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Defining “AS-IS” when Buying or Selling a Home

Mon, Jun 29, 2009

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The “AS-IS” title has a different meanings to different people.  When I speak with buyers and sellers about selling or purchasing a home, they rarely have the same definition of what “AS-IS” means.  If you speak with a seller they might believe that by having their real estate agent advertise the home “AS-IS” on the local multiple listing service (MLS), it will prevent them from completing any repairs that the buyer might request.  Sellers can also believe the “AS-IS” statement protects them from legal charges down the road.  If you speak with the buyer they might believe the “AS-IS” really means there is something terribly wrong with the home or more specifically, what is on the MLS is not exactly the true picture of the home itself.  Let’s break this down from both perspectives.

For the Seller:

First and foremost, as a seller you are never protected from legal actions because of an “AS-IS” statement.  You are best protected by disclosing all known issues with the home.  If you know about it, disclose it.  If you suspect something is wrong, not working, might be, could be not quite right; disclose it. If you think there might be a plumbing leak but think that if you don’t look for it, you don’t have to disclose it, an you are covered. You are not.  However, if you had no clue, no reason to suspect, no one ever told you, that the foundation had a crack; you are not responsible for disclosing the fact you didn’t know.  If you are not clear on what to disclose, here is a simple rule; If you know of anything that might affect the value of the home in a buyer’s eye - disclose it.asishouse

If you have lived by the railroad tracks 40 years and you fall asleep every night to the sound of the choo-choo running down the tracks, you should disclose that there is a rail road track near your home.  Don’t wait until you are in the court room to state,  “But your Honor, it never bothered me.”  Even with incredible tools like Google Earth, the seller is responsible for telling the buyer everything that is known about the home and neighborhood.

One piece of advice to sellers.  Forget “AS-IS”.  In my opinion advertising “AS-IS” raises questions that don’t need to be raised about the home’s condition.  When a buyer comes to buy your home they see the home “AS-IS”.  They are buying it “in current condition”.  The seller does not need to explain why the house is 40 years old, it simply is 40 years old.  The advertising “AS-IS” sets up more challenges then it is worth.  Leave opportunity for negotiation on everything.  If it is a simple plumbing leak, why wouldn’t you want to fix it to sell your home?  If it is a foundation crack with a $40,000 price tag to fix, why should a buyer simply accept it without seeing a credit for repair or discount in price to reflect the true value of a home with foundation issues?   The best way to negotiate any deal to the best interest of all parties is to slip on the other side’s moccasins. Remember, a key component of any contract is a meeting of the minds between parties.

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Choosing a Real Estate Agent. What Should You Expect?

Sun, Jun 21, 2009

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I am not necessarily a fan of the National Association of REALTORS®.  I don’t agree with many of their political maneuvers.   I only have one reason for being a member.  I commit to the ethical standards the organization created.  I believe making a promise to uphold high integrity, market knowledge, and consumer protection will make me the best agent.  In that light, I wanted to share with you some key components of the Code of Ethics instituted by the National Association of REALTORS®.  Not all agents are REALTORS®. When hiring your next real estate agent to buy or sell a home, refer to this guide to help you evaluate the agent. (You can download the complete code here.)

takingoathArticle 1
When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly.

Article 2
REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law.

Article 3
REALTORS® shall cooperate with other brokers except when cooperation is not in the client’s best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker.

Article 4
REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative.

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Understanding Zillow’s Zestimates and Home Values

Tue, May 26, 2009

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It is not uncommon for clients to approach me with a value for a home based on an “zestimate” given by Zillow.  As a real estate professional, sometimes I have agreed with Zillow’s estimate and sometimes I have not.  It can be challenging to explain to a client why the Zillow number is different than my assessment but now Zillow has come forward with a good video explaining the zestimate system.  Kudos to Zillow for this information.  I would also add that I use Zillow’s IPhone application a great deal.  It is one of the better applications for getting a big picture view of the neighborhood and currently is the fastest to load.  Take a look at the video from Zillow’s Sara Bonert.  I think it is a great overview and points out some key information on the site that many may have overlooked.


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Want to Know More About Asbestos and Your Home?

Sat, May 23, 2009

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Asbestos in the homeAsbestos is a material that many of us have heard about in the news.  The inhalation of asbestos fibers has been linked to a cancer called mesothelioma.  To know whether or not your home contains asbestos, it is first important to recognize where asbestos can be found  in the home. The two most common places associated with asbestos in the home is in insulation and the acoustic ceiling treatments popular between 1960 and 1980.  Beyond the dated look of acoustic or “popcorn” ceilings, many clients will express their concern regarding the safety of the material and whether or not it should be removed.  Not all acoustic ceilings contain asbestos.  To find out whether or not the home contains asbestos, it is best to contact a local professional that can inspect, sample, and test for asbestos.  Local information about asbestos specific to the San Jose environment can be found on the Asbestos.com web site.  To understand more about the potential health issues related to asbestos and mesothelioma, colleagues Brian Turner and Jack Bleaker at Mesothelioma.com offer some great information on their web site and also have offered this quick overview:

Homeowners Should Be Aware of Asbestos Hazards

As a new homeowner or potential seller, it is not likely that you are acquainted with the inner materials of a home. However, most buyers seek an updated home inspection before closing on a new property. It is important to reassure buyers that the home is safe and does not contain any potential health hazards. These inspections are critical to clearing hurdles down the road that may slow the sale of property.

One of the most common surprises new homeowners and sellers confront is asbestos in older structures. Indeed, asbestos containing materials (ACMs) are now banned for use in the United States but many older buildings still contain these products, which are generally safe, but homeowners should be aware of where they are and when they become hazardous. (more…)


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Tax Credits for First Time Home Buyers Explained

Sun, May 10, 2009

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This is a really great video that explains the tax credit for first time home buyers.


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The Hurdles to Purchasing a Home in Today’s Market

Tue, Mar 31, 2009

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hurdlehouse1Today’s housing market is like none other we have seen in awhile.  I hear agents talk about how bad the ’80s were but this market is different in many respects.  In order to purchase a home in this market, it is best if the home buyer prepares for potential hurdles that can be placed in between them and the door to their new home.

The first hurdle is summoning the courage to buy a home in a downward trending market.  Tell your friends you are house hunting and inevitably they will say, “Oh man, I would wait.  It is surely going to drop some more.”  That may be true but for most people buying a home is very different then buying a stock.  Some people buy because they absolutely hate renting.  They crave to paint the walls any color they want.  They want to have a dog, or a water bed, or a private jacuzzi for skinny dipping.  Whatever the reason, they want a home.

The second hurdle is relentlessly trolling the multiple listing service (MLS) and the multitude of other home search sites.  I do not know of a single site that has it all.  Look at this site for school districts.  Look at that site for street view.  Look at this site for market trends.  Some like Trulia, Zillow, and RealtyTrac have a lot of information but it may not always be as accurate as we would like.  Part of the process is simply deciding how you like to search.  By map? By criteria? By school district?  I offer my clients a variety of ways to search and I also offer the option to receive homes directly to their email inbox based on their specific search criteria.  There is no doubt internet house searches will continue to improve.  However, sifting through the inventory takes a trained eye and a deep knowledge of a variety of neighborhoods.  This is where a good agent can add value to  the online real estate search. (more…)


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Alum Rock San Jose - Housing Market at the Bottom?

Wed, Mar 25, 2009

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In the last couple of weeks, I have heard more and more real estate agents and loan officers tell me that they believe we might be near the bottom of the housing market in San Jose.  Their biggest support for this theory is kind of interesting.  It goes like this: ” How much lower can home prices possibly go?” Hmm. Well there you are.  Scientific, (not), analytical (not), a hypothetical guess (barely), coming right from the professionals.

I decided to look at the stats to see if I could see any indication that we are near the bottom of the housing market in San Jose.  I looked at the average sales price for each neighborhood for single family homes, condominiums, and town homes from February 2008 to February 2009.  Out of the 15 neighborhoods, 7 were continuing to trend down on average sales price.  Saratoga had a huge down in January and then a huge up in February so I will call that a wash.  Four areas, Milpitas, Central San Jose, Cambrian, and Willow Glen showed an average sales price slightly higher in February 2009.  Certainly hard to call one month’s results a trend in this market.  Especially, when over the last year we have seen some bump ups in almost all the neighborhoods at one time or another.

The most interesting graph came from the Alum Rock neighborhood.  Alum Rock has been hit hard as a result of sub-prime lending.  Alum Rock was one of the last areas to “boom” in San Jose.  It was also one of the first to show signs of trouble.  Over and over again, I see the “entry” level markets hit hardest by the sub-prime debacle.  There were not a lot of sub prime loans made in Atherton.  You see the results of sub-prime lending where minorities, blue collar workers, double and triple job Mom and Dads, with extended families  wanted a part of the American Dream.  But I digress.

Alum Rock has been fairly in regards to average sales price for the last 4 months.  Number of listings on the market coming down and new listings are down as well.  With 4 months of steady numbers, you might very well be able to call this a trend.

alumrockchart

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Deed of Trust, Note, Mortgage: What are all these papers I’m signing?

Mon, Mar 16, 2009

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escrow officerBuyer’s look forward to closing escrow (COE), because they have been told that after escrow closes they will receive the keys to their new home.  Signing documents regarding the purchase of a home can be a little overwhelming for some and for others a white and black blur.  For many clients simply signing their legal name after years and years of signing their “preferred” name is enough of a challenge, let alone reading and understanding all that they sign.   With that in mind, I wanted to take a moment to explain some of the documents involved in the purchase of real estate.

The Escrow Officer’s Role.
Simply put, this is a third party that insures that the contractual obligations of the buyer and seller are documented as satisfied.  They provide a neutral environment to sign documents and insure that the monies are dispersed according to the contractual directions.  Many times, escrow agents are employees of a title company.  In Santa Clara County, commonly the seller or listing agent chooses the escrow and/or title company that will be used for the transaction. However, it is actually the right of the buyer to designate.  If you have a preference, please make sure you discuss it with your agent at the time you create the purchase contract.

The difference between a mortgage and a deed of trust.
In California, the deed of trust is utilized as a security device for real property.   It is held by a third party (many times a title company- called the trustee) and has two simple functions.  The first responsibility of the trustee  in regards to the deed of trust is the reconveyance of the deed (ownership) from the trustee to the borrower once the note is paid off.  The second job of the trustee is in regards to the foreclosure process if the borrower fails to pay.  In essence, the trustee insures the contractual agreements between the beneficiary (lender) and the trustor (the borrower) are satisfied.

The mortgage as the security device.
There is no third party in the set up.  There is the lender and there is the borrower.  In this situation the borrower is dependent on the lender to transfer title to the borrower once payment is received in full.  The lender is dependent on the borrower paying off the debts as prescribed in the note or has the right to begin foreclosure proceedings.  So even though we might refer to paying our “mortgage” each month, the more accurate description in California would be loan payment.

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Top Downtown Housing Deals in San Jose

Mon, Mar 9, 2009

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The downtown area of San Jose is unknown to many. If you are not a student of San Jose State University, you may not even know there is a downtown San Jose. But for some of us, it is just the right size of downtown. For the most part, you can find parking fairly easily without spending a week’s paycheck. You can play Monopoly in the park, visit The Tech, or the Discovery Museum, see a ballet, or find a bite to eat in one of the 166-or-so restaurants. There are some great neighborhoods in downtown San Jose, including Naglee Park, Roosevelt Gardens, Hyde Park, Japan Town,and Hensley.

As like many neighborhoods in San Jose, downtown is seeing its share of foreclosures.  Any time a neighborhood has too many homes listed for sale by banks, the prices in that neighborhood suffer.  Selling foreclosed (REOs, bank-owned, corporate owned) homes is a way to stabilize housing prices and move the neighborhood forward.

First a look at the overall trends for the downtown San Jose housing market.  The amount of homes for sale is trending down. Overall, it is still a “buyer’s market” but take a look at the next chart regarding recent sales.

San Jose Downtown Housing Trends

San Jose Homes Sold Downtown

Here you can see the sales have increased in the first part of 2009.  There have been some deals. First time buyers and investors alike have helped to move these homes off the market.  A very good sign overall.  Currently, of all active single family detached homes listed in San Jose downtown, 33% are short sales and 15% are bank owned.  Overall, that places 40% of the downtown area in some state of distress. You can see why we need to make sure everyone is aware of the deals  and move this neighborhood toward stability.

Granted, like any selection of foreclosed listings there are always some major fixer-uppers.  The home at 338 E. Julian (below) has seen better days.  In 2005, this home (built in 1908) with 2 bedrooms and 1 bath, sold for $450,000.  At that time it was labeled as a “fixer-upper”.  Before that it sold in 1998 for $164,950.  It is currently an active listing, as a “fixer-upper” for $168,773.  Wow. What an example of the change in market.

338 E. Julian2005j338 E. Julian

This home is currently listed by Equity Capital.  It has been on the market for 342 days.

Here is a list of all 18 foreclosed detached homes in the 95112 zip code:

REO listings in downtown San Jose

Here is the list of condominiums or town homes that are currently bank-owned in downtown San Jose:

reocondo

It is time to take back these neighborhoods.  It is time to bring back affordability and reasonable value to the oldest and coolest neighborhoods in downtown San Jose.  Consider these homes as your next home or as your next investment.  Reap the incredible benefits of a buyer’s market and the benefit of being a positive force in a community.  If you would like to see any of these homes, contact me.


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House Values in San Jose Decline. Should Your Property Taxes?

Mon, Mar 2, 2009

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In 1978, the ballot initiative “People’s Initiative to Limit Property Taxation” was put in place by the voters of California.  This initiative basically restricted the increase in property taxes per year to 1% of value.   The result was a 57% cut in property taxes for California. This initiative also placed a high bar for change by requiring 2/3rds majority vote in local elections.  The origination of this initiative came from the belief that older citizens should not be priced out of their homes via ever increasing property taxes.  Valid argument.dreamstime_3946259

Some argue it has limited the housing market re-sale side (less inventory,high demand, pushing prices up),  has increased rents, and has created a demand for new construction on smaller and smaller amounts of available land.  It has been argued that not only do the long term residents benefit from a demand partially created by Proposition 13, but also benefit in services paid for by new home owner’s property tax rate.   There is not doubt that Proposition 13 has contributed to the affordability issue for new home owners in the Bay Area. There are many opinions about Proposition 13 and the debate heats up again and again.

Now, as home prices decline many home buyers that purchased homes after the year 2000 are asking why they are paying the same amount for property taxes.  My property tax bill actually increased this period in spite of losing $95,000 in equity from December 2007 to December 2008.   Therefore, I wanted to offer some resources to help those who have lost value on their property and have yet to see an adjustment on their tax bill. (more…)


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