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Real Estate
e-Newsletter
by Cynthia S. Radom
Award-winning Certified Seniors Specialist REALTOR® Specializing in Trust Sales
Since 1994
Coldwell Banker Realty - Beverly Hills CA
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NEWS & ISSUES for BABY BOOMERS to GOLDEN-AGERS |
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** Writer and Publisher since October 1999 **
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Excerpts from Curbed LA article
Not caused by a rainstorm, fire, earthquake or pandemic, but hundreds of Angelenos were killed in March 1928. More than 400 people perished as a wall of water roughly 100 feet tall coursed through the Santa Clarita Valley before spilling into the Pacific Ocean, south of Ventura. The St. Francis Dam gave out in San Francisquito Canyon, near present-day Valencia.
As news of the tragedy reached Hollywood, residents looked up and shuddered. There stood the Mulholland Dam, now commonly known as the Hollywood Reservoir or Lake Hollywood. The dam stood 200 feet high and 1,000 feet wide, and its design mirrored the St. Francis.
The St. Francis held a year’s supply of water for Los Angeles county. William Mulholland, of the famous Drive and then chief engineer of the Bureau of Water and Supply, had examined a leak proclaiming the dam safe just 12 hours before it burst.
Expert consensus holds that the catastrophe was caused by a combination of geography and man's folly. The dam buckled due to a perfect storm of factors, including its placement on an undetectable (at the time) ancient landslide and Mulholland’s inability to tailor the dam’s design to San Francisquito Canyon, relying too heavily on plans drawn up for the Mulholland Dam. Read more here. |
According to Forbes
States Where People Are Moving for Jobs: California (pre-COVID)
If it were a country, California’s $2.9 trillion economy would be the fifth biggest in the world, ranked between Germany and the United Kingdom. The state represents 14% of the U.S. economy. Home prices in the state have doubled from the lows of 2011 and finally surpassed their pre-recession highs in 2017. California’s outlook is bright with economic and job growth both expected to be strong over the next five years. Another plus is the $110 billion in venture capital money invested in CA companies over the past three years, an amount which is more than five times the total of any other state. (That's the good news! Post-COVID will be different.)
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Update: Prop 19
There are two effective dates for this newly passed law:
- February 16, 2021: eliminates inter-generational property tax transfer if an heir does not use the home as a primary residence.
- April 1, 2021: homeowners over 55 years old can transfer their low property tax to any county in CA. (Previously, Prop 90 included only 11 of the 58 CA counties with reciprocity for transferring property tax.) This is the portion of Prop 19 that C.A.R. (sponsor of the Bill) indicated would benefit all Senior homeowners.
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If you read my Newsletter, you know I am not a proponent of wasting thousands of dollars to professionally stage a home for market. Other REALTORS® may encourage a Seller to hire a staging company to re-decorate their home with newer looking furniture and accessories in hopes of getting a higher sale price, which remains unproven. If the home is new construction or the room layout is difficult to furnish, then staging may be a benefit. But, when a property is priced correctly it will sell quickly with or without any furnishings.
However, for a fraction of the cost there is virtual staging (life-like). Photographs of an empty room are taken and then uploaded onto a virtual staging website. Furniture, wall art, plants, area rugs and other accessories are inserted into the photo as shown in the above examples.
Furnishings should not be a focal point in a property sale. A Buyer needs to focus on the home and its structure to determine an offer. Furthermore, staging an older home in obvious need of repairs or updating with fresh, new decor looks out of place. Virtual staging gives an impression of a furnished home for listing photos, at a minimal cost.
There is nothing wrong with selling a vacant home. A Buyer is able to see more good and bad features, and is able to visualize their furniture in each room.
When utilizing virtual staging:
- Always disclose in the listing remarks that rooms are virtually staged.
- Do not change or enhance colors, flooring or remove anything in the actual photo.
- Only insert virtual furniture and accessories.
Don't try to fool a Buyer. What you are selling is what they are buying.
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Potential D.C. Policy Issue
Biden’s tax reform proposals include a repeal of a "little-known" provision called, step-up in basis (very well-known to CA homeowners), read here.
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Fairmont Century Plaza Hotel
Opening February 8th
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Not until 1978 was insulation in exterior walls required when building homes in CA. And, if your home was built prior to 1972, and was not custom-built, then for sure it does not contain insulation, according to KFI-640 radio host, House Whisperer, Dean Sharp.
Eastern states always included insulation to keep a home warmer in winter weather. As people started moving west, the falsehood was that home insulation in a sunny, warmer climate was unnecessary. As a result, a vast majority of CA homes are severely under insulated.
Insulation is not a heating system. It is a barrier that locks in an energy state, regardless if hot or cold…like a thermos. A well-insulated home not only saves money on heating and A-C, but when done correctly, a CA home barely needs these systems at all.
The return on investment to install insulation is far less than installing or replacing the heating and A-C systems. The benefits of insulation include a:
- quieter home inside
- warmer home in the winter
- cooler home in the summer
Before looking into a solar system that may require installing a new roof, check out what insulation can accomplish to lower monthly bills.
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Buying a Home
Low inventory in the LA area continues to keep home Buyers in a quandary, and future prospects remain unchanged. The advent of the Clear Cooperation Policy, whereby REALTORS® can no longer freely exchange information on off-market properties for sale, has limited buying options even further.
Some Sellers, for whatever reason, do not want their home promoted to the masses through the Multiple Listing Service and worldwide websites. However, sales of off-market homes and condos still permeate the market-place. Many "pocket" listings exist, but access to the information has been limited by the Policy. As a result, if a listing is not readily available for all agents to sell, then no advertising or sharing of off-market listings with other REALTORS® is allowed.
A private, or pocket, listing can be shared with associates of the same Brokerage. Coldwell Banker Realty has, by far, the most agents and therefore the greatest ability to learn about and to sell an off-market property. If you can't find a home to buy, and don't have a written obligation to a REALTOR®, then call me. I'm known for finding a "dream" home.
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2020 Record Sales Year
Despite COVID, 2020 will be the highest ever in closed sales of estates $5 plus million in Los Angeles; 619 as of Nov. 30th, up 23% over 2019.
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Capital Gains Deduction Review
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Everything you own and use for personal purposes, pleasure or investment, is a capital asset. Your primary residence and investment property is no exception. When you sell these assets there are taxes to be paid and for longtime homeowners this is a major reason why Seniors don't move. As a basic calculation, a capital gain or loss is the difference between the selling price and the basis (the price you initially paid for the property or the adjusted value as of the date a spouse passed away -- the reason an appraisal is needed). A Seller then deducts closing costs of the sale (i.e. Brokerage commission and escrow fees) and major home repair expenses from saved receipts. Also excluded from capital gains is a $250,000 tax-free deduction as a single homeowner or as a married couple filing separately, or $500,000 if filing jointly. The capital gains tax is then computed on the net proceeds after all deductions are taken. Note: a loss may be deducted only on an investment property, not on personal property.
Eligibility for claiming the $250,000 per person tax deduction requires the owner to have lived in the property as a primary residence for at least two of the last five years prior to selling or exchanging. Therefore, if you have been renting your home for three or more years, you will need to move back to qualify. The capital gains tax deduction is allowed each time you sell or exchange your principal residence, as often as every two years. And, you are not required to reinvest your proceeds. However, there are rules that apply to a 1031-exchange if a property owner wants to defer paying taxes when selling and to buy a like-for-like investment property.
The tax rate on capital gains is determined in part on the property owner's taxable income rate, and is a question for your CPA.
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COVID-19 immediately changed the dynamic of the family home. Baby Boomers, who were looking forward to being empty nesters, quickly found themselves with a full family unit living under their roof.
Off-spring, no matter what age, who were displaced with loss of income or a shuttered college moved back home to the nest. While their bedroom may have been converted to other uses, the kids take priority. This change went from an empty nest to a nuclear family household.
In addition, and concurrently, aging parents were placed on top of the "danger" list for contracting COVID-19. Some older Seniors who were living on their own, with assistance or even at an assisted-living residence, were quickly packed up and resettled to live with their adult children, which now included the grand children and the family pet. A full extended family unit suddenly living under one roof.
With the pre-COVID advent and approval of building accessory dwelling units (ADUs), the timing could not have been better. Converting a garage, adding on to the house or building a standalone ADU allows families to expand on-site. Or, is a larger home needed?
But, the unknowns remain. Will this be the new family home dynamic? Who will stay and who will move out in time?
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Tidbits of News!
- The average 65-year-old today has 47% more mortgage debt than the same group had in 2003.
- Need a new toilet? First check out this website for functionality.
- Eviction Update: In the Tenant and Landlord Relief Act of 2020, tenants can stay in their homes through Jan. 31, 2021, but they need to come up with 25% of their rent between Sept. 1 and that date. Tenants who can’t pay can be evicted starting Feb. 1, 2021.
- Fed indicates rock bottom interest rates (near zero) will remain through 2023!
- Yellow gizmo included with the last Newsletter mailing? It's a letter opener!!
- Century Plaza Residences: First condo owners moved in last month. Hotel opens in February.
- Property tax collection fraud:
It is being reported that unknown people are attempting to fraudulently collect in-person property tax payments at taxpayers' homes because of COVID-19. The individuals may even have fake identification as well as the tax bill for the specific homeowner in question. These individuals allegedly are claiming that the homeowner must pay their property taxes in-person because the COVID-19 pandemic has closed County offices to the public. Not so!
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When a property is priced right and multiple offers ensue, a Seller may encounter an “escalation clause” within an offer to enhance a Buyer’s chance of obtaining the property. An escalation clause is a provision whereby the Buyer offers “X dollars more” than the highest offer, i.e. $5,000 higher than any other offer. This allows a Buyer to make the highest offer, but only by the minimal amount necessary to out-price other Buyers.
Problematic Clause
While useful, in reality that clause is an open door for the Seller to jack-up the purchase price. Had the Buyer also stated a maximum cap on their purchase price, it discloses critical information about what they are willing to pay for the property. The Seller can use this to negotiate with others, so a cap is not advised. In CA it is legal to share someone else's offer unless there is a signed confidentiality agreement. Another issue can be a Buyer’s missing request to see proof of the offer to beat.
Expand the Clause
When writing an escalation clause in a purchase offer, a Buyer should include:
- With the acceptance, Seller will provide the Buyer with a complete copy of the highest offer received.
A multiple-offer situation requires the Seller and Buyer to confirm the price by re-signing the Counter Offer.
Given that the enforcement of an escalation clause is not 100% assured, and given the potential pitfalls, a Buyer is advised to speak with their attorney prior to including this clause. It can be a winner!
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New Home Trends
According to a Wall Street Journal survey, here are the next big trends in residential living for decades to come:
1. Crave Nature: Homes that welcome the sky, sun, breezes, windows that open, balconies, terraces.
2. Be Gone Open Floor Plans: Open floor plans are no longer desirable; defined spaces that distinguish between work and play are back.
3. Yen for Zen: Gyms will evolve into "wellness" rooms: yoga or steam rooms, infrared saunas.
4. Smaller and Quality Furniture: Heirloom-quality investments rather than throwaway pieces.
5. Washing Stations: High-traffic entry point with a sink, shoe and package storage; a tricked-out mudroom.
6. Generational Living: Three generations under one roof for cost and safety measures.
7. Softer Designs: Round and organic (irregular or asymmetrical) shapes to evoke harmony and warmth.
8. Home Office: Not necessarily traditional desk and chair, but customized for the user's needs.
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When selling any type of real estate in CA, there are numerous disclosure forms containing questions about the subject property that an owner must complete in writing and submit to the Buyer. The Seller must answer to their best recollection. If information is purposely withheld, a costly lawsuit may result. Exemption: a Successor Trustee is spared from completing disclosure forms. HOWEVER, if a material defect or issue is known, they too must disclose the facts.
A guideline to follow when disclosing: pretend you are the Buyer. What would you want to know about the property?
- When in doubt, disclose: If you question disclosing something, just do it!
- Submit before the counter: Buyers should receive disclosures before you submit the first counter offer.
- Properly attribute information:
Disclose the source of where details were obtained, i.e. public or title records, blueprints, etc.
- Do not make representations about unknown permits: Let the Buyer search and pull any/all permits.
- Estimates are just that: When changing a documented detail, i.e. home size stated on public record, indicate that it is the owner's estimated size. Buyers have the onus to confirm lot and house size.
-You're not a professional: If you cannot prove an answer to a Buyer's question, refer them to a lawyer, inspector, appraiser or contractor.
A REALTOR® may not complete any part of the Seller disclosure forms. And, if an answer needs to be revised for any reason, correct and advise the Buyer immediately, and hope that it's not too late.
Here are some other tips. |
Discrimination
Until recently, Buyers would often include an introductory letter with a purchase offer to distinguish themselves from other prospects. A personal letter that may contain a photo, a description of the family unit or what the Buyer likes about the home, appealing to the Seller's heartstrings.
This letter is now in question. The reason is, a Seller may not select a Buyer based on any of the 22 protected discriminatory classes in CA. Federal and State Fair Housing laws are now making a real estate transaction as "blind" as a multiple-offer process. A Seller's decision will be based only on the offered price and terms and not on any personal information.
These introductory letters worked.
A Seller told my clients that the letter we included was the clincher in a six-offer bid. A letter is now perceived to be inadvertently revealing the risk of a property owner's unconscious bias.
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Respecting your privacy and confidentiality, names and e-mails will only be used for providing pertinent material from Cynthia S. Radom and will not be shared with any other organization.
©2021 Coldwell Banker Real Estate LLC. Coldwell Banker® is a registered trademark licensed to Coldwell Banker Real Estate LLC. An Equal Opportunity Company. Equal Housing Opportunity. Owned By a Subsidiary of NRT LLC. This is not intended as a solicitation if your property is already listed.
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