This Month In Real Estate: September

When is Disclosure too Little, too Much or Just Right?

Real estate agents walk a fine line regarding disclosure in meeting their fiduciary responsibility to their clients. The question is when is disclosure too little, too much or just right? The truth is that there are no absolute answers, just common sense practices that an agent can follow to best serve their client and protect themselves.

We recently took a look at the C.L.U.E. report which has been available for approximately the last 8 or 9 years. Re-Insider finds this report to be a great example of the variety of information that can find its way into today’s real estate transactions.

The first question that should always be looked at when vetting disclosure information is, is there a legal requirement in the California Civil Code for a particular disclosure of information? If there is, for example the NHDS or TDS in most residential transfers, then it has to be in the disclosure information to the buyer.

But what about non legally required reports, C.L.U.E. being a good example? In the case of C.L.U.E. reports being provided, this grew simply from CAR adding a question to their SSD form which was then incorporated into the SPQ on page one. This is a form that has grown over the years to 10 questions in which a seller is advised, by CAR, to disclose to a prospective buyer of their residential property. The question on the CAR SPQ regarding insurance claims is simply “Insurance claims affecting the property in the last five years”— answer to be given as simply yes or no.

So how did the additional information contained in a C.L.U.E. report, not requested or required, come into use and does it potentially pose a liability to the agent? The quick answer to the first question for coming into use is money. What was once a simple yes or no answer from the seller is now a $19 + report that companies make money selling into the transaction.

As far as the question of liability to the agent, if the additional information in the C.L.U.E. report has a mistake in it, as happens from time to time and causes some of the problems discussed in the previous article, then who takes responsibility? The most common response from agents is the company that sold the report to me of course. But as it turns out this is not necessarily the case.

Why you ask? The C.L.U.E. report comes with no guarantee or indemnification from LexisNexus, the company that produces the report. The resellers, usually disclosure companies, all have a third party exclusion in their limits of liability that state they are not responsible for mistakes in information provided to them from outside sources.

This can leave the real estate agent or brokerage financially responsible for the C.L.U.E. report if there is a problem. The message in this for agents, using C.L.U.E. reports in this case, is to look at your disclosure procedures with an eye towards not only meeting your fiduciary duties to your clients, but managing your own risk. With that in mind, with the case of C.L.U.E. reports the best answer may be to use the CAR SSD form.

What do you think of this situation? Are you in favor of regulating disclosure companies?

 

RE Insider read more here:

http://re-insider.com/2014/07/23/when-is-disclosure-too-little-too-much-or-just-right/

How to Restore Your Credit Score Quickly

Buying a home is the American dream and you have decided that it is time to start looking into buying a home of your own. That's great! However, you probably know that there are things you should be doing before you begin your search - but where do you start? The first thing you need to get in order, before you do anything else, is to get a copy of your credit reports. That's plural - credit reports.

You need to get a copy of your credit reports from all three credit reporting agencies - Trans Union, Equifax and Experian. If you are thinking about buying a house, you may not realize the importance your credit reports hold in getting an approval for your new home.

 The mortgage companies are more concerned about your recent buying and repayment history than what may have happened years ago. If you have too many recent late payments or collections, there may not be anything you can do to get approved in the immediate future.

 However, there are some things you can do to clean up your report. So in six months to a year or maybe even two years, depending on how bad your credit is and how long it takes you to clean it up, you can apply for a home mortgage and get your approval.

 Here are a few things you can do to restore your credit and credit score quickly:

 1. Check your credit reports for errors. Again , that is plural so check all three of your credit reports for errors. If there are mistakes on your credit reports, you will need to start an investigation with the company or the source of the derogatory information. Contact them in writing and make sure you include all supporting documentation proving the information is in fact an error.

 2. Set up a timely repayment schedule. If you have any accounts that you have been late in paying, you will need to begin paying all of them on time. Paying your bills on time for a minimum of six months will go a long way in improving your credit rating.

 3. Collections. Try to avoid having your accounts turned in to collections. A collection is the most damaging of all credit issues. So work out a re-payment plan before your account turns into a collection. A credit improvement agency may be able to help you get your collections erased; but only if the creditor did not abide by all of the laws of the Fair Credit Reporting Act. However, this is generally not the case because most creditors know the laws and how to follow them. So don't count on this as a quick fix . Most collection accounts will stay on your credit report for a minimum of seven years.

 4. Keep a low balance on all of your revolving credit accounts. Try to keep your balances below 50% of your limit. The lesser the balance the better it looks to potential creditors.

5. Do some soul searching. Try to determine what caused your credit status to get out of control in the first place. Then do whatever you have to to amend your bad habits - if any.

 6. Get a secured credit card. Secured credit cards can be very helpful in improving your credit. There are many things you can do to get your credit report back on track quickly. So talk to your real estate agent for more information about how you should go about doing this.

 In the meantime, your Realtor will be able to get you started on your path to home ownership while you are working out your credit issues. Your agent has the experience and the know how to help you get into your new home as quickly as possible. So take advantage of all they have to offer you.

6 Common Mistakes Homebuyers Still Make

Getting a new home is easy but tricky at times. Many buyers are encountering stumbling blocks en route to their chosen house. This is because they commit minor mistakes along the way that hinders smooth processing. This can be prevented only if you are familiar with these common mistakes.

1. Having no pre-arrangements with the bank for mortgages before making an offer is the most popular mistake. Communicate with a bank to know the price range you are capable of paying and other mortgage details that you need to know.

2. Knowing your exact budget is critical. Most people look around for houses even without the budget in mind. First thing you need to know before finding a home to purchase is how much you can pay for a new home. You can save much time if you trim down your list of houses based on its price; imagine finding that dream home only to find out you won’t be approved for the mortgage?

3. Getting unreliable and inexperienced real estate agents is a big no-no. Choose an agent that has the background to back him or her up. Also, consider the real estate companies you are dealing with. Make sure that they have a good standing in terms of the services they are providing.

4. Most people are shopping around within a limited market. You can find homes for sale anywhere such as internet, print ads, and even on TV. You may also want to ask for help from your agent to provide you a list of preferred houses. You can save time if you know what kind of house you are looking for.

5. Purchasing a home long distance without thorough inspection is a mortal mistake. After choosing a home, it is a must to visit it personally so that you can see it in a closer view. Some pictures only show the good angles of the house. It can be very deceiving at times. Check the structure and foundation to ensure safety. Also, look around the neighborhood and get comfortable with it.

6. Buyers tend not to compute the total cost of the house. Other expenses such as home insurance, association dues and even lawyer's fee for proper documentation of the purchase should be considered. We are not talking about coins here. These range from hundreds of dollars to even thousands. You need to prepare your pocket for it.

Buyers are usually not aware of all the details. It is your home and you are responsible for it. You need to know and understand everything about it, from home warranty to insurances and even the history of the house.

You've Opened Escrow, Now What?

Congratulations, you are on your way to owning your very own home!

Follow these suggestions (and your realtor's advice) so that escrow and settlement with go as smooth as possible.

• You will be asked for a down payment on the home you are purchasing.  You can choose to put down as much or as little as you want (depending on your mortgage), but remember, the more you put down toward the total price of your home, the less time it will take you to pay off and the less your mortgage payments will be every month.
• During this period of purchasing your home, you are going to need an escrow or settlement company to act as an independent third party so that you know when and who to give your money to get the deed to your new home. The escrow or settlement company will hold your deposit and coordinate much of the activity that goes on during the escrow period.  This deposit check may also be held by an attorney or in the broker's trust account. Make sure that there are sufficient funds in your account to cover this check.
• The deposit check will be cashed. Assuming the sale goes through, this money will be applied to the purchase price of the home. If for any reason the sale is not consummated, you may be entitled to receive all of your deposit back, less standard cancellation fees. In certain instances, the seller may be able to retain this money as liquidated damages. Prior to executing a purchase contract, it would be wise to speak with your counsel regarding whether or not it is your best interest to have a liquidated damages clause as part of the contract.

The period that you are "in escrow" is often 30 days, but may be longer or shorter. During this time, each item specified in the contract must be completed satisfactorily. By the time you have opened escrow, you have come to an agreement with the seller on the closing date and the contingencies. Each contract is different, but most include the following:

1. Inspection contingency: this should be completed as soon as possible after the contract to purchase is signed as unsatisfactory results of the inspection may mean that you will want to cancel the contract.
2. Financing contingency: once the contract is signed, you have a period of time to secure funding. If, for any reason, you are unable to secure funding during the period of time granted to you by the contract (and the seller will not provide a written extension of time), you must decide whether you want to remove the contingency and take your chances on getting a loan. You may choose to cancel the purchase contract.
3. A requirement that the seller must provide marketable title.

With an attorney or title officer, review the title report. The title must be "clear" to ensure that you do not have legal issues regarding your ownership.Check into local and state ordinances regarding property transfer and make sure that you and/or the seller have complied with them.

Secure homeowner's insurance. This will probably be required before you can close the sale. Due to such requirements as special fire and earthquake insurance, obtaining this insurance may require a lengthy period of time. It would be in your best interest to apply for insurance as soon as possible after the contract is signed.

Contact local utility companies to schedule to have service turned on when you close escrow.

Schedule the final walk-through inspection. At this time, you should make sure that the property is exactly as the contract says it should be. What you thought to be a "permanently attached" chandelier that would come with the property might have been removed by the seller and replaced with a different fixture entirely.

You've made it! Once the sale has closed, you're the proud owner of a new home. Congratulations!

Advice for First-Time home buyers

• Pre-Qualification: Meet with a mortgage broker and find out how much you can afford to pay for a home.
      
• Pre-Approval: While knowing how much you can afford is the first step, sellers will be much more receptive to potential buyers who have been pre-approved. You'll also avoid being disappointed when going after homes that are out of your price range. With Pre-Approval, the buyer actually applies for a mortgage and receives a commitment in writing from a lender. This way, assuming the home you're interested in is at or under the amount you are pre-qualified for, the seller knows immediately that you are a serious buyer for that property. Costs for pre-approval are generally nominal and lenders will usually permit you to pay them when you close your loan.
      
• List of Needs & Wants: Make 2 lists. The first should include items you must have (i.e., the number of bedrooms you need for the size of your family, a one-story house if accessibility is a factor, etc.). The second list is your wishes, things you would like to have (pool, den, etc.) but that are not absolutely necessary. Realistically for first-time buyers, you probably will not get everything on your wish list, but it will keep you on track for what you are looking for.
      
• Representation by a Professional: Consider hiring your own real estate agent, one who is working for you, the buyer, not the seller.
      
• Focus & Organization: In a convenient location, keep handy the items that will assist you in maximizing your home search efforts. Such items may include:         
  1. One or more detailed maps with your areas of interest highlighted.         
  2. A file of the properties that your agent has shown to you, along with ads you have cut out from the newspaper.              
  3. Paper and pen, for taking notes as you search.              
  4. Instant or video camera to help refresh your memory on individual properties, especially if you are attending a series of showings.              
  5. Location: Look at a potential property as if you are the seller. Would a prospective buyer find it attractive based on school district, crime rate, proximity to positive (shopping, parks, freeway access) and negative (abandoned properties, garbage dump, source of noise) features of the area?
           
• Visualize the house empty & with your decor: Are the rooms laid out to fit your needs? Is there enough light?
      
• Be Objective: Instead of thinking with your heart when you find a home, think with your head. Does this home really meet your needs? There are many houses on the market, so don't make a hurried decision that you may regret later.
          
• Be Thorough: A few extra dollars well spent now may save you big expenses in the long run. Don't forget such essentials as:         
  1. Include inspection & mortgage contingencies in your written offer.     
  2. Have the property inspected by a professional inspector.              
  3. Request a second walk-through to take place within 24 hours of closing.
  4. You want to check to see that no changes have been made that were not agreed on (i.e., a nice chandelier that you assumed came with the sale having been replaced by a cheap ceiling light).
      
• All the above may seem rather overwhelming. That is why having a professional represent you and keep track of all the details for you is highly recommended. Please email me or call me directly to discuss any of these matters in further detail.

High-End Home Sales Soar throughout California

By RE Insider

While home sales throughout much of California have remained flat throughout this spring and early summer, a new study has indicated that multimillion dollar homes are selling in record numbers, offering hope that the market is still improving and prompting many to wonder what’s holding the rest of the market back.

According to a recent study performed by San Diego-based DataQuick, $1 million-plus sales grew at a 9.1% clip statewide compared with last year, while sales overall fell 7.4%. Additionally, California in the second quarter set all-time records for the number of homes sold for more than $2 million, more than $3 million, more than $4 million and more than $5 million.

What’s driving these high-end home sales? According to market-watchers, there are several factors.

One is the hot technology sector in the Bay Area and some affluent parts of Southern California, which is minting new millionaires who can afford seven-figure homes. Another is the 11.6% price growth in California over the last year, which means a house worth $925,000 last summer may be worth $1.03 million today. And there’s the influx of international buyers, which is pushing up prices at the high end.

“It’s always fascinating to watch this part of the real estate market. It behaves differently, responds to its own set of criteria,” said DataQuick analyst Andrew LePage. “These buyers, especially those in the multi-million-dollar market, are less likely to agonize over credit scores, income and job security, down payments and mortgage interest rates.”

With this in mind, do you think this the market is improving as a whole? And considering that mortgage rates remain historically low, what do you believe is holding other buyers back?

http://re-insider.com/2014/08/18/high-end-home-sales-soar-throughout-california/