September 06, 2007
Existing-Home Sales Stabilize in July
Click here for interesting information on existing home sales:
May 08, 2007
Charming Century 21 TV Commercial
Here's a TV commercial from my brokerage that I thought I'd share. I've been learning Spanish lately and thought the message was spot on about my collegues.
March 24, 2007
"Good Faith" Deposits 101
As Spring, the busiest time of year for home buyers and sellers, approaches I thought I'd share the following excerpts straight from Sue White in my firm's legal department regarding earnest money deposits buyers give to sellers.
The following hypotheticals assume the RPA-CA [California Residential Purchase Agreement] defaults of a 17-day contingency period and a 24-hour Notice to Perform
Q: If a Buyer who has not removed contingencies wants to cancel a transaction on the 17th day for no reason, can a Seller retain a Buyer’s deposit?
A: No. In the typical purchase contract, the Buyer has a contingency period to review statutory disclosure documents, to conduct an inspection of the property, and to secure financing and obtain an appraisal. The default contingency period is 17 days. If a Buyer cancels the transaction at any time before the contingency period expires, the Buyer is entitled to return of the deposit. Period. The Buyer needs no reason, good or otherwise. See RPA-CA page 4, paragraph 14B(1),(2),(3)
Q: If a Buyer who has not removed contingencies wants to cancel a transaction on the 29th day for no reason, and the Seller has not given the Buyer a Notice to Perform, can a Seller retain a Buyer’s deposit?
A: No. If the Buyer does not remove the contingencies, in writing, by the expiration of the contingency period, the contingency period simply continues!!! This is important because unless the seller delivers a written Notice to Perform to the Buyer, the 17-day time limit is meaningless. Thus, if the Buyer walks on the 29th day of a 30-day escrow and the Seller has not given the Buyer a Notice to Perform, the Seller has to return the buyer’s deposit. This can be an extreme hardship in cases where the seller is buying a replacement property and/or has already moved out in anticipation of the closing. See RPA-CA paragraph 14C(2)
If the Seller attempts to write around the contract by putting something like “all contingencies are deemed to be removed on the 17th day,” the seller has similar problems. The Notice to Perform provision is arguably still in effect because the phrase “deemed to be removed” is not enough to do away with the clear and specific language requiring a written Notice to Perform.
What this tells you is that the Notice to Perform is a very important document in terms of preserving what little right a Seller has to retain a Buyer’s deposit in the best of circumstances.
Q: What if the 17th day arrives, the Buyer has not removed contingencies, the Seller gives the Buyer a Notice to Perform and on the 23rd hour the Buyer cancels? Can the Seller retain the Buyer’s Deposit?
A: No. If the Buyer cancels at any time before the expiration of the Notice to Perform, the Buyer gets his/her money back. See RPA-CA paragraph 14C(1), (2)
Q: What if the 17th day arrives, the Buyer has not removed contingencies, the Seller gives the Buyer a Notice to Perform and the Buyer doesn’t cancel OR remove contingencies by the expiration of the Notice to Perform.? Can the Seller retain the Buyer’s Deposit?
A: Not without being the first one to send over a cancellation, and even then retaining the deposit is problematic! Why? Look at paragraph 14C(1) and (3). It is a two-step process: the Seller must provide a Notice to Perform AND must be the first to cancel in writing to have any prayer of retaining the Buyer’s deposit. Not only that, the clauses use the language “may cancel this Agreement in writing and authorize return of Buyer’s deposit . . .” That language appears to suggest that even when the Buyer has grossly breached, the Seller should give the Buyer his/her money back!! However, one could also argue that “MAY” is the operative word here, which would then mean that “MAY NOT” is another alternative. See how it is possible to argue this language two ways? In the final analysis, which argument is better? Well, of course that depends upon whether you’re the Buyer or the Seller, but in terms of what would happen in court or at a mediation, the analysis used would likely go like this:
Judge: The contract states that even in a gross Buyer breach, the Seller “may cancel this Agreement in writing and authorize return of Buyer’s deposit.” It seems clear to me that you, Seller, should give the money back. After all, you have the Buyer’s $10,000 and the property, and the Buyer has nothing.
Would this be the analysis every time? Obviously that would depend upon the judge or mediator used—some strictly adhere to the contract and some take liberties with the contract language and some rule completely with their emotions. Some combine all of these. As long as there are people involved in transactions, there will be differing interpretations of what happened and what the contract says or means. Once a dispute arises and the matter goes to a mediator, arbitrator, judge or jury, there will be differing interpretations of what happened and what the contract says or means.
SO, FINALLY, WHAT CAN YOU LEARN FROM THIS . . .
Q: If a Buyer wants to cancel a transaction, when can a Seller retain a Buyer’s deposit without encountering any problems doing so?
A: Almost never. Even in the most egregious Buyer breach where the Seller has done every piece of paperwork correctly and timely, and has moved out of the property or has another transaction riding on the sale, the Buyer can make a huge problem for a Seller by demanding their deposit back even when it is pretty clear that the Buyer shouldn’t be getting it back. The Buyer then refuses to sign escrow cancellation instructions unless he gets his deposit back, and the seller has to sell it to the next Buyer “subject to” the successful cancellation of the previous escrow. Meanwhile, the deposit remains in the first escrow and Buyer Number 1 and the Seller have to resolve the issue before the sale to Buyer Number 2 can close.
PLEASE BE AWARE OF THAT RETENTION OF A BUYER’S DEPOSIT IS NEVER A SURE THING, AND IT SHOULD NEVER BE COUNTED UPON! BE VIGILANT WITH YOUR NOTICES TO PERFORM, AND REMEMBER THE TWO-STEP PROCESS.
March 12, 2007
More of Why the OC is Hot
Another excerpt Gary Watt's January "Real Estate Outlook 2007: Orange County" report with more stats on the OC:
Source: Federal Reserve, IRS, U.S. Bureau of Labor, California Employment Development Department (EDD), Forbes
- has the lowest unemployment rate in California (3.2%) and usually the second lowest in the nation.
- ranks #7 in the U.S. in creating jobs (32,175) and #5 in the U.S. in total number of jobs (1.6 million).
- job creation has been twice the national average since 1996 (due to the creation of 317,000 new jobs)!
- has the lowest housing ratio (to jobs) in the nation!
- ranks #5 in the nation in rental rate increases at 6.4%, plus has a 96.8% occupancy rate.
- ranks #3 in the U.S. in Asian businesses and #3 in Asian population in California.
March 02, 2007
Homes Went Up by How Much!?
In this excerpt from Gary Watt's January "Real Estate Outlook 2007: Orange County" report, he tells us about the most commonly cited measures of home price appreciation, along with what those figures were at the end of 2006:
So What Were The Final Numbers?
Well, it depends upon what type of report your clients are reading! There are month to month reports, same month vs. last year, cumulative, and actual sales. So what type of statistics are your clients seeing? Here is a look at the four most common sources that report on housing appreciation.
DataQuick Informational Systems
This number is used the most by the media in southern California. They track the sales of all properties on a monthly basis and report the median price changes. They also report the cumulative difference year to date. The numbers on the previous page all come from this source on a month to month basis. If you use their cumulative report, the numbers are as follows: (through November):
- Orange County: 6.2%
- San Bernardino: 14.8%
- Riverside: 8.6%
- San Diego: .04%
- LA: 8.7%
This is one of the newer indices used by the commodity markets. Referred to as the Case-Shiller Indexes (CSI), it forecasts single-family and condo home prices and identifies long-term influences on prices, such as income trends and demographics, and cyclical factors such as joblessness and changes in mortgage rates.
Office of Federal Housing Enterprise Oversight
- Orange County: 7.1%
- San Bernardino: N/A
- Riverside: N/A
- San Diego: 1.0%
- LA: 7.1%
This is a quarterly report from the government that tracks gains and losses on single family homes and condos sold or refinanced in a county. It involves only government-sponsored mortgage buyers it oversees, which are the Fannie Mae and Freddie Mac loans with a limit of $417,000. These are for the 3rd quarter.
First American Real Estate Solutions
- Orange County: 11.3%
- San Bernardino: 14.2%
- Riverside: 14.2%
- San Diego: 3.21%
- LA: 15.98%
This is the newest of the indices; it measures sales of both single family homes and condos against the amount sellers paid when they bought the property. The yearly percentages are based upon length of ownership.
- Orange County: 15.2% (4.33 years)
- San Bernardino: 21.6% (4.0 years)
- Riverside: 16.8% (3.3 years)
- San Diego: 12.1% (5.15 years)
- LA: 17.2% (4.5 years)