Sometimes a  friend will call or email me and say that he or she is buying or selling a house, has a Realtor but wants my advice about the real estate purchase contract nuances, analyzing comps, or any other real estate related question. Usually it’s someone out of my Silicon Valley market area, though a few times it’s been someone closer to home.

Most professionals don’t want to be asked to give professional advice when they aren’t going to be compensated – this is true for lawyers, doctors, and many others.  But it’s also true for real estate professionals, too.  The problem, though, is not really that some folks overstep the bounds of asking for a favor. Instead, it is a matter of ethics.

I cannot interfere or meddle if you or they have a Realtor.  This is part of our Realtor Code of Ethics:

Code of Ethics
The Code establishes time-honored and baseline principles that come from the collective experiences of REALTORS® since the Code of Ethics was first established in 1913. Those principles can be loosely defined as:

• Loyalty to clients;
• Fiduciary (legal) duty to clients;
• Cooperation with competitors;
• Truthfulness in statements and advertising; and non-interference in exclusive relationships that other REALTORS® have with their clients.

Non Realtor real estate licensees also have boundaries on what they can and cannot do, too.  One big area is that we are not supposed to advice outside of our areas of competency.  I feel pretty good about a lot of areas ranging from Santa Cruz to the south to Redwood Shores to the north and Fremont, Pleasanton or Livermore on the east bay plus all of Santa Clara County.  But I don’t know Sacramento real estate, Santa Barbara Real Estate or San Diego real estate, so it would be wrong for me to suddenly delve into those arenas.  Even more so if that friend or relative asking “for a favor” were working with a Realtor or other real estate licensee and my commenting would constitute interference.

Frequently I’m asked if I (or another real estate licensee or agent) can help a consumer to purchase a foreclosure.  There are some nuances to this answer, but in short, it depends.

There are several stages in the foreclosure related sales in California.  Often, homes somewhere in this quagmire are listed on our Silicon Valley area MLS or multiple listing service.  If a property is listed in the MLS, then yes, we Realtors can help home buyers with a distressed sale purchase.

1. Pre-foreclosure (where payments have been missed and a Notice of Default or NOD has been filed – often, but not always, these homes are on the market and included in the MLS.  If they’re in the MLS, I can help.  Often these are short sales (but short sales are not always in pre-foreclosure – they may not have missed any payments).
2. Trustee’s sale, or actual foreclosure on the courthouse steps.  No role for a real estate agent here.  There are some big caveats and warnings! First,  often what’s owed against the home is more than it’s worth and the only way to purchase a home here is to pay off all the debts (so it may not be much of a deal!).  Second, if you buy here, you get NO inspection contingency and must pay cash for the house.  End of story – no backing out.  Worse, you cannot inspect it ahead of time!
3. Bank owned or REO.  These are usually listed on the MLS and if so, I can help you with it.  Sometimes banks hold onto them between the trustee’s sale and prior to listing them with a broker.  Often this is only for a month or two but sometimes it’s longer.  If it’s not on the MLS, it’s very very hard, or maybe impossible, to buy it.

While it’s not hard to locate homes where owners have missed some payments, it should not be assumed that these houses are either for sale or that the owners have any intention of selling them.  In my opinion, it would be harassment if consumers showed up on their doorsteps trying to purchase a house where a payment has been missed.  Most, maybe all, of the residents there would be offended.  They may be trying to get a loan modification (a friend of mine got one approved last week!) or have family & friends helping them to get back on track. If it is not listed in the MLS (which you can find at www.MLSListings.com – the public portal of our agent multiple listing service), the odds are overwhelmingly against it being available to you.

Multiple offers have returned to many segments of the Silicon Valley real estate market.  We are hearing about them in Palo Alto, Cupertino, Mountain View – areas where newly minted IPO money is having an impact – but also in more modest, middle class areas such as San Jose’s Cambrian neighborhood. The trend appears to be spreading.

What Silicon Valley home sellers need to know and do to attract multiple offers

If you’re a Silicon Valley home seller, what do you need to know to try to get multiples on your home?  What should you beware of?  In short, here’s what needs to happen if you want to attract multiple offers on your home for sale:

1. The home must be turnkey, either fully remodeled or close to it – it must look like there’s nothing or very little for a buyer to do.  In addition to being turnkey, it must be squeaky clean and well staged! It needs to be comfortable – not too hot, not too cold. You want buyers and their agent to linger longer.
   
2. The price must be at or even under market value.  That is, you must be willing to price it aggressively.  Think it’s worth $1,050,000?  You might list it at $999,999 to get in under a major price threshold and to be the very best, most attractive property for the money. Yes, it might be under priced.  Over priced listings get either one offer at best or, more likely, none at all.
3. The property must be highly accessible. If it is hard to see, you probably won’t get multiple offers (and may get none at all).  (Please see articles on accessibility and on open houses.)
4. Finally, the property must be well marketed.  This includes a wide range of factors ranging from photographs, text, fliers, signs, and even the commission rate offered to the buyer’s side.

What Silicon Valley home buyers need to know and do to compete with multiple offers

If you’re a Silicon Valley home buyer, how do you win out in multiples without giving away all of your rights or overpaying for your house/home? (more…)

Silicon Valley home buyers who are looking for a good deal can’t help but notice that prices on short sales and bank owned homes are a bargain compared to regular sales in the San Jose area. But what exactly ARE they? What’s the difference between a short sale and a foreclosure? What are the risks involved in buying one of these in Santa Clara County? Today we’ll have a look at the various types of distressed properties and the risks associated with purchasing each.

What are short sales?

Short sales are when home owners need to sell their home but there’s not enough equity in the property to pay off the loans and closing costs.  So the only way they can sell is if the bank agrees to accept a “short payoff“.  The bank or banks get paid in short, hence short sale.

Lately I have been given a lot of incomplete FIRPTAs from listing agents in & near Silicon Valley with the request (or demand) that my buyers sign them.  They explain “we don’t have to provide the social to the buyers anymore”.  These well intentioned agents have mixed up two choices and provided something of a hybrid that cannot be used to satisfy the requirement of the form. Hence this post.

It’s not just happening to me and to my buyers. There’s an immense amount of confusion about how to properly complete and handle the FIRPTA form in California real estate sales.  Most of it would be solved if people (buyers, sellers, realty agents, transaction coordinators and brokers) would simply read it and not assume what the requirements are.  (Silicon Valley Realtors have long heard local real estate trainer Guy Berry admonish us in class to simply read the forms.  He scrawls in large letters on the board for his class on the purchase agreement: What does the contract really say?)

So let’s do that.  Let’s see what the Seller’s Affidavit of Nonforeign Status And/Or California Withholding Exemption really says. To begin with, I uploaded the 2 page FIRPTA document onto my Valley of Hearts Delight website, so you can access the entire document by clicking on the link (it will download into a new window – it’s a pdf).  You might be surprised, especially if you are taking your information second-hand and have not read this form yourself in the last two years. (And if in doubt about any of it, please contact a real estate attorney for clarification.)

What is the purpose of the Seller’s Affidavit or FIRPTA?

Why do we have this form at all? The very first part of page one answers this question. (Words in red are mine.)

Internal Revenue Code (“IRC”) Section 1445 provides that a transferee (buyer) of U.S. real property interest must withhold tax if the transferor (seller) is a “foreign person”.  California Revenue and Taxation Code Section 18662 provides that a transferee (buyer) of a California real property interest must withhold tax unless an exemption applies.

So for starters, we are told that buyers must withhold tax from the sellers unless an exemption applies when they buy real estate in California. That’s what this FIRPTA form is all about: it tells the buyer that there is an exemption.  By completing this form and providing it, the seller is giving an affidavit that he or she is not subject to the withholding tax for either the Federal Government or for the State of California. The buyer is off the hook for holding money back in escrow from the seller. (more…)

Homeowners who are in financial trouble with their property sometimes wait too long to seek help, and then cannot mitigate the situation with a loan modification, a short sale or a deed in leiu of foreclosure. They wait so long and miss so many payments that significant harm is done.  The embarrassment, the sense of failure, the significant feelings of loss can keep home owners from reaching out for advice and guidance. This is happening on a big scale and is happening within my own close circle of loved ones too.

Recently a friend of mine, with whom I’ve done several transactions, informed me that she’d done a short sale with her home through a local attorney and hadn’t wanted to bother me with it, though she knew I’d have been willing to help.  (She was right: I would have.)

I was stunned on several counts, most of all that we hadn’t talked before she did it; I truly think it matters tremendously to do a good amount of information-gathering, and talking with trusted sources, before pulling the trigger on something big like this.  But very often, people become more private when under financial pressure. (Others are virtually in denial.)  This really just makes things worse since they may make huge decisions with insufficient information.
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The other day I was in the car with my uncle, a Jesuit priest and a very wise man. Our conversation turned to the ancient Greek philosopher Aristotle, and my uncle noted that for Aristotle, the most important thing was the type of question asked.

We chatted about this awhile (I had studied Aristotle in college, but hadn’t remembered this important point) and I realized that this is also very true with real estate and home buyers & home sellers right here in Silicon Valley today.

Let’s look at a few real estate questions and just think about where each one leads:

• What is the fastest way to…?
• What is the easiest way to…?
• What is the cheapest way to…?
• What is the most thorough way to…?
• What is the most careful or conservative way to…?

You can see what I mean.  So many times, people wanting to buy or sell homes start with certain questions…and they may or may not be the best questions. The questions above are the “how to” questions – what is the way to do whatever it is.

Here are some very different questions. Instead of the “how to do” questions, they are the “I want this outcome” type of questions:

• Where is the best school for my kids and their needs (or special needs)?
• What kind of neighborhood do I want to live in?
• What kind of agent do I want to hire to guide me?
• What kind of lender do I want to hire to assist me?
• When would I like to be in or out of my home?

Oftentimes, I’ll have a listing and will be working with the seller to get the home marketed and sold.  A buyer – who does not know me in the slightest – comes through an open house and asks me to help him or her or them to “write up the offer”.
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