Beach Cities Buzz

Real Estate Investment Property

Danielle Newson & Lauren Perreault The Fabulo — Sun, 28 Feb 2010 03:54:00 GMT

As Donald Trump and Warren Buffett will both tell you, buying Real Estate has been one of the keys to their financial success. But how can an ordinary person use Real Estate to build wealth? The answer: Residential Income Property.

Many people do not realize that if a property has 2, 3 or 4 units, an ordinary residential loan can be obtained on the property rather than a higher interest rate commercial loan. With sufficient down payment (these days, about 25 to 30 percent for non-owner occupied), the rents on the property may be enough to cover the mortgage and property taxes or even provide a positive cash flow once the tax advantages are considered.

What tax advantages? Well, for one thing, there is "passive loss", also known as depreciation. On paper, these homes can be considered to have a "loss" in value based on a formula that allows roughly one thirtieth of the building's purchase price (not including the land) to be taken as a "loss" for tax purposes. This paper "loss" will have to be accounted for as an adjustment to the tax basis for Capital Gains at the time of sale; however, a 1031 exchange can avoid this tax payment for many years until such a time (say, retirement) when it is more advantageous to take the gain.

Other tax advantages are that many costs of the property, such as the purchase of tools, maintenance, property management, etc, are tax deductible as well.

When buying income property, it is important to work with a Realtor who can help you figure out market rents and also help you project expected appreciation on the property. Calculating a "Gross Rent Multiplier" (GRM), which is the cost of the property divided by the annual income, is a good rule of thumb for screening down to which properties you are interested in.

Properties in an area that typically have lower appreciation, such as Lawndale, Inglewood, or Hawthorne, these days can have GRM's of 9 to12, meaning that they should fully pay for themselves in 9 to 12 years just on the rental income. Properties in the three Beach Cities, where appreciation has been historically higher, will have higher GRM's -- from 16 to 22 -- meaning that because of their higher prices, it will take longer for the rents to pay back the cost of the property. However, these areas will traditionally have gone up more in value, so they can be an equivalent or better investment if you have a higher downpayment or can handle a few years of negative cash flow and treat these properties as a long term savings project.

Neither approach (lower value properties with faster payback vs. higher value properties with better appreciation) is right or wrong -- this is an individual investment decision. Both can help you build wealth in Real Estate!

Finally, income property is GREAT for the first time home buyer. Because the FHA allows owner occupied loans on multi-family properties, you can live in one and rent out the others for as little as 5 percent down! The FHA loan limits are higher than the single family $729,750 limit as well.

You may wish to consult with your accountant to understand if the tax advantages of income property could help you. And when you are ready to invest, choose a knowledgeable Realtor who frequently works with investors to help you understand the cash flows and investment options you have.

Spring is Heating Up Already!

Danielle Newson & Lauren Perreault The Fabulo — Sun, 28 Feb 2010 03:49:00 GMT

The market is getting to it's typical "Spring Heat" earlier than usual this year, we think it's primarily due the same factors we talked about last month: expiration of the home buyer's credit on April 30th, expiration of the Fed's guarantee on Fannie/Freddie Loans in March, fear of rising interest rates and lack of inventory.

We've been seeing many prime properties in the Beach Cities being sold BEFORE they hit the MLS as "pocket" listings. To snag one of these, you need to work with a Realtor like us who networks with other Realtors to find out about these great deals before they become common knowledge.

We are also seeing the return of multiple offers and bidding wars. One property in Redondo Beach recently received 20 offers -- and this was NOT a short sale. Similarly, a recent FabulousSouthBay listing went in 2 days with multiple offers.

If you want a piece of the South Bay (or want to sell one you own), now is the time. Give us a call!

Twenty Five Million for A Spectacular Strand Property

Danielle Newson & Lauren Perreault The Fabulo — Sun, 28 Feb 2010 03:14:00 GMT

Wow -- with so many expensive homes in Manhattan Beach and Hermosa Beach, you wouldn't think that one property could totally blow you away like the new listing at 2909 The Strand does! This home, currently listed by Vintage Real Estate for $25 Million smackeroos, is totally fantastic at three to 25 times the price of just about anything else in town. With a double lot frontage on the spectacular Strand, this home, built before zoning laws changed, could not be duplicated today for any amount of money, as it is currently taller than zoning allows and also has a roof deck besides. With almost 10,000 square feet of luxury including a private gym, 7 bedrooms and 7 baths, etc, this home made even the jaded Realtors out on Brokers' Opens yesterday drool. Now if I could just find the right buyer so I'd be invited back again and again! :-> To see it, go to http://www.fabuloussouthbay.com/Hermosa_Beach_Sand_Section/page_2114191.html and look for the highest priced listing!

Real Estate 101: Mechanics Liens and other Scary Things

Danielle Newson & Lauren Perreault The Fabulo — Sat, 21 Nov 2009 06:57:00 GMT

By Lauren Perreault (cross posted in my column in The Beach Reporter on-line)

Any "lien" (pronounced like "lean") on your property is an indication that someone thinks you owe them money and your property is the collateral for that debt. The most common lien, of course, is the Deed of Trust lien. Other frequently seen liens are Property Tax Liens (for unpaid property taxes) and Federal or State Tax Liens (for unpaid income taxes).

Liens have a definite order of payout -- a Federal income tax lien comes first (Uncle Sam always gets theirs, right?), then State, then Property Tax, then mortgage liens in order of their recording date -- usually the first Trust Deed, then the second, etc. However, Mechanics Liens have an unusual nature.
Per the California Association of Realtors: Rather than commencing from the day they were recorded with the county, a mechanics' lien becomes effective from the day construction began on the property. If a property is foreclosed, mechanics' liens are paid off before any other lien that was recorded after the mechanics began working. Furthermore, mechanics' liens are paid off before loans that were taken out to finance the improvement, even if the loan was secured prior to the date construction began.

Further, CAR states "If a mechanic provided labor and/or materials to improve a property in exchange for compensation and the mechanic is unpaid, he or she may place a mechanics' lien on the property until the dispute is resolved. (Cal. Civ. Code § 3112.) Property owners must be wary of mechanics' liens because they can be recorded against a property before any formal judgment is issued. With other liens, creditors must first take a property owner to court and win the case before they can record a lien against the property. With mechanics' liens, the lien can be recorded first with the lawsuit happening at a later date. (Cal. Civ. Code §§ 3115, 3116.) "

As you can see, this might be tricky! For example, what if you paid a general contractor for work done and he/she did not pay the subcontractor? The subcontractor could put a mechanics lien on your property and you might have to pay again to clear the lien. In order to prevent this, you should always get a release from the subcontractors indicating that they have been paid before paying the general contractor.

To prevent complete confusion, mechanic liens must be placed against the property no more than 90 days after completion of the work or, if a formal notice of cessation has been made, no more than 30 days after the notice, and the lawsuit to "prove" the debt must be filed within 90 days of the recording of the lien. Further, a "Preliminary 20 day notice" must have been filed for the work within 20 days of beginning work or else only the portion of work done in the 20 days immediately preceeding the lien will be included in any deficiency judgment.

Finally, if anyone were to put a mechanics lien on your home after you bought it for work done under contract to the previous owner, your Title Insurance company will defend you and get the lien removed.

1031 Exchanges

Danielle Newson & Lauren Perreault The Fabulo — Thu, 12 Nov 2009 18:55:00 GMT

A "1031 Exchanges" or Striker exchange, is a mechanism used to defer(not avoid forever) capital gain on the sale of investment propertyuntil a later date -- usually, a date in the future when the owner'sincome is smaller (i.e, retirement) and therefore the tax "hit" issmaller. In effect, the government gives you a no interest loan byallowing you to keep the capital gain in circulation and buy a newproperty. The idea is that you hopefully will make even more money andeventually pay the government more taxes, but a good tax accountant canavoid this.

The key here is investment property -- it can't beused on your personal residence, but can be very useful if you havestarted to build your real estate investment portfolio. Under veryspecific circumstances, you can convert a personal residence to aninvestment property or an investment property back to a personalresidence, but the tax laws changed pretty significantly on this in2009, so be sure to discuss all of this with your tax adviser beforeattempting this.

The details of the exchange must be handledvery precisely, so in addition to escrow a 1031 Qualified Facilitatorcompany is employed to be sure all IRS requirements are satisfied andyour gain is securely held until you roll it into your next property.When you sell an investment property, you can do a Deferred Exchangewhich allows you a certain narrow window of time to identify andpurchase a replacement property, or you can purchase the replacementproperty at the same time as the sale of the old investment property. The new property must generally be worth more than the old one, or thedifference is immediately taxable, but you can for example buy threeless expensive properties as long as the total of the properties isgreater than the sale price of the exchanged property. The law alsorequires that you finance at least an equal amount on the new propertyas what you owed on the old property, or you will have to pay taxes onthat amount as a virtual gain.

To find out more details, you can go here to the Qualified Facilitator's Professional Trade Association website.

Ifyou have investment property and want to "trade up", we have thetraining and experience to help you get the whole transaction to workout in accordance with the regulations. We also are good at findingthe best deals in residential income property. Let us know yourparameters and we'll be happy to start searching for the perfect nextinvestment for you.

Greening Your Home by Lauren Perreault and Danielle Newson

Danielle Newson & Lauren Perreault The Fabulo — Thu, 12 Nov 2009 18:22:00 GMT

(cross published at The Beach Reporter and Eco Friendly Living Magazine)

You may not realize it, butaccording to the Green Building Council, buildings consume up to 40 percent of ALL energy used, add 30-40 percentof all emissions into the environment, and use up to 30 percent of all rawmaterials. So thinking about yourhome and how you can add value to it while also caring about the environment isa great idea that can help to save the planet (and save you money as well.)

Althoughmost of us already know the basics of energy savings around the home, includingreplacing inefficient lighting and appliances with newer technology products,using a fan instead of the air conditioner and making sure the weather strippingaround doors is in good shape before winter, but did you know that your waterheater is a major consumer of energy that often gets overlooked? If you water heater is outside,consider putting a thermal blanket around it or if it's time to replace it,check out the hi-efficiency tankless water heaters and save up to 35% on yourelectric bill.

Doinga major remodel? Notedenvironmental architect Garth Sheriff (http://www.GarthDesigns.com) of Manhattan Beach says that you should consider the source of materials. "Wood floors are beautiful, but youshould ensure that you are buying woods from a sustainable source rather than asource that is stripping the rain forest bare. You can tell if the wood is environmentally friendly byseeing if the manufacturer is a member of the Forest Stewardship Council (FSC)". Cork or linoleum are both eco-friendlychoices as well, especially for kitchens or other areas where wood may not besuitable.

Forcountertops, materials made from recycled glass, crushed stone, or evenrecycled paper are both environmentally responsible AND beautiful. When replacing cabinetry, considerwhether new doors or a new finish would work as well and eliminate the landfillwaste - or at least donate the old cabinets to someplace that recycles buildingmaterials. Other ways to be ecoconscious about cabinets are to choose veneers rather than solid - many morecabinets can be made out of the same lumber when using veneers.

Forcarpet, look for the Carpet Rug Institute (CRI) designation for low outgassing,and for other fabrics, look for those made from sustainable materials such asbamboo or hemp. Exterior surfacefinishes such as integral color stucco rather than paint is a great choice toeliminate noxious fumes, or else specify paints that do not contain volatileorganic compounds, which are designated as low VOC.

Andif all this seems too overwhelming and you'd rather just buy a new homethatwas already environmentally sensitive and "green", contact Danielle& Lauren (www.FabulousSouthBay.com) who understand the issuesand materials and can help you find the perfect eco friendly home foryou.

"Lowballing" and Why It Rarely Works

Danielle Newson & Lauren Perreault The Fabulo — Thu, 12 Nov 2009 18:15:00 GMT

(cross posted at my column at The Beach Reporter)

"Low balling", or the process of making very low offers on properties,is a technique that is taught by many a self-styled "real estate guru"on late night infomercials or expensive seminars. In theory, it soundsgreat -- make an offer much less than asking to see how desperate theseller is, especially if you have a very strong (perhaps all cash)offer. These gurus are filled with stories of how much money theysaved doing this. And of course, they make a lot of money by"teaching" people how to do it themselves, which was really the wholepoint of their actions.

In reality, the market sets the price,and Realtors have a saying that "there's a lid for every pot" or abuyer for every property IF the property is priced correctly. If aproperty is in a good location, meets your needs and is priced wellaccording to the comparable market analysis, then offering close toasking price or even more is NOT a bad idea. If the property IS a goodone and you offer a low ball price way less than asking, the mostlikely outcome is that your offer will be ignored, you will be wayoutbid by others who see the value in the property at the asking price,and you will not be offered a chance to participate in any multiplecounter offers. Many times sellers will refuse to even respond to whatthey consider an insultingly low offer.

What about when a property is over priced? Well,of course that is when you should bid lower than asking, but not simplyby applying some arbitrary percentage reduction like these gurusteach. You need to try to determine the fair market value and thestrength of your bargaining position (all cash? no loancontingencies?) and then base your opening bid accordingly. In thiscase, because the property is priced so high, it is possible that theSeller's will still ignore your offer as they don't understand or arenot willing to accept what the market is telling them, but at leastyou'll know when to stop bidding -- and they may call you back whenthey decide to face reality.

Seller's often don't understand whypricing a property too high ends up making all offers, even low ones,dry up. It is because Realtors have learned that the low ball offerrarely works, so they don't like to show property that is overpricedand they don't want to waste time writing up offers that will berejected. So if you are a Seller, don't price your property high, orno one will see it and be able to fall in love with it. At the rightprice, there will be offers, no matter what the property's challengesin terms of location, condition, or style may be.

The point weare making is that because the market demand sets the price, if aproperty meets all your needs, you should not just arbitrarily bidlower because "everyone else is" or you may lose the property tosomeone who took the time to understand the market. And if it doesn'tmeet your needs, then you didn't want to buy it anyway, right?

Understanding the Short Sale and REO Negotiation Process by Lauren Perreault, Realtor, Licensed Broker

Danielle Newson & Lauren Perreault The Fabulo — Tue, 21 Apr 2009 17:29:00 GMT

(cross posted at our column in The Beach Reporter on-line Real Estate News)

These days, many clients come to us to find deals in the distressed property market, including short sales, homes with notices of default, homes scheduled for foreclosure, and finally, bank owned properties known as REO's.

Negotiating on these properties requires that you understand what stage of the process the home is in, so let's start with a few definitions and the differences in negotiations for each.

A "short sale" is when the current owner owes more than the home is currently worth and needs to have the bank accept a sale at an amount that is "short" of the amount owed. These homes may or may not also be somewhere along the foreclosure process. In these sales, the bank MUST agree to accept the reduced amount or the sale cannot proceed unless the seller is willing to contribute cash to the process. Generally, the seller must prove hardship to the bank, such as why they need to sell, why they can't just keep paying the mortgage, etc.

There is a LOT of paperwork in the Short Sale involved for the Seller, and these sales can often stall because the Seller, who naturally is in somewhat a state of denial, drags their feet on this paperwork. The bank must also obtain Broker Price Opinions (BPO's) on the property from several real estate firms in order to satisfy their shareholders that they did the best they could to collect the monies owed, which also takes time. Further, the banks do not even begin the process of approving a price until at least one bonafide offer (and possibly dozens of offers) is/are submitted, and then they typically take 4 to 6 weeks to analyze the offers, only perhaps to decide that the offers (and the asking price) was nowhere near high enough. In order to provide an offer attractive to the bank, it is important to make the best possible offer, including limiting contingencies and having the most possible down payment. Short sales can be VERY frustrating for everyone involved as there is typically a LOT of competition -- we have heard of several cases where there were over 20 offers and the final price was over $100,000 over the asking price.

A home that has a Notice of Default, or NOD, is at least 90 days late with the mortgage payments and the bank has begun the process of foreclosure, but the seller can still bring the note current and "cure" the default. When buying a home that is in this stage, it is important to remember that not only does it have all the problems of the short sale, but additionally there is now a 90 day clock ticking on the home. If the home is not sold before the 90 day foreclosure period is over, and if the bank's bureaucracy does not allow an extension, you can be very close to buying the property and then lose it to another pile of bureaucratic nonsense.

Once the home is officially "in foreclosure" the home is scheduled for sale at an auction at the courthouse. Although it is possible to get a really good deal on these, it is important to realize that if you bid and win, you MUST buy the home or lose the required 10 percent deposit (which must be brought in Cashier's checks to the auction.) There is NO right of inspection, no investigations possible once you've bid. You had better have your financing lined up or be prepared to pay all cash ... and perhaps get a few rude surprises when you take possession and find problems. As Realtors, we feel that this process is so risky that we will not represent people at auction proceedings.

Finally, often the home will not sell at the foreclosure auction and the bank effectively "sells" it to itself or to another bank. The property is now known as an REO, which stands for Real Estate Owned. At this point, the bank generally analyzes the price, hires a real estate agent who specializes in representing the bank, and tries to sell the home as quickly as possible. You can often get the best deals on these, as the bank's loss mitigation department has already done the analysis and figured out the price they will accept, and the bank is now carrying the cost of the home such as utilities and taxes, so they are very motivated to get it "off their books." It is very important to have your own Realtor represent you on these purchases, as the homes can sometimes have been "stripped" of appliances, plumbing fixtures, and even the copper wiring in the walls; you need to have someone who cares about your interests and isn't just working on the bank's behalf.

Each distressed property sale is different -- some are priced so agressively the competition will be fierce, some are not really very good deals, and some will not qualify for the low cost FHA financing that most people want. Be sure you don't attempt to wade through the shark infested waters yourself -- get a Realtor involved.

Finally, don't limit yourself to only these properties -- because distressed properties have affected average pricing, many ordinary properties are out there that are very good buys -- and they won't have the bureaucracy, delays, and hassles that characterize distressed property sales. Let your Realtor (hopefully us) know what kind of home you need, not what legal status the property is in - and then let us do our jobs for you!

The Golden Rule

Danielle Newson & Lauren Perreault The Fabulo — Tue, 02 Sep 2008 20:13:00 GMT

It's natural to believe with all the doom and gloom that is in the news about the housing market these days that there must be dozens of unbelievable bargains just waiting to be purchased. Unfortunately, the real deals don't stay on the market very long to wait for the Buyer to make up their minds and arrange their financing.

In this market, the number one "Golden Rule" to remember is the old joke "He who has the Gold, makes the rules!" In this case, the Gold is the loans and/or cash and the first, most important, and most difficult thing to get in this market is financing. A Buyer shouldn't even start looking at homes until they have completely nailed down their financing arrangements, including hopefully a pre-APPROVAL, not just a pre-qualification, letter. This will allow the Buyer to make an offer quickly and confidently when you they find something that does appear to be a bargain, and having their financing settled will make their offer stand out against other possible competitors in any bidding war.

It's hard to believe there could still be bidding wars! But the best located, competitively priced properties are still going extremely quickly with multiple offers - my office just listed a very tired fixer upper in Manhattan Beach. The 2 bedroom home was basically a wreck but had a great location within walking distance of the beach and interesting architecture -- it would take some real money and determination to make it habitable, but it was a true diamond in the rough. It was priced at $799,000, which if you follow Manhattan Beach real estate at all, you know is ridiculously low. Within 2 days, the client had 7 offers, including 2 all cash to choose from. The listing agent said the client was going to decide by tonight, so I'm not sure what it will end up at, but you can bet it went for well over asking price.

Another great property I saw recently in Rancho Palos Verdes had 3200 square feet and panoramic 180 degree ocean views. It was priced at $1,500,000 -- not cheap, but much cheaper than that view usually goes for. It sold in 10 days with multiple offers. My estimate is that with about $50,000 of work, it will be worth at least $2,000,000.

These two deals were rare examples of properties that had a lot of equity built into them from the start. Most homes in this market, however, also have pent-up equity built in -- the equity the Buyer will gain after living in it for a few years! No one promises, when you buy real estate, that the market will go straight up without a hiccup or two. But over the long-run, South Bay real estate has been a remarkably good investment, returning an average annual return of close to seven percent -- much better than the stock market!

Trying to find the real deals on your own by using the publicly available MLS's is not a winning proposition. If the home is really a deal, Realtors and their clients will have bought it already, because they will get to see it before it hit the Multiple Listing Service or at least get a call immediately that one of the really good ones has come up. Again, EVEN IN THIS MARKET, THE BEST LOCATED, MOST COMPETITIVELY PRICED PROPERTIES ARE STILL GOING EXTREMELY QUICKLY!

To really find a bargain, a Buyer needs to work closely with a Lender and a Realtor. The financing should be all lined up so the Realtor knows exactly what can and can't be negotiated. And the Buyer needs to be very clear about their needs versus their wants, and exactly how much of a "fixer" they are ready to take on. Buyers need to really understand what they will compromise on -- because every home is a compromise in some way unless you are fabulously wealthy. Buyers probably can't have everything for the price they want to pay -- the reality is that if the home had everything, than it should and will be priced higher, reflecting its higher value.

Will you give up location for size? Will you give up that dreamed for view for a better school district? Unless you are clear in your own mind about what you really need vs. what you want, you will not be able to decide quickly when your Realtor (hopefully Moi!) gives you that call that says "Guess what! A home just like what you are looking for just came into our office -- it's going to go fast!" But if you're ready -- the next bargain may be yours!

Why shopping ONLY for a foreclosure//bank owned property is a bad idea by Lauren Perreault

Danielle Newson & Lauren Perreault The Fabulo — Sat, 12 Apr 2008 22:28:00 GMT

These days, I get lots of emails and calls from buyers who say "I only want to buy a foreclosure property." This always makes me groan a little inside, because it is the sign of someone who is reacting to all the media hoopla and really doesn't understand all the issues involved in foreclosure sales.

The reality is that you don't want to limit your searching to just foreclosure properties. Foreclosure properties and bank owned (REO -- real-estate-owned) properties often have a number of things going against them:

In the case of REO's, the Seller (the bank) knows absolutely nothing about the property and will not take any responsibility for disclosures. You are buying a pig in a poke, with no information as to anything that may be wrong with the property. Your inspections become so much more critical in this case, because you don't even have the disclosure statements to give you a clue as to what to investigate.
Both foreclosure homes and REO homes have typically had neglected maintenance for a long time, as the previous or current homeowner was short on the cash that would have been required to keep the place up.
These homes by definition are generally in an area where the property values have fallen. If they had held, the homeowner would most likely have been able to renegotiate a new loan, but because they became "upside down", then they couldn't refinance. Since the first rule of Real Estate is of course, Location, Location, Location -- do you really want to buy in a neighborhood where prices are dropping? Especially when so much of the South Bay has held its' value over the last two years? Remember, when you are the owner, the same effect will apply -- the areas that held value will go up faster than the areas that dropped during these last few years.
The banks are notoriously difficult to negotiate with. While you submit an offer on a short sale, the banks typically are waiting to review the offers at one time. So there might be a number of competing offers, and you are only one of the offerors. When negotiating, it is always better to be one-on-one rather than many to one.

That's not to say that sometimes the best home for you isn't a short sale property or REO. My point is that you have to tell your Realtor what you are looking for and how much money you have to spend and let her (notice I use her , 'cause of course you're gonna hire Danielle and me, right :-> ) use her expertise and market knowledge to find the very best property that the market has to offer, regardless of whether it is a short sale or not.

Sometimes the better deal will be a non-foreclosure house that is lingering on the market because it is ugly inside, when all it needs is a cosmetic makeover (and most buyers lack the imagination to see what to do.) I once got a terrific buy on a home because it reeked of cat urine and most people couldn't hold their noses long enough to complete the tour! But rip out the ratty orange pee soaked carpet and the furring strips that went with it, sand down the solid oak hardwood floors underneath (replacing the sections that had pee stains of course), add new bath and kitchen cabinets, plumbing fixtues and appliances, and this house looked gorgeous --- and sold for a lot more money.

I know that foreclosures sound like a way to get a bargain, AND THEY CAN BE! However, please don't tie your Realtor's hand behind their back by telling them you only want to look at foreclosures. Instead, get prequalified, figure out what YOU can comfortably afford, and then figure out what kind of house you'd like to have. Discuss these needs honestly with your Realtor and target the parts of town you might reasonably find the kind of home you are dreaming of for the price you can afford to pay. Your Realtor, hopefully Danielle or I, may know of homes that are NOT foreclosures that might still be just right for you. Or we may know of properties that might just be about to become short sales. Give us a chance to earn our commissions, and let us find you the house based on price and location and not just on some arbitrary criteria about its' legal status.

If your wish list is unrealistic.....

Danielle Newson & Lauren Perreault The Fabulo — Sat, 12 Apr 2008 22:21:00 GMT

(reposted from my other blog at www.FabulousPalosVerdesHomes.com)

Everyone has a wish list for their ideal home. For some people, it might be simply a certain neighborhood plus x number of bedrooms and a home they can afford that doesn’t look like it will fall down. Other people only like a particular style, or only want homes that are new or newish. One couple I helped recently was willing to live almost anywhere as long as they would have room for their four beloved dogs at a price they could afford.

And then there are the people that are hopeful but unrealistic. Their wish list of criteria is simply unrealistic for the market conditions, because there are so rarely homes available that have their whole list of right number of bedrooms, bathrooms, square footage, in the right part of town, with a view, without any neighbors that look shabby, on a quiet street, in good condition, at the relatively low price they want to pay. It’s not that it never happens, its just that it happens so very, very rarely. The truth is that if the house had all that, it would probably be priced higher!!! And in the meantime, many other homes that they like a lot, but aren’t just absolutely perfect, get sold to other people … and the market prices are increasing. So if they keep on going this way, soon they won’t be able to afford as much house as they could when we started this process!

Sometimes I wonder if I actually DO manage to find a home with all the criteria that this client wants, will there just be other criteria that they produce, because they are actually scared of making the commitment to buy a new home?

Buying a home is kind of like dating. Some people keep holding out for Mr. or Ms. Right, trying to find the absolute perfect mate and they end up single forever because they are actually scared of making the choice of one slightly imperfect person. People don’t really fall in love on a first date like a lightening bolt hitting. Homes are like that too. As you go househunting, don’t dismiss each house so quickly. Keep an open mind. Take another look at the home and see if it has the POTENTIAL for you to fall in love with it. Does it have good “bones?” Does it have good traffic flow, or a great location? Maybe it needs to have a wall taken out to improve the light and flow. Or maybe it isn’t even really the house you can love forever, but it’s a great price and one you can tolerate for two years, build some equity and make some money on, and then be able to buy your dream house (unlike dating, it is ok here to begin planning your divorce right from the start ;->). Maybe it just needs new paint and maybe bathroom tile and cabinets and drapes — again, kind of like that TV reality show Beauty and the Geek — sometimes those guys just really need a makeover and some houses do also!

My point here is that if you have been looking and looking for a home and not finding what you want, perhaps your list is unrealistic. Try editing it down between the Must haves (you must have so many bedrooms, for example) vs. the want to have (you WANT to have x number of square feet). Then let your Realtor (hopefully ME!) know the difference between the Musts and the Wants. Pretty soon you’ll be moving into your new home … and falling in love all over again.

Counter offers (and Counter -counter offers!)

Danielle Newson & Lauren Perreault The Fabulo — Sat, 12 Apr 2008 22:15:00 GMT

(Reposted from my other blog at www.FabulousPalosVerdesHomes.com)

You finally find the house you’ve been looking for, agonize over what price to offer, settle on a strategy of price and terms that you feel will be attractive to your seller, and wait, hoping for the phone call that will tell you that your dream house is soon to be yours. Instead, you hear the words “There’s a counter offer coming in.” This can happen even in this Buyer's Market for the most attractive, most attractively priced properties! Now many buyers, in my experience, tend to panic at this point, while in reality this is just a part of the give and take of the normal negotiating process. You probably didn’t offer full price — you are trying to get the best deal you can. So are the sellers. The happiest real estate deals are where everyone thinks that they pushed the other side just about as far as they could and still made the deal happen.

So the key to counter offers is to read between the lines and determine “”What is the issue that drove the counter?” Is it simply price? Or are other things, like the seller needing a longer escrow, or the seller wanting more “earnest money” in escrow to feel comfortable, or perhaps the sellers’ needs to rent the place back for a week or two after closing also driving the deal?

Many times, what seems to be just a straight money issue are really emotional issues about these other things that get mixed in. One time, a seller actually countered back with an offer that differed essentially by only $500 — he just had to be able to tell his friends, I guess, that he had countered at a higher price! The buyer signed laughingly and we had a deal and the seller could happily tell everyone what a hard negotiator he was.

When you are the only buyer that a seller is countering to, you do not have to simply accept the counter offer or walk away. You can send back a “counter-counter-offer” and this can go back and forth a number of times until you can reach an agreement. It can even be fun if you try not to take any of it personally and try to put yourself in the other sides’ shoes and think about what do they need to feel whole and healthy at the end of the day. If you really try to be fair and objective, and while you want to get a good deal, you also want to be honest and fair, you can almost always find a way to compromise and give them what they want without sacrificing what you want.

However, when the dreaded “multiple counter-offers” box is checked on the form, all bets are off. At this point, you have to ask yourself, how badly do I want this house? Because sometimes even if you agree to all the terms on the counter offer, you won’t get the house, because someone else will also agree to all their terms and they might like their downpayment better or whatever.

If you really want it, you have to make the grand gesture and go OVER what they asked for in some way. Maybe not money, maybe it is some other thing, like not asking for the refrigerator after all, or offering to close escrow faster if you know that will make them happy. Usually, though, my mentor in real estate says “If there is one other offer, go at least full price of the counter, if there are two other offers, go $10,000 over the counter.”

On the other hand, sometimes the multiple counter offer box is checked because they happen to have one great offer (from you) and are lucky enough to have one horrible, crummy, lowball offer from an unqualified buyer. I say lucky because this legally allows the seller’s agent to check the little “multiple counter-offer” box. Do you know which situation it is? Nope. It’s like poker. They could be bluffing. You just have to decide how badly you want that particular house and whether you are willing to pay x amount for it in order to ensure that you “win” the “hand.” As your Realtor, I can advise you, and I can try to figure out if there really are other legitimate offers. But only you can figure out how you are going to feel if I tell you that you lost the house by a few thousand dollars. Maybe you’ll say “Fine, it wasn’t worth more than what I bid.” But if there’s a chance that you’ll feel sick at heart, then remember that the seller holds the Aces in the multiple counter offer situation. If you really, really, really want the house, then you sometimes have to be willing to raise the stakes.

Sad Sad Saga of why to use "Double -Apping" on Mortgage Applications

Danielle Newson & Lauren Perreault The Fabulo — Sat, 12 Apr 2008 22:07:00 GMT

(Cross posted from my other website www.FabulousPalosVerdesHomes.com)

A few weeks ago, I had some very nice young clients come to me who had very little money down and wanted to buy their first home in Southern California. They wanted to buy, but weren’t sure they could afford to buy in our expensive market.

After consulting with them, we figured out that they could indeed afford a small townhome. I found it for them and we opened escrow! Yay! Everything should be good, right? At the time, I asked them to please “double-app” the loan, meaning go with two different mortgage brokers to ensure that at least one of them would come through for them. I really wanted them to have at least one of the loan guys be someone I had worked with before, someone I could count on if things got rough, as they might with a loan where they had so little money down.

I even offered to pay for the second appraisal fee out of my commission so that the cost of running two applications wasn’t a consideration for them, since they were so tight on money — I felt that strongly about it. But somehow, the other lender, someone they found on the internet, with a few sly remarks here and a few twisted words there, somehow seemed to give them the impression that the reason I was pushing so hard for “my guy” was that somehow I was getting an illegal kickback on the loan or something. Of course, the only thing I pride myself more on than my service is my ethics, so I was horrified by this insinuation, but nobody came right out and said anything … it was just the ugly elephant under the rug that seemed to be messing up my relationship with my clients. So I backed off on my begging them to double-app and instead let them put all their eggs in the one basket of this loan guy they found on the internet.

Fast forward three weeks. We are supposed to close escrow next week and the internet loan guy informs them today that they aren’t going to get the loan that he has been promising them for three weeks is a “done deal” and “a piece of cake”. He’s got a zillion excuses, a million people to blame, a billion sad stories as to why it’s not his fault. The recent issues with sub-prime lenders is some of it, but I can’t help but wonder how much of it he could have controlled. Maybe none, but I just don’t have a history with this guy and I don’t know how much to trust him. If it was “my guy”, I’d have known every step of the way what was happening and we wouldn’t be surprised now. None of this gets my clients into their new house, however!! So now, at the very last minute, we are trying to get “my guy” involved in the deal to see if somehow he can save the day and get these very nice, very sweet people their house.

The last time I personally bought a home to flip, I used two different loan brokers and told them they were in competition with each other. It helped me to keep the fees down really low and at the last minute get even more shaved off the interest rate on one of them. I wasn’t dishonest about it, I was very up-front. It’s just business. If they don’t want to be competitive, they don’t have to bid. But by knowing that the “other guy” is out there, it forces each of them to perform to the best of their ability, including being sure that there aren’t any junk fees or extra high interest rates in the package. It also helps me as your Realtor ensure that we get loan documents in time to ensure a successful close of escrow so that you can move right into your new home on time.

So if I (or if you aren’t in my area, some other great Realtor) tells you to “Double-App” , in the words of the Nike commercial “Just Do It.” It might be the smartest $400 you ever spent. And for Seller's -- you may want to insist that the Buyers double app with someone your Realtor trusts just to be sure you have a backup plan!

Updated 4/11/08: We closed three weeks late on this home due to the poor management of this loan guy. My clients had to pay extra fees for delaying the escrow, the Sellers almost lost their'"upleg", and ultimately my Buyers accepted a loan that was far higher interest rate than what they had been promised just so they wouldn't lose the home completely. They told me they were sorry that they had chosen this loan guy and that they wished they had listened to me about double-apping. As soon as a little more time passes, we will try to get them re-fi'ed into a better loan - this time with someone we can trust.

The importance of Patience in Buying a Home

Danielle Newson & Lauren Perreault The Fabulo — Sat, 12 Apr 2008 22:04:00 GMT

(cross posted from my other website www.FabulousPalosVerdesHomes.com)

I recently sold a home in Hollyglen, a lovely little area of Hawthorne, California that is “Manhattan Beach adjacent,” to one of my favorite clients, Warren V. Warren is a very analytical kind of guy, very smart and very thorough. He also respects the value of expertise, both mine and other professionals, which of course is one of the reasons he is one of my favorite clients!

Warren made an offer on this really darling house and got a very good price on it in the beginning, mainly because the seller was ill and kept cancelling open houses and making it generally very difficult to see the home. Warren was persistent though — he really liked the location and the look of the home from the outside and was willing to be PATIENT — a key word that will be repeated here throughout this little tale — in order to finally get into see the home. After he and his lovely fiance’ Caryn both were able to see it and liked it, we made an offer that, after some back and forth, was accepted, but with only TEN DAYS to complete all inspections and remove those contingencies.

For those of you new at this game, the reason Sellers do this is to shorten their period of worrying and waiting — if you are going to find something you don’t like about the house, you will tell them in 10 rather than the standard 17 days and then they’ll be able to put the house back on the market a whole week sooner. It makes sense from a Sellers point of view and usually is no big deal because most homes can be inspected in 1 day. So we agreed that the 10 day clock could start ticking on Saturday, which meant Day 3 was Monday. I couldn’t get a home inspector scheduled on Sunday, so first thing Tuesday, Warren and I were there with Tom C, my favorite inspector. We also used this day of access to have a hardwood floor refinisher stop by to give an estimate, to have the appraisal done, and to have my husband the architect stop by to talk to Warren and Caryn about future kitchen remodel plans — there were guys everywhere at one point!

Now you have to understand that this home looked very well cared for. It still had original late 1950’s bath fixtures and kitchen cabinets, but they were in remarkably good shape and had obviously been cared for. The home had new windows, a reasonably new roof, was freshly painted, garden fairly well kept. We weren’t expecting anything major on this inspection. But Tom found cracks in the fireplace and chimney that might lead up into the flue (a special camera would be needed to tell), leaks coming from the heater/air conditioning condenser unit, a faulty switch and bad seals on the heater, a broken oven and dishwasher, and most worrisome… dum, dah, dum dah (the music from Jaws plays here) a LOT of water under the house from unknown causes. There weren’t puddles where he could actually tell exactly where it was coming from — it was just profoundly damp. WAY damp. A whole lot damper than it should have been given that we haven’t had a lot of rain.

Many Buyers might have panicked at this stage and backed out of the deal — the whole idea of the home having this many things wrong would have spooked them, and we would have had to start over. Some Realtors might have too, since they don’t have the expertise to get the right support team in to find out what’s what. But Warren, smart guy that he is, knew that he had been looking a while and his budget was tight. This street and location was perfect and the house’s floorplan was good. The structure of the house was sound and the square footage of the home was quite large due to a permitted addition that had been done quite nicely. So Warren decided to be PATIENT and as I call it, “pull the thread” to see where further investigations would lead us. It might tell us that the problems with the house were so severe that they couldn’t be repaired reasonably, or it might tell us that they actually weren’t as bad as they initially seemed.

By the next day, Wednesday, Day 5, we had a FIRE certified chimney/fireplace inspector, a certified and licensed Heating, Ventilation and Air Conditioning (HVAC) contractor, and a plumber scheduled.

The chimney guy had good news — his camera showed that the fireplace cracks were in the exterior brick only and had not gone through to the flue pipe. The repairs could be done and the home would not be in danger. Next came the HVAC guy — he too had good news and his repair costs would be minor. The plumber had to reschedule to Day 4, but he was able to find the source of the leaks and determine that they too were repairable.

Finally, the appliance repair company came on the morning of day 10 and gave us an estimate for the repair of the oven and dishwasher.

We were able to negotiate with the Seller’s to give Warren a credit for ALL the necessary repairs. He offered a credit option rather than insisting that the Seller repair everything before escrow closed because the Seller was ill and the repairs would have been a hardship for her. Another few weeks of her living there wasn’t going to make a big difference after the years and years that she had already had the leaks.

This was another key area where PATIENCE worked in Warren’s favor. If he had insisted that everything be fixed immediately, the hassle factor probably would have had the Seller saying “NO!” just because she couldn’t emotionally face the idea of that many strange workmen traipsing around her house while she wasn’t feeling well. Refusing to give Warren the full credit wasn’t going to really work, though, because if he went away, she would most likely have had to have the repairs done for any other Buyer in advance of the sale. So because he was patient and willing to wait a few more weeks to get the problems fixed, he was able to get a fairly large repair credit back from her and he will be able to have the repairs done by the workmen of his choosing rather than have the Seller try to hire somebody who perhaps would offer her a cut-rate price and possibly cut-rate level of service quality.

Thus, patience resulted in a win-win situation for everyone — Warren and Caryn get a house they really like, the Seller gets to stay in her home and rest for a few more weeks before her move, and the Realtors on both sides feel like the professionals evaluated the situation and therefore we can sleep at night!

Although this is one of my longer blog entries, I felt that the whole long story was necesssary to demonstrate the importance of patience in buying a home. This whole process only took about 2 weeks including the negotiations of the initial price and the negotiations for the credit back, even though at times I’m sure it felt to Warren and Caryn as though they were plowing through wet cement. It if had been rushed, we wouldn’t have had the right experts, and the only choice would have been to walk away from the cute house at the great price or take a huge risk that we were guessing the right amounts for the repairs. Pulling the thread is always the right decision, even though it seems hard to wait to see what is at the other end. Often, it’s your dream house!

My favorite paint company -- Dunn Edwards

Danielle Newson & Lauren Perreault The Fabulo — Sat, 12 Apr 2008 21:47:00 GMT

Those of you who've checked out my bio know that I've done a number of "flips" and have helped my clients do some of their own. I thought that I would start posting some tips here on my blog about some of my favorite tips on inexpensive ideas for going from "fixer to fabulous" . Turning an ugly duckling into a swan isn't as hard as some people think -- a lot of time it is just imagination. The other thing that it takes is a good color palette.

Which brings me to the subject of this blog -- Dunn Edwards. My husband is an architect, so all the big paint companies give us the full "color box" of paint samples and fan decks that you "civilians" have to go to the paint stores to see. What I have noticed from playing with my hubby's toys is that Dunn Edwards colors are just, well. PRETTIER! They are more sophisticated, more subtle, more... MORE. They have more gradations of a shade than most of the other companies and their shades are not so bright and blaring as some of the other companies. Their color palettes also go very well with each other, leaving you with a way to make your whole home go together well. They keep up with the latest trends in color style too.

They have excellent paint too -- one of my favorites is a washable flat. Flat paint is great for hiding imperfections in walls, but is usually terrible for a family because they don't wash well. This paint covers in one coat, is very durable and washable, and can make those "too textured" 70's walls fade away.

And, they would hate me telling you this, but if you absolutely can't afford the extra $5 or so a can their excellent quality costs (and I really think you should, because it will cover better and look better), but if your budget just won't allow it, you can always take the Dunn Edwards color chip to Home Depot and have them match the color!

My very favorite, secret, use it wherever you want color? Dunn Edwards Pale Beach. It is a wonderful, warm, wet sand kind of color that just pops with white woodwork. And it goes with any accessory and furniture color and looks great in daylight, evening, fluorescent light, halogen, incandescent -- you name it.

Watch this blog for more "flip tips!!"