Marin Real Estate Pulse

Why construction building permits are so important

warren — Thu, 02 Feb 2012 01:26:14 +0000

Just a few years ago no one seemed to care if a home improvement or addition was done without permits. Appraisers are now required to call out differences between square footage on tax records and actual measurements. If the home has an addition that was done without permits some banks will not lend on the property, others reduce or eliminate the value of the addition.

When you buy a foreclosure permits are even more important because you don’t get any history of what improvements were done or who did the work. When improvements are done by a homeowner or unskilled worker the results can be disastrous. I have seen beautiful bathrooms with the marble falling off the shower walls because it was not installed correctly. This is something you would not be able to see, and likely a home inspector would not be able to find until the damage was obvious. I have also run into homes that had windows installed without permits and the windows did not have any headers (the beams that support the wall and roof above the window). The windows in this same house were installed in such a fashion that the walls had no shear (support that would keep the home from falling down in strong winds or mild earthquake).

Electrical work done by homeowners is almost always done incorrectly and creates unsafe wiring and grounding, overloaded circuits, and unprotected wires.

We don’t like getting permits because it cost money, slows down the job, and of course the building inspector will see everything you are doing. Most people feel they are doing a good job and the permits are not necessary but building codes are designed for safety and are not always easy to follow.

If you buy a home that had work done without permits and you start a project with permits it is possible the building inspector will notice the other work that was done and make you get permits for the old work. Remember, the responsibility follows the home so once you own the home you also own the improvements that were done by prior owners.

Most homes in Marin County are older and I would guess that many, if not most, of them have had work done without the proper permits. When buying a home a full investigation of its permit history is in order. Talk to the county or City, look at the permits and if the permit does not have a “final” stamp that means the work was not done or at least not signed off by the building inspector. Buy the house if you like it but discount your price for work that may need to be redone.

What it’s like buying a short sale

warren — Mon, 04 Apr 2011 20:51:34 +0000

I recently wrote about the process of buying a foreclosure, in this article I will cover my least favorite transaction, a Short Sale. These real estate transactions are called short sales because the bank that has the loan on the house for sale will get shorted on the amount owed them. It works something like this; the seller, who maybe lost their job and can’t make the payments, owes $800,000 on the home and the most they can sell it for is $600,000. In this case the Short Sale bank might agree to accept the $600,000 and let the owner sell the house.

The only consistency in Short Sales is the rules change all the time, as a matter of fact, there really are no rules, we are talking the Wild West. In the above example the bank might agree to let the owner sell and loose $200,000 (actually much more after selling cost; commission etc.) but they could just as easily agree only to do so it they seller signs a promissory note agreeing to pay back the money at some future date. This is less common because most owners would then just tell the bank to go ahead and foreclose. When that happens the bank usually cannot go after the seller for lost money. The main reason people Short Sale rather than foreclose is the hopes of it not affecting credit scores as much and the opportunity to buy another home in just a few years vs. almost 10 years.

Now that some of the basics are out of the way what is this process like for someone buying one of these homes? First, my advice to my clients is this is the last type of property you want to buy. Sure, if you just love a house and it is just right for you, go ahead and make an offer even if it is a Short Sale, just don’t get too attached because chances are the deal may fall apart. Second, if you really want the house just hang in there, it may take months, many months, maybe over a year.

Why do you have to wait so long? The transaction starts normal enough, you write an offer, the seller accepts it but the offer is contingent on the Short Sale bank accepting the offer. That is what takes so long, waiting on the Short Sale bank.

Why do so many of these escrows fall apart (this list is long)? The buyers may get tired of waiting and find another home thus cancelling the Short Sale escrow. After waiting several months for the Short Sale bank to approve the deal you get out-bid by another buyer. The seller might change their mind and decide to let the bank foreclose on them so they get a few extra months free rent. The Short Sale bank might decide the offer price is way too low and counter at something much higher than the buyer can afford (this is not necessarily unreasonable as sometimes listing agents price short sale too low in the hopes of getting an offer before the foreclosure). Your inspection period usually does not start until the Short Sale bank has accepted the offer and if you find something bad at that point you may have just spent several months waiting for nothing.

Like I said, if the house you love is a short sale make an offer just don’t get your hopes up.

Warren Carreiro

warren@RealtyOfMarin.com

What it’s like buying a Bank Owned Foreclosure

warren — Wed, 30 Mar 2011 21:40:23 +0000

You’ve been looking and finally found the house you want to buy and it is a foreclosure, also known as an REO (Real Estate Owned –“by a bank”). Usually these are considered a good deal, at least they typically are priced a little below the going rate.

Here is what you need to know. There are no disclosures, nothing telling you the next door neighbors might be noisy or maybe water leaks under the house in heavy rains. There are reasons for this; the bank has never lived in the house so they don’t know anything about it. The former owners that got foreclosed on are not anxious to help the bank sell the house. Also, those owners might make the house look better or worse than it is just to “get back at the bank”. All this means you better do your homework and get inspections so you know what you are getting into.

When you write an offer on a foreclosure it may take several days for the bank to let you know if your offer is accepted, we are talking bankers’ hours. Most of the larger banks with counter your offer, even if they like your price, with an addendum that turns the whole purchase contract in their favor. For example, in a typical purchase contract you might have 17 days to do your inspections and if you don’t expressly remove the Inspection Contingency you can get out of the contract without losing your deposit. The banks addendum changes that so if you don’t remove your Inspection Contingency by the given date it is assumed everything is okay and you are stuck in the contract. Not only that but they usually give you just 5 to 7 days to complete inspections.

I suppose we could live with the shorter timeline and passive removal of contingencies except it is usually not clear when your timeline starts. This is because when the bank counters your offer with their addendum they may sign it one day and you don’t receive it for several days after that. Usually that would not be a problem but the bank form might say the start date is when it is signed by the bank. At this point I can’t guarantee my clients what the real start day of the contract is so we have to go conservative and assume it starts when the bank signs it. That can take our 7 day inspection period down to just a few days or worse if it is Friday or a long weekend. No problem, right? All we need to do it issue an addendum asking for more time for our inspections. The listing agent will say okay and send it to the REO bank. Problem is the bank never signs the extension but you are told it is okay. We all know everything in real estate has to be in writing but we can’t get the bank to sign anything. I have to say, so far, the banks have been honorable with their word but who wants to be there when they aren’t.

If a buyer get emotional in a multiple offer situation they may offer more than they wanted once all the dust settles. No problem for the bank, their addendum takes care of that for them. If you want the deal they make you sign a form that says if the home appraises for less that your offer you will still go through with the deal and make up the difference with a larger down payment.

Regardless of all these problems with buying a bank owned foreclosure, REO, it likely will still be less frustrating that buying a Short Sale…

Warren Carreiro

warren@RealtyOfMarin.com

Marin Real Estate Better This Year

warren — Wed, 29 Sep 2010 22:44:48 +0000

The Marin Independent Journal front page headlines was a story about real estate tax valuations going down for the first time since Proposition 13. Somewhere in the article it mentioned that the actual bills were still higher than last year thanks to all the “add-in” taxes. This shows what we all know, home values have come down.

Of course the property tax rolls are a trailing indicator. Just yesterday I was helping a client that wanted to have their assessment value reduced. The assessor wants comparable sales for January-March of this year, (If you were getting a bank loan an appraiser would consider those comps too old). This means as values fall your home is assessed too high and conversely as values rise you get the benefit of an under-assessment.

I ran the numbers for home and condo sales year-to-date this year compared to the same period last year and the results might be surprising to those that rely on the newspaper for this information.

Marin Sales January 1 through September 29:

Single Family Homes (2010) (2009)

No. of sales 1,359 1,139

Median Price $799,000 $769,000

Condo’s

No. of sales 355 350

Median Price $360,000 $322,450

Marin real estate does not seem to look as bad as some headlines would lead you to believe.

Warren Carreiro, Broker

Warren@RealtyOfMarin.com

Home Sales PLUNGE: Not for Marin

warren — Tue, 24 Aug 2010 18:36:07 +0000

It is all over the news this morning; home sales PLUNGE to levels not seen in 15 years. While this may be true nationwide the saying “real estate is local” definitely applies to Marin. Sure we have taken our hit on prices and sales and I do feel badly for those homeowners that are underwater or have lost their homes to foreclosure, however, our sales did not plunge in July.

According to the report on Huffington Post sales nationwide are down 27% from last July. In Marin sales were down 3% from last July. Year-to-date sales of Marin County Real Estate are up 21% compared to 2009. The Marin median price is also up 5% so far this year.

Even Belvedere which has a high number of listings (47), with only 2 in contract, and believe me those numbers yell OVERPRICED, is doing better than last year. So far this year there have been 18 sales compared to 13 for the same period last year. The median price is down to $808 per square foot from $941 but because it is such a small town with few sales the statistically base is too small to mean much.