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Is Real Estate Becoming a Buyer’s Market?  

Dear Monica:  I am looking to buy a home and have noticed a shift.  There are more properties on the market than before and I am seeing some price reductions, which didn’t happen earlier in the year.  What is happening in the real estate market now?   Beverly C.

 

Dear Beverly:  There is a change in the market now from what we saw in the spring.  The peak months for real estate sales and prices this year was March/April.  Things slowed in the summer, which is not unusual, but now that it’s mid-September, we are seeing fewer multiple offers and lower bids.  The rising prices we saw in the spring cannot be sustained and so prices are leveling off and in some cases, diminishing, from what they were a few months ago.

 

Mortgage interest rates have risen to the 4.5% range, which affects what buyers can pay.   Other factors too, such as recent tax law changes, tariffs on imports, and others, have made buyers more concerned about how these changes will affect them.  If you are a buyer, this is a better market for you.  But sellers, who expect the price surges they saw last spring, are disappointed that their properties are not getting bid up as they’d hoped.   It may take time for them to realize that the market has changed.

 

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Buyer’s Second Thoughts

Dear Monica: I made a non-contingent offer on a property and to my surprise, the sellers accepted it.  There were multiple offers so I didn’t think I would get it but I did.  Now I am having second thoughts about this property.  What can I do?  Lauren G.

 

Dear Lauren: You are experiencing a very common emotion referred to as “Buyer’s Remorse”.  Sellers too can have this feeling.  It is especially common in our area where the  pace of the real estate market is rapid and buyers can be swept up in the flurry that surrounds the multiple offer process.  When they succeed sometimes they hesitate and wonder if they did the right thing.

 

Know that it is normal to feel this way and once you absorb the reality that you are buying a property, you will likely have no further second thoughts about it.   Relax, take a deep breath, and you should be just fine.  And congratulations on having your offer accepted.

Think Long Term When Buying Real Estate

Dear Monica:  I am in the market to buy a rental property but real estate prices have gone up so much that I am thinking I should wait until the market cools a bit before buying.  What would you advise?  Jonathan C.

 

Dear Jonathan:  We have seen prices rise considerably in many Bay Area communities in the past 5+ years.  But there is still strong demand and companies are building large office spaces up and down the Peninsula.   All of those who work in the buildings want to live as close to them as possible or take public transportation if it works well for their commute.  So here is what I believe and what I tell my clients.  You don’t need to wait to buy, but if you buy,  you should have a long term plan for the property.  Quick turnovers don’t work in this market.  But a buy and hold policy does work, if you hold it at least 5 – 7 years.  Our market will fluctuate from time to time but barring a larger correction this strategy is the best plan.

 

Restrictions on Renting A Property        

Dear Monica:  I have been looking to buy a condo or townhouse but have not been able to find an affordable place in this market.  However this week I have seen a good place in my price range but the condo rules don’t allow an owner to lease the property.  I am in my 30s and have a good job but it is possible I could be transferred and if so, I would have to sell the condo because of this restriction.  What should I do?  Amy C.

 

Dear Amy:  I think the rental restriction makes this property a bad choice for you.  Some condo homeowner associations have rules that don’t allow owners to lease their properties and it affects the desirability of them.  You may not intend to lease the property but circumstances change and you may have to move.  If you can’t rent the property your only good option is to sell it.  The market might not be good but you would be forced to sell then or carry the cost of the property until you do.   It’s too bad you can’t go ahead and buy this condo but I would advise you to keep looking.

 

Getting a Final Inspection Approval      

Dear Monica:  I am in contract to buy a beautiful newly constructed house.  At the moment the Builder/Seller does not have a final approval for all the work that was done.  How would you advise me to structure my contract to allow for the fact that the final has not yet been obtained?  David G.

Dear David:  The best approach for you to take is to have a contingency that requires the seller to have a final inspection approval before you remove the contingency.  Once the final approval has been obtained, you can remove your contingency and close the transaction.  You may also want to have your own inspector inspect the property and produce a punch list of items the seller/builder needs to correct/repair.

There is a one-year warranty on new construction that covers all of the appliances, fixtures, plumbing, electrical and other things.  In addition, there is a 10-year warranty on things that are not immediately apparent but that become material problems during the 10 year period.  The limitations are spelled out in SB800, a California law that should be part of your contract.

Exclusions     

Dear Monica: I am in the process of selling my house and have excluded a few items that I don’t want to sell with the house.  I want to keep the washer and dryer, refrigerator and dining room chandelier.  My agent is advising me not to do this.  What do you advise?  Tom R.

Dear Tom:  Exclusions are often a negative in the mind of a buyer, some less than others.  If you want to keep your dining room chandelier, my advice would be to remove it now and replace it with a suitable but simple one, and then the buyer never sees the one you want to keep.  As for the washer and dryer, it is common for sellers leave these items with the house, but it is also common to exclude them.  If they are older, leave them.  If they are newer, it’s fine to take them but a buyer might appreciate having them left with the house.

As for the kitchen refrigerator, I would advise you not to exclude this.  Even if the refrigerator is not built in, it is unusual and definitely a negative for a buyer to have to replace the refrigerator as soon as they move in.  You didn’t say how much your house is listed for but with high prices in our area, buyers don’t expect to pay these prices and then have several exclusions.  If your goal is to achieve a good sale, it is best not to exclude anything.

Selling Above Asking Prices – How To Evaluate?

Dear Monica:  I see varying information about how much properties are selling relative to their list prices.  Some agents tout selling prices far in excess of the starting prices and other selling prices reflect different percentages.  How can I best evaluate this information?  James W.

 

Dear James:  The best way to understand this information is to note what the list price is.  Some agents price properties artificially low compared to their market value.  Thus when they sell substantially higher than the initial starting price it broadcasts the message that the property and the agent who sold it, must be fantastic to have achieved such a price.  One must look at the comparable sales to confirm that this scenario  of list price=amazing sales price is a result of agents pricing the property very low to begin with.

 

It’s true that selling well in this market means pricing your property within an attractive range of where comparable properties have recently sold.  Don’t price it too high but price where buyers see good value and room to bid a bit higher if there are multiple offers.  But extreme low pricing is not only misleading, it is frustrating to buyers.  It is more straight forward to price a property closer  to where it is likely to sell.

 

A Seller Contingency

Dear Monica: I want to sell my house at a price high enough to buy another house, keep my Prop 60/90 property tax and pay my capital gain tax.  I am afraid if I sell my house I won’t find another that allows me to do all of these things.  What would you advise?  Grace W.

Dear Grace:  You are not alone in wanting to do what you describe.  Alas, our housing market is tight and prices are rising so this will not be easy to do.  First of all, you don’t know yet what your own house will sell for.  Therefore you don’t know whether you can buy the next property at a price that allows you to keep your property tax rate and pay your capital gain.  And in this market of multiple offers, you will have a hard time convincing a seller to accept your offer contingent on selling your present house at a certain price.

One strategy that could work is to accept an offer on your current house contingent on buying another one that fits your financial plan.   Because inventory is still low, you should be able to find buyers willing wait for you to find the right replacement property.   This seems the only way you can be sure you will cover all your costs before you give up your present house.

 

Items Left at a Property

Dear Monica: We closed escrow on a property a few days ago and the sellers have left some items there that we thought would be removed.  They left an old refrigerator in the garage and some other items.  Should this have been removed?  Jeff W.

Dear Jeff:  The contract states that all built in appliances are part of the transaction.  If a refrigerator in a kitchen is not built in, you should state in the contract whether or not you want it included.  Typically an old refrigerator in a garage is not considered part of the transaction, unless specifically included in the contract.

To avoid confusion on this, the seller’s agent should confirm that it is okay to leave the refrigerator in the garage and/or the buyer’s agent can stipulate that it is not included.  This should eliminate any confusion about whether to leave the old fridge or not.

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