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You are here: Home » 2015 » February

CAN WE ASK FOR THAT?

Let’s say you’re looking for a house to buy and you find one that seems to fit your needs, wants and price range. As you finish your tour you enter the garage and it’s amazing… Finished walls, epoxy floor and a work bench with state-of-the-art tools, all shiny and obviously in perfect working order. You absolutely LOVE tools and these are all the type you’ve been wanting to buy forever. As you express your admiration for them, your agent smiles and says, “Sorry, those don’t come with the house…”

Your agent is correct. They don’t come with the property automatically the way normal fixtures do, like the roof, HVAC system, hardwood floors, etc. Tools would be considered personal property. However, you can ask for them to be included in the sale as part of your purchase contract. The question is, should you?

Those shiny tools may be the home seller’s pride and joy, and an offer that asks him or her to leave them to the new homeowners may create needless animosity and risk them declining your offer, no matter how good it is.

You would probably do better by asking to negotiate the purchase of the tools outside of the contract to purchase the rest of the house. And do that AFTER you are in contract for the house. Handled carefully, the seller may feel impressed by your obvious appreciation of quality tools…and you may end up owning some or all of them.

 

Keep in mind that including personal property items in your offer can cause complications with your loan because your lender will be concerned that those items are artificially raising the cost of the home, but that they wouldn’t permanently stay with the house if you didn’t make your payment and they had to foreclose.

 

WHY THE BUILDER’S LENDER?

In the past, new home builders seemed to be focused on selling the homes, and they didn’t care where you got your financing from. Then a few years ago, they started bringing the lender “in-house” for one-stop shopping convenience for you, and an additional profit center for them. They might even offer you $2,000 to $5,000 in closing costs credit if you used their lender.

 

But nowadays, you’ll often encounter a pretty strong push from the builder to use their lender, with credits of almost $10,000 and on rare occasions even more. This is often more than what the builder will make on your loan. So why in the world is the builder willing to possibly take a loss on your loan in order to steer you to their lender?

 

It comes down to accurate forecasting for the builder. If a home sale is delayed or falls apart altogether, that can cost the builder big bucks. There are different accounting rules for a home under construction versus a completed home, and a builder sitting on a completed home is bad news, accounting-wise.

 

The builder wants to be able to call up the lender, and get the straight story about the status of all their transactions in the pipeline. They will be familiar with and have a higher level of confidence with their in-house lender. This will not be true for some lender the buyer found on the Internet that the builder has never dealt with before. Anyone who has been in the business a while has been told by some unknown lender that the buyer is “pre-approved,” only to have the deal fall apart at the end, and you find out the buyer wasn’t even close to getting a loan. Imagine if you are a builder dealing with hundreds of closings across multiple projects. Confidence in their projections is worth A LOT to a builder.

HANDYMAN LICENSE?

Very often in a real estate transaction the owner of the property will have work done on the property either to get it ready for sale, or based on the buyer’s request for repairs. A question arises if the person they hire to do the work needs a contractor’s license.

 

The California Business and Professions Code says it’s a misdemeanor for anyone to act as a contractor without having a license, unless, “…the aggregate contract price which for labor, materials, and all other items is less than five hundred dollars ($500)…” So if the price is less than $500, the work can be done by an unlicensed person, what we often call a “handyman.”

 

Some people try to get around this by splitting the job up in pieces to get each piece under $500 by description, or by billing. However, the Code is wise to this ruse and prohibits it. Even if the particular job is less than $500, it is not exempt if it’s part of a larger job, whether done by the same or a different person.

 

The homeowner takes on a lot of risks by hiring an unlicensed contractor, no matter the cost of the job. If the handyman gets hurt, damages a neighbor’s property, or hires other workers, those could all blow up in a negative way for the homeowner. They could be liable for Workman’s Compensation, be found to be the “employer” of the hired workers, etc.

 

There is also a danger to the unlicensed handyman in that the homeowner may be able to refuse to pay them for the work done, even if the work was done perfectly.

 

Bottom line – it’s probably wise to use a licensed contractor for all repairs, even if it’s just a small job.

INVENTORY UPDATE

It seems like there is always some “expert” warning us about some upcoming economic disaster, and they have plenty of logical arguments and graphs to back up their arguments. For a while there we were worried about all the “shadow inventory” where they thought the banks were holding foreclosed off the market but were about to dump them on us all at once and our inventory was going to rise drastically. Then it was all the adjustable rate mortgages that were going to reset and cause another flood of foreclosures. Then they said interest rates were going to rise, which was going to put a huge chill on the buyer activity. All of these were supposed to lead to MUCH higher inventory of homes for sale.

 

Well, Chicken Little was wrong, again. As of the end of January, inventory of homes for sale is still very low across all of East Contra Costa County. Brentwood is hovering around 100 resale homes for sale. Oakley is just under 50 resale homes for sale, Antioch has 158 and Discovery Bay has 50.

 

It did look like inventory WAS rising last year. On a percentage basis, most of our local towns saw inventory increase 50-100% last year, which sounds like a huge increase. But keep in mind that, for example, in Brentwood last year we started the year with about 75 resale homes on the market. So when it went to about 150, that was a big percentage increase, but still low by historical numbers.

 

Normally such low inventory numbers would mean that it’s a “Seller’s Market” which means prices will continue to rise. However, since we are bumping up hard against what is “affordable” for buyers, we’ll have to wait and see how this year plays out.

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