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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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Pent-up demand, rock bottom interest rates and lifestyle choices have been fueling LA home sales during this worldwide pandemic. Never before have people spent so much time in their home learn-ing what they want, need or no longer desire in a residence. Buyers see sale prices rise as demand continues to outweigh very low inventory. Yet, record home sales persist locally.
REALTORS® remain challenged when selling property; limited by one-on-one showings, no open houses and no agent previews. Sanitizing areas that have been touched by each visitor and ensuring everyone adheres to mandated protective equipment and CDC protocols. Potential virus exposure from countless Buyer viewings and inspections is a reality. Understanding and empathy by an agent is foremost when a Buyer suddenly cancels escrow as employment ceases, or a Seller loses a loved one gripped by the COVID virus.
Until real estate was designated an "essential service", the quietness in our industry was deafening. Virtual tours were a bust. No one was going to buy a home without actually seeing, feeling and walking the property. A physical experience is needed. Even if the home was going to be razed, a Buyer must be on-site. Unlike online shopping, there are no returns in property sales.
What has eased the home selling process is technology. Required distancing is upheld with electronic signatures used on every form. Money is wired to and from any account and online meetings using Zoom videoconferencing are held with clients or lenders.
FaceTime on an iPhone is used as a tool for those who cannot be on-site. A Buyer can view an issue found during an inspection. Or, an out-of-town heir who wants to locate a memento inside the home can look through the house. Technology has made selling property safer during the pandemic, and some procedures are here to stay.
March 19, 2020 CA received the initial COVID stay-at-home order.
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April 1st is the effective date on Part 2 of the new Prop 19 law. Part 1 dealt with intergenerational property tax transfer that went into effect on February 16th.
Part 2 offers Seniors (55+) a benefit to transfer their low property tax when buying a replacement primary residence anywhere within CA. The old law restricted the transfer, according to Props 60 and 90, to only 11 of the 58 CA counties and capped the new home purchase value to equal to or lesser than the sale price of the original house.
Other benefits of Prop 19 include:
- No cap on the replacement home purchase price (however, some adjustments if "greater" in value than the sale price of the original home)
- Buy a new home prior to or within two years of the sale, allowing time to build a new home or to find a resale replacement
- Ability to utilize three times in a property owner's lifetime (but, without limitation for those whose houses are destroyed by fire)
While Prop 19 passed with only 51% of the votes, expect some changes and clarifications, especially to Part 1. However, the likelihood of a reversal is nil.
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Transfer Tax
Every property sold in LA County includes a City and County documentary transfer tax. In most transactions, the Seller pays this fee at the close of escrow. The tax is computed at a cost per $1,000 of the sale price. While the County tax rate is $1.10 on all price levels, the City tax varies per area.
Effective March 1st, Santa Monica and Culver City had a substantial price increase in transfer taxes.
Santa Monica: now has a graduated tax rate of $3.00 on sales under $4,999,999 and $6.00 over $5 million
Culver City: now has a graduated percentage on various price levels ranging from .45% to 4%
Los Angeles: remains at $4.50 per $1,000 of the sale price
Bev Hills: no City transfer tax!
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As a parent, it may have been your dream for the children to inherit the family home. That dream may have changed to some extent with Part 1 of Prop 19.
The biggest change to the new law is that your children can no longer convert the home into a rental and keep the low Prop 13 property tax. The home would be reassessed and the property tax would increase substantially. In addition, the designation of the home would change to an income property. Should this change be made, there are added tax consequences when selling a rental home in the future, that also need to be considered beforehand.
If one sibling wants to move into the family home as their primary residence...well, this is best left to an estate planning attorney to help satisfy the other heirs. Even so, Prop 19 created a kink in the low property tax transfer when the new value is $1M over the current taxable basis (i.e. new value is $3M, less current basis $390,000, less $1M (exclusion) results in added tax computed on $1,610K).
With the advent of the new law, it is time to have a family discussion. Like many longtime homeowners, you were staying put for the sake of the children. Living in an older home that, at the very least, has been maintained only for bare necessities. A possible "cash cow".
The good news: Parents are now free to leave the nest! Start thinking about a lifestyle change. Begin by making a list of what you want or need in a replacement home. For example: an updated, service-oriented residence that does not require a waste of cash like the old family home.
Computer-savvy people can start searching online to pique your interest. A condo, an apartment, an active Senior community, even a move closer to family or to the vacation home area where you've been staying during the pandemic. I can help. Complete and return this form then I will send selected listings for your consideration. |
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Whenever a Buyer is obtaining a mortgage for a home loan, the lender always requires a property appraisal. For jumbo loans there are usually two appraisals required. What happens if the property does not appraise for the offered purchase price? How important are the agents for this process?
Low value appraisal
- If the price cannot be justified by comps, the Buyer and Seller may re-negotiate to have the Buyer pay the difference in cash, to reduce the purchase price to the lender's satisfaction or to cancel the deal. A resolution may depend on the offer terms, if an appraisal is, or is not, a contingency.
Agents' (very important) role
- It is important for the Buyer's and Seller's agents to have local sales knowledge. If an appraiser is not familiar with the area or does not know the nuances of a particular listing, the agent(s) can and should educate.
Off-market home sales (not listed in the MLS) do not normally generate the highest price. Yet, agents are obligated to submit the sale information to the MLS. These off-market and foreclosure sales often diminish area property values, and an appraiser needs to take this into account. Selling a home and promoting to the masses will always generate top-dollar. During a strong housing market, when multiple offers create a frenzy, a Buyer may pay over "market" to ensure the winning bid. Seller, beware of a "bait and switch" strategy when a Buyer asks for a price reduction during escrow. However, the ultimate decision is a Seller's choice.
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A much needed revision in CA's outdated Homestead Exemption law was recently approved, per Assembly Bill 1885. The change increases the amount of equity in someone's home that a creditor cannot touch as part of a claim, from $175,000 to a minimum base of $300,000 and a high of $600,000. This means that up to $600,000 of equity is exempt from satisfying a judgment debt.
The base is determined on the median sale price of homes within a particular county, in a particular year. The current median home price in LA County is about $810,000. The revised law also includes an automatic annual increase in the base amount for inflation.
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Tidbits of News!
- Remote workforce: Almost 25% of the U.S. workforce (36 million people) are expected to be working remotely from home by 2025. An 87% pre-pandemic increase.
- LA prices increase: Home prices in the LA market rose 6% during COVID-2020 from 2019. While low rates continue to fuel the Buyer market, another 8% increase is expected in 2021.
Sellers...now is the time!!
- RECORD BREAKER: In the first year of the global pandemic, there were 725 closed estate sales of $5M+ versus 560 in 2019 in our LA market (30% increase). Real estate sales are keeping the CA economy well-fueled during COVID.
- Another record: At the end of February, estate sales between $5M and $10M were up 52% v. 2020. Overall sales in our CB-BH office rose 102% over 2020.
- Biden Admin: Possible changes to watch from the current D.C. administration: Repeal of the tax-free 1031 like-kind exchange and the step-up in basis on assets; and a decrease in the gift and estate tax exemption. (If you were upset about Prop 19 - just wait!!)
- READY! Watermark WW Village,
the all-new Senior residence in the former locale of WW Horizons, is ready to move in.
- In-N-Out estate: Heir to the burger fortune is selling this 18,687 sft. Bradbury compound.
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As solar energy becomes more popular to curb heating costs, REALTORS® are learning of potential issues when selling a property with panels installed on the roof. Most solar panels are rented by property owners from a third-party energy provider, and few panels are owned outright.
With every lease comes a contract, and a deed that may be recorded against the property until the lease obligation is fulfilled. All liens must be removed from a property at the time of sale.
In the Residential Purchase Agreement, there is a section titled: Items Included In and Excluded From Sale. A Seller is to disclose information about Leased or Liened Items and Systems and submit the contract to the Buyer. When items are not owned by the Seller, or there are items to be excluded from the sale, this must be disclosed to the Buyer up front. In turn, the Buyer has a choice to accept or decline as a contingency of the sale. First and foremost, the Seller needs to determine if a lease contract is transferable to a new party.
Case in point: A Buyer declined the solar panels and required the Seller to deal with the long-term lease. According to the lease contract, not only was the Seller obligated for all the payments of a 25-year lease, but there was an extra cost for removing the panels. This amounted to thousands of dollars that the owner had to absorb, or look for a new Buyer.
Note: Electric vehicle charging stations are also leased.
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2020 Award-Winner The year of COVID...click here to see Realtor Radom's honor.
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ADU permits
About 20% of all LA building permits in 2020 were to add or convert to an ADU (a separate dwelling unit) on a residential property. According to the LA Assessor the ADU will assessed and added to property taxes.
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Knowing where property boundary lines are located is important to a Buyer and to all land owners. When there is a reason to confirm, the information can be obtained one of two ways; a professional survey or a visual inspection and measurement.
Where sidewalks are used, there is often a marker embedded into the cement denoting the edge of a property. From that point a documented measurement can determine the property's frontage.
Reasons for locating the boundary lines, include:
- Building area: when a new home is planned, lot lines are crucial for setback measurements; the minimum distance which a structure must be set back from a street or other property lines.
- Fencing: too often a thick cinder block wall, a driveway gate or other fencing is located on two adjoining lots. When a repair or replacement is required the cost needs to be negotiated among the property owners. A Buyer may require that the Seller resolve the issue prior to closing.
- Encroachment: a major issue ensues when any part of a structure or an access road, that someone has been using for years, is found within a neighbor's lot line. Legal counsel is usually obtained to settle the matter.
It is important to realize that an actual property line is just that, a thin line separating two lots.
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Plan for Tomorrow
Below is a reply from a daughter acknowledging my condolences on the passing of her father, a Senior homeowner who received my mailings:
I am so glad that (we) established a relationship with you some time ago, and that your area of expertise is so suited to our needs at this time.
Establishing a relationship now with a REALTOR® is like any other professional, legal or financial, to assist you and your family. Have a discussion with your Trustee and get all of your affairs in order.
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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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