Working in real estate
What is the function of a title company or title insurance company in real estate purchases or refinances? In Silicon Valley, and the San Francisco Bay Area and northern California generally, title companies perform two specific services:
- provide title insurance for real estate being bought or borrowed against
- provide escrow services, acting as the neutral third party which takes in the deposit money and holds it during the escrow period, disbursing all funds when escrow closes and having someone go to the county recorder’s office to record the deeds to complete the sale
Title insurance companies research the title history, find out what recorded easements may exist,reveal any encumbrances (leins, clouds on title, etc.). An escrow officer from the title company is usually the professional with a notary’s license who will sign off home buyers and sellers on the final documents, too.
There are many other services that title companies provide. Many people wonder how to hold title, and while neither your Realtor nor your escrow officer can advise you on how to do so, the title companies all have a little 1 page handout explaining the major concepts for each option on how to hold title.
If you need to sign off on the final documents out of town or even out of the country, the escrow officer and her or his support staff will work with you to coordinate it. (It can be a little tricky if overseas and outside of the U.S.).
If you are selling your house or condo and discover that an old loan that you paid off is still showing up in the preliminary title report, the escrow officer at the title insurance company will work to get it resolved and removed.
The customer service department at title companies can research the chain of title, too. Sometimes it’s quite interesting as the chain brings you back to the time of patents and land grants, with hand written deeds in a style of cursive which is somewhat foreign to us today.
There are many other things that title companies do – big and small – and most of them are “behind the scenes” that few of us ever witness directly, but without which no one would be able to close out sales with the safety net of title insurance which we value so much.
Title insurance can be a confusing concept, but I wrote about it elsewhere on this site.
In Silicon Valley, most of the licensed real estate professionals belong to local, state, and a national trade group. There’s a name for members of these associations, in which dues paying members promise to abide by a code of ethics. Do you know that the name is? You’ll hear various things, even out of members: Realtor, Realitor, Realator, Relator, Reeltur. Which is it? The answer is the first one, REALTOR. It’s two syllables, pronounced Real-tor. (There is no a, e, i, o, or u between the REAL and the TOR parts.)
Also, please note that being a member of the National Association of Realtors (NAR), the California Association of Realtors (CAR) and the Silicon Valley Association of Realtors (SILVAR) is not the same as being licensed. The states issue licenses for real estate sales people, brokers, and other professionals. Realtors are first licensed by the state and then voluntarily join the trade group for the industry. In California, it’s now the Bureau of Real Estate which issues the salesperson or broker licnese. (Please see the related article at the bottom of this post for more on that.)
Looking for a Silicon Valley Realtor? A Los Gatos Realtor? A San Jose Realtor? Please call or email me, Mary Pope-Handy, to chat about your real estate needs, buying and selling a home here in the South Bay area. And please, don’t call me or anyone else Realitor, Realator, Relator, or Reeltur!
Earnest money refers to a home buyer’s deposit on a home that he or she is in contract to purchase. It’s often called an earnest money deposit, initial deposit, or good faith deposit in Silicon Valley. The terms are all interchangeable.
How much is the earnest money?
In the San Jose & Los Gatos areas, and Santa Clara County generally, the earnest money is usually 3% of the purchase price of the home. It is placed in an escrow account, which is usually at a title company (in northern California that’s how it is handled – in Southern California, often there is a separate escrow company).
Ordinarily, funds are due within 3 business days of acceptance of the contract, but that can be changed (it’s one of the few places where the CAR and PRDS contracts reference business days rather than calendar days). Some listing agents will counter back that funds need to be in title the next day after the offer is ratified. Some buyers may request more than 3 days if their funds are coming from abroad. With competitive, multiple offer situations, buyers should anticipate needing to get the money to title fast and have it ready to go before the offer is presented so that they aren’t at a disadvantage.
Is a cashier’s check required for the good faith deposit?
The initial deposit does not have to be a cashier’s check, however, some listing agents and sellers may request that in a counter offer. That’s most likely to happen in a very competitive multiple offer frenzy, and unlikely to happen if it’s just one or two bids.
Increasingly, the funds today are wired to title, but in some cases, buyers may instead write a check. For the earnest money deposit, it may be a personal check. (At the end of escrow, it must be either a cashier’s check or a wire to bring the balance of the down payment to title. Both of these are referred to as “good funds”.) It is important for home buyers to draft the check correctly (not made out to just “title company”, for instance), and to understand that this isn’t a check that just sits in a drawer. The check for the initial deposit is cashed by the escrow company as soon as they get it. Real estate brokerages tend to prefer that Realtors don’t touch the buyer’s funds, so many are encouraging that consumers wire in funds rather than hand a check to a real estate agent.
Phishing and wire fraud is a concern, so when sending funds in electronically it is extremely important to phone the title company and verify the specific instructions.
Does the earnest money count as part of the entire down payment?
Yes, if the buyer is putting 20% down on some real estate, the initial deposit is likely to be 3% and the balance of the down payment will be 17%. The balance of funds will need to be in escrow a couple of days before closing. Many lenders will not fund the loan on the property until and unless the buyer’s money is in escrow first.
Can the buyers get the initial deposit back if they change their minds about buying the home?
This is not a “one size fits all” question. If the buyers have contingencies, it may be possible to back out of the transaction and have the full deposit returned. If the buyer has written an offer with no contingencies, that may be an uphill battle, and time to consult with a real estate attorney, as Realtors are not qualified nor allowed to provide tax or legal advice.
What is escrow? (on popehandy.com blog)
What do international home buyers need to know about financing a real estate purchase in the United States? (on Move2SiliconValley.com – relocation site)
Words can be so revealing.
Recently at an open house, a home buyer said that he and his wife don’t have a buyer’s agent. Later, though, he volunteered that recently they’d written an offer on a property and had “used an agent“.
What does that tell you?
Most Silicon Valley real estate professionals would like to have established professional working relationships with home buyers and sellers. They want clients, not customers. Realtors put in a lot of time reviewing disclosures, pulling comps, analyzing the realty market, looking for red flags at the property and in the paperwork. The real estate salespeople or brokers want to go “all in” to help their home buying clients to buy their next home with the best price and terms possible.
But do home buyers want the same thing that their Realtors do? I’d say usually yes – but not always. Often you can tell how committed a home buyer is by the way he or she speaks, but sometimes only in the way that person behaves. For those of us working in the industry, it’s very important to understand the client’s motivation and loyalty; spend too much time with buyers who aren’t committed to working with you and you will be in the hole financially.
Probably 15% or so of San Jose area home buyers really don’t want a relationship with a Realtor. They’d rather go it alone. At another open house, someone said to me that she didn’t like “feeling obligated” to anyone, and found that if she did anything with any real estate agent, that person was expecting her ultimate business.
Yes, that is how it works. We only get paid if a sale closes.
In many areas of the United States, it is very common for Realtors to engage with home buyers using a Buyer Broker Contract (buyer broker agreement). Here, it’s not so common. We prefer to work on a handshake, we prefer to work for our clients with the faith that they will reciprocate our hard work with their loyalty. Silicon Valley Realtors want to guide and assist you all the way through from before, during, and after the sale. They do want to know that you will work exclusively with them – and not just “use” them. If that’s the working, professional relationship you have with your Realtor, it will give you benefits for years to come as that buyer’s agent can be an ongoing source of advice and guidance.
When a home seller remains in the home after the close of escrow, it’s as a tenant or renter – even for a brief period of a few days. With the shifting role from home owner to new renter, the rules of engagement may not be clear, and expectations may not line up with the addendum for the rent back. So let’s do a set of what happens during the tenancy period after the sale is done.
Seller rent back True or False questions – which of these statements is true or false for the period when the seller is a tenant?
- When escrow closes, the buyers get keys to the home
- The seller must be undisturbed by the buyer until moving out
- The buyer can do repairs, including fumigation, during the rent back
- Prospective tenants may view the property during the rent back
- Contractors may enter the property during the rent back
- The new owners must give 72 hours notice before entry
- To enter the home, new owners must use an official CAR or PRDS “Notice of Entry” form
- The new owners may only enter the property if their Realtor is present or if the listing agent is present
- If the seller overstays the agreed upon rent back time, there’s a penalty fee that will be charged
- If there’s a rent back, buyers may do a walk through both before close of escrow and also at the end of the rent back period.
Some of these are challenging not just for buyers and sellers, but for real estate agents too. The reason for the confusion has to do with the number of forms involved. There are 3 different rent back addenda which may be employed in Silicon Valley: 2 options from the California Association of Realtors (CAR) and 1 from the Peninsula Regional Data Service (PRDS).
- PRDS form RSOAS – Seller Occupancy After Sale Addendum (1 page form)
- CAR form SIP – Seller in Possession Addendum (1 page form, intended for less than 30 days)
- CAR form RLAS – Residential Lease After Sale (5 page form, for more than 30 days rental to seller)
Some Realtors only use either CAR or PRDS forms, but I have found that depending on whom you represent, it may be worthwhile to tell the client about the differences between them as they are not exactly the same for all of these questions.
Now let’s go back to our questions and see what the contract & addenda have to say about each one. Continue reading
Are you wondering what the Brexit vote will do to US home prices? Lawrence Yun, the National Association of Realtors’ chief economist, believes it could be a good thing short term as investors strive for quality assets that have a return greater than US treasuries, and lower mortgage rates as a result of the flight to US treasuries.
As a Los Gatos Realtor, I hear many consumers and real estate agents state that they believe that U.S. real estate and the U.S. economy are viewed as the most stable in the world. If that is the case, then people from all over will want to invest in homes and land here rather than elsewhere.
It remains a strong seller’s real estate market in Silicon Valley, with many properties selling with multiple offers, but there’s an undercurrent of concern that we are the near the peak of pricing. That has some buyers nervous (though most will quip that Apple and Google and others are still hiring, and the local economy is strong – so they are not too worried). For those who are a little nervous, sometimes it turns into cold feet – and it’s costing them.
What we are seeing in terms of cold feet with Silicon Valley home buying:
This undercurrent is not being widely reported but we are experiencing it in our real estate practices as a few things have been taking place.
First, a larger than usual number of transactions have been falling through. Many of these, though, are not recorded on the multiple listing service, as they take place right after an offer is accepted, so the listing agent and sellers turn to one of the other bidders and put them into contract within hours. Because they aren’t recorded, it’s impossible to track – but the stories are out there of this happening more now than a year or two ago.
In other cases, offers are written and submitted but withdrawn before they could be countered or accepted.
And in others, buyer agents say that they will be submitting an offer, but on the day of offer presentation, the home buyers back out and the offer is never submitted.
In my experience, all of these things are happening “more than normal” right now. A lot of it is not easily measurable.
Symptoms of cold feet to come
Home sellers want to feel confident when they accept a contract that it will stick, both because they don’t want the work or emotional upheaval associated with a transaction that falls through, but also because often the best price is the first price. When a home ‘resells’, most of the time it is for less than the origanlly accepted bid.
For that reason, smart listing agents are looking for the symptoms of cold feet. They’d rather not get their sellers into contract with nervous buyers who will change their mind about buying the house or condo.
Symptoms of nervousness about the property at an open house:
- Dominating the listing agent’s time with incessant and low-level questions – best to give most of your questions to your own buyer’s agent, who will help you with them. It’s good to ask about the home, the reports and so on, but you don’t want to take so much of the Realtor’s time that he or she cannot talk with others there. Think balance both in terms of the time and the nature of the questions. You want to present yourself as reasonable and easy to work with.
- We often say that the longer a buyer stays, the more likely he or she is to write an offer. This is true, up to a point. Buyers who come to an open house and stay for 2 hours, or who make 4 or 5 trips to see the house go from looking interested to appearing unsure.
Symptoms of nervousness about the property (your potentially cold feet) when your offer is submitted:
- Sending in an incomplete offer and supporting documents. If the listing agent requires proof of funds, provide it. If the disclosures are to be signed, do all of them – not just the cover sheet. Aim to be thorough, it will present you as serious. It will also show that you are not a pain to work with, that you and your Realtor can follow directions and that the listing agent won’t have to chase down the paperwork later. Go the extra mile, it helps!
- Submitting an offer package “last minute”, without the buyer’s agent giving advance notice that it’s coming. Related to this is seeing the property and reviewing everything well in advance, but only deciding a few hours before the deadline to actually write, sign, and submit the bid. The serious buyers who are rock solid are the ones who know early on that they want the property and are committed to it early on. Their buyer’s agent will let the listing agent know long before offers are due that these home buyers are going to bid on it. One agent recently told me “my buyers are madly in love with the house” many days before the offer due date. This makes a big impression on sellers and their agents.
- If the buyer’s agent needs to call every few days to see how things are looking, it usually hints that the buyers are not too sure or that they will only write an offer if there’s limited competition. The truly sure buyers plunge ahead despite competing bids or the lack of them.
Want to buy a home? Try not to come across as skiddish to the listing agent! Your cold feet may cost you the home, even if your offer’s got the highest price. Home sellers and their agents want to feel confident that you will close on the sale if your offer is accepted. Present yourself as serious, capable, reliable, and easy to work with and your odds of success will be increased. At the end of the day, it is always “price and terms”, but never underestimate the influence that your behavior and your real estate agent’s behavior play into the overall package, because shaky buyers may not close the sale, but home buyers who are rock solid and madly in love with the house will.
Lastly, in an appreciating market, as we have right now, it should be noted that often the next house or townhouse or condo will be more costly or in worse shape than the one you could not decide to get serious about. Stay nervous too long, and you could ultimately really impact how much home you can buy at all. Worse yet, take too long and you may price yourself out of the market entirely.
Recently an old friend asked me why some Realtors are on Zillow but not all Realtors are found there. She was wondering if perhaps they weren’t really Realtors if they weren’t on that site. This is a very smart lady, and I thought if she was confused about it, anyone could be. So today I wanted to go over that question.
When you see a real estate agent’s name and image on Zillow, it’s either because that person is the listing agent of the property being viewed, meaning that he or she represents the seller of that home, or is someone advertising on Zillow in that zip code. The same applies with Trulia and nearly all online real estate portals or websites.
Why do some Realtors or real estate licensees choose to spend their advertising dollars on Zillow, Trulia Yelp, Angie’s List, FindTheHome, Movoto, Redfin, etc., and others do not?
Simple: it is how they decide to run their business, and how they expect to see a return on investment.
Often consumers believe that Realtors just help peopole to buy and sell homes. It is true that we do that, but we are also business owners. We spend time “on” the business, planning its growth, creating what should be future business, paying our work related bills. We need to budget carefully and allocate our marketing and advertising dollars wisely or we end up with little to show for our hard work. Real estate is an expensive business – agents (usually) split income with a broker, pay business fees (thousands of dollars per year) to that company, pay dues for the MLS and Realtor associations, and many other things. It is not uncommon for real estate agents to spend 20-40% of their net (after splitting with their broker) on marketing costs (fliers for listings, postcards, the for sale signs, photography, print ads, online ads and so on).
For some people, having an ad on the San Jose Mercury’s website, or Facebook, or any online site seems like a good idea and will help clients to remember that Realtor. For others, their main marketing is print advertising, open house work (more time than money), or door knocking, or cold calling, email marketing, video email marketing, blogging, social media marketing, contacting for sale by owners or expired listing home owners, or simply keeping in touch with their sphere of influence and requesting referrals from them. For most, a solid business plan includes several sources of new clients at all times, so most agents do some sort of combination of these or other avenues to grow their business.
Zillow is a very popular real estate site for home buyers and sellers all across the U.S. Many real estate agents have decided that advertising there will bring them business. Others would rather spend marketing dollars elsewhere. It is neither to their credit nor to their discredit if they advertise on that site or any other. It’s simply a business owner aiming for a good return on dollars spent. There are good agents found on those sites and there are good agents who will not spend their money on those sites. Don’t be fooled into thinking that being on them makes a Realtor better, or that being off them makes a Realtor worse. They are just agents who spend their money differently to grow their business.
$14,650,000 : 750 N 23rd ST, SAN JOSE0 beds, 0 baths
$15,000,000 : 470 Boynton AVE, SAN JOSE0 beds, 0 baths
$3,650,000 : 171 Roundtable DR, SAN JOSE0 beds, 0 baths
$5,100,000 : 650 S 8th ST, SAN JOSE0 beds, 0 baths
$5,588,000 : 2068 Biarritz PL, SAN JOSE5 beds, 5 full, 2 half baths
$2,595,000 : 4075 Soelro CT, SAN JOSE6 beds, 5 full, 1 half baths
$4,999,000 : 20750 Lost Ranch RD, SAN JOSE5 beds, 6 full, 1 half baths
$6,888,888 : 1724 Dry Creek RD, SAN JOSE6 beds, 6 full, 4 half baths
$3,499,000 : 5681 La Seyne PL, SAN JOSE5 beds, 5 full, 1 half baths
$2,899,998 : 551 Avalani AVE, SAN JOSE0 beds, 0 baths
See all Real estate in the city of San Jose.
(all data current as of 5/29/2017)
Listing information deemed reliable but not guaranteed. Read full disclaimer.
“When in doubt, disclose” is the advice that real estate and legal professionals use as a guiding principal in home sales. And yet many sellers forget or miss things that should be told to the buyer, and some listing agents are a bit sloppy in reviewing their clients’ disclosure paperwork. It is not uncommon to see questions unanswered or only partially answered. The home owner may presume that if the disclosure paperwork was done wrong, the Realtor hired to help market and sell the home will catch it. Would that it were so, but too often, that is not the case.
To avoid problems later, whether small or big, it is best to be thorough and careful while making your disclosure.
Small problems are created by seller (and listing broker) omissions when the paperwork gets kicked back for clarification or to complete the needed response. Bigger problems are forged when a sale is nearly closed and a new disclosure is made – introducing a brand new 3 day “right of rescission” for the home buyer. Worse yet is something substantial which is only brought to light after the close of escrow. At that point, it’s not an inconvenience, it risks being costly and time consuming to resolve it.
The State of California requires that the Transfer Disclosure Statement or TDS be filled out in most realty transactions. The intention of the form is to help you, the property owner, to disclose anything materially impacting value or desirability. That’s a tall order to fill, so other forms have been created to supplement the TDS, which has pretty much become Step #1 for disclosing defects and other issues to buyers.
What kind of things are often skipped in the real estate disclosure paperwork?
On the TDS, a very common error involves the question as to whether Continue reading
Home sellers appreciate it when their Realtor takes some of the workload off of their shoulders. In some places, we are seeing real estate licensees overstepping their professional boundaries, though, and acting as if they are general contractors and overseeing the complete rehabilitation of properties before they go on the market. Unless those agents are also licensed contractors, they likely are acting illegally, though.
A few years ago, I had a listing appointment in Milpitas with a home owner who felt that my job, as a seller’s agent, would be to get the home ready for market. “I work full time, I cannot supervise all these people coming in to fix up my house,” she said. I explained to her that I am not a licensed contractor and it would be illegal for me to take responsibility over the plumbers, electricians, and the rest of the trades. She truly believed that these functions were part of a real estate agent’s job and nothing I said could convince her otherwise, so I told her that I could not work with her in the sale of her home. Where did her expectation come from? Most likely, she’d heard stories of other people selling their homes and having the listing agents do the lion’s share of organizing and supervising the fixup-to-sell jobs.
When is a contractor’s license needed? It’s simple. Here is a quote from the California State Contractors Licensing Board:
“In California, anyone who contracts to perform work on a project that is valued at $500 or more for combined labor and materials costs must hold a current, valid license from CSLB.”
When in doubt, check with the Contractors State License Board!
What can the Realtor do legally to assist a home owner in preparing a property to sell?
As a listing agent who is not a licensed contractor, I can Continue reading