Search

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.

 

Advertisements

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.

Keeping a Property When You Move Away

Dear Monica: I am being relocated to another state and don’t know whether to sell my home here.  I may need to sell in order to buy in my new location but I worry that I won’t be able to afford to live here again if I want to move back.  What would you advise?  Mary E.

Dear Mary: If you think you will ever want to move back to the Bay Area, I would advise you not to sell your home now unless you have to.  See how you like the place you are being transferred to as well as the job you will be doing there.   If ultimately you decide you want to stay in the new location, then you can sell your Bay Area property knowing that it is a good decision for you.

The real estate market here is one of the strongest in the country and while it may not remain that way forever, it will stay strong as long as the economy here continues as it is.  Too often homeowners sell when they leave the area and then cannot buy their former home back when they return because the price is too high.

Condo Reserve Funds

Dear Monica:  I own a condo in a small complex of six units.  At our recent Homeowner Association (HOA) meeting we discussed our low reserve account and some felt we should raise HOA dues to build up greater reserves.  What do you advise?  Howard G.

 

Dear Howard:  This is a question that comes up often especially when prospective buyers are considering a unit governed by an HOA.  Many HOAs would rather keep required monthly dues low and when large expenditures are needed,  have a special assessment paid by each owner.  This works well for many complexes but the risk is that an owner won’t pay the assessment when it’s due and the HOA must record a lien on the delinquent owner’s property.  To avoid this, many HOAs maintain reasonable reserves. Other complexes, especially large ones, build substantial reserve accounts that are used to pay all or most of the repairs and replacements needed, such as a new roof, painting, termite repairs, etc.

If a buyer is considering a condo or townhouse, he/she should look carefully at the reserve account to be prepared for future assessments if the reserves are low.  This should be a negotiating point with the seller and factored into the price and terms.

 

In-Law Units

Dear Monica: We want to find a property that has room for a secondary unit for my parents to live in. This is difficult to find within local zoning laws and our budget. Do you have any advice? Jenny M.

Dear Jenny: Many cities and towns are expanding their zoning laws to make it easier to add a second unit to residential property, even properties zoned for single family homes. If a property has reached the maximum allowable square footage for the lot size, you will have to find space for an in-law unit within the existing structure. It may be possible to convert a garage to living space but check with the local laws about this. Some cities require a residence to have at least one covered parking space while other cities allow all parking spaces to be uncovered. There are also limits on the size a second unit can be as well as other rules. Check the local zoning laws for guidance.

Buying A New Home   

 

 

Dear Monica:  I want to buy new construction and don’t know how buying a newly built home differs from buying an existing one.  What would you advise?  Daniel B.

 

Dear Daniel:  If you are buying a home that has just been built, you will have the advantage of the builder’s one year warranty for patent defects, as well as a 10-year warranty for latent defects.  The process for claiming defects in California is governed by SB800.  Your contract for buying a new home should include SB800 as an addendum.  It would be to your advantage to buy from an established builder who will be in business for a long time should you need to request repairs.

 

The property should have a final inspection signed by the city, and also a certificate of occupancy, if the city provides this.  Your lender, if you are getting a mortgage, will require this as well.  You should do your own termite and home inspections so that you can independently evaluate the quality of the construction, as well as produce a punch list of items to be repaired before close of escrow.  Once you move in, you may discover more items to be repaired and these would likely fall under the warranty.

 

Do Beautiful Gardens Add Value?

 

 

Dear Monica:     I am ready to put my home on the market but am wondering if I should wait a month or two when I know the garden will be in full bloom and look its best.  What would you advise?  Diane G.

 

Dear Diane:  There are a couple of important things to consider when making this decision.  The first and most important, is the state of the market.  If it is very strong now, but you are not certain it will be as strong in two months, I would not wait to sell my home.  I would put it on the market now and add flowers to planting beds and pots to enhance the beauty of the property.

 

But if the market is stable and you think it may be even stronger as the spring selling season continues, then I would wait until your landscaping is in full bloom.  A beautiful garden not only adds visual value but it extends the usable space of your home.  In California we can use our outdoor space at least six months of the year and with heat lamps and other devices, can extend the usability even longer.  Buyers will be captivated by a garden that offers beauty, as well as places for entertaining and quiet enjoyment.

Does My Property Qualify for a 1031 Exchange?

 

 

Dear Monica:  I am in the process of a divorce and am selling a rental property that I own with my spouse.  I would like to do a 1031 Exchange with the proceeds of my ownership portion.  May I do this?  Philip T.

 

Dear Philip: There are many rules for exchanging an investment property into another investment property and deferring tax on the gain.   It can be a very simple exchange, or a more complex one, especially if exchanging only one owner’s portion as part of a divorce, as you would do be doing.  Some issues you need to think about are how title is held on the property you are selling because the property you buy may have to be held the same way.  Another issue is if the property you are buying is in another state will California allow you to defer the tax you owe them?  California may impose a capital gain tax when the out-of-state property is ultimately sold. There are many other issues as well.

 

You should first consult your attorney regarding how your ownership portion would be regarded by the IRS.  You should also consult an accountant well versed in IRS and California exchange rules to be sure you meet all requirements. If your exchange fits the rules, you will be able to roll your proceeds into another like-kind property without it being a taxable event.

Should I Do My Own Inspection?

 

 

Dear Monica:  I am going to make an offer on a property and the seller has provided a home inspection as well as many disclosures.  I would like to have my own contractor look at the property rather than relying solely on the seller’s report.  What would you advise?  Robert G.

 

Dear Robert: I think it would be a very good idea for you to have your contractor look at the property on your behalf.  You will need the seller’s permission to do this but this should be easy to obtain.

 

With the fast pace of the real estate market here, and the fact that multiple offers are common, having your own consultant review the property condition will make you feel more confident about it.  And doing your due diligence before making an offer means you won’t have to ask for a property inspection contingency.   Most sellers choose the best non-contingent offer rather than one with an inspection contingency.   Good luck with your offer.

 

Blog at WordPress.com.

Up ↑