I found this article written by HEATHER ELIAS who is the Director of Social Business Practice at National Association of Realtors. As I more than occasionally get questions about the ObamaCare 3.8% Tax on the “sale of Palos Verdes homes and South Bay homes”, I thought I would just distribute her article word for word with all the hyperlinks active. This way, you can get the straight unfiltered information. Hope this helps clear up questions. Personally, I believe this to be an onerous tax, but you can, of course, decide for yourself.
Last week, I wrote a post here about the 3.8% tax that is part of the Health Care Reform Act, which passed in 2010. There have been numerous emails circulating that mischaracterized how the tax worked, and here at NAR we wanted to help people understand it better. The post created a flurry of comments, and I thought we would address some of the points raised directly. (I’m taking some of my clarification points directly from The Top 10 Things You Need to Know about the 3.8% Tax.)
Here is a video with NAR’s director of tax policy, Linda Goold, that does a very good job of explaining:
And here are some more resources that could help explain:
The market for Palos Verdes Homes …
… is getting better but are we out of the woods yet?
I’ve been studying the South Bay Home trends and Palos Verdes Homes trends for over 20 years now and have been keeping detailed records on the market.
This has helped me immensely in guiding my clients, both buyers and sellers so that they are empowered with the best information to make intelligent, deliberate and provident decisions.
Based on the data at hand, here are my latest conclusions. If the player does not appear below, please go here: Latest Palos Verdes Real Estate Trends
Now that you’ve seen there are some very positive signs in the market, consider owning one of the best Rolling Hills homes just listed this week at 11 Ranchview Road!
Continue here to view more Palos Verdes Real Estate trends (yellow tab below)
Why Are More Buyers Canceling Contracts?
RealtorMag reported this week that a high number of buyers are walking away from purchase contracts. Their article was based on the research done by Capital Economics, an independent research firm. They found that nearly 18% of all signed contracts were canceled during the three month period of May, June and July of 2012. The last time that number was so high was back in May of 2010 when the number reached 23% and before the housing slump, the number never exceeded 10%.
So what does that mean for the buyer looking to purchase Palos Verdes real estate or the homeowners looking to sell their Palos Verdes homes? When digging into the reasons why, two main categories became apparent. One is psychological and the other is financial.
Let’s study the psychological reason first. There’s a balance of power that shifts during negotiations between buyer and seller and when the home is actually in escrow. In a market such as we are now that is grossly undersupplied (refer back to my blog post of a few days ago for Palos Verdes homes supply), in most cases buyers are competing against other buyers for well priced homes. Often, multiple offers result. The balance of power is with the seller in this case and Capital Economics stated, “Ironically, the recent pickup in home sales is contributing to rising contract cancellations. As more buyers compete over a limited inventory of for-sale homes*, some are bidding aggressively to get the seller’s attention, but not assessing whether they truly want the house until they’re in contract”. Now that buyer has won the house and they’re in escrow, then the balance of power shifts to the buyer who may in fact have buyer’s remorse or tend to request concessions from the seller based on the results of the home inspection. What are some steps you can take as a seller to help yourself during this natural and organic power shift? These are the three tips I give my sellers of homes in Palos Verdes and the South Bay when I’m interviewing for the job of marketing their home and getting it sold.
The second category is financial. “Tight lending requirements are also contributing to contract cancellations, says Paul Diggle, property economist at Capital Economics. As more buyers move off the sidelines to purchase a home, they’re finding they can’t qualify for a mortgage, he says.” And what’s worse folks is that the underwriting criteria are changing all the time, often during the course of an escrow. Nothing is static, everything is fluid. There’s a mortgage banker that I’ve counted on for over 20 years, Kent Kirkpatrick at American Capital (he’s one of the partners in that firm) who is one of the elite best in getting the job done for my buyers. When you’re selling your home in Palos Verdes or anywhere around the South Bay, you need to make sure your agent is properly interrogating the buyer’s agent and the buyer’s mortgage banker on the financial bona fides of the buyer. As a buyer of real estate in Palos Verdes or around the South Bay, you need to understand that the mortgage banker you choose can make the difference between a deal’s life and death. These folks are definitely not all the same. What are some of the things you can do and complete upfront before making an offer as a buyer to make sure your loan goes through and as a seller, what do you need to find out about your buyer.
*How limited are listings in the South Bay? Study this chart and you will see we haven’t seen this low a level of new listing volume in nearly 20 years. What is this doing to prices? What does this mean for your own neighborhood and home? Send me an email or give me call and we can talk about it. Follow the link in the orange tab below to get access to real estate charts such as these. Charts are updated weekly and monthly.
**I hear about these so called “tight lending requirements” and how they are “holding back the purchase market”…. and I am honestly amazed…. Really, tight? A borrower can buy a $750,000 house with 3.5% down and a credit score of 620… can get a 3.25% 30 year fixed rate on that…. 3.25% 30 year fixed rate with a tiny down payment, debt to income ratios of 50%… and a questionable credit history to boot…. “TIGHT?” seriously…. No… it is not… it is still probably a bit loose…. If the government were not backing those FHA loans they would not be out there… no bank would put that program out… not one….
I have asked numerous people in the past two years when I am asked about the tight lending standards of banks today to give me an example…. Most cannot come up with a plausible example of where a borrower should have obtained financing and didn’t….. those that do site a borrower who has a large amount of equity, excellent credit history and great cash reserves but lack a solid or consistent income…. just because you have the first three does not mean you qualify for new debt…. If you rely on equity or existing cash reserves to make payments (on some occasions this can make sense) it does not mean the new loan will be repaid the same as those with solid cash flow from a consistent income… all too often in the past five years we have seen instances where borrowers had the first three and chose to walk away from the new debt rather than liquidate their equity, cash reserves etc….. it does make sense that in the overall picture, a borrower should have the cash flow to pay for a debt…. That is good lending, sound principal… it can also make sense that in a case by case basis a lender who specializes in loans not sold to the large government agencies like fannie mae and freddie mac, to step into this area and make these loans to solid borrowers who don’t fit the norm…. it does not make sense for large government agencies to do these as we have seen from the past…. They should focus on exactly the type of lending they are doing today….
Another example that comes up when I ask why they think lending is tight is that their client was just declined for a loan by a bank. Once we delve into why, the normal problems fall into two categories…. First, the loan officer made the critical mistake of not doing the upfront interview with the client properly…. This is THE most important part of lending… period. The first five minute conversation with the borrower should be the loan officer asking a myriad of questions from “tell me about what you are trying to accomplish with this purchase or this refinance” to then asking detailed, and I mean VERY detailed, questions regarding the borrowers personal finances…. If this is done properly, it will eliminate 99% of any problems that can come up in the approval/funding process. This then takes us to the next most important part, which as I write this, I am wondering if I should have made this the number one part….
Choosing the right lender to do your loan…. this is critical as well…. ( and I will disclose who I am…. I own a 19 year old mortgage bank that survived the last ten years after struggling by not doing subprime loans ( which made no credit sense ) that all other mortgage banks did and then watching most normal financing disappear for three years in the resulting financial meltdown)…. it is my belief that most borrowers, wrongly influenced by the media and the government, believe it is in their best interest to go directly to a bank for a home loan. This could not be farther from the truth. Banks have one set of products, guidelines and goals…. They take only the types of loans and borrowers that fit their needs…. Mortgage bankers have multiple funding options and goals…. The most important goal is to match a borrowers needs to a funding source and do it in an efficient, compliant, honest and straightforward manner. Mortgage bankers have better pricing, better operational efficiency and a much larger product diversity to deliver a wider range of options to the client. While one bank says it will only do loans to 90% loan to value, another might allow 95%… if the borrower apply’ s at the first bank, they may never know that they had an option at 95%…. they may just walk away and say “lending these days is just too tight”…. There are thousands, yes, thousands of examples that are similar to this first one…. the other day a client was referred to me after getting turned down at Wells Fargo… the issue was the debt to income ratio for the borrower was over 41%… industry standard is 45%… we can even go up to 50% with compensating factors like good credit, strong job stability etc… but Wells Fargo has so much business that they have decided they only want the BEST loans… with lower debt ratios… this client had perfect credit, 22 years as a teacher, 15 years as a police officer ( husband) and great cash reserves while putting down 10% on the home… we funded that loan in 9 days at a 3.375% no point 30 year fixed rate.
The third most important part…. LISTEN TO YOUR REAL ESTATE AGENT REGARDING THEIR MORTGAGE REFFERAL…. They know… they do this all day, year, career long…. They are not going to refer you to someone who they don’t trust…. They refer you to who gets the best combination of product, price and service…. Period…
Fourth most important…. Once you have chosen a lender… trust them… trust that your upfront research and conversations have led you to a funding source that is the right one… and then listen to them and let them lead you through the process.
Fifth, expect that numerous times during the process you are going to say “seriously?, you really need that as well?… I have given you so much already and you just keep asking for more?” this is the way it is today… to get these great rates, they put you through the ringer and back… every I dotted, every T crossed… and then they want more….
There is so much that goes into mortgage lending… so much is changing… it is the mortgage professionals job to set the right expectation with the client and make sure to follow through on that…. that is what I do.
For more information on just one of the hi-tech venues in which I market my seller’s homes, just visit the link profiled in the yellow tab below.
Meanwhile, who do you know that is looking to move in, out or around the South Bay – your referrals will ALWAYS be cherished!
How to market homes in Palos Verdes for top dollar
It’s really easy. Here are the steps:
See, it’s easy!
In all seriousness, executing and implementing these steps is where the difficulty lies. As the old saying goes, “…the devil is in the details…” Let’s take a look at step 1, “make sure the world knows…”
Did you know that over 80% (and in some markets it’s nearly 100%) of all buyers go to the internet to search for homes for sale in Palos Verdes? Here are just a couple of the dozens of internet strategies I use to market my clients’ homes…
In just the last week, on Realtor.com, my clients’ homes 626 listing views! Just in one week!
and on Facebook, as silly as many people think that media is, one of my pages received 148 new “Likes” in the last week. I read a study a few months ago that indicated that the “average” person has 96 friends on facebook, so with 148 new “Likes” in the last week, this property was seen by an average of 148 x 96 = 14,208 people.
Marketing is not that difficult … it all comes down to “More buyers = More Competition & Demand for the product = Faster sale at a higher price”
So, if you are thinking about selling or know someone thinking about selling, or who has had a bad experience in getting their home sold, maybe there are some marketing tactics that you need to learn more about – there are dozens more that I implement to get the job done for my clients.
|This article was originally posted at http://realestatemarbles.com/homeispalosverdes/2012/07/18/selling-a-home-in-palos-verdes-for-top-dollar/|