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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

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.

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

SELLING TO TENANT

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.

 

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.

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.

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