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TREE ROOTS AND REAL ESTATE

The roots of trees that grow from one yard into a neighbor’s yard have been a point of contention for many neighbors. The roots can damage fences, patios, foul sewer lines, etc. But can you just cut back any roots that wind up on your side of the fence? Maybe, or maybe not.

 

There was an old court case that ruled that homeowners have an “absolute right” to cut back any roots that encroach on their property from a neighbor’s tree, no matter what happens to the tree. Many people think this is the law of the land. But there was another case in 1994 that ruled differently. It said that a homeowner does have the right to manage their land HOWEVER that is tempered by the burden of making reasonable allowances for the health of the neighbor’s tree. So, you have rights, but they can’t infringe on the rights of others.

 

So, this means it’s a gray area, and it depends on the circumstances. Let’s say your neighbor’s tree is healthy and located in the middle of their yard and it sends out one long rogue root that is about to cause damage to your expensive pool decking. You could probably trim it back as long as it does no damage to the tree. Now let’s say it’s a “Heritage”’ oak tree that’s quite old but it’s the center of attention for their back yard. Maybe a lot of the roots are on your side but they aren’t harming anything in your yard, but you cut them all off just out of spite and the tree dies because it is so old. You could find yourself on the losing end of a court battle.

 

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). #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.

CONTINGENT OFFER SOLUTION

Last week I wrote about the challenges associated with writing an offer contingent on selling your home when your home isn’t even on the market yet. I often hear people say that they don’t want to put their home on the market until they find the home they want to buy. Their concern is that they will find a buyer for their home and then have to move out if they can’t find and purchase the home of their choice in time. But then when the “right” home does come on the market, they often lose out to other non-contingent buyers.

 

There is a potential solution available. You put your home on the market, and then when you receive an offer, you counter them with a form called “SPRP.” This stands for “Seller’s Purchase of Replacement Property.” This gives you the option to cancel the transaction if you aren’t able to locate and close escrow on the home of your choice. This alleviates the biggest concern about being homeless.

 

From the buyer’s perspective, they may not accept this contingency if they have a hard deadline to meet for their move and need more certainty that they ARE going to get this particular home by a certain date, so they just look for another house.

 

Normally, your buyer will hold off on inspections until you find the home of your choice. But there is an option in the SPRP form where you keep a contingency that you actually close escrow on the replacement property. So another concern the buyer may have is that they may have spent money on inspections, appraisal, etc. on a home that they now can’t buy. One solution is that you agree to reimburse them up to a certain amount if you do cancel the transaction at the last second.

CONTINGENT OFFERS?

I know of many people that would like to move, but don’t really HAVE to. They don’t want to put their current home on the market until they find the “right one” to buy, but because there isn’t much for sale, they continue to wait. And even when the “right one” comes on the market they find that many sellers won’t accept an offer contingent on their home selling if it’s not on the market yet.

 

One solution is to buy first, then sell after. The hard part to this option is that the lender will want to see that you can afford to make the payments on both homes, even though you plan to sell the second home soon after. The other problem with this plan is that you could own two homes for a while, and that can get expensive if it takes a while to sell your old home. You could rent out the home you are leaving to have the rent cover that payment. However, most lenders won’t just take your word on that plan. They may require a signed rental agreement, plus proof the tenant has given you a deposit and first month’s rent, and some even want proof that the tenant has taken possession. This means you would have to move out and into temporary housing yourself.

 

Another option is to put your home on the market and then ask your buyer for a long close of escrow. Some sellers will accept a contingent offer if the buyer’s home is in contract and closing looks likely. Another option is a long rent-back period after closing and you hope that the right home comes on the market before you have to move out. If not, you then move out and rent until the right home comes on the market.

WHEN IS BUYER “APPROVED”?

I received an offer on one of my listings recently, and when I presented the offer to my client, they asked why there was a financial contingency in the contract if the buyer was already “approved” for their loan? I explained that there are different types of approvals, and different levels within each type. I don’t have space to go into all of them, but I wanted to cover the most common misunderstanding about an “approved” buyer.

 

When a lender issues a pre-approval letter for a buyer, there will almost always be some conditions to the approval. These conditions can may be really basic and easy to meet. For example, let’s say the buyer has submitted all their bank statements and paystubs, but they will receive new ones within a week, and the lender wants to see those when they are printed and confirm there are no big changes. Or the conditions could be more difficult to meet. For example, let’s say a buyer’s credit report shows a bunch of old unpaid accounts from various sources. The buyer believes they were all paid off years ago, or that some are not their accounts. In that case the buyer needs to find the proof they were paid, or verify somehow that the information in the credit report is incorrect.

 

Depending on the buyer’s and lender’s confidence to clear these conditions, they may say that the buyer is “approved” and the buyer may even remove their loan contingency when the time comes. But the loan won’t fund and we can’t close the escrow until all the conditions are met. There have been situations in the past where a buyer had a super-clean, full loan commitment from a lender, but then the buyer lost their job before closing. Continued employment would be a “condition” of that approval.

REAL ESTATE AUCTIONS

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!

BUYER LETTER WARNING

Let’s say you are non-contingent, pre-approved, putting a large amount of money down, and you are willing to pay over the list price. Even then, it may not be a slam-dunk to have your offer accepted on the hottest properties that are attracting multiple offers. What else can be done? Many buyers are writing personal letters (even videos) to the sellers as a way to make their offers stand out.

 

I think this can be a good idea to personalize your offer. Normally it won’t make the seller take your offer if another offer is thousands of dollars more in sales price, or they are willing to waive the appraisal contingency and you aren’t. But at least it may nudge the seller into giving your offer a second look and maybe give you a chance to match that other offer’s terms. I had two situations recently where it turned out that the seller (or seller’s adult children) knew the buyer very well and they did take a few thousand less than another offer just because of that connection.

 

But I think buyers need to be careful to not overdo it. I’ve seen some letters come in on my listings where the buyer gushes about how long they’ve been looking, how desperate they are, and how they love this home so much and that this is the ONLY home in the world for them, etc. This definitely swings the negotiating pendulum over to the seller’s side, either when negotiating the price, or negotiating repairs or appraisal challenges later. So tell them who you are and that you will be able to perform per the contract if your offer is selected. But keep it from sounding desperate unless you absolutely, positively have to have that home and are willing to give up some negotiating power.

 

USE THE RIGHT TYPE OF AGENT

When you are experiencing an important medical situation, you will normally wind up with a specialist of some kind. The same goes for real estate.

 

A California real estate license allows us to transact business across a wide range of activities. What usually comes to mind is that we can represent sellers or buyers in a residential resale transaction of a single-family home. But our license also allows us to do leases, property management, bare land, commercial transactions, business opportunities, mobile homes, mortgages (with some extra requirements), and more. Each of these transactions can be very different and have their own pitfalls and steep learning curves. When someone takes the required courses and then passes the real estate test, they may be licensed to perform all these transactions, but they likely don’t know everything about all these different type of transactions. Personally, I’ve focused almost exclusively on representing sellers of residential homes, and after almost 20 years I feel like I’m still learning something new all the time!

 

It’s one thing to ask an agent, “Can you help me buy/sell/lease this home/mobile home/commercial building?” They can honestly answer, “Yes,” since our license is so broad. But the better question to ask is, “Have you done this type of transaction before? How many times?” Ask them for a list of their transactions for the last few years. Even if they HAVE done many transactions of that type, do they usually represent buyers or sellers? If you are selling a custom home on 10 acres with a well and septic and your agent usually only sells tract homes in town, that could pose challenges. If your situation is a divorce, have they dealt with divorces before? Probate? Short sale? If they haven’t, make sure they have a mentor to rely on.

APPRAISAL WOES

Over the last 30 days, I’ve had challenges on several transactions due to appraisals coming in low. I believe I’m being objective when I say they came in “low” because they were not in contract for tremendously higher than what the recent solds were. The appraisers seemed to be making overly negative adjustments and/or were just flat-out ignoring major positive attributes to our subject property. I’ve checked with other local agents and many of them are reporting similar challenges. This is NOT on every transaction, and most appraisers do a great job, but it’s happening on enough transactions that it’s becoming a common issue.

 

It’s possible that some appraisers think our market is getting over-heated again beyond the fundamentals, and that it’s their job to slow things down by putting their “thumb on the scale” a little bit. I had a situation recently where the same home was appraised by two different appraisers less than two weeks of each other and it came in $25K higher the second time.

 

So what does this mean if you are in the real estate market right now? If you are a seller, you may look more favorably at offers where the buyer is willing to waive some or all of the appraisal contingency. Sometimes the highest offer is not the best offer. If you are the buyer, don’t be surprised if the seller asks you to waive some or all of the appraisal contingency. If you are willing to do that, it helps if you can provide proof of liquid funds with your offer to show that you can pay the difference if needed. In the SF/Silicon Valley, it’s almost expected that the buyer waive the appraisal contingency. We aren’t there yet out here, but it may be moving in that direction.

THE BIG NO-NO

So here is an agent’s nightmare: I’ll have an appointment with a client to sign the final closing papers on their new home, and they drive up in a brand spankin’ new car. My clients usually want me to compliment them on their new “ride” when I instead blurt out, “Does your lender know about this?” Hopefully, they say “yes.” If not, we might have a big problem.

 

When you apply for a loan, you are providing a snapshot of your financial picture, with so much income to support so much in payment obligations. Then the lender takes out your old home payment, and inserts your new home payment. As long as that ratio (your debt ratio) is under that lender’s acceptable range, you are OK. However, if you incur any new payments before you buy the home, the lender will have to recalculate your debt ratio to make sure you still meet their criteria. If that new payment takes you over their limit, your loan could be turned down, or they could raise your points and/or interest rate.

 

And just how will they find out about it? Well, first, you are supposed to tell them. You usually sign something when you first applied for your loan that you would alert them to significant changes in your financial picture. Even if you don’t tell them, many lenders run another credit report right before close of escrow, and your new car payment may show up. At the very least the inquiry will show up, which will raise a red flag to your lender as to why an auto financing company is asking for a copy of your credit report.

 

So, put the Tesla brochure down, and step away from the dealership… It’s for your own good!

MOVING OUT WARNINGS

Moving can be stressful. So many things to do, so many loose ends. The last week or two is the worst because the deadline of moving day is approaching. Here are some items that are easy to miss in the hustle and bustle but can cause MAJOR headaches if not handled correctly:

 

REFRIGERATOR AND LAUNDRY HOOK-UPS. Your washer and possibly your refrigerator have water line hookups on the back. If you are taking either of these with you, you need to really monitor the shut-off valves. These valves don’t get used except once or twice every few years so they OFTEN don’t shut off all the way. Or they appear to shut off, but then develop a small leak hours later. I’ve walked into several vacant homes with water damage because of this very issue. Your best bet is to turn the main water valve off to the house to avoid leaks until the new owner can set up their appliances.

 

THIEVES. They are watching you. They notice when you start moving out but know it can take several trips. This can make you a prime target and unfortunately, I’ve had clients experience thefts during this time period. One client actually had their whole moving truck stolen full of their belongings! Other times the house was broken into when it was obvious no one was home but there were still items inside. Do your best to avoid telegraphing that the house is vacant. Put lights on timers, play music, ask a neighbor to park a car in the driveway, etc. Also communicate with your neighbors and ask them to be aware. The thieves are banking on your neighbors not being suspicious when a strange car or person shows up, even at odd hours, and not calling the police.

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