Patty's "All Things Real Estate" Blog.

There has been much publicity in the media, and no doubt from your local real estate agent, that the time has come that house payments may be less expensive than rent payments.

While this is certainly true in some geographic areas, like right here in the Pleasanton & Tri-Valley areas, there is more to maintaining a household than the actual house payment itself.  Once you make the leap from renter to homeowner, many maintenance issues and expenses that a landlord has taken care of now become the responsibility of the homeowner.  These additional expenses could wipe out any monthly savings you were expecting to gain in your reduced payment.

For example:

• Utilities – as a homeowner these are now solely your responsibility (water, garbage, gas/electric, cable, phone, internet) .
• Property Taxes – in Alameda County, taxes are approximately 1.25% of the purchase price of the home.  ($500,000 home = $6250 year in property taxes, or $520.84 per month).
• HOA Fees – if you buy in a homeowners association, be prepared to pay monthly.  The cost depends on amenities at the complex (pool, common areas, maintenance, etc.)  Do your homework on this!
• Yard maintenance – you now have to buy a lawn mower, edger, blower, tree/shrub trimmer OR hire a gardener
• Pool maintenance – you must consult with an expert at your local pool store on how to maintain your pool, then purchase chlorine, a brush, net, and other chemicals and cleaning supplies OR hire a pool service to maintain your pool.
• General Home Repairs and Appliances – the home you buy might be in great shape when you buy it, but over time, you will need to maintain many things that may have been taken care of by a landlord while you were renting.  New water heater = $1000; New heater = $3000; new air conditioner = $5000 +; new refrigerator = $2500; washer/dryer=$1500, New Roof – $10,000+; along with various other repairs like, leaky faucets, plumbing leaks, plumbing stoppages, electrical issues, painting, flooring, garage doors/openers, leaky windows, roof leaks, chimney cracks, fences & gates,  the list goes on.
• Insurance – if you have a mortgage, you will be required to carry homeowners insurance on your property. The cost of the insurance is based on the replacement value of your home.  For example on my 1800 sf home in Pleasanton, my annual insurance is approximately $700.  If you are in a flood zone, add another $500+ per year.  If you want Earthquake Insurance, add some more $$.

So, when you are planning to make the leap from renting to homeownership, make sure you consider ALL the expenses you will incur, not just the amount of your house payment. Some of the expenses can be tax deductible, but many are not.

As always, it is a good idea to consult with a real estate professional, professional lender, and CPA to help you gather information to assist you in your home buying decision.

I have worked with many home buyers and I completely understand the notion of a client wanting to buy the ‘perfect’ house, however, if you are buying a house that someone else has owned, it will never be perfect.  I hear comments like, do you think the seller will change the carpet, I dont like the color;  Do you think the seller will repaint becuase I dont like the color; do you think the seller will replace that missing knob on the bathroom cabinet?; fix the scratches on the baseboards, chip in the tile, scratch in the floor, ugly light switch covers, remove the wallpaper, etc…. you get the idea. 

When you are buying a house, make a list of the major things that are important to you and make that your priority, like square footage, bedrooms, baths, features, architecture, neighborhood, schools.  Sellers have decorated their homes to their taste, not yours, so there will always be something that has to be fixed, repainted, or moved to adapt to your taste and lifestyle.  Keep an open mind. 

In this market of short sales and REO’s (foreclosure sales) we are seeing more and more homes being sold AS-IS, meaning the property owners and the banks will not be doing any repairs on the property prior to close.  If you are in contract to purchase a home you have the right to perform inspections on the home, be sure you get the home thoroughly inspected by qualified, licensed inspectors so you know the property condition and any defects BEFORE you remove your contingencies. 

And as always, consult your local real estate professional for advise & guidance.

I get asked this questions several times a week and the short answer is that there is no exact time-frame. Whether you are buying Pleasanton Real Estate or anywhere else in California, every short sale is unique, therefore, the time lines to complete the transactions are unique.

Some short sales can be completed within 90 days, some can take up to a year. Why the big difference in time?  To answer that question, you need a little education on the process of a short sale.

When a contract on a short sale property is negotiated between a buyer and seller, the contract is then forwarded to the bank (sellers  lender) for approval.  That approval process can take weeks or months.  Typically with large banks there is a specific protocol that must be followed.  There is a list of documents that must be submitted with the purchase contract.  Account numbers & sellers names must be printed on each page (some banks require the sellers signature on each page), then the whole package needs to be faxed to the bank.  It can take anywhere from 7 -21 business days for the fax to be ‘digitally imaged’ into their system.  Once that is completed, the file can be opened and viewed by the short sale department.  After the file is opened, it need to be reviewed and assigned to a ‘negotiator’ which takes an additional 7 – 21 business days.  Once the negotiator has the file, they have another 7-21 business days to contact the sellers agent to start the process of determining whether they will accept the buyers offer.  So in reality it could take 3 months or more just to get the offer in front of the negotiator before any actual negotiations take place.  And if there is more than one lender in the transaction, that will take even longer as the 1st lender has to negotiate with the 2nd lender (and maybe even a 3rd), before determining if they will approve the short sale.  During this time the listing agent will be on the phone daily or weekly getting updates on the process, and depending on hold times, these calls can take hours.

If you are considering a short sale (on either side) it would be wise to select an agent that you feel confident will take the initiative to follow up consistently with all parties to the transaction, and make weekly, or sometimes even daily phone calls to the lending institutions for updates.

So the long answer is that short-sales can take a very long time, and in some cases even after all the waiting, there is no guarantee the bank will accept the offer.  But in the end, it can be worth the wait – if you have the time & patience to wait.

I recently heard a horror story and though I would share it with you. 

A family made an offer on a property, it was a distressed property so they were dealing with the sellers bank.  After the offer was submitted to the bank, the bank came back with an addendum that said there was NO Inspection Contingency period, and the buyer would be accepting the house AS-IS.  So the family, with the knowledge of their agent, decided to accept the banks addendum.  The buyer, and apparently the agent as well, mistakenly thought this addendum meant the bank was not allowing them to have any property inspections - so they didn’t!.  After escrow was closed the buyer called the utility company to have the power turned on.  They moved into the house and guess what?  No Power!  The utility company said the service was connected to the home, so the lack of power meant they had other electrical issues inside the house.  As more details of this story unfolded, it was apparent that the house never did have power.  When they initially saw the house the utilities were turned off.  At no time did anyone (sellers agent, buyers agent, buyer, seller) suggest the power be turned on so they could make sure everything worked. As a result, this buyer is now having to do electrical repairs so they can live in the house  - and they are very very sad, dissappointed, and angry.  And they should be!

First of all, when any contract says that a sale is AS-IS, the buyer still has the right to know what the “AS-IS” is.  You HAVE to know what you are buying.  Banks cannot disclose the condition of a property because they have not lived there.  Their contracts are AS-IS because they have no knowledge of the property condition.  It is the responsibility of the buyer to INVESTIGATE the condition of the property.  And by investigate, I mean order ALL THE PROPERTY INSPECTIONS YOU WISH TO HAVE. 

When a banks addendum says there is NO Inspection Contingency, that ONLY means the buyer will not have the typical  ’grace period’ after the inspection in which they can cancel the contract based on the results of the inspection.  It DOES NOT mean that you relinquish your right to have inspections.  The bank won’t know, or even care if you have inspections that are not part of the contract, just like they won’t know what you had for breakfast today. 

Always, always, always get inspections when you are buying a home!

I talk to lots of people about buying homes.  Not long ago I was talking to a newlywed couple and they mentioned they wanted to buy a house and they were saving for a down-payment.  I then asked them what else they were doing to prepare for the home purchase.  They looked at me with a most quizzical expression and asked “What do you mean”? 

While a down-payment is a necessity, it takes much more than a down-payment to buy a home.  Buying the home is the goal and to accomplish this goal you must have an ‘Action Plan’ to get there!  What do I mean by action plan?  I mean there are many steps that must be taken along the way prior to the home purchase.  For example:

• Do you know what your credit score is?  This is an important factor in obtaining a loan.   You must have a minimum credit score to qualify for a loan.  Your credit score is based on your payment history (on time & delinquent) and how much debt you have. 
• Have you seen a copy of your credit report? This is very important.  You can download a free copy of your credit report every year from each of the three credit bureaus.  This report contains a list of your creditors, balances, payment history, and personal information.  It is a good idea to get this report and verify that the information is correct.  There could be outdated or incorrect information on your report that negatively affects your credit score.  You can contact the credit bureau directly to dispute or correct information.  This may take some time so factor that into your timeline of your action plan.
• Have you spoken with a lender about how much house you can afford now? Another very important step.  A lender will meet with you and get a picture of what your financial status is and advise you of where you need to be prior to purchasing a home.  The lender can also advise you of what documentation will be required to qualify for a loan (pay stubs, tax returns, employment verifications, etc.)
• Have you educated yourself about down-payment assistance programs that might be available to you? Your lender can assist you with this information.  There is also a great organization called the Tri-Valley Housing Opportunities Center.  The Tri-Valley Housing Opportunity Center  (TVHOC) provides home-buyer pre and post purchase education, income and asset development education, information regarding private sector lender programs, and funding sources – helping match those in need with programs and services that benefit them most.

After performing these tasks, you may find out that you may have some financial work to do before you can buy a home, and you can establish a time line (action plan) for accomplishing this goal.  Or you may find out that you are financially ready right now.  Either way it is worth the effort to be educated, informed, and prepared.