Oakland Real Estate News

Some Real Estate deals can end up being complete nightmares, with villains and all! That is why you should always be doing your homework and taking notes (not necessarily literally but maybe in some cases). Real estate transactions require the right kind of effort from all parties, and if one party drops the ball, all can suffer. If you are a party to one of these transactions consider some of the following preventative care.

Create a Transaction Model

Outlining/Summarizing the transaction from beginning to end on paper may seem unnecessary but can be helpful for any party wanting to better understand the transaction. By doing this you are able to see each party's involvement and responsibility, time/deadlines for completion, your personal responsibilities and more. With a model in place you are also able to be more thorough in noticing potential problems before they arise. This totally makes sense for the first time home buyer/seller. As a realtor I try to knock out as much paperwork/signing as possible on any given day from the beginning. This let's me complete my file quickly and helps me to easily run through my checklist.

Create a specific digital folder for your transaction

I don't need to tell anyone how much it sucks to have to search your email, desk drawer or other location for pertinent documents or files. Well it can be worse in a real estate transaction. With deadlines in place once an offer has been accepted and you are in contract it makes the most sense to have all emails,scans and other docs in a central location for easy access. Creating one place for your tangible paperwork should already be a norm but another for your digital files is almost a necessity. I have found that utilizing apps such as Dropbox, Office 365 and even Microsoft Outlook etc. to create transaction specific folders has been a huge help that most realtors now take advantage of. With these tools in place you can conduct most of your transaction directly from your smartphone or tablet. In addition to that your files are shared across different devices making it easy to utilize a printer or scanner that is only connected to a specific one for example. There are many advantages to these applications.

Keep People In The Loop

As professionals routine knowledge and information can sometimes seem minimal and/or a "given". But being reluctant to share it can sometimes result in problems in a transaction. It is very important to keep necessary parties in the loop of what is going on with the deal and any new occurrences or situations. The seemingly smallest left out detail can kill a deal or weaken a buyer/seller's position usually costing them money in the long run. Keeping lines of communication open is important. If you have a question don't be afraid to ask it because getting the answer may prevent headaches. Be sure to include all necessary parties in emails by putting their email addresses in the "To:" field as opposed to the "cc" or "bcc" fields. This prevents your recipients from accidentally getting emails in their spam or junk mail. You don't want to take chances. Email and even text messaging is good because it creates a time stamped trail which prevents confusion and disagreements. Buyers and sellers as well as realtors, lenders, appraisers, escrow officers, inspectors etc. all have a responsibility to share information with proper parties. It is best if these parties build lines of the best ways of communication at their introduction to prevent one from having to chase the other down for anything.  

Create a transaction savings

Most people feel as if they are financially prepared for a real estate transaction when they decide to get into one. Many times buyers save just enough (they feel) to be able to close, and follow their lenders orders for how much (the lender said)  to have at least come that desired day. The truth is most times the amount a buyer will need is more than what was quoted initially. Keep in mind that as a buyer you don't normally pay any commissions to your realtor. But when you factor in costs along the yellow brick road to the closing table it can make you scratch your head. In Oakland, to make things worse, a home must have an inspected and cleared Sewer Lateral with clearance certification upon transfer which usually starts at around $4200 to complete. In a Seller's Market such as this one this cost is almost always transferred to the buyer unless negotiated otherwise.  With this, the appraisal, inspections, closing costs and other miscellaneous expenses that can come up it's better to be prepared (and it's never too late to start). Consider putting away some of your disposable income each pay period before and throughout your transaction to help with these costs. It's always better to have been prepared for some of these expenses as opposed to being hit with them right away with a deadline. Even if you are getting down payment assistance it is best to be prepared for out of pocket costs before and at closing. 

Sellers can consider doing this too. The sewer lateral issue needs to be negotiated early and is most times done prior to closing. With that in mind sellers should have its completion as a possible playing card for negotiation, keeping in mind that they don't get paid until closing. It can sweeten the deal a little to put your home on the market with an already completed sewer lateral or getting that sod job by the back porch. Sellers are getting more for their homes when there is less to do for the buyer. Smart sellers start the savings process early and get repairs and possible upgrades over time and then decide to sell after enjoying their updated home some. 

Basically with all of that being said it is best to be very well prepared and organized in your transaction which usually means taking it to the next level and maintaining professionalism whether you are the client or the professional at work. None of us are able to predict what will happen in the future. But we can choose to learn from others mistakes before making them ourselves. Stay aware, prepared and organized. 

Inexperienced and even some seasoned buyers have anxiously asked "How long does it actually take to buy a house?". In truth there is no perfectly right answer. Being that everyone (both on the agent and client side) is different, the experience varies. Funny enough it is not always people's buying power or pre-approval amount either. Different responsibilities come in to play when making a purchase and everything doesn't necessarily fall on the realtor. Buyers are encouraged to be as involved as possible to ensure they get what they want. And that doesn't mean taking over as the realtor buyer and bombarding your realtor with Zillow Zestimates and Trulia  homes either.

Be Prepared to Buy

As an interested buyer, if you don't already know that getting pre-approved by a lender is one of the first things you must do, even just to write an offer to purchase in most cases, you do now. But that is not all if you really want to be prepared. To have a few extra bases covered consider:

A few months to at least a year prior to getting pre-qualified start taking steps to raise your credit score. There are a number of things one can do to strengthen their credit score in a short amount of time. I won't go into much detail in this post but to name a few; make sure you have checking and savings accounts with average daily balances and not $0.00 routinely; if you don't have any, get a credit card or two being sure to continuously pay down your balance to 30% at most of your max credit limit each month; start a department store credit line at Macy's or a like store and keep the credit balance at most 30% of the max, DO NOT GO OVER 30 DAYS WITHOUT PAYING ANY CREDITOR INVOICE.

Start a savings plan in which you are putting extra money aside to assist in your buying expenses such as down payment, inspections, closing costs, appraisal, title and escrow fees etc. It's not cheap buying a house and the more money the better. When you start your savings plan don't be frugal. Without a down payment assistance program you normally need to have at least 3% of the purchase price, and that is only the down payment.

Figure out a good schedule with your realtor to routinely go and look at homes.

Go and Look!

Aside from paperwork and qualification, a buyer needs to realize the emphasis that needs to be put on the basics, which include footwork and actually going to look at homes. We are all very busy and that is to be understood from all angles. But when it comes to the decision to buy a home in today's extremely HOT market one needs to realize that regardless of how busy people are, the smart ones go after one of their most prized possessions aggressively. If you don't go and see homes then you won't get a home (unless you are an absentee investor buyer or have some other situation going on). This means that whenever your schedule permits and your realtor has shared homes that interest you, you should go and check them out. If you are working nights go during the day and vice versa or even try going at lunch. Now in many cases offers will not be accepted until a specified date. If this is the case then fine, you have an excuse. Otherwise do not hesitate to get out there. These days homes go fast, and sometimes even sell below a price that you would have offered.

Thoroughly Study Your CMA and the SOLD Trends in the Area Before Determining Your Offer Price

I know it sounds elementary but I've noticed where a thorough market evaluation isn't being done prior to submitting offers for many buyers. It has become common practice to write offers over asking price in the Bay Area market and people have been under bidding for high priced fixer uppers for as long as I've known. However, research of the present market is still pertinent to coming up with the best and most competitive offer price. Our market is definitely very tricky right now, especially in the East Bay as sold prices are going well above the appraised value in many instances. With just that in mind buyers do not want to bite off more than they can chew and should have knowledge via their Comparative Market Analysis and any other reports that may be provided, of what has recently sold and what can likely be expected when the appraisal comes back. Good realtors should be able to guide buyers and decipher between a situation where there was a buyer with deep pockets on a SOLD home that was able to afford to make up the difference in appraised value and offer amount or not. Definitely do your homework as time is precious. 

Not much in decent areas is being sold for less than $400,000. And anything above $417,000 would be considered a jumbo loan which is a little more strict on terms and for some harder to qualify for. This means that many people buying these homes are getting loans for up to $417k and financing the rest with their own cash reserves or other assets. The harsh creeping reality of our market, at least in the East Bay, now is that you MUST have some considerable extra cash to put down or else you are almost certain to be outbid. The good thing is that the new wave of buyers in our market more and more have higher incomes. The bad thing is current long-time residents are being displaced.

When it comes to the desires of home buyers I've been hearing more of lately; "something with a Granny Unit", "must have an in law suite", "need an additional room or garage conversion" and so on. Even when going to the weekly marketing meetings Realtors more and more are asking if anyone has listings with these features. In reality these home features have been around for years and are common in the Bay Area. Now that rent has risen the extra living space is definitely desirable to those looking to supplement their mortgage expenditure, but one must also consider our senior and elderly population. The need for senior housing has always been around. But with the extreme rise in rents in the bay area (and everywhere else for that matter) the need is even greater due to affordability.

So what are some options for these homeowners or buyers? A few come to mind, but would depend on the situation.   

The FHA 203k loan may be a good option for those looking to purchase there first home and perform upgrades/repairs prior to moving in. This program can also be used by homeowners for deferred maintenance and/or upgrades. These loan types offer one consolidated loan which combines a principle loan amount (money for the purchase of the home) with the amount the borrower will need for repairs. This allows the borrower to repair what they want right away as well as only have one payment for everything. This is an FHA loan, so the qualifications may be more strict than other programs but as far as credit, all you need from what I know is a 620. NO CREDIT? NO PROBLEM! They can use what they refer to as alternative credit or non-traditional credit in which a person is able to qualify with proof of on-time rent payments for the prior twelve months in addition to 3 other accounts that have been paid on time within the same time frame. 

Buying a home below market value may sound easier said then done but they're out there. Normally if a home is being sold for less than market value it needs a considerable amount of work done. This is where buying real estate gets risky, but this may be an opportunity to add an in-law unit feature in addition to getting other necessary repairs done and furthermore possibly getting a deal! It can be a daunting task trying to get financing for fixer homes. And if it is an investment property the whole twenty percent down requirement is not working in the buyers favor either. In some cases if there is a conventional loan being used certain repair needs can slip through the cracks. If the home is bought for a below market rate through great negotiations for needed work by their Realtor, the buyer may have the opportunity to get a Home Equity Line of Credit or a HELOC. This allows the homeowner to draw funds on the equity of the home usually up to a stated market value. So let's say the home was purchased for $325k, but if it were repaired it would be worth $360k. The HELOC would allow the homeowner to draw up to $35k ($360k-$325k=$35k) for whatever repairs (or anything else) the owner needs. This can be a great way to finance an in-law unit.

Fannie Mae now offers a conventional fixer upper loan referred to as the Fannie Mae Homestyle Renovation Loan. This option allows homeowners flexible down payment options and is available for owner occupied or second home purchase/refinance for 1-4 units and investment purchase/refinance for 1 unit. Very similar to the FHA 203k loan the borrower will still have a consolidated payment. This loan will allow the borrower up to 50% of the after-repair value for their renovations! It even allows for certain renovation related costs to be wrapped into the loan as well. Some of these costs include inspections, architectural costs, permit fees, reports, appraisals and engineering to name a few. You can even do some of the work yourself and be reimbursed for the materials! This is definitely one to consider if doing a big job. 

Hard Money Loans aren't for amateurs and I honestly wouldn't recommend them for most. They can be a means to an end however for those with no equity in their home or dings on their credit. Usually the terms are not the best so if this route is to be taken it is strongly recommended to have a good plan. In the case of building an in-law unit there may be reason to move forward with hard money. A good one in my opinion would be if there was a particular long-term tenant in mind that were desiring to rent the completed unit at a considerable return. If the monthly return on the unit in addition to the amount of value added to the property with the addition is worth it to the owner (everyone's circumstances are different) then hard money just may work. But it would be best to ALWAYS use caution when getting a loan like this as the word loan shark goes hand in hand with them.

Whatever your repair needs or renovation desires it is best to always consult a licensed professional no matter how small the job. Use your best judgement when using handymen and unlicensed service providers. They are not always a bad option and can usually save money. Just know the risks and get as many guarantees and warranties as possible. Also don't be afraid to get creative and consider trying something new. 

Good Luck!