Real-Time Real Estate Market Data from Altos Research LLC

Real-Time Real Estate Market Data from Altos Research LLC: "

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Burlingame Market Update August 22, 2010

Sunday August 22, 2010

BURLINGAME 94010

This Week

The median single family home price in BURLINGAME 94010 this week is $1,210,000.

Inventory has been tightening and days-on-market increasing recently. The Market Action Index has been basically flat, not providing strong indication for market conditions.

Price

We continue to see prices in this zip code hovering around these current levels, even though they bumped up a bit this week. Look for a persistent up- shift in the Market Action Index before we see prices move significantly from here.

Supply and Demand

Local conditions are currently quite strongly in the Buyer's Market zone (below 30). The 90-day Market Action Index stands at 17. With several months of inventory available at the current sales rate, buyers should find ample choice.

How Long Before You Can Buy After a Foreclosure?

Foreclosures really affect your credit and ability to borrow. In fact, it could be 7-8 years before you can get a mortgage to buy a home again.

And, credit scores are only one component of a decision by an underwriter. They will also look back to see if you just walked away from the home while you could have kept paying the mortgage or if the foreclosure was the result of a job loss, health issue, etc. The reason makes a difference. If a strategic decision was made to default, it will work against you.

Underwriters will also look at your current situation – how much money you have in the bank, do you have a current job, what is your current income, etc. They compare that information with your past history – employment, payment history, etc., when assessing whether to give you a mortgage or not.

And, in the end, you will probably need a slightly bigger down payment and you may pay a higher interest rate to get the loan. However, it will be much easier for you if the default resulted from factors that were beyond your control. So, the lesson here is that while walking away may solve a current problem, a price will be paid in the future. Before you just walk away, explore all your options – refinance, loan remodification, etc.

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Market stats for Condo Properties in BURLINGAME, CA 94010

Market stats for Condo Properties in BURLINGAME, CA 94010: "Market stats for Condo properties in BURLINGAME, CA 94010 as of 23 Apr 2010
Median Price: $532,000
Mean Price: $607,763
Inventory: 41
Market Heat: 8.43
Days on Market: 145
Price per Square Foot: $470
Median Square Feet: 1,170
Median Lot Size: n/a
Average Beds: 1.73
Average Baths: 2.26
Average Age: 27"

Less Players, More Competence Among Lenders

There has been a dramatic decrease in the number of loan officers in this country.  I have seen estimates that show that in 2005 (the peak of mortgage activity) there were 450,000 loan officers, and that by 2009, the number had shrunk to 150,000.  Nearly 70% of individuals feeding their families by originating mortgages have left the industry.  There are numerous reasons for this occurrence:

1. Less purchase transactions:  Home Sales dropped during the Subprime Meltdown.  Homebuyers were scared to buy (or waiting for lower prices) while prices were falling and sellers were slow to reduce their asking prices.
2. Less refinance business:  Simultaneously, refinance activity slowed as rates bumped up a bit and declining home values made extracting equity more difficult.
3. Less loan products:  Gone are the days where lenders gave loans to “anybody”; gone are the loans that didn’t pay attention to a borrowers’ income, assets or credit.  We have tougher underwriting guidelines.  With a smaller product menu to offer, loan officers struggled to satisfy the consumers’ need.
4. More regulation:  Between new appraisal guidelines and higher standards for approval for warehouse lines, secondary market investors and FHA Authority, mortgage brokers have been practically eliminated as an option for many consumers, and many lenders have exited the business entirely.
5. Loan Officer Licensing:  One of the more welcome regulatory changes that resulted from the challenges of the past few years is a national registry of loan officers.  LOs are now required to take classes on a Federal and State level to ensure a minimum competency.  The fact is that we are in the middle of this licensing process right now and more than 30% of the people taking the test are FAILING!

Recognize that the market flushed out 70% of the loan officers.  Now, testing and licensing requirements appear to endanger even some of the “survivors”…..and THAT IS GOOD NEWS!  Why?  Because those of us left standing will truly be operating at a much higher level than what used-to-be the typical loan officer.  (As a side note, the barrier of entry for new people will make it extremely difficult for them to enter the industry.)

In the end, what will remain are professionals who truly know their products, who know the regulations, who can truly advise customers of options, and who can assess the short- and long- term ramifications of choices borrowers make.  What will remain are people who work with the real estate agents, the attorneys, the title companies, and all the other ancillary service providers to serve the educational needs of the public.

The net result of this cleansing we are enduring as an industry is that there will be less competitors, but more demands from our customers.  This combination is something to rejoice, because I am confident that, in the future, mortgage loan officers will once again be a respected profession.

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NEWS FLASH: EPA ON LEAD-BASED PAINT

As of 4/22/2010, home owners must comply with the Lead-Based Paint Renovation Rule of the EPA: Any renovations, repairs or painting projects that disturb lead-based paint in pre-1978 residential properties, child care facilities and schools, are subject to these rules to protect against lead poisoning. These rules are not applicable when homeowners renovate the homes they live in or when minor repairs or maintenance are carried out. Interestingly, window replacement is not regarded as minor maintenance or repair.

The EPA rules could come into play when home owners decide to sell and paint their home to improve the marketability thereof.

Many topics are covered, from who may do the renovations (must be trained and EPA-certified to perform safe work practices to prevent lead contamination) to the definition of “renovation” (a modification of an existing structure that disturbs a painted surface).

Best to check the EPA’s New Renovation, Repair and Painting Rule webpage for complete information.

Who Cares If I Miss Out On The Tax Credit?

Many people who are looking to buy a home now NEED the Tax Credit to close a gap in their finances.  But not everyone feels that way.

As the days tick away, I have started to hear some buyers already begin rationalizing why they have not yet gone to contract.  They say things like, “$8,000 isn’t enough money to rush me into buying a home”.  I am not sure they are right (especially as you see interest rates on the rise at the same time), but I do know that the people who “discount” the impact of $8,000 need to open their minds to some “out of the box” thoughts.

Here’s One Thought Process

If a customer had sufficient monies to close and cash reserves in the bank after closing such that they didn’t NEED the $8,000, as they contend, I would propose to those clients this strategy:  Pay $8,000 in additional Discount Points on your mortgage! You see, by doing this our buyers gain two benefits:

1. As I am sure we all know, Discount Points are tax deductible as prepaid interest on the mortgage.  That means our Buyer (assuming a 28% top Income Tax Bracket) will receive a $2240.00 higher tax refund next year…..that’s good!
2. By paying 2 points on a $400,000 mortgage (cost $8,000), our borrower is likely to receive approximately a .50% lower interest rate on their mortgage.  Over the course of the first five years of homeownership, they would save nearly an additional $8,000 in monthly mortgage payments…that also is good!

Or How About This?

By paying the points for a lower rate, you would reduce your Principal & Interest Payment about $132/month on your $400,000 loan.  If you were comfortable with your original payment, you could actually borrow an additional $20-25,000 for the same payment.  That’s $20-25,000 that you could put into a 203K loan to finance home improvements OR it’s buying the bigger house OR buying in a better part of town….for the same payment you were willing to accept without the tax credit.

Here’s Another

$8,000 is enough money for a skylight, a living room set, a large Jacuzzi/hot tub, a deck, an awesome barbecue, an above ground pool, a plasma television or one of dozens of other cool things you might want to add to your new home.  Or maybe, it’s the money for a vacation or a top notch House Warming Party.  Whatever you spend it on, it’s basically a FREE GIFT from Uncle Sam.  How many great moments or memories can you “buy” with this gift of $8,000?

Okay, One More

$8,000 untouched in a conservative investment (like Savings Bonds) at 6% would compound to more than $25,000 in 20 years to help pay for college, a wedding, or a car.  In 30 years, when you retire, it would blossom to more than $46,000!  That’s a lot of trinkets for your grandchildren.

Remember, this is money you didn’t need.  This is money that didn’t provide sufficient incentive to force you to BUY NOW.   Don’t be silly, take the money and enjoy it!  Save monthly, improve your home, improve your lifestyle, or improve your future.  Any way you look at it, $8,000 can go a long way.

Interest Rates a Week after the Fed’s Exit

As the Fed was planning to exit the mortgage market at the end of last month, more and more experts were calling for the exit to be uneventful. Their belief was that there was ample demand sitting on the sideline ready to replace the Fed’s role. Well it is now a week later and let’s examine the situation.

What actually did happen?

RATES ARE UP OVER ONE QUARTER OF A POINT.

The Mortgage Bankers Association’s (MBA) Weekly Rate Survey reported:

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.31 percent from 5.04 percent … for 80 percent loan-to-value (LTV) ratio loans. This is the highest 30-year rate recorded in the survey since the first week of August 2009.

I am sure that there are plenty of economists that will explain that there were other factors besides the Fed exit that caused the jump and that may be true. However, Michael Fratantoni, MBA’s Vice President of Research and Economics mentioned the Fed’s exit in the press release:

“Mortgage rates jumped last week as the Federal Reserve completed their purchases of mortgage-backed securities.”

How high might rates go?

The million dollar question is what will happen to rates throughout the year. Housing Wirein an article Wednesday suggested that rates might continue upward throughout the year:

A number of investors involved on the potential buy side of these deals suggest there remain concerns that the first real private RMBS deal may be a dud … mortgages need to be originated at roughly 6% at least to get any sort of capital flow; this was the case in previous securitization efforts, and it’s likely true now as well.

In an article the same day, MSNBC said:

Many analysts forecast rates will rise as high as 6 percent by early next year.

What will this do to the housing recovery?

Let’s look at how the purchaser’s buying power is impacted by a rise in rates. From theMSNBC article:

For every 1 percentage point rise in rates, 300,000 to 400,000 would-be buyers are priced out of the market in a given year, according to the National Association of Realtors.

And it dramatically affects the buyers whom it doesn’t eliminate:

Taking out a 30-year mortgage for $300,000 at a rate of 5 percent will cost you about $1,600 a month, not including taxes and insurance. But the same monthly payment at a rate of 6 percent will only get you a loan of $270,000.

What does this mean to you?

If you are buying, buy now before rates go any higher. If you are selling, take advantage of the fact that buyers are coming to the market now. Don’t wait until higher rates diminish the buyer pool.

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Buying a Lot

Before you buy a lot, determine the actual cost of the lot vs. the listed price of the lot. What do I mean by this? You may think that a lot is a great price, and that you are going to save a whole bunch of money by buying this lot over another lot, and building there. However, this may or may not be the case. For example, one lot may be several thousand dollars cheaper, but if you have to put in a new water well and a septic system, you need to add that to the price. Check all of those types of things, and get estimates for everything from utility hookups to tree removal so you have a clear idea of what the lot will actually cost you, before you buy it!

Once you have determined your bottom line on the cost of the building site (purchase price, soil removal or additions, utility hook ups, water, septic, tree removal etc.) it is time to determine if it is worth that price. Don't let cost determine value. You want to save some money, and to do that you have to find a lot that will be a good price, but that will be a good value as well.

After finding a lot that fits your needs, and determining what it is going to cost you and whether or not that is a good value, it is time for you and the seller to determine a price. A real estate agent could really come in handy during this part because they can negotiate for you if necessary, and can help you find comparable sales so you know what a fair market price is for the property.

However, if you find the lot yourself, why pay an agent? You can do a little research and find your own comps, and you can use any improvements that need to be made on the lot to make it buildable, a negotiating point, and make an offer using all the negotiating tactics you can.

In order to get the best price try negotiating using these tactics: Ask all your questions before you make an offer, find out any terms the seller wants, ask what price they will give you for a "cash offer" (even if you are getting bank financing), build your case for why your price is right, have an official and legal contract, make sure the seller knows you have looked at other property, don't be in a hurry, and make sure that your contract protects you.so if the seller says the lot is buildable, get it in writing, that way if it isn't, you don't take a loss.

Once you settle on a price you feel good about, you buy the lot! Of course when you buy anything, especially if it is a major purchase, you want to make sure the contract of sale is legal and binding so the previous owner can't take it back form you after you put a bunch of money into it. To save yourself from any lawsuits etc, either have an agent or an attorney draw up the contract; of course you will want to check to make sure it is fair to both the buyer and the seller, and make sure there are no liens or encumbrances on the property. Once you have done all of that, there is a bunch of paperwork and the site is yours. The paper work is not much fun, but knowing that you just purchased (legally purchased) a lot that you are going to build the house of your dreams on, is exciting, and is also a lot of fun.

A sad reality of some REO agents

I am not unfamiliar with foreclosures. I have bought and sold more than a few, and I did a short sale last year. I don't for a moment think that selling an REO is simple; yes, they are vacant, but as an investor myself I know that the property has to be managed and overseen. I know some particularly good brokers who sell REO listings. One of them called me once about a year ago and informed me that he was the new agent for a listing I had that was scheduled to close in another 3 days. When I told him this, rather then say "tough luck," he assisted my client's attorney and myself in getting the home reinstated and allowing it to close as scheduled. It cost him a listing, but it earned my gratitude and respect.


That said, some REO agents conduct business in an utterly deplorable manner. You probably know the type in your marketplace: one crappy photo taken from the car, no remarks, and no communication. We've got a few here that absolutely take the cake in this regard. Talking with some is like dealing with the DMV- rude and arrogant. One won't even take a phone call to set an appointment to show- he just published the lockbox combination in the agents remarks. At least I can show his listings. And to get a question answered? Forget it!


To those agents who think that the foreclosure gravy train exempts them from acting like a respectful, competent professional, you reap what you sow. Maybe not today or tomorrow, but at some point what you have sent around will come back to bite you. Maybe your asset manager gets wind of your shenanigans. Maybe the bank reorganizes and they start dealing with other agents. It doesn't matter. At some point, these agents will have to go back to dealing with the rest of us, and it will be that much harder for them because they are no longer practiced in being accountable for their actions.


Like I said, some REO agents are very, very good. But the bad ones are the worst, and their time will come. I just wish it would come sooner in one or two cases!

FHA GUIDELINES ARE GOING TO GET TOUGHER

The FHA is going to tighten lending standards on January 1, 2010.

The exact extent of the credit tightening is not clear, but the result will be less people qualifying for FHA loans for purchase and refinance. In addition, the FHA will comply with tighter appraisal standards. In the first half of 2009 FHA financing was used in 19% of new home purchase and that number should increase in the second half of this year. The FHA is simply running out of reserves and must slow down the lending by tightening standards.

The rules of real estate are under constant stress and change. Never before has there been such a need for a true real estate expert. Pick your Realtor well.

The Real Estate Investor | The New Scourge of 2010

The Real Estate Investor | The New Scourge of 2010

It was about a year ago that we started to get phone calls from people who called themselves real estate investors and they all sang me a variation of the same song:

(Hum along to the tune of Fiddler on the Roof's If I were a rich man) 

I'm a very well-to-do real estate investor and I'm looking for opportunities in the area. In exchange for giving me names of people you know, I'll make it very worth your while. Then we'll push these homes through foreclosure or a short sale and both of us will be very wealthy. 

WTH?

The first few calls didn't go very well because I wasn't fully grasping what these people wanted from me. Now, these calls don't go very well because I fully understand what these vultures want from me. They want to take advantage of a homeowner's financial distress and turn it into a financial windfall for themselves.

These investors are all cut from the same cloth and they are the same people who jump from money-making gimmick to money-making gimmick. Whatever is being infomercialized and marketed as the path to financial freedom is the direction they are following. And, their expertise is based on a seminar, which is normally taught by an ex-con who's figured-out that the seminar gig can payoff big. 

The Tenets of the Scam

The investor tells the distressed homeowner that they can solve all of their financial problems and stop the foreclosure process. Sounds philanthropic and generous, right? Actually, the goal is to get ownership of the home and then sell it for a profit. Even if they don't get ownership, they'll put their name on title and claim ownership, and then they'll proceed to negotiate with lenders to whip-out the debt at pennies on the dollar. At the end of the day, the only way the foreclosure is stopped is through the investor's involvement in the sale of the home. 

How to spot the scam

There are several tale tells that have quickly become the investors costume of choice including:

• They have a website that includes the words stop and foreclosure in the URL
• Their car has stop foreclosure information on the back window and bumper
• They actually call themselves a real estate investors
• They belong to an investment group
• They've perviously sold some sort of product online (weight loss, Himalayan berry juice, a patented rack or doohickey 
• Promises that never materialize and deadlines that are missed, and missed and missed
• They advertise on Craigslist and for sale by owner websites. They don't want to involve Realtors or anyone else who will question ownership of the property
• And the number one thing red flag, they have little or no experience in real estate

There are exceptions to everything

Of course, there are exceptions to everything I've said and I'm sure there are many compassionate, honest real estate investors who will take exception to this journal entry. If you are an honest investor who would like the opportunity to provide your side of the story, I'd love to talk with you. 

Unlicensed and unregulated

Many real estate investors do whatever they can to reach the prize, the money that's hidden in a foreclosed home. There are no regulations, no rules (that they follow) no oversite, and no required training or licensing—it's the wild west out there. 

What should you do if your home is headed into foreclosure

If you're already to the point where you're reaching out to an investor, odds are pretty good that you're going to lose your home. As mentioned, investors are investing their time (and sometimes money) that they can get you out of your home and take a portion of the home's final proceeds. 

If your goal is to keep your home, you need to be talking with your lender. If you DO NEED to sell, most banks/lenders will work with you through a short sale transaction, and even hold off from pursuing the foreclosure while your property is actively listed with a Realtor.

What is a Real Real Estate investor?

My definition, which may very from many others, sees a true real estate investor as being a person or group who buy residential or income properties for their long term investment opportunity/strategy. The difference here is that they are not trying to steal the home through games and manipulation, they are business people who are working with agents to purchase real property that adds to their real estate portfolio.

San Mateo County Real Estate Report 4th Quarter 2009

How safe is would your house be in an earthquake?

"Many thousands of people live in older homes that can and should be seismically strengthened... An earthquake can throw an entire frame off the foundation and turn a house into a heap of rubble. The good news is that this is probably preventable."


~Los Angeles Times editorial March 21, 1994

Earthquake Retrofit.

A home is the most personal element of our lives; it represents the last refuge, the one place where we know we're safe from the outside world. For most of us it's also the most sizable financial investment we'll ever make. The investment is so significant that we don't even want to think about what may happen to that investment, that home, during an earthquake. But we live in an area where the threat of a serious earthquake increases each day. Scientists can only guess, not predict, when the next quake will occur, and we all know that sooner or later the quake is going to be "the big one." It's vital to think about protecting our homes against catastrophic loss.

How safe is your home during an earthquake?

If it's an older home, especially pre-1939, chances are it's deficient with respect to modern building codes. Your home may lack foundation anchorage, framing connections and adequate bracing. During a sizable quake like the 1994, 6.7 Northridge temblor, your home could actually slide off the foundation and experience partial collapse. That's a frightening prospect. Yet, it happens too often for anyone to be complacent. During the 1989, 7.1 Loma Prieta earthquake in Northern California, over 23,000 homes were damaged or completely destroyed. After an extensive study the State Legislature found and declared that "lack of anchorage and cripple-wall failure were the avoidable causes." Simply put, it means foundation bolting & cripple wall bracing.

We know of no properly earthquake retrofitted homes that suffered from sliding or from collapse.


Not until 1941 did building codes require proper anchorage and bracing. Most local jurisdictions began to recognize the new codes as early as 1939. The Northridge quake resulted in a national record of 365,118 applications for federal assistance. While not all of those were for structural damage, you can be sure that the number of homes damaged or completely destroyed will exceed the 1989 Loma Prieta quake figure.

The good news is that a home without adequate structural protection can be reinforced. One very effective method is a procedure called "house bolting" and it dramatically increases the safety of your home during an earthquake.

Words of Wisdom:

It's a good idea to have safety equipment in your car, like seat belts, windshield wipers, and maybe a horn; but none of those will do much good if you don't have brakes. Likewise, it is equally important to prepare for emergencies at home by storing extra food and water and strapping your water heater. Sadly, this planning will be a total waste if you lose your whole house because it wasn't bolted. We have seen it happen.

Allan G. Lindh, Chief Seismologist at the U.S. Geological Survey in Menlo Park has stated: "Recent quakes in the Mojave Desert, among the largest in state history, are a 'final warning' that the Big One on the southern end of the San Andreas is just around the corner. In addition, he has said, "It's time to act as if the damn thing will happen tomorrow. For citizens of California or other earthquake-prone regions,” Lindh says, "safety is a simple matter of bolting houses to foundations and paying attention to the 'duck and cover' drills that have been part of Earthquake Preparedness Week every April since 1985".

If most of your assets are in an unbolted home, this is something you need to think about. In most cases, for less than the cost of a paint job you can help protect your investment. What are the odds of your home surviving a large earthquake? If it is an older home - built before 1938 - it may lack vital connections that would keep it on the foundation during the next earthquake.

If you have a raised foundation with poorly braced cripple studs, bolted or not bolted, the severity of the above damage scales would be greater, and could occur in much lower-magnitude quakes.


Just suppose your carefully collected emergency supplies are stored in a poorly protected home, as was the case with some victims of the 7.1 Loma Prieta earthquake of 1989. During a future quake, these supplies could be damaged or contaminated, if they haven't been consumed by fire. Under emergency circumstances, authorities often deny homeowners access to dangerously damaged homes - and stored supplies are worthless if they are unavailable.


Seismic Safety For Your Home

Why should you bolt your foundation?

To avoid struggles with insurance collection,

To lessen a need for temporary housing.

To decrease the load on emergency response personnel.

To avoid those nagging worries of:

"Will it happen tonight?"

"Will it happen while I'm not at home with the family?"

AND Self-recriminations such as:

"I should have called Seismic Safety!"

"I wish I would have called Seismic Safety!"

"I told my wife to call Seismic Safety!"

"I really and truly was going to call Seismic Safety next week!"

6 Questions You Should Ask Your Lender

More and more, consumers are learning that there is much more to getting a mortgage than just the interest rate and points.  A good mortgage planner is more in the advice business than the lowest price business.  With tightening guidelines, often the question first is, “Will the loan be approved?”  But moreover, the borrowers’ concerns need to involve some of the answers to some of these non-price questions:

1. What type of lender should I use?

There are three basic types of lenders.  Mortgage BROKERS promote a broad product menu, competitive pricing, and entrepreneurial approach; however, BROKERS cannot lock, commit, or approve your loan because they are not actual lenders.  Banks and Credit Unions rely on financial strength, direct lending capabilities, and stability; however, they have limited product menus and often a “cover my butt” mentality.  Mortgage BANKERS blend the best of both: direct lending ability, financial strength and stability, wide product offerings, competitive pricing and the entrepreneurial spirit.

2. What loan products should I be considering?

Make sure your lender has multiple types of products (Conventional, FHA, VA, State Mortgage Agency Products, etc.).  While most people today do choose a 30 year fixed, it is not always the wisest choice.  Borrowers need to consider how long they will be staying in the home and any changes in their income during that time period before just accepting the same loan as everyone else.  Additionally, with many properties in need of some renovations or repairs, you need to explore the FHA 203K Program discussed in one of my earlier articles.

3. Should I lock or float my interest rate?

Most mortgage planners are trained to dodge this question.  I believe you should be hiring an expert who should have an informed opinion about the direction of rates….in the short term and the long term.  Weighing numerous factors ranging from your projected closing date to upcoming economic reports, a good mortgage planner can counsel a client into saving money.  While no one can predict with absolute certainty, you need to reach a comfort level that the lender you choose has the best information and your best interest at heart.

4. What are mortgage rates based on?

There is only one correct answer.  It is the pricing of Mortgage Backed Securities.  (Unfortunately, too many people answer the 10-year Treasury Bill.)  If you get the wrong answer on this basic question, what else don’t they know?

5. What is the next important economic release that can impact rates?

How will a Jobs Report, a Fed Board Meeting or Inflation Number affect your home loan?  Your mortgage planner should know, explain it to you, and keep you informed.

6. How can I improve my chances of getting approved and at the lowest possible cost?

Sometimes even minor improvements in a credit score, the amount of your down payment, or how you position your assets can make a big difference.  During your counseling sessions, your mortgage planner should be advising you on how the “little things can make a big difference.”

Good advice, whether it’s from your doctor, lawyer, real estate agent or lender, can be invaluable.  Finding a lender who is an expert….who has your goals in mind…and who offers creative solutions is one of the most important factors in a successful real estate transaction.

I'll Fix The Roof After Escrow Closes

Often it may occur that the property you are buying, upon inspection, reveals a problem that needs correcting. The problem may be a leaky faucet, sagging floor, termite damage, defective roof, or any other problems from small to substantial. In the haste to close escrow, a Buyer may agree to let the repair work be done after the escrow has closed. Is there any damage in that? Will the Buyer be protected?




Generally a purchase agreement between Buyer and Seller contains a provision for an inspection of the property, to be made by the Buyer. The Buyer then has a specified period of time, such as ten working days, to approve or disapprove the inspection report. The Buyer most often still wants to go ahead with his purchase, but wants certain defects corrected by the Seller. Some defects the Buyer may be willing to accept.



The best solution is to have the seller correct the problem or defect before escrow closes. Once escrow has closed, it may be very difficult to get the Seller to perform the necessary repairs. The answer to this problem is to have money held back in escrow at closing time. The escrow holder acts as the stake holder of the money, and this money is then be released only after the repairs have been made.



Provision for holding funds in escrow is done by amendments made to the escrow instructions. These amendments must be signed by both the Buyer and the Seller. The escrow closing agent can prepare these amendments for you. The Buyer and Seller could negotiate to split the repair costs, or the Seller may agree to lower the purchase price of the property or the Buyer could agree to accept the property "as is", thereby accepting the items found in the inspection report.



A word of caution is that once escrow has closed, it may be very difficult to go back after the Seller for repairs. Once the deed is recorded, the Buyer becomes the legal owner of the property and responsible for the property in it's condition at that time. Title insurance will not cover building defects. A home warranty policy will typically cover only certain items which are found defective and of which the Buyer was not aware existed before the close of escrow.

REAL ESTATE DICTIONARY

Real Estate Terminology

Abatement - The termination of an offensive activity, as the abatement of a nuisance.

Abstract of title - A condensed compilation of the history of the title to a piece of property; starts with the original grant and contains all subsequent conveyances, liens, or other encumbrances.

Abut - To be next to or touch another property or body of water.

Acceleration Clause - A provision in a note, such that if payments are in default, the owner of the note can declare the entire balance due and payable earlier than the stated due date.

Acceptance - An act by which a grantor receives a deed with the intention of retaining it in order to vest himself with title to the real estate; an express or implied indication of willingness to be bound to the terms of an offer to contract.

Access - The right of a property owner to have a means of entry and exit from his property to a public street.

Accretion - Addition to land by deposit of soil or sand as a result of natural action by stream, lake, river, or sea.

Accrued Depreciation - The actual depreciation in a property that has already accrued as of a given date; past depreciation.

Acknowledgment - The process whereby a person goes before a notary public or other recognized officer and executes a legal document and at the same time declares that he is executing the document as a free and voluntary act.

Acre - A measure of land equal to 43,560 sq. ft.

Action - A court process to enforce a right.

Actual age - The number of years a building has been in existence; chronological age.

Administrator - A person appointed by a probate court to handle the estate of a deceased person who left no will.

Ad valorem - According to value.

Ad valorem rax - A real property tax based on the value of the property.

Adverse possession - The continuous, visible, hostile use or occupation of the property of another. Title may be acquired by adverse possession for a period prescribed by law.

After Acquired Title - A doctrine under which a prior grantee automatically obtains title to real estate acquired by a grantor who previously attempted to convey title which he did not in fact own.

Agency - The relationship between a principal and agent whereby the agent represents the principal in dealing with third parties.

Agent - A person who has authority to act for another.

Air rights - A landowner's right to the use and enjoyment of the space above his land to the extent that he can effectively enjoy it.

Alienate - To convey or transfer title to property.

ALTA - American Land Title Association.

ALTA title insurance policy - A broad form of title insurance policy, which includes unusual risks such as factors, which could be disclosed by inspection of the land or by a survey.

Amenities - Those qualities which are pleasing and agreeable; intangible benefits of property ownership such as pride of ownership or scenic beauty.

Common elements - Those areas within a condominium which each owner of a condominium unit has the right to use in common with each other.

Common Law - The body of law based on custom and usage, some derived from English law.

Community property - Property owned half by each married partner, if acquired during the marriage period with joint funds or efforts; exists in only a few states.

Concurrent ownership - Ownership where two or more persons possess simultaneous estates in the same property.

Condemnation - The process whereby the government or a quasigovernment ownership takes title to private property for public use in exchange for just compensation under the power of eminent domain.

Conditional - Depends upon the occurrence of certain terms or events.

Condominium - A unit in an apartment or multifamily structure, which is owned by an individual in the same way an individual, can own other real property.

Conservator - A person appointed by a court to take legal charge of the person and property of a person incapable of managing his affairs.

Consideration - Anything of value, whether tangible or not, given by one party in a contractual agreement.

Constructive notice - Other than actual notice- notice given to the public through the process of recording documents in the public records office; notice imputed to a buyer by persons in possession of property.

Consummate Dower - After the death of a husband, the dower interest which the wife had in her husband's estate.

Contiguous - Next to and in actual contact.

Contingent - Dependent upon a future event which is uncertain.

Contingent remainder - An estate in land, the possession and enjoyment of which is delayed until the termination of a preceding estate and the occurrence of a condition. Contour Surface shape of land.

Contract - A legally enforceable agreement.

Contract for deed - See Installment land contract.

Contract rent - The rent stipulated in a lease agreement or contract.

Conventional mortgage - A mortgage other than one guaranteed by FHA or VA.

Conveyance - The transfer of title to real estate from one party to another by written instrument.

Cooperative - An apartment or multifamily building owned by several persons through a corporation, such that each owner is a stockholder and also leases a portion of the building.

Co-owners - Two or more persons who possess simultaneous estates in the same property.

Corporation - An artificial entity created by and under the authority of a state or other government for private or public purposes.

Cost approach - A property appraisal process in which the appraiser estimates building value as replacement cost minus depreciation.

Cul de sac - A circular turn-around street in a property development.

Courtesy - The right which a husband by law in his deceased wife's estate; applicable in only a few states.

Damages - The amount recoverable by a person who has suffered an injury, either in person or property, due to the wrong of another.

Datum - A plan of elevation from which heights and depths are measured.

Debtor - The owner of a property in a security agreement; sometimes called mortgager.

Declaration of restrictions - An instrument other than a deed containing restrictive covenants which is incorporated by reference and made part of a deed.

Decree - A court order as a result of a judicial proceeding.

Dedication - A voluntary giving of property by the owner for use by authorized public officials on behalf of the public.

Deed - A written instrument by which title to real property is conveyed from one person to another.

Default - The failure to fulfill a contractual obligation.

Defeasance Clause - The clause in a mortgage note that allows the mortgager to redeem his property after all payments due the mortgagee are paid.

Deficiency Judgment - A judgment rendered after default when the security pledged for a loan does not satisfy the debt.

Exception - A right or portion of property reserved in the grantor in a conveyance by deed.
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Exclusive agency listing - A listing agreement between a seller and a broker where either has a right to sell the property; if sold by the broker, a commission will be due.

Exclusive right to sell - A listing agreement between a seller and a broker whereby the broker receives a commission, whoever sells the property.

Execute - To sign and deliver an instrument, such as a deed.

Executor - A person specified in a will to carry out the provisions of the will.

Express Contract - A contract whose elements are stated orally or in writing.

Fee on a condition subsequent - A fee simple which is conveyed reserving to the grantor the right of entry upon occurrence of a condition subsequent.

Fee simple - The highest interest a person may have in real property.

Fee simple Determinable - (Qualified fee) Fee simple subject to a condition or limitation, the occurrence of which causes title to revert back to its grantor or his heirs automatically.

FHA - Federal Housing Administration; a federal agency which insures home mortgages.

Fiduciary - A relationship of trust and confidence as between a principal and agent.

Financing statement - An instrument filed with the recorder or register of deeds indicating that personal property is encumbered.

Fixture - An item that was originally personal property but is so attached to the property that it becomes part of the real estate.

Flashing - Sheet metal or other material used around chimneys or other places to prevent water seepage.

Footing - The base on which a home foundation stands.

Foreclosure - A legal proceeding by a lien claimant to force sale of a property to pay the amount due the lien claimant.

Forfeiture - The loss of money or right due to default or failure to perform in accord with a contract.

Foundation - The portion of a structure which supports the first floor and construction above it.

Fraud - Successful deception with the intent of deceiving another person.

Freehold Estate - An estate existing for an indefinite length of time; an estate of inheritance or for life.

Frontage - Property on a street, highway, or lake.

Front foot - A measure of property value where the distance is measured along the street, highway, stream, or other body of water.

Functional Obsolescence - Things internal to a structure that detract from a building value.

General lien - A lien effective against all of a person's property, both real and personal.

Grade - The level of the ground at the structure foundation.

Graduated lease - A lease providing for a variable rate of rend depending upon some future event.

Grantor - A person who transfers property, such as a seller.

Gross lease - A lease agreement whereby the pro0perty owner pays taxes, insurance, repairs, and other costs.

Ground lease - An agreement for rental of land only.

Ground rent - The portion of property income attributed to the ground value itself'; used in a few states whereby a person can own a structure and rent the ground.

Guardian - A person granted power by a court to take care of and manage the property of another person who has been declared legally incapable of administering his own affairs.

Habendum - A provision in a deed, which defines the extent of the ownership to be granted to and enjoyed by the grantee.

Heirs - The persons designated by statute to receive an estate where there is no will.

Highest and best use - The use of a property, which will yield the greatest return on the property.

Homestead - Any real estate where the owner resides and which is exempt from creditor's claims to an amount specified by state law.

HUD - Federal Department of Housing and Urban Development.

Hypothecate - To give something as security without giving up its possession.

MAI - A member of the American Institute of Appraisers qualified to specified requirements.

Marginal land - Land in use which barely pays the cost of working it.

Market approach - The process of property appraisal by comparing it to sales of equivalent properties.

Market value - The highest price which property would be expected to bring in the open market under normal conditions.

Meandered - Area such as a lake on which taxes are not paid.

Meander line - The approximate border of a natural body of water.

Mechanic's lien - A lien which can be filed by mechanics or material men who supply labor or materials for property improvement to secure payment.

Meridian - Map lines running north and south to locate land under the governmental survey system.

Metes and bounds - A method of legal description by use of measurements, boundaries and directions.

Mineral rights - A legal interest in minerals in land, which includes the right to take minerals from land.

Minor - A person not of legal age.

Modernization - Replacement of outmoded fixture, equipment, and other features of an improvement with modern features.

Monument - A fixed object, either natural or artificial, which surveyors use to measure.

Mortgage - A written instrument in which real estate is used as security for repayment of a debt or obligation.

Mortgage - The party who lends money for a mortgage.

Mortgager - The party who borrows money with his property as security.

Multiple Listing - A listing agreement whereby other brokers in an organization are allowed to sell a listed property.

NAR - National Association of Realtors

Navigable water - A waterway capable of passage by watercraft; navigable if so designated on a U.S. Map.

Net lease - A lease agreement in which the tenant pays rent plus all taxes, insurance, repairs, and other costs.

Net listing - A listing agreement whereby the owner receives a set amount and the broker receives all above that amount.

Nominal consideration - Consideration having no relationship to the actual value of the contract or property conveyed.

Nonfreehold estate - An estate in land of a certain duration, i.e., leasehold estate.

Note - A written instrument promising payment.

Notice to quit - Notice given to a tenant to vacate a rented property.

Nuisance - Anything that is offensive to a person or property.

Obsolescence - Loss in value due to obsolete or out-of-date design or construction.

Open end mortgage - A mortgage agreement such that the mortgager can borrow additional funds in the future without rewriting the mortgage.

Open listing - A listing agreement whereby either the owner or the broker can sell the property; if the broker is the procuring cause, a commission is due.

Option - A contractual right given for a consideration permitting a person to lease or buy the property at a specified price within a given period.

Optionee - A person who holds an option.

Optionor - A person who gives an option to another person.

Ordinance - A law passed by the legislative body by a municipal corporation.

Overhang - The portion of a roof extending beyond the walls.

Partition - An action seeking to have property owned by two or more persons sold and the proceeds divided between the parties; or to have the property divided into two or more portions.

Partnership - An association of two or more persons to carry on a business for profit as co-owners.

Party wall - A wall erected on the line between two adjacent properties for the use of both parties.

Replacement cost - The cost incurred in replacing one property with another of similar utility using modernized equipment, materials, and techniques.

Reproduction cost - The cost of reproducing an exact replica property based on current prices.

Rescind - To declare a contract void in its inception and put an end to it as though it never existed.

Reservation - A right kept by a grantor when conveying property.

Restriction - An encumbrance created by deed or special agreement which limits use of the property.

Reversion - The portion of an estate remaining with the original grantor after the termination of a leasehold or life estate.

Right of redemption - A person's right by law to buy back property taken by forced sale for a period of time stated by law.

Right of way - The right to cross over or under another person's property for ingress, egress, utility lines, sewers, etc.

Riparian rights - Rights of an owner of property abutting water to use the water and have uninterrupted flow and drainage.

Rod - A measure of length equal to 161/2 ft.

Rural - Pertaining to the country; rather than urban.

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Satisfaction - Discharge of lien upon payment of debt.

Seal - An impression made to attest to the execution of a written instrument; also the word "seal" typed in to form a sealed document.

Section - A unit of land measure one-mile square containing 640 acres.

Security Deposit - Earnest money.

Seize - The possession of land under a claim of freehold estate.

Septic Tank - An underground tank used where city sewage is not available.

Servient estate - An estate burdened by an easement.
Setback - A distance from the curb to the building, often specified by ordinance.

Settlement - The process of completing the sale of real property; same as closing.

Severalty - Sole ownership; by one person.

Sheriff's deed - A deed given as a result of a court order to sell property in satisfaction of a judgment.

Signature - The act of putting down a person's name, mark, or symbol with the intent that it attest the validity of a written instrument.

Site - A plot of ground upon which anything is, has been, or will be located.

Situs - Location.

Special assessment - An assessment against real estate to pay for improvements such as sidewalks, curbs, streetlights, or other things which benefit certain property owners.

Special warranty deed - A form of deed whereby the grantor warrants the title only against claims generated while the grantor owned the property.

Specification - A document describing requirements for a house, subdivision, or other project.

Specific performance - A legal action to compel the performance of the terms of an agreement, such as the sale of a home.

Specific Lien - A lien which affects only a single parcel of property.

SRA - Designates a member of the Society of Real Estate Appraisers.

Statute - State or federal law.

Statute of frauds - The state law which requires that certain contracts, including those for the sale of real property, must by in writing.

Strict foreclosure - A court decree vesting title to mortgaged property in the mortgagee upon the default of the mortgagor without any sale of the property.

Stud - Vertical timbers in a house wall.

Subdivision - A tract of land divided into lots suitable for residential purposes.

Subject to - The purchase of real property subject to a mortgage, whereby the original holder remains personally liable for the mortgage.

Sublease - A lease given to another by a lessee.

Subordinate - To make a mortgage subservient to another mortgage.

Subsequent purchaser for value - A purchaser for value in good faith and without notice of any adverse interest in the property purchased.

Suburb - The area close and adjacent to a city or town.

Survey - The process of measuring land; the resulting map of the property.

Syndicate - A group of persons joining together to deal in real property.

Tangible - Existing physically; that which can be touched.