Straight Talk About Real Estate

When a buyer makes an offer to purchase, how can the seller know that this buyer is serious about buying? What if the seller accepts the offer and proceeds with his plans to move and the buyer decides to change his mind?

The seriousness of the buyer is measured by the size of his deposit. The deposit is the money he puts into escrow upon signing of the purchase contract before the transaction is closed. This is not the down payment.

The deposit is what the buyer stands to lose if he changes his mind about buying the house for reasons that are not stated as contingencies in the contract. For example, if obtaining a certain kind of loan is a contingency to buying, and the buyer couldn’t qualify for that loan, then he can cancel the contract and get his deposit back. Another example, if buying is contingent on the buyer’s satisfaction with the termite inspection, and the termite report did not satisfy him, then he gets his deposit back.

However, if the buyer’s contingencies have all be met, and then he decides he just doesn’t want to buy, then he loses his deposit to the seller.

The deposit can be any amount acceptable to both buyer and seller. As you can see, it is more secure for the seller to see a higher deposit, and it is better for the buyer to give as low a deposit as possible. A customary amount in our area is anywhere from 2 to 3% of the purchase price. If I represent the seller, and the buyer’s deposit is low, I find out if there is a good explanation, and ask for a higher deposit. If the buyer is unwilling to put in more for no good reason, I discourage the seller from accepting the offer. I find that a buyer with a low deposit is generally not serious, and usually causes problems down the line, and end up cancelling escrow.

Incidences of home buglary goes up around the holidays. Criminals are watching and waiting while you are out shopping and partying.

My house was broken into on Christmas Day 13 years ago. The policeman told us the best security system against buglars is a dog. A few months later, we adopted a Rottweiler. We have not had another incident of break-in since then. I suppose buglars checked off our house since there is nothing left to steal a second time.

Compare to 13 years ago, the technology for home security has improved much. It is much easier and cheaper to obtain a good electronic security system. Whether you DIY (do it yourself) or have a professional company install a system, or get a big dog, it is a good idea to be armed with some kind of deterrent.

With many homes having access to high-speed internet service, one attractive option is a internet camera. This allows you to monitor your home from anywhere in the world, as long as you have net access. Rather than worry about wiring, there are now remote internet cameras that can be hidden around the home and easily accessed off-site.

If you own a business, it’s also comforting to be able to monitor activity at your business. Several times a year we get an the burglar alarm going off at the office. Most of the time, its a false alarm. But what if it isn’t? Rather than frantic phone calls or a drive-by to check on it, a quick look through the internet camera will show if it’s all clear.

Did you ever want to own your own home - at sea?

Knut U. Kloster Jr, former chairman of Royal Viking Line and Norwegian Cruise Lines, came up with the concept of building condo units on a cruise ship. The idea is to combine the comforts of home while traveling around the world.

Do you want to take a guess at the price? The ship - The World - offers a 630 square foot unit for $6.3 million, while a 3,200 square foot condo with three bedrooms sells for $6.3. The annual maintenance fee costs from $80,000 to $450,000, based on the unit’s square footage. The upside: there is no property tax.

I wonder: Does homeowner’s insurance cover “sunk ship”?

This is a whole new way of looking at “vacation homes”.

It is no surprise that a home in Southern California, built with a wood frame, will have termites. There are different types, but the bottom line is, they feast on wood and wood products.

If the termite inspector sees evidence of termite infestation, such as droppings, etc., they will either recommend local treatment or fumigation.

People are concerned about the chemicals used in fumigating their homes. There are different types of methods and gases for fumigation. I am not an expert on that. What I do want to point out here is, if you have a tile roof, or a light weight metal roof, there is 100% chance that it will be damaged to some extent when you fumigate.

The workers have to get on your roof to put up the tent that covers the house. The covering is heavy. They cannot possibly tiptoe on the roof while pulling that heavy material onto the roof. You will be asked to sign a waiver saying they will not be responsible for damage to the roof. If you do not sign it, they will not do the job.

You can expect broken tiles. It’s not a big deal to replace them. You just need to anticipate that this will happen and not get upset when it does.

If you have a composition roof, you do not have to worry.

I read in the local paper that a real estate agent was shot when he was door-knocking. This was in Diamond Bar, California, a quiet residential area, part of my service area.

Real estate agents routinely solicit for business by going door to door to introduce themselves to the neighborhood. This is common practice and you can certainly get clients that way. I have done that in the past, but I do not do that anymore, not because I am afraid for my life, but homeowners are usually afraid for theirs. Very few open their doors to solicitors due to horror stories of home invasion, or they are just tired of the bombardment of advertising everywhere. (80% of my mail are junk, both postal and electronic). They don’t need it to come to their door step.

Those of you reading this obviously believe in the use of the internet to get information and possibly do business on the internet. I think it’s the best way now to advertise any type of business, both for the consumer and the company.

Fortunately, this hardworking injured agent is going to recover. The news report said it was a case of “mistaken identity”. Lucky for the person who was meant to be shot! The gunman pleaded not guilty to a felony charge of assault with a firearm. It seems rather obvious that he is guilty since the victim identified him. Perhaps the defense attorney wants to get him off so he can go back and shoot the intended victim…In the meantime, is the judicial system doing anything to help the agent, who is the sole breadwinner for his wife and four children?

The closing date may be different from the possession date.

The closing date is the day title legally changes hands. When the buyer gets possesion of the property is negotiable.

It is customary in our area in Southern California to give the seller an extra 1-3 days to move out completely. Sometimes the seller try to negotiate up to 5-7 days, but I think that is stretching it. Basically, they are asking for the buyer to give them that many days of free rent, in the meanwhile, the buyer has already started making payments on the house. A few days does not seem to matter much, but if your mortgage is $3000 a month, that’s $100 a day you are paying. Five days is worth $500.

Ideally, the buyer gets possession on the day escrow closes. The seller is completely moved out, and all keys and garage openers are handed over. But it doesn’t hurt to allow a couple of days for the seller to clear out. Any more than that the buyer can ask to be compensated per diem by the seller.

At the time of purchase, it is customary for the seller to pay for a one-year home warranty plan for the buyer. Sometimes it is called a home protection plan. The basic plan usually runs about $250-$300. You can also add on optional coverages.

Do not think that everything that goes wrong with the house will be covered by the plan. First American Home Protection Plan is a reputable company and explains what a typical plan covers. Whatever is not listed is not covered.

Optional coverage costs extra, such as central air conditioning, pool and spa equipment, and roof.

I suggest not getting the roof coverage. Read the limitations on it. If you have a roof problem, chances are it won’t be covered.

Whenever you call the home warranty company for service, there is a service charge of $35-$50. If the repair person comes out and tells you it is not covered by the plan, you still have to pay the service charge. So I suggest you describe in detail your problem to the warranty company on the phone, and ask if it is covered. If not, you may as well shop for the best repair company, save the $35-$50 service charge, and not be tied to using the one they send.

For major problems not covered by the home warranty plan, call your homeowner’s insurance. Remember your homeowner’s insurance probably have a deductible of $500 or $1000, so it is only worthwhile if the problem cost much more than your deductible. Fortunately, there is no service charge if the insurance sends someone out to look at the problem.

Just about everything in real estate is negotiable.

Depending on what area you live in, there are customary fees for sellers to pay, and there are fees for buyers to pay. But they are not law. Anyone can pay for anything as long as the principle parties agree. In the Southern California area, it is customary for the seller to pay for title insurance. A one-year home warranty plan is usually paid by the seller. Escrow fees are split so that buyer and seller pay their own portion of the escrow fee. Again, even if it is customary, it is negotiable. I had a case where the buyer was getting such a sweet deal on the price that he agreed to pay all the seller’s closing costs.

On the other hand, I once had a seller say he didn’t want to pay for title fees. But he wasn’t giving up anything in exchange. That won’t sit right with the buyer when he knows another seller down the street will pay the title fees. So it is no use to negotiate unless you are willing to give and take. Otherwise you kill the deal by going against normal accepted practice.

Some sellers will agree to pay a portion of the buyer’s closing cost. How much the seller is willing to pay depends on the price and terms that are offered. If the seller gets what he wants, he may be willing to give the buyer what he wants in closing costs. The assistance with costs can be negotiated as a percentage of the selling price, such as “2% of nonrecurring closing costs.” Or it can be negotiated as a flat fee, such as “seller will credit buyer $5,000 towards nonrecurring closing costs.” Most lenders will not allow the buyer to get more than 3% of the selling price. Otherwise the buyer might end up with money in his pocket.

“If the seller accepted someone else’s offer, should I put in a back-up offer?”

Sure, why not? It doesn’t hurt you at all, if the terms of the back-up are written correctly.

Your back-up offer should require the seller to give you written notice that the first contract is cancelled and that prior to this written notice, you can cancel your back-up offer anytime.

Don’t sit around and wait for the cancellation, which may never happen. Keep looking for houses, and if you find another one, then cancel your back-up.

I had a client as the 3rd back-up offer. The first two didn’t come through, for whatever reason, and my clients bought the house.

A Flag Lot is a lot shaped like a flag on a staff. Imagine the staff of the flag is the driveway that leads from the street up to the bulk of the lot where the house sits. The land adjacent to the staff, or in front of the “flag” part is a separate lot that belongs to someone else. That lot could have another house on it. So if you own a house on a flag lot, your house is behind someone else’s house and not visible from the street. Some people thinks this give them privacy, but most of the time, houses on flag lots are lower in value than a house with street frontage.

My father’s house is the front house, and there is a house behind him on a flag lot. He sees the owner once a week having to push his trash cans a long way down the lengthy driveway to put the trash on the curb for pick-up. Then he has to take the empty cans all the way back. So take that into consideration when you think of buying a house on a flag lot.