Facebook
YouTube
LinkedIn
You are here: Home » Archive by category "Buying a home"

WHAT IS A MULTIPLE COUNTER-OFFER?

We are seeing multiple offers on some properties. There are no rules set in stone for how sellers and their agents deal with this situation. Sometimes they will just accept the highest offer, or they will counter the highest offer on price or other terms. Another strategy that is very common is when the agent tells all the agents to consult with their buyers and come back with their highest and best offer within a day or two. Another option is where the seller counters multiple offers all at the same time. They can counter all the buyers back at the same terms, or different terms, and they don’t have to disclose to you what those terms are. It also means that if you accept the seller’s terms, you are NOT officially in contract with the seller until they accept your acceptance. It’s important that you verify if the counter-offer you receive from the seller is the regular counter (SCO) or is it the multiple counter-offer form (SMCO).

 

One strategy you can discuss with your agent is whether you want to accept the terms of the counter-offer, and then hope that the other buyers DON’T accept, which would mean it’s likely yours will be accepted OR do you want to improve your terms somehow? That way in case all the other buyers accept the seller’s terms that your offer may stand out. Of course, the seller could come back with another round of multiple counter-offers at that point and keep this going until they are ready to accept an offer. However, the seller is running the risk that some or all of the buyers simply walk away and look for another home. I’ve seen that happen where buyers get frustrated at the process and give up. Sometimes they ALL do that and the seller is now scrambling to get one of them back in the fold.

 

If you have questions about real estate, call me at (925) 240-MOVE (6683). Voted “Best of Brentwood” multiple times. To search the MLS for free, go to: www.SharpHomesOnline.com. Sharp Realty. #01245186

INVENTORY UPDATE

The number of homes for sale (what we call “inventory”) is still very low across East Contra Costa County. The reports that I’m seeing from some of the third-party companies I subscribe to show that we have a little more for sale than we did this time last year and about the same as the year before that. But I also keep track of inventory manually and I show that we are actually lower than both of the prior two years at this time. There can be a difference in how new homes are counted, as well as if you are looking at the first of the month or end of the month.

 

But it’s safe to say that inventory is still very low. This is causing frustration among buyers in that the best homes are attracting multiple offers again and we are seeing offers going above list price on some homes that are really nice and priced right.

 

Many “experts” were predicting that inventory would rise through 2017 and 2018 but that hasn’t happened yet. I think we are seeing a bottleneck because many of the potential sellers don’t want to put their home on the market because they are concerned they won’t be able to buy a replacement home right away and they don’t want to do a double-move. Mostly because it’s just so hard to move twice but on top of that the rental market is very tight and finding a short-term rental is really difficult even if they are willing to make the second move. This keeps homes off the market, which further compounds the problem.

 

If you really want to move, you may just have to take a leap of faith and put your home on the market and try to negotiate a long rent-back from your buyer and then hope the right homes comes on the market in time.

QUICK CREDIT SCORE FIX

Your credit score is a number that summarizes your credit report. It is the end result of a very complicated formula that takes into account how well you pay your bills, how much debt you have, how “maxed-out” your credit cards are, etc. Lenders are relying more and more upon your credit score to determine not only if they will approve your loan, but also what rate you pay. For example, if your credit score is between 600 and 700, you would probably still get approved, but at a slightly higher interest rate than if it was 700 or more.

 

Sometimes, there will be an error on your report that brings your score down to just under the lender’s “cutoff” number. An incorrect reporting of one late payment on your report can drop your score by 10-15 points, or more. I’ve seen buyers with scores at 599, and they needed scores at 600 to get the loan they wanted. This is a frustrating situation because it can take a month or more to get some errors in your credit report corrected through the normal channels. By then you may have lost the home you wanted to buy, or the interest rate you wanted.

 

If you are faced with this situation, ask your loan officer if you are a candidate for a “rapid rescore.” If you have documents to prove your case that the information in your credit report is incorrect, you can request a rescoring of your credit report with the new, correct information. This may result in your scores going up, and this can happen in as short as a few days. This assumes, of course, that your proof is accepted and the creditor and/or the credit bureau agrees to change the reporting. The only advantage to the rapid rescore is the speed. It shouldn’t result in a larger change to your score than the normal process.

A BULLISH SIGN?

I noticed a small article last week in one of the real estate trade publications that really caught my eye. It was talking about the projections for an increase in the number of HELOCs (Home Equity Line of Credit) over the next few years. The chart showed that from 2012-2016 there were 4.8 million new HELOCs but that from 2018-2022 they are expecting 10 million. That’s more than double.

 

So why is this interesting to me? Well, let’s think about what most people get a HELOC for. Maybe they want to remodel the house, put in a pool, put in solar panels, or they want to buy a car, or a boat, or pay down some debt. Nearly all of those uses will put money directly into the general economy.

 

Let’s look at a typical bathroom remodel: The contractor gets paid, their workers get paid, they need to buy materials so the local hardware store gets paid. When the workers come to the house, they may stop off to get gas in town, buy a sandwich, etc. Once it’s done, you’ll want to buy new towels so the department store gets paid. This money can then be multiplied throughout the economy as each of those recipients turn around and spend more.

 

Tapping into your home’s equity is a way to live a lifestyle beyond your current income, so it’s like giving people a pay raise. I am NOT suggesting this is a “good” or wise way to live. I’m just pointing out that this increase in HELOCs will probably result in people spending more money, which is good for the economy, which usually drives real estate prices even higher. Yes, this happened last time. Yes, that ended in disaster. We can only hope that the new lending rules prevent the excesses of last time. Lenders are supposed to verify that borrowers can actually afford their payments.

INSPECTION IS NOT A REPAIR LIST

Potential home buyers often incorrectly view an inspection report as a mandatory repair list for the seller. The fact is, sellers are not required to produce a flawless house. They have no such obligation by law or by contract.

 

Most repairs are subject to negotiation between buyer and seller. Typically, buyers will request that various conditions be repaired before the close of escrow, and sellers may choose to repair all, some or none of these requests. Sellers may agree to make repairs as a matter of choice, not obligation, to foster goodwill or to facilitate consummation of the sale.  Sellers maintain the legal right to refuse repair requests. The buyer then has the right to choose not to buy the home, and receive their deposit back.

 

A big factor is the agreed-upon sales price. If the buyer is paying top-dollar for the home, they will expect more repairs done. Conversely, if the buyer is getting a “good deal,” the seller may be more likely to choose not to agree to any repairs.

 

Before you make any demands of the seller, try to evaluate the inspection report with an eye toward problems of greatest significance. Look for conditions that compromise health and safety like active leakage of water or gas. It’s common for sellers to agree to fix problems affecting sensitive areas such as the plumbing, roof, gas burning fixtures, or electrical wiring.

 

The primary objective is to know what you are buying before you buy it. All homes have defects, it is not possible to acquire one that is perfect.

 

Most real estate contracts require the seller to ensure that the smoke and carbon monoxide detectors are installed properly and operational, as well as having the water heater strapped correctly. The buyer does not need to request these to be done since that was already spelled out in the contract ahead of time.

MULTIPLE OFFER STRATEGIES

When a listing receives multiple offers, my buyer clients will ask me, “If we aren’t the highest, offer, they’ll counter us, right?” Unfortunately, that doesn’t always happen. There are no hard-and-fast rules in how agents handle multiple offers. Sometimes they go through several rounds of counter-offers and they include every offer that came in, or they’ll just counter the top offers. Or sometimes they just take the highest and best first offer.

 

Whenever there is more than one offer, it can be a very fluid situation. Once buyers find out there is competition for the property they can improve their offers. This means that the “best” offer can quickly get leap-frogged by another offer. It can get to be like an auction environment with buyers upping their offer, or they get discouraged and withdraw their offer suddenly if they think the price is escalating too quickly.

 

The key idea for buyers to take away is that you shouldn’t assume that you will get another shot at it later. I know some buyers want to start low so they can work their way up on price later through the negotiating process. This can backfire if someone else comes in with their highest offer right off the bat and the seller just accepts it without countering.

 

Sometimes we find out what the highest offer is. Buyers can’t just assume that if they match that offer the seller will switch to them (assuming everything else is the same). Most sellers feel some allegiance to the buyer that came in higher initially instead of being talked into coming up later.

 

I am NOT recommending that you “overpay” for a home. My point is that if you’ve been looking for a while, and you have specific needs and you find the “perfect” home for you, come in with a strong offer to start with.

 

If you have questions about real estate, call me at (925) 240-MOVE (6683). Voted “Best of Brentwood” multiple times. To search the MLS for free, go to: www.SharpHomesOnline.com. Sharp Realty. #01245186

HOW DOES NEW TAX BILL AFFECT REAL ESTATE?

The real estate industry has been worried for a while now that the mortgage interest and property tax deductions and/or the generous exclusion on capital gains from the sale of your principal residence would go away. There are some tweaks but most of these will stay about the same for the average homeowner.

 

MORTGAGE INTEREST DEDUCTIONS: The bill caps the limit on deductible mortgage debt at $750,000 for loans taken out after Dec. 14. (Loans made before that date can continue to deduct interest on mortgage debt up to $1 million.)

 

PROPERTY TAX DEDUCTIONS: The bill also keeps deductions in place for state and local income taxes and property taxes, but limits the two deductions together to $10,000.

 

CAPITAL GAINS EXCLUSION: An earlier proposal of this bill would have increased the required time that you live in your principal residence in order to exclude some of that gain from two out of the last five to five out of the last eight years, but that was struck down. So, no change that I can see in this area.

MOVING EXPENSES: The deduction for moving expenses has been eliminated except for members of the military.

POSSIBLE IMPACT: The cap on mortgage interest deductions may put a bit of a damper on home sales where the buyer has a loan between $750,000 and $1M as it will now be slightly more expensive for them. And homeowners where their combined state, local and property taxes exceed $10,000 are going to pay more income taxes.

I don’t think this will have a HUGE impact on the overall real estate market one way or the other. How it impacts the general economy, household incomes and therefore consumer sentiment and spending WILL greatly impact the real estate market.

I am not a tax expert so please consult one. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). Voted “Best of Brentwood” multiple times. To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty.

 

HOME INSPECTOR MISSED SOMETHING

Most of time, a home buyer will obtain a home inspection during their contingency period before they purchase a home. If something major is discovered, what we call a “health and safety” item(s), the buyer will usually ask the seller to repair those items or for a credit towards those repairs. But what if the home inspector missed something major? If it’s serious enough and the buyer thinks the inspector was negligent, they may sue them.

 

Many of the home inspectors will have a contract that the buyer signs as part of their working relationship with the buyer, and they will try to limit their exposure (which is reasonable, of course). They will say that they aren’t responsible for things that they COULDN’T have known about like damage or issues behind walls, or under the floors, etc. They will also limit what parts of the home they will inspect. Some inspectors even try to limit their liability to the amount that the buyer paid them, but this limitation often doesn’t hold up in court.

 

Their contract may also limit the amount of time that the buyer has to bring suit, what’s called the “statute of limitations.” This last one is particularly interesting, in that the inspector will want that time limit to start from the day of the inspection itself. But the buyer will want the time to start when the item is discovered.

 

I did find a court case where the court agreed with the buyer, that the time period starts when the item is discovered. They said that the average homeowner won’t know anything is wrong until the situation gets to the point where they would notice it. This may or may not apply as a precedent to all cases like this.

 

I AM NOT AN ATTORNEY. PLEASE CONSULT ONE FOR SPECIFICS TO YOUR SITUATION. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). Voted “Best of Brentwood” multiple times. To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty.

SELLER’S DUTY TO DISCLOSE

A long time ago, real estate was sold under the idea of “buyer beware.” This meant that the seller didn’t have to disclose anything, and the burden was on the buyer to find out what was wrong with the property. We’ve come a long way since then, and there are now legal requirements for sellers of property to disclose any material defects or facts that affect the value of the property if the seller has: #1. Actual knowledge of and/or #2. Should have known about these issues. We have many pages of questions that help jog seller’s memories about past water leaks, neighborhood noise problems, issues with settling, etc.

There was a recent court case that ruled that the seller had to have had actual knowledge of the problem, not just that they should have known about it. This is a pretty big shift in the burden from seller back to the buyer if this becomes a new legal precedent.

What this means to you if you are a buyer—Do your due diligence. Get your inspections. Talk to neighbors. Visit the property multiple times. Go talk to the City/County offices if there are ANY concerns about zoning, permits, etc. (you will probably need to get the seller’s approval to ask specific questions about their property).

What this means to you if you are a seller—I still advise my seller clients to disclose anything and everything that may be of interest to the buyer. This new court case does NOT mean you are “off the hook” for disclosing questionable items. If you even ask, “Should we disclose ‘X’?” that means you probably should. Better to disclose ahead of time and have the buyer potentially cancel then deal with a lawsuit later.

I AM NOT AN ATTORNEY. CONSULT A LEGAL EXPERT FOR YOUR SITUATION. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). Voted “Best of Brentwood” multiple times. To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty.

PROPERTY TAX PRO-RATIONS

Our standard contract calls for property taxes to be pro-rated between Buyer and Seller as of the date of close of escrow. That part everyone understands, but HOW that is accomplished can be pretty confusing. The County Tax Collector only accepts full payments for each installment, so the title company has to do some adjusting on the closing figures to make it work out. Sometimes it’s a credit to the Buyer and a charge to the Seller, or vice versa. Sometimes there is a credit AND a charge, but it washes out correctly.

 

If we are closing escrow before the tax bill is due and before it has been paid, the title company will charge the Seller for the taxes they owe through the day of close of escrow, and that becomes a credit to the Buyer. They do it that way because the Buyer is going to be paying the full installment when it comes due, and that will include some time that the Seller owned the property.

 

If the Seller had already paid the installment and that covers a period of time when they will no longer own the home, then they will get a credit from the Buyer to reimburse them.

 

It gets confusing when it’s around the time that the tax bill is due. In that case, the title company will charge the Seller for the full installment (all 6 months) but then give them a credit from the Buyer for the time after close of escrow, since that time period is the Buyer’s responsibility.

 

If the Seller has an impound account with their lender, their lender will then refund them the funds that the lender had been collecting in anticipation of paying that installment. This usually comes in about 30 days after closing.

Next Page »

Return to top of page

Contact Us

  • Sharp Realty
  • 320 Fairview Ave.
  • Brentwood CA 94513
  • P: 925.240.6683
  • F: 925.524.2302
  • E: info@SharpHomesOnline.com
  • DRE# 01858431