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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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When a Seller of real estate fully executes their obligations according to the terms of the Purchase Agreement, but a Buyer has not and defaults, there are specific steps that a REALTOR® must follow. However, even when those steps are completed to the letter, the Seller is often squeezed into returning the Buyer’s deposit that rightfully should be kept by the owner because of the default. An example of a breach is when the Buyer has removed all contingencies and has failed to fund the balance of the purchase price in time to close escrow.
The Seller’s agent must issue written forms to the Buyer, in this sequence, adhering to strict guidelines when a problem arises:
1. Notice to Buyer to Perform: This form is sent to the Buyer’s agent specifying what term the Buyer has failed to complete.
If the “warning” notice is ignored or the Seller declines to extend the deadline, the next step is:
2. Demand to Close Escrow: This form is sent to the Buyer’s agent demanding that escrow close within X-days of the notice. This may automatically extend past the original closing date, depending on when the Demand was sent.
If the “demand” notice is ignored, or the Seller does not agree to extend the closing, the next step is:
3. Cancellation of Contract: Issued by the Seller, and this is where the owner gets squeezed if they decide not to return the Buyer's 3% initial deposit and seek a mediated resolution.
The Buyer has clearly defaulted by not following through on the purchase contract terms. However, the issue is that both principals must agree to cancel escrow and the Buyer is not likely to sign off if their deposit is withheld. The property can still be sold to another party, requiring a different escrow company, but a new Buyer will want to see a fully executed Cancellation of Escrow before agreeing to the purchase. This squeezes the Seller into refunding the deposit.
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It doesn't "pay" to look back. When you're ready to sell or buy real estate, it's the right time.
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You’re ready to sell the family home but your children say NO! “We grew up in this house; we love visiting, especially for the holidays". What to do? Stay and let offspring deal with the eventual inheritance, sell now, or rent the house? There must be a reason you’re ready to move: safety, upkeep, health or financial issues, loneliness, yearning to travel or simply a desire to change your lifestyle. Start by making a list of reasons why you want to move now.
The process begins with a family discussion as a group. Share your list with them. If one of your children wants to live in the home as their primary residence, determine how the others will be compensated for their inheritance. Before anything is decided, talk to your CPA and/or estate planning attorney to learn what current and future tax ramifications occur when selling or renting. Yes, there is a capital gains tax to pay when selling. But, renting the house for more than two years changes the property status to residential income, and a whole new set of tax rules apply.
Determine if you need the equity from a sale to pay for future expenses, especially unforeseen medical care. How will the improvements and safety requirements be paid to ready the home for renting? Selling ‘as is’ requires no cash outlay.
Who will be the designated Landlord for leasing, tenant issues, bookkeeping, bill paying, rent collection, 24/7 maintenance calls, etc.? If there is a deadbeat tenant or another eviction moratorium, can you afford the property expenses without a rental income?
There is not an easy or quick determination to sell or rent the family home. One thing is for sure, as the parent and current homeowner, the ultimate decision should be yours. Review your list. Remember, leaving an inheritance is a gift, whether it is money or real estate.
You decide, it's your name on the title!
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Remember the children’s story about Chicken Little who famously panicked, "the sky is falling, the sky is falling"? This does not apply to the SoCal real estate market. There is no bursting bubble and the sky is not falling.
We are experiencing an adjust-ment; a shift in the market after ten consecutive years of constant and too many annual double-digit property price increases. The Fed is curbing a robust spending frenzy that was out of control, like the real estate market, and a correction is sorely needed.
Today vs. Yesterday
Sellers
- When priced competitively, the property will sell
- Forget about multiple offers, you only need one Buyer
- Days on market may be longer, patience is required
- Buyers are plentiful; ready, willing and able to buy at all price levels
- When your REALTOR® suggests a price reduction, heed their professional reasoning
Buyers
- Stop waiting, unrealistically, for prices to fall 20% to 30%
- When you see yourself living in a home, buy it
- Forget about interest rates; think about the monthly payment and learn how to reduce a loan rate
- Work with a knowledgeable loan broker who offers numerous plans
Sellers and Buyers
When a mutually acceptable purchase price is close, both sides need to compromise. There are creative options to consider instead of a price reduction. For example, the Seller can reduce the Buyer’s mortgage rate by buying down points (read the article below). Or, one side can pay the other side’s non-recurring closing costs.
Some Buyers have pulled away from the market because they can’t qualify. And, some Sellers need to take a deep breath and realize they may have missed the top. But SoCal continues to have a very strong and active real estate market, which is still the best investment you can make.
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Bomb Shelters, the First ADU
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During my career, I have listed two LA homes with an underground bomb shelter, exploring one 15’ down under but the other was inaccessible. An LA Times article offers an "interesting" insight as to when and how the so-called need for shelters began. Some readers may recall their own experiences. It was a time when atomic fever and bunker building were in full swing. Starting in the ‘50s and ‘60s, following WWII through the Cuban Missile Crisis and mid-way into the Cold War, federal and local governments along with doomsday entrepreneurs promoted the bomb/fallout shelter as something no family should be without. Some homeowners believed that it was the only means of survival in the event of a nuclear attack. In May 1960 an LA trampoline maker pivoted to making prefab metal fallout shelters for $1,500. Also, a Pomona company sold an igloo-shaped shelter with a guarantee to withstand an atomic bomb blast within three miles (as long as one survived to collect the refund). Even Wallace Neff, the renowned architect, built an underground shelter at his Bubble house in Pasadena where, reportedly, a subsequent owner would retreat for primal-scream therapy sessions. In 1965, 200,000 shelters were estimated nationwide, but building came to an end in CA when County Assessors added a property tax to what I call the original ADU ( accessory dwelling unit).
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In case you're doing some home remodeling, here are some critical dimension and clearance tips to know, according to KFI-am radio host, Dean Sharp:
-Toilet space: Side clearance is 15" to 18" from the center of the seat in both directions; front is 22" to 24" for leg space
-Table space: From the table edge to a backside object: 32" for no pass-behind clearance, 36" for slide past and 48" for walk-behind clearance area
- Chair space: Between seats is a minimum of 24" to a comfortable area of 30"
- Gas water heaters: Brand-specific directions are key, but in a closet 12" all around and 18" above the floor for clearance
- Hanging light fixtures: Placed over a table with an 8 ft. ceiling: 30" to 34" above the table to the bottom of the fixture. Vaulted ceiling entrances: place the fixture as high as possible to focus on the height of the ceiling
More information on the "House Whisperer" podcast, KFI radio.
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Tidbits of News!
- Vegas to LA? What happens in Vegas does not always stay in Vegas! Effective September 1st, a 600 sqft. size limit for a newly built residential pool went into effect in Las Vegas. Some pools can be as large as 5,000 sqft. on private estates. While this is an effort to address the drought issue in NV, can CA (i.e. Los Angeles) be far behind in limiting a pool size?
- Out-of-area sales: I can oversee your property sale of any type,
anywhere within the U.S. I just sold ten homes in Las Vegas.
- FTC Fines Big: Opendoor (a new partner of Zillow) just got nailed with a $62M fine for mis-leading customers, stating they could make more money by selling homes through Opendoor rather than through a traditional brokerage. The FTC alleges that not only were Opendoor’s offers lower than a home’s market value, but also that the company actually asked Sellers to spend more for home repair costs “that were higher than what people would typically spend on repairs in a market sale”.
- It's not the listing price that counts, but how much money you put in your pocket.
- Condo records: When buying a condo, ask the HOA management to supply all repair records on file.
- When a Buyer defaults on a purchase, the burden of proof is on the Seller to show harm to retain a forfeited deposit.
- They're back: Loan fees, the expense a lender charges for evaluating and preparing a mortgage loan. When money was "cheap", with 2.5% interest rates, points were eliminated.
- Fires, droughts, earthquakes, wind, rain, hot days, chilly days, inflation, a national financial crisis or recessions...the LA real estate market goes on, no matter what.
- Great insight on today's real estate market, read here.
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Don't be surprised when mortgage rates rise to 7% from the historic low of 2.5% just last year. What is a Buyer to do?
Two options:
1. Adjustable-Rate Mortgage (ARM): While the Fed is curbing inflation with unprecedented high interest rate increases, ARM's are back in lieu of a fixed-rate loan.
- Flexible loan period
- Initial fixed-rate
- Rate can adjust bi-annually based on market conditions
Unlike locking in a fixed-rate for 30 years, determine a shorter loan period whereby rates may fall again, giving you an opportunity to re-fi.
2. Rate Buydown: Reduce the rate by paying for a decrease. A partial to a full point reduction can bring down the monthly mortgage payment to a desired amount:
- Buyer can pay with excess cash or use a cash "gift"
- Seller agrees, with lender approval, to increase the loan and use "excess" funds for non-recurring closing costs; thereby the Seller issues a "cash" credit to the Buyer/lender at the close
Call Chris Dickie, mortgage broker guru with GRA to learn how to reduce a mortgage interest rate, (626) 786-5026.
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Listing Photos
The home you sell is not the home you live in. Look around, does your home look lived-in? Counter and table tops filled with personal items, bath towels scattered and unfolded, bills and papers strewn throughout or the water hose a tangled mess in the garden. This is not how you will be selling your home. A home for sale looks like no one lives there!
Staging means the inside is ultra neat, clean and odor-free. Essen-tially, it looks like a model home. This does not require renting furniture. Any unsightly items can be removed or simply sell the home clean and vacant. If you need help removing unwanted items before the sale, I have a list of vendors that offer this and other services.
You only get one chance to make a great first impression and it starts with the listing photos. A Buyer must get hooked within seconds as they scroll through the professional photography online. Start by taking some pix with your phone. Does your eye go to the personal items? If so, remove it and store whatever you can. You're selling the bones of the home, so allow a photo to capture that essence.
Read what a photographer wants you to hide for the photo shoot.
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Correction: A 1031-exchange is tax-deferred, not tax-free as incorrectly stated in my previous Newsletter.
Thank you, Mr. Miller, for bringing this to my attention. Readers of my Real Estate Newsletter are always encouraged to offer comments and to ask questions.
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While lawn watering is being regulated to one or two days a week because of the drought, CA homeowners are also challenged with weather issues of wind and heat while trying to conserve water. Here is a little-known and effective watering system to consider.
Subsurface drip irrigation systems are highly efficient by applying accurate amounts of water directly to the root zone, thereby preventing water loss through evaporation and other negative effects of surface irrigation. This is especially suitable for arid, semi-arid, hot, and windy areas with limited water supply. However, as the system is relatively complex and most likely automated, it may be more suitable for medium to large-scale production.
Advantages
- High degree of control over water application with the potential for high uniformity of application
- Evaporation is reduced
-The amount of water can be fine-tuned. This avoids water loss caused by run-off or evaporation
- Frequent irrigation allows for optimum soil moisture content in the root zone
- Great performance in windy and arid locations
- If pre-treated wastewater is used for irrigation, the risk of direct contact with crops and laborers is reduced
While there are disadvantages to this system, i.e. clogging pipes or system repairs, it may be worth investigating this drought and eco- friendly alternative.
Other watering suggestions include a new digital timer and 180-degree sprinkler heads that don't water the cement. Both are easy to install on your current system.
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Successor Trustee
When selling real estate, what are the responsibilities of a Successor Trustee? Most likely you have appointed one or more of your offspring to handle the sale of the family home and it may be their first property transaction. By now, they should know my name and number as your trusted real estate advisor, having kept in touch with you for years. I will be happy to meet with you and your Successor Trustee(s) to offer suggestions and to answer any questions. Call Realtor Radom for an appointment.
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Two New LUXURY Rentals:
-The Park Santa Monica: 500 Broadway, ready for move-in.
- Respara Brentwood: off upper S. Barrington, ready in November.
"Referred by: Cynthia Radom,
Coldwell Banker Realty" when registering.
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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.
©2022 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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