Danville Home Owners

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A few weeks ago I wrote about Price Per Square Foot as a way to price homes. Having spent 14 years in Corporate Real Estate before I turned Residential in 2003, I ALWAYS start with price per square foot – then adjust accordingly looking at features, location and lot value.

But with this CRAZY market where pricing it right makes ALL THE DIFFERENCE IN THE WORLD (see last week’s Price it Right or Expect to Hear Crickets) let’s pause. Take for example two homes that are currently on the market in the RoundHill area of Alamo next door to each other! Price per Square Foot would have these two homes priced about the same – one is a little bigger, with an extra bath, but same street, same Golf Course View – but not the same condition. One came out at just over $1.7MM, the other came out at just under $1.6MM. Now as a percentage of asking price – we’re talking less than 10% – but in reality… $1.6MM got Multiple offers and went way over. $1.7 has been on the market for 54 days and has had a price reduction.

Why, why, why? You ask… Because how you price a home, especially if it’s NOT a tract home, is so critical in this market – if you don’t get it right – it can make your life miserable. And it’s my job to keep you from having a Miserable Life when it comes to Real Estate!

So… The Comparable Sales Approach is the most common, and in this market the best way to price a property. While it may not be the most mathematically accurate approach, it is the approach most likely to get your home sold (or to make you the successful buyer if you are in a multiple offer situation (BTW – Always use a Professional if you find yourself in Multiple Offers – you will surely get blanked or over pay if you try to do multiple offers on your own or with an Out Of Area Agent!).

The Comparable Sales Approach has three basic steps:

  • Look at Recent sales that are “comparable” – same area, similar size, similar lot, condition and upgrades to your home
  • Adjust the Value to these same factors – location, size, lot size, condition, upgrades. For example (see above) a remodeled home will command a significantly higher price even if the other home is slightly larger.
  • Adjust to the current housing market – as this changes with the wind, it’s important to work with someone who has their ear to the ground locally, not their ear to the media – which is always 3-6 months behind what is really happening.

I will arrive at a home’s current value using this approach, along with a first look at Price Per Square foot. However, the very best way to determine the value of YOUR home is to call an expert – like me J – to give a Free Home Value Analysis. Give me a ring at 925-855-1955 today!

 

Disclaimer: This information is provided for reference only and is deemed reliable, but not verified or guaranteed. Listings may or may not be by Nancy Benvenuto or The RE/Max Collection. If your property is currently listed with a real estate professional, it is not our intent to solicit those listings. 

The Clash

If I go it could be trouble, if I stay it could be double!! Remember those lyrics from The Clash? Wow – that has NEVER been more true regarding selling your home now – or not. If you are anywhere near being “short” (your home value is equal to or less than your loan amounts) get ready to sell NOW!! Here’s why . . .

California just passed CCP 580e (more on that in a second), and who knows, it could be repealed at any time. So if you need to sell short or just sell, DO IT NOW! It’s estimated that as many as 50% of the homes in California are now worth less than their loan amount. While our little world is probably closer to 20-30%, it’s still a huge number and something we should all be thinking about because the laws are changing and what could be a simple short sale now, could be a big financial mess in a few short months.

What is CCP 580e? Let me try to explain (a lawyer nor accountant am I)  . . .When one buys a home – the first loan is called a “purchase money loan”. There is no recourse on a purchase money loan by the bank. In other words, if you default or sell below the loan amount, if the loan is your first (purchase money) loan, the banks can’t come after you for the deficiency. But if you EVER refinanced – 1st, 2nd or wrapped – that is a recourse loan that the bank can come after you for the deficiency. They rarely did, but they COULD, and that possibility prompted CCP 580e.

The California legislature decided to protect the borrower and make second loans non-recourse too, by passing and implementing CCP 580e. So for now, if you sell your home for less than the loan amount owed, whether it’s a first, second or whatever kind of loan – it is now a non-deficiency loan. The bank can’t come back after you to repay the difference between what you owe and what you sell your home for.

Banks giving us the finger?How long do you think the banks are going to let that happen? Who knows, but better safe than sorry. If you know your home is worth less than the loan amount and you think there is any chance you won’t be in it “until death do you part” – it’s worth having a conversation with an attorney or accountant – or both. I can get you started, but I can’t answer legal questions. I just know things are changing – and fast – and there is a window right now for individuals to sell if they think they may need to do so in the next few years.

And here’s the other reason – the tax situation around these short sales is going to change too. As of now, the state and federal governments are not coming after borrowers to pay income taxes on the money they pulled out of their home. So if you got a $200,000 equity loan, and spent that money – on anything from home improvements, to college tuition to that new Porsche in the driveway, as of today you won’t pay income tax on that $200,000. But come December of 2012 – that is changing and both the IRS and state governments are expected to let that tax law expire so they can collect all the income tax on all that money that Americans pulled out of their homes.

As we all know, it’s virtually impossible to get a Home Equity loan these days – so there will be very little “new” money exposed to this expired tax law, but any money borrowed against a home could then be subject to a deficiency judgment (you may need to pay it back), but it could also be taxed as income. OUCH!!

Hmmmm – are we surprised that big banks and the government are aggressively seeking new avenues of income for their strapped divisions and agencies? I get it, and I even get that there is personal responsibility for those who over borrowed on their houses – but let’s not be naïve or ignorant and sit back and not be strategic and smart on how this entire financial meltdown could affect us.

So if you find yourself in a questionable circumstance – talk with someone who can properly advise you on your income, tax and liability surrounding your mortgage. I have several very specialized attorneys I work with who can coach you through your options.

There are also big credit rating ramifications on short sale v. foreclosure v. deed in lieu of etc. It’s all gotten sooooooo complicated, and I am far from the expert – but I know enough to know now is the time to be considering your options because while the freefall in pricing may have stopped, home values are not going back up any time soon, and the laws surrounding how that could affect YOU and your family and your family’s future are changing fast.

Information OverloadI know that was a lot of information to digest, so let’s reduce it to the bottom line. However much you may be emotionally attached to your home, you need to think strategically about your financial future for the long run. If you are not sure where you stand regarding your mortgage, home value and how the changing laws may affect you, pick up the phone and get some professional advise right now, rather than later.

If you need somewhere to start, start by calling me and I’ll send you in the right direction. You are important to me and I want you to know that I am always here to help.

IMPORTANT NOTICE: I am not an attorney or tax expert. Any comments I make in regards to tax/legal issues are of a general nature and should not be relied upon. Please seek expert counsel in these areas for specifics to your situation.

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