3 Tips for Seller’s ‘Stay Or Go?’ Dilemma

3 Tips for Seller’s ‘Stay Or Go?’ Dilemma
Written by PJ Wade

Although the focus is on selling price during negotiations, sellers know that how they use their real estate, and all that represents, present and future, is the true measure of value. It’s this accumulated value, not just how much money they’ll get, that sellers should concentrate on when tackling the “Should we stay, or should we go?” dilemma.

Lack of experience or uneasiness with the unknown should not dissuade you from the mental adventure of weighing your options. Don’t shy away from a thorough, creative comparison of all that can be gained by staying and all that this would cost versusall that can be gained by going and all that would cost. Have fun talking to friends and exploring the internet to discover other people’s successes and experiments. Here’s 3 tips to get you started on your real estate adventure:

1. Don’t just compare possible selling price to potential purchase price.

When deciding whether this is the real estate market to jump into, many sellers concentrate on the possible selling price of their current real estate and the potential purchase price of the next property. These dollar figures get the most attention, but they are not all that buying and selling real estate involves. Yes, selling and purchasing prices matter, but it’s your TOTAL NET GAIN from the combined sell-and-buy real estate transactions that really counts:

TOTAL NET GAIN = NET GAIN from Sale + NET GAIN from next Purchase

Your real estate professional can help you estimate how much will end up in or out of your pocket after mortgages and a long list of fees (including theirs) for both the sale of your current real estate and the purchase of your next property. Add to the “sale cost” list any long-standing service contracts for which you’ll lose price benefits when you move, and any accumulated benefits like-lower-than-neighbours realty tax, earned by consistently disputing tax increases. Moving, legal, and renovation costs must be included in the equation, too. Broad strokes will get you started, so you can assess net benefits and net losses in every aspect of life and homeownership. Often this exercise reveals clear “stay” benefits or disadvantages that make deciding easier.

2. Don’t let financial promise distract you from assessing the true value ownership represents to you.

Before setting goals and scribbling down a “what comes next” action plan, assess the true value of ownership of your current real estate and all it connects you to, not just its financial value. One measure of what your home means to your life and family is whether you want to move out of the neighbourhood or just to a new location within it. If you don’t want a dramatic location change, list what you value about the neighbourhood. Will these items persist, or is social or economic change putting those value elements at risk? While you assess what’s keeping you here, consider these connections with open eyes not just nostalgia for what was. Moving to a new location brings change on many levels. How will the new neighbourhood enrich life and what will be sacrificed?

3. Don’t overlook how ‘staying’ could involve significant change.

Just because you are not handy and have never undertaken a renovation before does not mean you can’t or that you won’t be great at it. If there is a strong pattern of extensive renovation and new builds in the neighbourhood, take a close look at what these options, or a less ambitious refreshing of your property would give you and at what cost. If this pattern is common in your area, moving to a new location in the same neighbourhood may represent a lateral financial move or even require additional expenditure. Then, your choice may be to renovate your current property or move to a less expensive area. Also, check with your municipal office to see if secondary suites or duplexing would be an option for your property. Adding an income-generating suite will also give you choice in the future.

For example, you could live in the suite and spend time travelling on the rental income from the rest of your home. Tied to these considerations are modernizations and upgrades that are necessary, or will be, since 15 to 20 years is the average life of most residential systems. If you project ahead 5 or so years, what overhauls will be necessary? If a new furnace, roof, windows…are on the horizon, a renovation now may make sense. This may allow upgrades like solar panels, heat pumps, and energy-efficient windows which can also improve building efficiency, increase comfort, and reduce maintenance and costs, while increasing property value. Architects, renovation contractors, builders, and real estate professionals are the idea people to involve in these value investigations.

This mental exercise will open doors and expand horizons in ways you may not have been able to foresee. This is research, so step back from anyone intent on getting you to sign a contract for anything until you have had time to explore your options. This may take a while, especially if you have only a few gripes about your current home or cottage.

May I suggest a great place to start? Write out a two or three sentence description of how you want your life to change. Be very specific. I suggest this exercise to clients who want things to improve or who are faced with change they wish to triumph over. The clearer the future is to you, the more likely you are to achieve it. Finish this sentence with what a brilliant outcome represents to you: “When I/we are successful…”. If you don’t know where you want to end up, how will you know the best way to get there?

Onward & Upward…The directions that really matter!


New Homes in Sacramento Areas…

Six-acre, 55-home community planned along Madison Avenue



Home Equity Rises Across Sacramento…

Home equity rises sharply across Sacramento region


Published: Tuesday, Sep. 10, 2013 – 8:54 pm
Last Modified: Thursday, Sep. 12, 2013 – 9:20 am

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Jose Luis Villegas / jvillegas@sacbee.com

The most underwater neighborhood in the entire Sacramento region is the Sunrise-Douglas area in Rancho Cordova.


The flood of underwater mortgages that swamped the Sacramento region during the housing collapse receded at a rapid rate this spring as home prices rose, CoreLogic reported Tuesday.

The Santa Ana-based real estate information service said the number of area homeowners with mortgages who owed more than their homes were worth plunged to 18 percent in April, May and June compared to more than twice that figure during the same months last year.

There were 86,500 upside-down mortgages in the region at the end of the second quarter of this year, the firm said. The number was down dramatically from even the first few months of 2013, when almost 124,000 area mortgages were underwater.

The reason: Home prices have risen sharply because of strong buyer demand and a tight supply of homes for sale.

In June, for instance, home prices across Sacramento, Placer, El Dorado and Yolo counties rose by almost 26 percent from June 2012, CoreLogic said. July posted similar gains compared with the same month a year before, it said.

“It’s a historic bounce back we many never see again in our lifetimes,” said Pat Shea, president of Lyon Real Estate in Sacramento.

The region’s home prices rebounded from a low point in early 2012 when they were undervalued to the point that investors, and then traditional homebuyers, swept in to purchase houses. Record-low interest rates fueled demand.

The prices and rates created a perfect storm for a mass return of equity.

“Anyone who was 25 percent or less underwater no longer is,” said Jeff Michael, economist at the University of the Pacific in Stockton. For those who were severely upside down on their mortgages, “short sales and foreclosures have taken many underwater mortgages out of the system,” he said.

CoreLogic said another 15,000 Sacramento-area homeowners were close to regaining equity in their homes at the end of June.

The region’s experience mirrored a nationwide trend in the second quarter, when approximately 2.5 million residential properties returned to positive equity, the data firm said. That left about 7 million homes, or 14.5 percent of all residential properties with a mortgage, still in negative equity at the end of the quarter, it said.

“Price appreciation obviously had a positive impact on home equity over the first half of 2013, especially the second quarter,” Anand Nallathambi, president and CEO of CoreLogic, said in a news release.

The rapid rise in home prices in the Sacramento area and elsewhere is expected to slow now that the traditional spring and summer buying season has ended.

“In just the first half of 2013, almost 3 1/2 million homeowners have returned to positive equity, but the pace of improvement will likely slow as price appreciation moderates in the second half,” Mark Fleming, CoreLogic’s chief economist, said in the news release.

Shea said a greater inventory of homes for sale will help stabilize the Sacramento region’s market, and he expects sales to continue at a decent clip.

Prices remain affordable compared with the excesses of last decade’s housing boom, and interest rates are rising but remain well below historic averages.

As more homeowners emerge from underwater, Shea said, many will want to move to a bigger or smaller house or to a different location, having felt trapped for years.

Without equity in their homes, and the ability to sell, Shea said, “people have been handcuffed."



House Flipping is Back

House-flipping is back, flourishing again
CNBC.com 07/18/13 12:52 PM ET
By: Diana Olick

For the past several years single-family housing investors have been playing the buy and hold game. Strong rental demand and soft home prices made that the best bet. Now, with home prices up more than 12 percent from a year ago, the strategy is suddenly changing.

“It’s a perfect storm for flipping right now in many parts of the country because home prices are bouncing off the bottom,” said Daren Blomquist, vice president at RealtyTrac. “That is something that flippers can catch on the coattails of and ride that wave as long as it lasts.”

Home-flipping, defined as buying and selling the same home within six months, came roaring back in the first half of this year. There were 136,184 homes flipped, an increase of 19 percent from a year ago and 74 percent from the first half of 2011, according to a new report to be released Friday by RealtyTrac.

John Paulson created quite a buzz in the housing market yesterday at the Delivering Alpha conference. CNBC’s Diana Olick digs into the latest housing data for your best investment.

Increases, however, are nothing compared with the profit jump. Investors made an average gross profit of $18,391 per home, or a 9 percent gross return. That is up 246 percent from a year ago.

“Home-flipping business has keyed up quite a bit in the last 6 months,” said Steve Jones, founder of Los Angeles-based Better Shelter. Jones, who has been flipping homes for five years, said the competition is really heating up.

“There’s not a lot of inventory, and every time a listing comes up it’s like piranha in the water,” he said.

Jones bought and flipped eight houses in the first half of this year, going in with all-cash and looking for hidden value, like unique architecture or renovation potential. He does quite a bit of work on the homes, always looking at the bottom line, but also imagining who the end buyer is going to be.

(Read more: Corelogic: There is no housing bubble)

“Some homes you do really great, and some homes you kind of do OK. I have to keep my crews busy, so it averages out,” said Jones.
The math is looking better and better to investors as prices rise, with one possible hitch: Rising mortgage rates. Investors largely use cash on the front end, but their buyers don’t.

“On the flip side, when they are actually flipping the properties to the end-users, interest rates matter because those end-users will not be able to afford as much as interest rates go up.” added Blomquist.

Carl Quintanilla spoke with John Paulson at CNBC’s “Delivering Alpha” conference. Large-scale institutional investors have been swarming the distressed housing market since the height of the housing crash, buying homes in bulk, rehabilitating them and putting them up for rent. Companies like Blackstone, Colony Capital, Waypoint and hedge fund titan John Paulson have been reaping solid rewards on the trade.

Paulson, speaking at CNBC’s Delivering Alpha conference, said he is still high on housing.

“It’s not too late to get involved. I still think buying a home is the best investment any individual can make. Affordability is still at an all-time high,” said Paulson.

Large-scale investors, however, may not be behind the surge in home flipping. They may, in fact, be the cause of it.

“Now that the institutional investors are doing buy and hold, a lot of these guys [individual investors] can’t compete with their checkbooks,” said Rick Sharga, formerly an executive at Carrington who now works for Auction.com. “In some cases the individual investors are flipping them to the institutional investors.”

While many of the large funds have teams that renovate homes, in some cases they would rather pay a premium for a move-in-ready property, rather than waste time and money remodeling.

“So the flippers are kind of the in-between middleman who is getting the property into good rentable condition and then selling to the institutional investors,” explained Blomquist.

(Read more: Map: Tracking the US real estate recovery)

The renovation of course takes away from the flipper’s profit, begging the question, if a flipper is getting perhaps a 5 percent return on the investment after costs, why not play the stock market instead? Surely they will see a bigger profit faster, but there is larger downside risk.

“You can’t control the stock market,” remarked Sharga. “You have a little bit more ability to control your success in housing if you know what you’re doing and you know your market well.”

The potential profit from house flipping varies dramatically market to market.

Formerly hot investor markets like Phoenix, Las Vegas and much of Southern California are seeing big drops in flipping, as there is very little to buy and what is available is selling at a premium.

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.
Questions?Comments? facebook.com/DianaOlickCNBC.

California Real Estate Agents Keeping it Legal

As Real Estate Professionals, sometimes it could be a challenge to stay current with so many ever changing rules, ordinances and laws.

Local Sign Ordinances

It is important to be a good steward when it comes to real estate sign placement, use discretion and common sense when putting signs up.  Following current ordinances helps avoid restrictions on where and when signs can be placed.  Many of our local ordinances have small variations between one another and it can be difficult to keep track, so we have put together a refresher course at the bottom of the newsletter.  Two good rules to always follow: keep signs out of the public right of way, this includes sidewalks, and never attach balloons to signs.

Mortgage Interest Deduction at Risk?
The National Association of REALTORS® issued an important call-for-action.  The U.S. Senate is considering tax reform options and adopted a “Blank Slate” approach that initially eliminates every provision in the tax code, including the mortgage interest deduction and all those that encourage real estate ownership and investment.  Senators must submit their tax reform priorities by July 26th.  REALTORS® need to make their voices heard now so real estate provisions are on the top of Senators’ lists.  If you have not responded to this call-for-action to voice your support for the mortgage interest deduction, doing so is quick and simple: you can take action here

Potential Reform for Fannie and Freddie
House Financial Services Chairman Jeb Hensarling (R-Texas) introduced legislation to phase out federal involvement in the secondary mortgage market by eliminating Fannie Mae and Freddie Mac over several years, and adding limits to who can get federally backed financing through FHA, how much would be guaranteed, and at what cost.  NAR is strongly opposed to this legislation in its current version.  NAR believes in retaining federal involvement in the conventional mortgage market.  SAR members met with local elected Congressional representatives in May to discuss the importance and need for a “do no harm” approach in potential reform for Fannie and Freddie.

NFIP Implementation
The National Association of REALTORS® is currently working a multifaceted approach to keep REALTORS® apprised of, and address serious concerns about the implementation of the National Flood Insurance Program reform legislation.  This legislation will phase out certain flood insurance subsidies.  SAR has received unofficial preliminary information that the Sacramento Region will not be affected by these price increases.  If you see or hear anything contrary, please contact Caylyn Brown at cbrown@sacrealtor.org.

Local Sign Ordinances Continued
California Civil Code Section 713 sets the legal ground work for real estate signs.  This section states that an owner of a property, or their agent, is allowed to advertise the sale or lease of that property on site in plain view of the public.  This advertisement may include directions to the property, the owner or agent’s name, address, and telephone number.  Local governments are permitted to regulate the display or placement of these signs on public and private right of way.

The City of Citrus Heights requires that real estate signs be no more than five square feet, and set back from the public right of way ten feet.  Freestanding directional signs should be limited to one per driveway, and one per service entrance.  Directional signs are to be less than four square feet and thirty inches tall.  These signs need to be set back at least five feet from the public right of way.

The City of Elk Grove requires on site real estate signs to be set back five feet from the public right of way, and out of any required vision triangle.  Residential property signs cannot be more than six square feet, and are limited to three riders per sign.  Directional open house signs are allowed on weekends and holidays.  One sign may be placed for each change in direction, to a maximum of five signs.  The open house signs may not be more than six square feet.  For commercial property, one on site sign per street frontage is allowed.  Commercial parcels less than one acre may have a thirty-two square foot sign, parcels larger than one acre may have a forty-eight square foot sign no more than eight feet tall.  All signs must be removed no later than close of escrow.

In the City of Folsom, signs must be set back five feet from the public right of way, and remain out of the vision triangle.  For residential property these signs need to be less than six square feet, and no more than three riders per sign.  Open house signs are allowed on weekends and holidays, one sign for every change in direction, with a maximum of five signs.  Open house signs may not be larger than six square feet.  Commercial property is permitted to use one sign per street frontage.  For property less than one acre these signs must be no more than thirty-two square feet.  Parcels larger than one acre may use a forty-eight square foot sign, with an eight foot height limit.

The City of Rancho Cordova allows for not more than one for sale sign per property frontage.  Residential signs are limited to ten square feet and must be set back at least three feet, and shall not obstruct corner visibility requirements.  Nonresidential signs are limited to a maximum of 32 square feet and shall be set back at least three feet from the right-of-way.  Open house directional signs are permitted on weekends and holidays when open house sales activities are ongoing.  One sign may be placed for each change in direction to a maximum of five signs.  Directional signs are not to exceed an overall size of nine square feet, including supports, and not exceed a height of thirty inches.  Directional signs are not to be placed in the public right-of-way.

In the City of Sacramento, one sign per parcel is allowed, one sign may be located on the ground level, and one above balcony level, no sign shall be attached to the first floor balcony.  The area of the sign will not exceed six square feet, and the design of each sign shall be black ink on white board.  The sign is to be removed within seven days after the sale, rental, or lease solicited is accomplished.  If the sign is not removed within this time frame, it shall be removed immediately, at no cost to the City.  No signs are to be in the public right-of-way.  Signs may be placed in the area between the face of the street curb and the street side edge of the sidewalk (commonly referred to as the planting strip or mowing strip).

The City of West Sacramento allows one sign per property, but it must remain entirely on the property it applies to, be smaller than six square feet, and cannot be directly illuminated.  This sign must be removed within seven days of sale, rental, or lease of the property.  Off-site directional signs are allowed for real property events that are sponsored by a real estate agent or property owner.  The signs may only be displayed on event days, and will be displayed no earlier than eight am on the day of the event and removed no later than four pm the day of the event.  These signs are only allowed for existing properties that are available for sale, lease, or exchange.