, 2014, and the increase or decrease compared directly to June of one year ago (prices may differ from overall annualized price), plus stats on closed sales and days on market (DOM).  Actual number and percentage of sales are down (see red column), a lot; properties are usually spending more time on the market before going into escrow (last column); and the average house price, on a citywide basis, is higher than one year ago.  The percentage increase in price, however, is lower compared to May's increases, in many areas. (P.S. See my new Metro Summary page for Long Beach region info for July).
     

Cerritos	$739,333	+10.8%	Closed Sales	-40%	DOM +27.8%
Lakewood	$463,096	+7%	Closed Sales	-32%	DOM +8%
Long Beach	$555,496	+17%	Closed Sales	-28.4%	DOM +58%
Los Alamitos	$726,667	+9%	Closed Sales	-57%	DOM +72%
Seal Beach	$1,021,223	+14%	Closed Sales	-20%	DOM -33.3%
Signal Hill	$655,000	+7%	Closed Sales	-75%	DOM +87%
Huntington Beach	$920,396	+19%	Closed Sales	-21%	DOM +68%
Norwalk	$340,943	+9%	Closed Sales	-8%	DOM +5%
Downey	$444,903	+8%	Closed Sales	-24%	DOM +59%
Garden Grove	$503,922	+15%	Closed Sales	-58%	DOM -9%

Thinking of Taking Money Out of Your California 1031 Exchange? Do It The Right Way

A basic feature/requirements of 1031 exchanges is that the taxpayer doing the exchange cannot have access to their funds--that's why there's an accommodator, or "qualified intermediary" (QI).  In real estate, 1031 exchanges are allowed where the property owner has not lived in the property as a principal residence, but has owned it usually as some form of income or investment property. There are certain exceptions to this, but they will not be covered here.  Just know that the rules surrounding IRS 1031 exchanges are specific and detailed, and must be complied with to the letter.  A principal 1031 exchange benefit is in deferring capital gains taxes on the sale of property by shifting funds into a new purchase, also a non-owner occupied property.  For a property owner who bought in a low market, and is selling in a much higher market, the tax savings can be significant. Simply, in this type of transaction, the taxpayer is not allowed access to funds which are handled through the QI, unless there is an agreement that the taxpayer is taking money out of the first sale, known as "boot", which will not be used in the acquisition of the next property.

As previously covered in other posts, the State of California wants all of the money it's entitled to, so recently a tax audit of an exchange failed because the State said the taxpayer didn't follow the 1031 exchange agreement.  So that means the taxpayer is now probably paying a lot of taxes which otherwise would not have been the case.  The State didn't like the taxpayer giving the escrow officer, not the QI, instructions to exclude $150,000 from the purchase of the next property and send it over to the taxpayer.  The Franchise Tax Board said the taxpayer thus really had access to the funds, which he/she was not supposed to have, and so the exchange was violated.

Moral of this story:  If you're doing a 1031 exchange transaction and you want to take out money from it, make sure it's included in the actual written agreement with the QI, because the QI is who is responsible for handling all funds in the exchange, not the escrow officer. Make sure you are using an experienced and known professional accommodator, are following the advice of an experienced tax professional, and are working with an experienced REALTOR as well.  It could make a huge difference to your bottom line.  Read more at Asset Preservation.

New Listing: Long Beach, 7027 E Keynote St., Carson Park, Large Single Family House!

7027 E Keynote, Long Beach CA

Just Listed -

Here is a spacious 4 bedroom home in East Long Beach with 2 baths and a large family room at 7027 E Keynote St, Long Beach 90808.

With two bedrooms and one bath downstairs, this could be ideal for an extended family or one with older children staying at home.

Low maintenance rear area is great for a spa addition, and side yard could easily be fully enclosed for a pet area.

This home shows as 2402 sq.ft per the tax assessor, features forced air heating, wet bar and large brick fireplace in the family room, an inside storage area, and a remodeled kitchen enlarged from the original 1953 floor plan; it also includes cable TV and FiOS wiring. The inside laundry room includes the washer and dryer.

The quieter interior block location is off the busy streets, yet not too far from freeway access.  Two schools are just a few blocks away and within walking distance.  A great neighborhood for walking and bicycling.  See more at www.juliahuntsman.com "Featured Properties".  Lic #01188996

As of July 15, 2014, offer price is $575,000. Sold 10/30/2014

Maternity Leave is NOT a Reason to Not Get Your Mortgage

#120906801 / gettyimages.com

Every day we are hearing that many buyers are having a tough time getting a mortgage, and there are real reasons lenders are not giving out loans to certain buyers. But one thing that's not supposed to be happening is discrimination:

Several banks, including Bank of America, PNC Mortgage, Cornerstone Mortgage, and at least one insurer, MGIC, have been found guilty have been penalized for delaying or denying applicants because of pregnancy and/or upcoming maternity leave. We thought such discrimination was behind us, but apparently not.

Lenders see a time of reduced income, and assuming this, have been denying mortgage approvals.  Apparently quite a few women have complained, because the insurer MGIC was guilty of denials for at least 70 women.  Mountain America Credit Union, based in Utah, was also found guilty, in addition to other mortgage insurers.

In spite of the numbers of working mothers in this country, some lenders still believe that a woman's commitment to the workplace diminishes after having a child.  According to MomsRising, a  national advocacy group, three quarters of all mothers are working women.

However, federal law assures an applicant: “Any denial or delay of a mortgage application, according to fair lending regulations, violates the federal Fair Housing Act, which prohibits any form of unequal treatment based on gender or familial status”. 

HUD and the Department of Justice have levied monetary penalties against the offenders, even though they say they are following underwriting guidelines and have done nothing wrong.

Ironically, lenders DO NOT accept the birth of a child as a reason for reduced income or any other financial impact when a distressed borrower applies for a short sale from a lender , so why is it being given as a reason for denial of loan approval?

See this article by Ken Harney: http://www.latimes.com/business/realestate/la-fi-harney-20140706-story.html 

Long Beach Concerts in the Park for 2014

Long Beach Concerts in the Park for 2014 begins this week in various locations in the City. Please check the link below for complete information.


Week 1 - July 1 through July 4
LET FREEDOM RING


Week 2 - July 8 through July 11
BROADWAY SPECTACULARS

Week 3 - July 15 through July 18
DIXIELAND JAM AND RAGTIME REVIEW 

Week 4 - July 22 through July 25
VIVA LA FIESTA

Week 5 - July 29 through August 1
GERSHWIN!

http://www.longbeach.gov/park/recreation/lb_municipal_band.asp

So Cal Cities Update - Long Beach Region

Happy 4th of July!

 




Average single family home prices in May, 2014, and increase/decrease from one year ago (prices may differ from overall annualized price):

Cerritos:                 $644,036, +9%
Lakewood:             $479,462, +10%
Long Beach:           $534,617, +4%
Los Alamitos:         $641,000, -16%
Seal Beach:             $989,577, +20%
Signal Hill:              $630,500, -10%
Huntington Beach:  $849,050, +2%
Norwalk:                 $362,598, +12%
Downey:                 $476,152, +19%
Garden Grove:        $495,475, 14%

Financing Options in Southern California

About 25% of buyers, especially first time buyers, are reporting in a recent survey by HSH.com that they are having trouble with accumulating funds for mortgage down payment.  Another 25% say the price of the housing market is slowing them down, keeping them from buying.
The actual breakdown as to the biggest hurdles to home ownership in this survey where the respondents were given these choices: here is how they responded:

• Credit score: 12.8 percent
• Home prices: 23.5 percent
• Property taxes: 7.3 percent
• Down payment: 22.9 percent
• Interest rates: 12.6 percent
• No issues: 20.9 percent

(The last category is interesting, because it's made up of predominantly female respondents who said they had no problems at all, and 29% of this category were also older buyers over 60.)

What is often not in the minds of people is how they can eliminate some problems with saving money for down payment if they're willing to eliminate expenses in their lifestyle.  This may be unthinkable, but yes, it should be done.  Why should a very well-off national/international coffee franchise be continually supported by you when it is not returning the favor by contributing to your down payment?  The point being that the daily disappearance of a few dollars is not thought of on an annual scale, but it makes a difference.   For instance, Chipotle is a place I love for lunch.  Even if I just buy my favorite steak bowl there, with no drinks or chips, it's now $8.07 including tax because they just had another price increase.  Let's say I go there 5 times a week:  $40.35 x 4 = $161.40 month x 12 = $1936.80 a year!  Just do that same calculation with your favorite lunch place and see what it adds up to.  You can do the same with weekend food, breakfast restaurants, or whatever. I love to select restaurant/dining out food as an item for economizing, because there's more opportunity to control it by eating at home more often.

If you are approved to buy a $450,000 home, your FHA downpayment will be at the rate of 3.5% (plus upfront MIP costs which can be folded into your loan amount).  That's $15,750 for the down payment.  Could you get there faster by figuring out where to economize?  This is the part where you priorities get prioritized if you want to buy.  Gas prices and student loan payments are non-negotiable areas, but there are many personal choices which can be changed and deposited into an interest-bearing account for the future!

REALTORS® vs Real Estate Data and Your Home

Real estate data on the internet exists in multiple forms and multiple places.  I think the paradox is  that with all the available sources of data, many people are actually less knowledgeable about real estate "facts" due to the growing number of multiple choices to view real estate listings on the internet.

Issues:

• Non-REALTOR® internet sources are not obligated by a code of ethics, and are not required to be licensed real estate professionals. Commercial sites obtain permission (in most cases) from MLS (multiple listing service used by REALTORS®) sources which contain the original listing information, and then publish it on their sites. Active listings syndicated from MLSs are not "public information" similar to what could be found in a search of property tax records for sold properties, but are the result of listing contracts signed between sellers and their licensed brokers which are then published on other commercial sites. Not all sellers want their addresses published this way, and some refuse to do so.  The National Association of Realtor code of ethics not only requires certain higher professional standards of REALTOR® members, they also may have a legal impact as well. For instance, in California an agent, governed by state law and by a code of ethics, may represent both buyer and seller in single transaction with the parties' agreement, but dual agency is a violation of the law in Colorado and Florida.
• Skews data--i.e., days on market is undetermined when "pre-listed" as a "coming soon" listing on the internet that is not yet in the MLS . The number of days on market in the MLS is significant for seeing a trend between demand and supply--the more days on market may indicate more properties for buyers to choose from, or there may be a seasonal effect such as cold weather where showings are slow, or there may be more buyers have financial qualification problems so that properties are falling out of escrow and properties are coming back on the market. This information is just one fact not available when properties are sold off the MLS, and is not available for analysis by the many legitimate providers of real estate analysis, such as real estate appraisers, who utilize MLS information.  This is just one of factors in off-MLS listings.
• Are off-MLS listings getting, you the seller, the best price and the most money for your property?  Off-MLS listings are may also be known as "pocket listings" or may be listed on specific non-MLS sites for individual sale.  Generally, a seller can be more assured of receiving a fair market price when his/her property is exposed to a broad market of potential buyers.  Since the MLSs exist nationwide as cooperative organizations composed of over one million REALTORS® each with their own database of clients, please see this article about determining what is in a client's best interest when choosing a private venue in which to sell property:  http://www.realtor.org/news-releases/2014/06/coming-soon-properties-can-create-consumer-confusion.

The internet, and competing housing data sites, is here to stay.  Buyers have become accustomed to searching online before even finding a REALTOR® to work with, and there may be certain advantages to that if the buyer is prepared with some prior market knowledge by the time a REALTOR is selected. 

For sellers who want to get market value, there are sites offering an "instantaneous" home evaluation price, based on property tax sales data and certain other measurements built into various proprietary software.  The software does not do what a human does, however, which is go inside the property for sale and develop human judgment about it.  Such software can be wildly inaccurate on price -- Zillow by its own admission can be as much as 30% away from actual sale price.  Companies such as CoreLogic may be a little more accurate, but no one should pinpoint the value of their property based on a software system alone. The illustration at right is from the Realtors Property Resource program and is an actual estimated 2014 value for a Long Beach property, showing an extremely large range with two stars for its level of confidence.  In an area of fewer matching comparables based on the data available to the software, it's tougher to come up with a tighter price estimate.  Don't you think the buyer would choose the lower price, and the seller wants the higher price?  A further illustration of comparisons of sold price vs. Zillow's Zestimate for actual Long Beach properties sold in 2014--due to CRMLS policies only the sold addresses can be sold--as provided by CRMLS.

Online source for housing values:

Metropolitan Sales Areas - Housing Data and Map--National Association of REALTORS®.

See Interactive Market Stats for California Counties

Learn About Tableau

Or go to full page display here

Long Beach Homeownership Fair, June 28th!

Find a Homeownership Fair near you. 

Pacific West Association of REALTORs and California Association of REALTORs are hosting one this weekend at the Museum of Latin American Art on Saturday, June 28, 9:00 am to 4 pm, 628 Alamitos Ave., Long Beach.  This event is for both buyers and sellers:

A message from California Association of REALTORs:  "The Homeownership Fair promises to be a great resource for anyone interested in purchasing or selling a home whether you’re looking to re-enter the market or this is your first time purchasing or selling a home – we have the resources for you! Exhibitors will be on hand to provide you information and answer any questions you might have.  We’ll also have workshops sessions throughout the day on the wealth development, what is a REALTOR®?, How to get your offer  accepted? Down Payment Assistance programs, plus free giveaways throughout the day and much, much, more."

There are numerous 30-minute presentations throughout the day on topics including: the current state of the real estate market, buyer assistance loans and grants in California, successfully purchasing HUD homes in California,  building positive credit and credit repair.

Other fairs are being scheduled for  San Gabriel, East Bay, Fresno, and Sacramento

Don't miss this opportunity!

California Smoke Detectors Requirements on July 1, 2014

Are you concerned about your smoke alarms? You should be.  The law is changing as of July 1, 2014 in California.   According to CA's Health and Safety Code, all smoke alarms installed after July 1 must have none-replaceable battery with a 10-year battery life.  If you have currently have smoke alarms installed, you are not required to replace it until you replace it with a new smoke alarm.


Also,beginning January 1, 2015, the State Fire Marshal will require all smoke alarms to:

• display the date of manufacture;
• provide a place where the date of installation can be written; and
• incorporate a hush feature.

Landlords should be careful to note rules regarding their rental units/properties, and though there is no time schedule for inspections of smoke alarms," if a smoke alarm defect can be reasonably ascertained visually during a landlord’s visit to the unit, the landlord needs to repair or replace the device."  This also includes notifications by tenants of any problems.

Property owners applying for building permits will also have to review their smoke alarms when there is more than $1,000 of work to be done.

Sellers of property will be required to make all disclosures on their Transfer Disclosure Statement concerning the status of smoke alarms.  See the full article.

According to the National Fire Protection Association, between 2007-2011, the leading cause of  non-fatal home fires was cooking equipment.  The leading cause of home deaths by fire were smoking materials.  One-quarter of all fire deaths were caused by fires started in the bedroom. See full article.

Are Flipped Properties Always a Good Deal?

While many buyers these days have gained more knowledge about obtaining disclosures when buying a property, they don't always know what to ask for.

Walking in to a clean, newly painted home with brand new flooring and granite counters in the kitchen and bathrooms is often a time of easy decision-making, largely because of the assumptions made by buyers and oftentimes their agents. 

The buyer is urged however, to look more closely, because many flipped properties were bought out o foreclosure by an investor.  Investors are just that--they are looking for ways to maximize profit by buying homes they can realize a profit on, so if they buy a "fixer", they are usually experienced in knowing how much money to spend in that local market in order to come away with cash after the sale.

In some cases, property enhancements are reasonably good quality, after all, no one can expect an investor to fix up a property with the most expensive custom  features available.  However, buyers need to still take a careful look, and ask for as much information as possible from the seller.  Just because it's an investor doesn't mean he/she is exempt from disclosure.  One of the fastest ways to find the prior condition of the property is to look for the previous listing's photographs (but many times there is only one exterior photograph, the required minimum for the MLS) and property remarks, which may be revealing.

There is not necessarily a horror story behind every foreclosed property, but more commonly there may be prior deferred maintenance because the prior owner could not keep up a property due to long-term financial problems which led to the foreclosure.  And, the prior owner may have blown his/her budget and spent a lot of money upgrading the house, and then ran out of money.  Either way, the current buyer should go to some effort to find out as much history as possible on a flipped property.

Barbara Nichols, owner of a general contracting firm in Beverly Hills and an expert witness for real estate lawsuits, advises buyers to ask such questions as:

• What was the property's condition when it was taken back in foreclosure?
• Are there receipts from licensed contractors for work performed by seller?
• Is there written documentation on what was done to correct defective conditions?
• Were there unrepaired defects?
• What work was done by a handyman? 
• What work was done with permits, and what work was done without permits?

Finding out if work was done by a licensed contractor is significant, because if the seller is claiming that thousands of dollars of improvements were made, it should be done with permits and not by a handyman.

Will all flippers be able to answer these questions to the buyer's satisfaction? The buyer will have the chance to find out, and then decide if he/she wishes to go forward with the sale by the time their contract contingencies are acted upon.



See the story here.

Do You Own Income/Investment Property? Read This about Proposed 1031 Changes

I just received this in my e-mail this morning:

• "There are currently three different proposals that the federal government is weighing, which would significantly alter Section 1031:
•  Former Sen. Max Baucus (D-Montana), who became U.S. ambassador to China earlier this year, released a draft proposal when he was chairman of the Senate Finance Committee that would potentially eliminate 1031 exchanges. His proposal, which is still before the Senate Finance Committee for discussion, contains other provisions unfavorable to real estate investments, including lengthening depreciation schedules for commercial and residential properties from 39 and 27.5 years, respectively, to 43 years for both and characterizing gains from real estate sales as ordinary income, instead of capital gain.
•  U.S. Rep Dave Camp (R-Michigan), chairman of the House Ways and Means Committee, has released a proposed tax bill eliminating all Section 1031 exchanges beginning Jan. 1, 2015.
• President Obama, in his 2015 budget proposal, wants to limit the amount of capital gains deferred in a 1031 exchange to $1 million (indexed for inflation) per taxpayer per taxable year, beginning Jan. 1, 2015." 

As so often happens, legislators propose laws that probably won't accomplish what they intend, in this case, raise tax money.  Property owners benefit greatly from the 1031 tax exchange laws, and should changes occur which prevent or greatly affect the benefits which have been in existence since 1921, many owners just won't make a change.   Sizeable tax consequences can be faced by some investors, so they could very well hold onto their properties rather than sell.

Real estate transactions generate business for many professionals, ancillary businesses and services. The ripple effect from a change in investment and/or commercial sales will impact not only the brokers, but many other job holders, i.e., environmental companies, appraisers, title and escrow personnel, contractors who restore/rehabilitate such properties.

Currently, the company that sent me this email has just exanded their office space on the East Coast because they are currently doing much more business.   But curtailing 1031 exchange activity may curtail many jobs and other economic activity.

"What can you do to help preserve Section 1031 exchanges? Contact your representatives in Congress to express support for Section 1031 in its current form, and the economic activity and job-stimulating aspects of this powerful tax code section."

California Propositions 60 and 90, Still a Good Tax Tool

These propositions allow for the transfer of a property's tax base, meeting certain requirements, for persons over the age of 55.

Proposition 60 allows for the value of an existing residence to a replacement residence within the same county, for every county in California.  The replacement home must be of equal or lesser value, and must be acquired or constructed within two years (before or after) the sale of the original property.  Transfers between parents and children will probably not qualify, as the original property must be subject to an appraisal (or re-appraisal).

Equal or lesser value of the replacement property is determined at 100%, 105% or 110% of the original property depending on the timing of the purchase/construction: before the original property is sold, within the first year, or within the 2nd year, after the original property is sold.  The guidelines are definite, and the replacement property will not qualify for the tax base transfer if the criteria is not strictly met.

A change from the recent years is the increase in number of counties honoring intercounty transfers.  At one time there were only five counties, there are now nine: Alameda, Ventura, Santa Clara, Orange, Los Angeles, Riverside, San Mateo, San Diego and El Dorado Counties.  These nine counties have passed ordinances which all intercounty base year transfers.  These counties will accept a value transfer from any other county in California as long as all requirements are met.

For the seller thinking of relocating, this is an opportunity to move from, for example, the higher cost areas within Orange or Los Angeles Counties to a lower cost area in a county among the above group of nine. This can work well for someone leaving a condominium to purchase a house in a different area.


If you are considering such a move, I would be happy to provide a list of available properties from several of these counties! Please contact me via phone or e-mail for available properties in areas you might be considering, and also for an estimate of current home value of your current residence.

The California Legislature Considers Tax on Homeowners

 

The state legislature has been considering a tax that would be imposed on homeowners who need to record certain documents with their counties. This $75 per document tax will be imposed on a variety of documents, which will include, for example, documents related to refinancing properties, taking properties in and out of trusts, making lot line adjustments, obtaining constructions loans and upon the death of a spouse.

The tax also applies to foreclosures (the owner would be responsible, not the lender) and filing mechanics liens. For instance, it’s not untypical in a refinance, for six documents to be subject to the new tax, resulting in a tax total of $552. If a spouse dies, up to five documents need to be recorded, creating a total tax of $440 including existing recording fees.

SB 391 is in the Assembly Appropriations Committee. The CALIFORNIA ASSOCIATION OF REALTORS® is opposing this bill. 

Listings Under $300,000 in Long Beach

My last post was in July, 2013, when there were 47 SFR active listings in this price range, the rest being condos or own-your-owns. 

Surprisingly, the number hasn't really changed since then:  As of today in Long Beach there are 49 active single family home listings, with a total of 162 of all types.  See current listings  here.

Since the majority of these are condos, it's good to know that downtown Long Beach and Alamitos Beach offer quite a few opportunities in this range.  Due to the price range, many investors consider them as good rental purchases. Condos are a good opportunity, for the right buyer.  Just some of the things important to look into, especially for a first time owner-occupant buyer: 

1. Is the HOA already FHA or VA approved if that's the loan type being used? 2. For conventional loan buyers, does your lender want to see 70% owner occupancy, or is 52% OK?  You must this before writing an offer, and you should find out the owner occ % before writing an offer.  3. If an investor, find out first if the CCRs restrict the number of rentals, or allow any at all--why waste time finding out later you cannot close escrow without it becoming a primary home for you or an immediate family member. 

For the right buyer, a single family home opportunity is at Windward Village--a community of manufactured homes converting into a Planned Unit Development meaning the owner has his/her own plot of land inside a gated community with open space and recreational facilities. These are priced in the mid and low-$200,000's for homes in the 1500 sq. ft. range.  And, as with condos, you should consider your loan type and ask all questions from your lender as to what conditions could an appraiser expect to note--these may be issues for your loan as well.

Do you think a Spanish style bungalow in North Long Beach could be a great buy at $290,000?  It could, because you might also find one that's been "flipped", or was otherwise remodeled by it's most recent owner.  And because it's in clean condition, it probably won't last long.

If you're concerned about neighborhood crime conditions, or the schools serving the area, it's easy to look up this information at the sites for Long Beach Police Department and the Long Beach Unified School District.

Currently, the average list price for a Long Beach house under $300,000 is $263,000; the average list price for a condominium under $300,000 is $205,000.

For more information about any area in Long Beach, please contact me:

Housing Affordability in Southern California Is Once Again Raising Its Head

March 2014 Prices for Long Beach

Sales of lower to medium-priced homes have become a challenge. 

First time buyers are feeling the effects as inventory levels remain low, and multiple offers are a continuing feature of the market in many instances.   In the last year, some zip codes in the Long Beach area saw a 20% increase in the average price of a single family home, yet sales volume is low.  Younger, first time buyers are the most impacted by the increase--financing has higher requirements to meet and many younger buyers have heavier debts. 

"Housing affordability is really taking a bite out of the market," said Leslie Appleton-Young, chief economist for the California Assn. of Realtors. "We haven't seen this issue since 2007."

Investor activity in the market has actually leveled off since 2013 as prices have risen, and combined with some buyer frustration and buyer loan qualification issues, this combined effects have actually left many homes on the market for longer, a paradoxical effect to the competition over certain homes.   The March stats for Long Beach, for example, show a 20% range increase to the average and median home prices of $450,000 to $504,000 for the last 12 months, as well as a very modest 15% increase in supply of inventory.  But that inventory is still well below the 6-month supply level, but still, it's an increase. 

So it's unknown how long this slowdown in the lower ranges may be here, but if you're a solidly pre-approved homebuyer who is financially prepared, seeing some houses sit on the market a little longer could mean the chance for you.

http://www.latimes.com/business/realestate/la-fi-home-prices-20140416,0,4794538.story#ixzz2z5asarPC

Appearances are Important, But Housebuying Involves More Than Looks

Everyone has heard of "flips". They were often foreclosed houses or condos bought, usually by an investor or some legal entity for the purpose of "fix and sell".

 

Often, they have updated or completely remodeled interiors that usually include granite countertops in the kitchen, new ceramic tile flooring in the baths plus new shower and tub tiled walls, all new sinks and toilets, stainless steel (or brushed stainless look) appliances in the kitchen, new paint, new carpet or newly refinished floors, sometimes new landscaping outside, maybe a new garage door, and if you're really lucky, a new roof.  What's not to love?   Anyone could get excited about moving into a new home that has that new look that will not need work for quite a while.

But since most buyers are obtaining financing (all cash buyers are about 30% of the market overall), the loan people have requirements.

What You Need to Find Out Before Making An Offer:

Did the seller acquire this property less than 30 days ago? If you're a "regular" buyer with standard financing, you will be locked out of making an offer on this property UNLESS is it a Fannie or Freddie property, owned by a state or government agency, an approved non-profit which handles HUD REOs or one connected to "Neighborhood Community Stabilization Program".

If the seller has owned the property up to 90 days, and the new sales price is 20% or more higher than what the seller paid for the property, then there are more issues: There must be a second appraisal (on top of the first one by the buyer's lender), not at the buyer's expense, but at someone else's, which could be another $500 to be paid up front when it's completely unknown if the two appraisals can somehow agree with each other (and many times appraiser don't agree with each other); additionally, another property inspection must be performed and paid up front by the loan officer.   THEN, copies of all work performed by the seller in renovation must be produced, which only a very caring property flipper will probably have on hand. Remember, property flips are often financed by short term loans by sellers who have never lived in the property and have no attachment to it, and whose disclosures to the buyer will probably be very minimal.  And even if you find a loan officer willing to front another $800 up front, this will not all be accomplished in a 30-day escrow. 

After 90 days? You're good to go.

Who the seller is, the length of time it's been on the market, these are very critical to know before an offer is made. And then the buyer will have to realize that should any items be called out on the home inspection by your inspector (there is no such thing as a perfect home), the seller almost always will refuse to do any additional repair because it's "already been done".  Perhaps, but anything your lender notes on the appraisal(s) will be critical before the loan can close, and if the seller refuses, you may decide to walk. 

SO, let your agent help you with finding properties that will meet your buying and lender criteria. Professional help can save you a lot of time and wrong directions.

Just Listed in The Lafayette

Lovely 10th floor studio unit in The Lafayette in downtown Long Beach. Faces south for panoramic city, neighborhood,

and ocean views. Lots of light in this spacious unit. Kitchen upgraded in 1995 with cabinetry, counters and ceramic tile flooring in kitchen/dining areas. The bathroom tile reflects the Art Deco historic style. Unit is close to the elevator. Visit the solarium on the 11th floor for more views, and the patio on the 7th floor. Extra storage units (see HOA for fee) are on availability basis. A former ballroom has become the association gym. Tax records show as one-bedroom, however, this is a studio unit with a Murphy bed in a double-door enclosed area in the living room area. Dining area offers direct views to the south. The historic Lafayette has a beautiful lobby reflecting its Art Deco past, and is located in prime urban downtown with shops, restaurants.

List price $193,000.  Lic 01188996

 

Note: Sold 4/28/2014 for $203,500. If you want a free market analysis for your property, please contact me!

 

A Few Things I Have Learned From My Clients and Selling Homes

Learning does not necessarily come in the form you think it will--sometimes you learn from mistakes, or you learn from what others tell you and what they know, or you learn from having been around that bend in the road before.  We are in the business of having to explain to our clients what they must do before, during and after transaction, and hence, we are constantly in the business of explaining and talking.  But the learning process goes in both directions.

I was so surprised when I was helping a buyer in  a purchase transaction for a WWI era Craftsman-style home to find out that those foundation blocks that look like solid concrete are in fact . . . hollow.  It turned out the particular house in question had a very poor deteriorated foundation on 3 sides.  The remaining side with hollow ornamental concrete block was providing the most support, which was not full support either. It turned out my buyer, who had prior experience with this type of foundation and didn't like them, knew and expected the concrete block to be hollow, a fact I ended up learning from this one client and which was emphasized by his physical inspector as well. Yes,  they finally bought the house anyway because in the end, he wanted an older house style.

I've learned this more than once:  Sometimes what people think they must have and they can't live without can be laid to rest if they find something that's desirable enough to make them forget their first "must have".  When working with a couple who had the expectation of buying at the standard of the brand new housing their parents could buy in the 1950s, I was beginning to wonder if I could sell them a home in a city of 50-year-old homes. After all, most houses have cracks in the driveway if it isn't brand new concrete.  I pulled up to preview a property and thought twice about going in--it had cracks in the driveway, among other things.  But I thought, what the heck, I'm here so I may as well look.  After seeing the vaulted and beamed ceiling family room, I knew I had to get them in there.  It turned out that was the feature that sold them on it, and even though the cracks in the driveway were noticed, they paled in comparison to the family room.

Sometimes the talkative partner who says they have the final word just turns out to not be the ultimate decision-maker.  If you have to talk about it too much, you're probably not it.  Like these birds milling around in the parking lot and not going anywhere, such people don't buy or sell because they don't come to an agreement.  "Meeting of the minds" is what makes everything move forward.

As Realtors helping our clients understand the market, we get used to telling them things, sometimes over and over.  And then again and again, because there's a lot to know in all that paperwork, and data about the market, and what comes from our knowledge and experience.  But, sometimes (and I learned this from a garage mechanic one time who was good at listening to me ramble on about my car's symptoms) people have their own intuition about their own deal. In the midst of a counter-offer meeting, the buyer insisted on a low price I believed the seller was unlikely to take, even though that market had more sellers than buyers. Maybe it was the glint in the his eye, but I decided to go ahead and print up the counter offer with the buyer's price.  With no further ado, the next day the seller accepted it, and escrow was opened.

So sometimes you know a lot, but you still have to keep your alert system on for incoming unrecognized sources.

Water Conservation in Southern California--It Can Save You Money!

Ironically, on the day of heavy rain last week in Long Beach, drought conditions were officially declared (again) by the City, and water restrictions were officially put into place, and/or reminded of once more. So diners must ask for water in restaurants, and water users are not to water more often than 3 days per week at specified times and for no longer than 10 minutes. Most people don't think about how much water a dripping shower wastes, or sprinklers that are constantly leaking--you can save lots of money by fixing these problems.

Here are 10 tips from the Community Associations Institute to conserve water, because about 60% of water usage is used outdoors, according to the Irvine Ranch Water District.

1. Water early in the morning or later in the evening when temperatures are cooler. Save 25 gallons per day.
2. Choose a water-efficient irrigation system, such as drip irrigation for your trees, flowers and shrubs. Save 15 gallons each time you water.
3. Maintain your irrigation system. Check your sprinkler system frequently for leaks, and adjust nozzles so only your lawn is being watered and not the house, sidewalk or street. A well-functioning irrigation system can save 500 gallons per month.
4. Water deeply, but less frequently to create healthier and stronger landscapes. Reduce water runoff onto sidewalk, streets, by watering as frequently as possible and for less time. For a free watering schedule, visit irwd.com. Save 12-15 gallons each time you water.
5. Monitor the performance of your landscape and adjust the run times up or down accordingly. If your lawn does not spring back when stepped on, it’s time to water.  Be sure to turn off your irrigation system when it rains, and depending on rainfall wait to restart. Save 1,100 gallons per irrigation cycle.
6. Consider investing in a weather-based smart controller. These devices will automatically adjust the watering schedule based on soil moisture, rain, wind and evaporation and transpiration rates. Check with your local water agency to see if there is a rebate available for the purchase of a smart controller. Save 40 gallons per day.
7. Replace your lawn with drought-resistant trees and plants. These plants are well suited for California’s mild winters and dry summers. They are low maintenance, use less water and don’t require soil preparation or fertilizing. Remember to contact your association and obtain prior architectural approval, if necessary.  Save 30-60 gallons each time you water per 1,000 sq. ft.
8. Plant the right plants for your climate. Use the Save Our Water-Wise Garden Tool to learn what plants and flowers will work best in your neighborhood. Or, download a free copy of A Homeowners Guide to a WaterSmart Landscape.
9. Put a layer of mulch around trees and plants to reduce evaporation and keep the soil cool.  Organic mulch also improves the soil and prevents weeds. Save 20-30 gallons each time you water per 1000 sq. ft.
10. Avoid using water for outdoor clean-up. Use a broom to clean driveways, sidewalks, and patios. Wash cars with a bucket, sponge, and hose with self-closing nozzle. Save 8-18 gallons per minute.

See http://www.lblawntogarden.com/ for the City of Long Beach conservation and rebate programs for residences.

For more tips and samples of drought tolerant landscapes, visit www.bewaterwise.com, http://saveourh20.org or download the toolkit.

Some Lenders Are Checking Borrowers' Social Media Accounts

Along with new lending rules for buyers and lenders that came into effect on January 1, there's more to think about, too.  According to an article in the Wall Street Journal, a buyer's Facebook and Twitter data may help a lending company determine a borrower's creditworthiness.  Ironically, these same lending companies may be backed with venture funding from Google Ventures or Accell Partners (early Facebook investor). 

Social media accounts are a way to double check a borrower's job information (see your LinkedIn account), or there's a post about how you got fired on Facebook.  And E-Bay could be a great place to check your small business reviews by others. Right now this practice of social media review is primarily used by smaller loan sources, but Fair Isaac Corp. (your FICO credit score company) is considering incorporating social media, and since it provides credit scoring for the vast majority of lender decisions, that could have a huge impact.

Lendup, a San Francisco lending source, is one company currently using a mix of credit bureau and social media information to help assess borrowers' risk and verify identities. Applicants are voluntarily sharing their Facebook, Twitter and other social sites which Lendup is using, although they don't require it.  It just helps on the road towards loan approval.  This is a company backed by Google Ventures and which expects to make 300,000 loans in 2014.

At Moven, a mobile-only bank, customers can link up their social media accounts to learn about their own financial behavior and make payments to friends. The President of Moven says social-media activity will be one factor used in lending decision on their future loans. He believes social media data says more about customers than their FICO score.

Kabbage Inc, a loan source for small businesses, requires a customer to link at least one account such as Amazon, e-Bay, or Xero for underwriting decisions.  Kabbage, Inc., is looking at how many "likes" a customer receives, and what reviews are saying about the borrower's business.

The Consumer Financial Protection Bureau and the Federal Trade Commission are taking a close look at privacy issues. If, for example, a consumer reporting company such as Experience or Equifax has inaccurate information on a borrower, the consumer may dispute that information under the Fair Credit Reporting Act. But  companies using social media in their lending decisions don't have to verify the information about you because it isn't reported to third parties, so there apparently is little or no regulation when it comes to this type of  "background check" on a borrower.

" 'There are privacy concerns. People don't understand the implications or why they may be considered undesirable' " for credit, said Jeffrey Chester, executive director of the Center for Digital Democracy in Washington, who is calling for regulation."

See the full article at http://online.wsj.com/news/articles/SB10001424052702304773104579266423512930050?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304773104579266423512930050.html

Sellers, Get the Price You Deserve!

Seller's selling tasks

Every year  National Association of Realtors publishes its survey of home buyers and sellers, but this 2011-2012 survey (most recent) on FSBO's (for sale by owner) shows one of the largest gaps I've seen in selling price.  Traditionally, the figure was about a 5% difference in selling price (including all costs)between selling on one's own vs. being represented by a REALTOR. This, however, is showing a 20% difference in price when sellers did not use professional representation.

Not to pick on just one group, though, the graphic really highlights the issues before all sellers:

Having enough time to devote to preparing your home for sale, reviewing and negotiating all items as represented in transactional documents, understanding buyer financing issues, and being on top of the current market so that your setting the right price.

Very often, sellers focus on price to the exclusion of other terms, and may actually end up with a lower bottom line.  How is this possible? It's important to recognize negotiating issues and how much to give, or not give.

For an estimate of your home's value (condo, single family or residential units), please contact me.  If you're thinking you need to save money, you should first get an accurate estimate.  Your home could be worth more than you think (although I don't endorse overpricing), and you could actually net more than you originally thought by using a knowledgeable REALTOR.

The Overall Picture for Long Beach Area Real Estate for 2013

The market has increased in price! 2013 saw upward jumps in most areas for the average annual sales price of a single family home:

• Long Beach, increased to $489,000, +18%.
• Cerritos, $605,000, +11%.
• Lakewood, $420,000, +17%.
• Huntington Beach, $803,000, +10%.
• Signal Hill, $600,000, +13%.
• Los Alamitos, $686,000, +9%.
• Seal Beach, $947,000, +25%.
• Cypress, $532,000, +17%.
• Norwalk, $318,000, +17%
• La Palma, $576,000, +18%.
• Bellflower, $356,000, +15%.
• Garden Grove, $443,000, +17%.

Along with price increases, there are: multiple offers as new buyers compete with each other and with investors, all cash purchasers, inventory shortages, sellers reaching for too high a price in some cases, an overall upward movement in mortgage interest rates, new lending rules which may have a tightening effect for some borrowers, and more buyers in the market who are emerging from a past foreclosure or short sale and are looking to buy again. And, appraisals continue to be an issue.

Keep in mind, pricing for condos, and 2-4 unit properties would be different, and should you want to know specific pricing for your city or zip code (south Los Angeles County and north Orange County areas), please contact me. 
This data is current as of January 6, 2014, and all data comes from the MLS.

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.

Chocolate chip cookie recipe

Here's a fun way to start off your year with a quick, easy, chocolate cookie recipe, with a calendar for January 2014.

Happy New Year.

Housing Equity 2013--The Gap Narrows

Housing Equity 2013

A borrower who purchased a median priced home in 2004 and held it for nine years, the current median tenure of a homeowner according to NAR’s annual Profile of Home Buyers and Sellers, would have $28,114 in equity from the combined benefit of price appreciation and paying down the mortgage principle. A borrower who bought a median price home in 2012 would have more than $23,000 in equity.

Borrowers who purchased in 2006 and 2007 at the peak of the market and thus those who experienced the sharpest price declines are now nearly in positive equity. A person who purchased in 2006 and owned through 2012 (not pictured) would have been underwater by roughly $28,200, but by 2013 this gap was down to $4,700. Continued price growth in 2014 will help to further ameliorate this gap. Homeowners who purchased since 2007 are in positive equity.

Even through the vicissitudes of the great recession, for most homeowners housing remains an effective vehicle for building equity and wealth.

Do You Have a HELOC Line of Credit Loan due for a Reset in 2014?

Starting about 10 years ago, it was not unusual to obtain a home loan with a 10% down payment from the borrower, an 80% first mortgage, and then a home equity line of credit (HELOC) as a 10% second mortgage. 

For some borrowers who have not refinanced in the meantime, and have been paying interest only on that HELOC loan, their time is coming due.  Credit lines usually have mandatory "resets" after 10 years when borrowers must now pay up or pay an amortized principal and interest payment.  For some people, who may have been paying an interest only payment of $200-$250 on a $100,000 loan, their monthly payments will probably increase significantly: they will now be paying principal and interest, along with interest rates now being set at a higher level. It was not unusual for lines of credit to be as high as $150,000.  A jump up to another $500-$600 in monthly payment may not be unexpected in these cases.

The bank that owns the note, if the borrower does not or cannot pay the new payment, can demand full payment and foreclose if there is enough equity in the property. Borrowers, depending on the bank, may be able to refinance or modify these loans.

However, with new mortgage rules coming into play in January 2014, refinance may not be possible because the homeowner may not qualify, interest rates will be higher, their credit scores may not make the grade, or the combined loan amount on the mortgages may exceed the value of the house. 

Owners should prepare themselves now by checking for the reset date in their loan documents, the amount of increase, their ability to refinance, and also finding out if they have equity in their property.  Should the borrower consider foreclosure (because after all, it's only the second), that's really not advisable: in California if the line of credit was made as part of your purchase loan, then you may be exempt from a deficiency judgment, but you would still have a foreclosure on your record, which could cause problems for years every time you applied for insurance, a job, or anything else where your credit is checked.  Even if you could avoid paying, and the bank did not spend money foreclosing because you still don't have equity in your property, your credit score would suffer with each non-payment.  Late pays/delinquencies have huge impact on your credit score, and again, it would be something to impact you for years into the future.

Borrowers should review their loan documents, and contact their banks to find out what a reset increase amount would be, and then what their other options might be.

Note:  About $30 billion in home equity lines dating to 2004 are due for resets next year, $53 billion the following year and a staggering $111 billion in 2018.

In order to find out the value of your home, please contact me.  Equity in your property could be your friend in this situation. For an easy online request, click on Long Beach Real Estate Homes and Condos for Sale here.