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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.


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.


Let’s say you’ve been renting out a home for several years to a tenant. They approach you about buying the property and you are interested. There are some things to consider.


First, this should be handled like a regular sales transaction with all the paperwork for your protection. The only difference is that it won’t be listed in the MLS as an active listing so other buyers won’t have a chance to compete for it. But you should do all the normal disclosures and the tenant should do all their normal inspections. You should strongly consider using a real estate agent to represent you but of course it would be fair to ask for a reduced commission in this case.


The second issue would be price. The tenant usually wants to come in low because they think you are “saving” the commission. Per my comment above, you may still be paying something. And then also consider that you could be leaving money on the table by not exposing this to the market. So, unless you really want to do the tenant a favor, I like these transactions to go out closer to market value than at a big discount. Remember that you BOTH can’t “save the commission,” at least, not all of it. If it sells for market value minus X%, the BUYER just saved the commission and you netted about the same.


The third issue to consider would be whether you have a property manager. If so, it’s likely there is a clause in their contract that if the tenant buys the property, the property manager will handle the sale and their pre-printed form often lists a 6% commission rate. So, read your property management documents carefully before you move forward with this sale. Otherwise you may find a big surprise at the closing table!


If you have questions on this or 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.



We use words in real estate that can be confusing.  One of the biggest areas of confusion is around when the transaction is actually CLOSED. Each of the steps below can take hours or even days. There are cut-off times during the day for some of these things to happen. This means that sometimes being even just a few minutes late on any of these can delay closing by a day or even a few days if it’s before a weekend.


“Approved for docs” – This means buyer’s lender has cleared the conditions of their approval enough to where they will print the buyer’s loan documents in the very near future.

“Docs are in title” – The loan documents have arrived at the title company and they are ready for buyer to sign.

“Buyers have signed” – The buyers have signed their loan documents.

“Docs are at lender” – The signed documents have arrived at the lender’s office and they are reviewing them for accuracy.

“Docs are approved” – The lender has approved the signatures and will wire funds at the next available opportunity.

“Lender funds have been sent”’ – The lender has sent a wire with their funds to the title company.

“Lender funds have been received” – The title company has received the wire.

“Clear to close” – Everyone that has a say in the matter says it’s OK to close the escrow.

“Deed is at County” – The grant deed has been delivered to the County Recorder’s office. (Technically ownership passes as soon as it’s stamped as “received.”)

“Confirmation received” – Later that day the County confirms with the title company that the grant deed was received.

“Wire sent” – The title company has wired out the Seller’s proceeds.

“Wire received” – The money is now liquid in the Seller’s bank account.


We are seeing auctions again in real estate, but they are mostly online, so it’s more like eBay.


Usually the opening bid is quite low compared to the market value. This is what usually attracts buyers to auctions as they think they may be able to get a “deal.” What most people don’t know is that there is often an undisclosed reserve price. So let’s say a home worth $500,000 has an opening bid of $300,000, and the highest bid is $400,000 when the auction ends. But it’s possible the owner of the property had put a reserve price of $475,000, which means the auction is just cancelled in this case. Auctions with NO reserve are preferred by buyers, but feared by sellers.


You can usually view the properties before bidding and it’s common to have normal loan and inspection contingencies. This means you normally don’t HAVE to pay 100% cash. You generally can be represented by an agent if you choose. Either you or your agent can register and bid for you. You will usually need to register and give your credit card information. This is so if you are the winning bidder, they can collect the deposit. This is also an attempt to make sure you are a real bidder. Although, we have heard several reports where the home’s owner logged in and created a fake account to try to bid the price up.


There will be a deadline for offers, but if an offer comes in within the last few minutes, they will usually automatically extend the deadline another 5-10 minutes.


Another oddity of auctions is something called a “Buyer’s Premium.” This is a fee that is paid by the buyer at close of escrow. I’ve seen them as low as 1% and as high as 10%. So it’s important to read EVERYTHING prior to bidding!


I realize there is a LOT of paperwork in buying or selling a home and that we are often under a time crunch to get an offer submitted BUT you should still read what you are signing!


Here is a horrible recent example that will give you some extra incentive to read what you are signing. Some past clients of mine moved out of the area and started working with a local agent there and wrote several offers unsuccessfully. Very quickly they realized this agent wasn’t very experienced and very likely had a full-time job other than real estate. They politely told this agent they would be working with another agent and they got into contract on another home. However, their prior agent advised the new agent that the client had signed an exclusive buyer’s representation agreement with her, and they would owe her the full commission on the sale! The client says the agent never discussed this arrangement with her, but when they went back and reviewed all the paperwork they had signed with her, on the last transaction the buyer’s representation forms were quietly slipped in behind the offer documents and they did sign them. They may have to hire an attorney to fight this. These are highly intelligent people that this happened to. It’s just that after writing several offers, it’s easy to think these are the same documents as before, just on a different property and sign away. (Unfortunately, this is not the first time I’ve heard of this happening to someone.)


Another moral of the story is to only work with an ethical agent, but better still is to read everything before you sign it. If it’s a form you’ve seen before, maybe you can glance over it just to look for any changes. But watch for any new forms and ask questions of your agent!


If you are thinking of selling an investment property and you’ve heard that you can delay paying income tax on the gains by buying another investment property, this article is for you. This is called a 1031 exchange. In years past, you could only sell and then buy “similar” properties. For example, if you were selling a single-family home that you were renting out, you had to buy another single-family home, not a condo, or commercial building. But now the rules have been expanded so that as long as you are selling some kind of investment property and buying another type of investment property, it’s probably OK.


There are rules to this that must be followed. Most importantly, you have to set up the exchange BEFORE you close escrow on the first property. This means selecting a Qualified Intermediary who will step in take title of the property you are buying, so they receive the proceeds of the sale, and then they will purchase the next property for you, and then that property is put back into your name.  This way you never have what’s called “constructive receipt”’ of any of the proceeds.


From the time the escrow closes on the first property, you will have 45 calendar days to identify the replacement property (you can even identify more than one property in case there is a problem). Then you will have up to 180 days to close escrow on the replacement property(ies). It can be less than 180 days if you sell the first property late in the year.


There are other rules about the amount of debt you have on each and there is even a situation where you can buy first, and then sell, called a reverse exchange.


I AM NOT A TAX EXPERT OR 1031 EXPERT SO CONSULT ONE FOR YOUR SITUATION. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). #1 for Brentwood listings sold multiple years. To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty.


Here is the latest scam I have to warn you about – homes for rent at “too good to be true” prices. The most common location for these scams are on Craigslist, but they can happen anywhere.


Here is how it works. You are looking for a home to rent, and come across one that looks great, and the price is even better. When you contact them, they tell you the owner has to leave the country unexpectedly, or got a sudden job transfer. They are willing to rent it for less than market rent just to get it over with. They will send you multiple interior photos, but make excuses why they can’t show it to you in person. When you express interest in renting the property, they will send you an application and an official-looking rental agreement. Once you give them your deposit and first month’s rent, they will send you a house key.


Here is the problem: They may not even own the property, so when you show up, your key doesn’t work. The real owner may meet you at the door and ask what you are doing on his front porch. When you try to reach the “owner” or “agent” you dealt with, they are long gone and so is your money.


These scam artists are “scraping” info and pictures of legitimate homes for rent from the Internet, then substituting their contact info to pretend to be either the owner or the owner’s agent. Some of them even target vacant bank-owned homes. They have the locks changed to make the scam look even more real by opening the home up for you in person.


You’ll want to verify three things – 1. The property. Drive by and see if there is a different for lease or for sale sign in front. 2. Is the owner real? Check the public records for who really owns the property. 3. Is the agent real? Go to www.bre.ca.gov to verify their license. But even these 3 items won’t 100% protect you if the scammer is sophisticated enough.


Many people use dollar per sq. ft. as the “gold standard” when valuing a home. However, I’ve found that it isn’t nearly as accurate as they think.


The biggest challenge is that it doesn’t account for condition, location or upgrades from one home to the next. An immaculate home on a large lot at the end of a court with a pool, granite slab counters, and hardwood floors will be a LOT more per sq. ft. than the same floor plan in poor condition with no upgrades and on a busy street.


Another challenge is that it is difficult to compare homes of drastically different sizes. Smaller homes tend to have higher dollar per sq. ft. values compared to a larger home. This is because you still have the lot, the utilities, a kitchen, etc., no matter how big the house is. There are many fixed costs, and have larger impact on the value of a smaller house.


The other issue that makes dollar per sq. ft. confusing is that there is only an incremental difference in value between two homes of similar size. Most appraisers tell me that they will only give a value of between $40-60 per sq. ft. to compare two different homes, even though it may have cost $200 per sq. ft. to build the whole house. For example, if you were comparing two homes, one at 2100 square feet, and the other at 2350 square feet, the difference is 250 square feet more. An appraiser may only give the larger home about $12,500 more for the size ($50 X 250), not $50,000 ($200 X 250).


This doesn’t mean you should completely ignore dollar per sq. ft., but it’s only one factor to consider among many, and it works best when you are comparing homes of similar size and location with similar upgrades and amenities.


I’ve had sellers tell me they would MUCH prefer a 20% down buyer over a low-down payment buyer because the 20% down buyer is more likely to close and we will have less problems if the appraisal comes in low. This may or may not be true. What if the 20% down buyer is scraping together every penny they have to come up with the 20% plus closing costs? If the appraisal does come in low, they simply don’t have the funds to make up the difference. Their lender may also be concerned about their “reserves” (cash in the bank after close of escrow). And then let’s say that the FHA or VA buyer has a boatload of cash sitting in the bank, they are just choosing to go with the low-down options for other reasons. In that case, if the appraisal comes in low, it’s actually the FHA or VA buyer that would have the funds to make up the difference if they choose to.


Now, if the buyer approved for a 20% down loan is actually putting 30-50%+ down, THEN I would agree that that buyer is probably much stronger than a low-down payment buyer. Their lender is willing to make them a loan for 80% of the appraised value, so in their case, if the appraisal comes in low, they can still complete the purchase and may not have to come up with any more funds than they were already planning to.


The moral of the story is that you need to look at ALL the facts before you turn away the FHA or VA buyer to go with the 20% down buyer. I’m more concerned about which buyer has more funds BEYOND what the lender requires, and how strong their approval status is.

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