THINK TWICE ABOUT ATTIC AND RAFTERS STORAGE!

A man in Michigan is suing his in-laws because he fell through their attic helping them retrieve Christmas decorations.  So we are using this opportunity to remind everyone most attics are built for one purpose – to hold up the roof.  The rafters and trusses are designed to support the weight of the roofing material.  They are not normally engineered for the weight of stored items.  Stressing the trusses, rafters, and joints beyond the structural integrity they were designed for can cause damage and ultimately failure of the roofing system.

Unfortunately, many people think that the attic and the rafters in the garage are great places to store stuff.   They often lay wood flooring in the attic and will install a ladder to create permanent storage space unconcerned with the weight of the items they store.  We have seen boxes of books and paper records, furniture and more stuffed into these spaces.

To compound the problem, homeowners often wish to promote an attic storage area as a feature of the house when they list it for sale. They don’t understand the potential future liability of promoting this illegal storage space in the event that the trusses are structurally compromised later by the unwitting buyer.

We recommend homeowners not to utilize their attics for storage; and when selling their home, never advertise it for that use.

Rich and Jan McMillen

www.TOHomes.com

 

WHEN IS A WIRE TRANSFER NOT A WIRE TRANSFER?

This was one of the easiest short sales we have handled until today! 

Last Monday our clients signed their loan docs so escrow could close Friday.  All they had to do was wire the rest of their down payment and closing costs to the title company.  Before leaving the office, the buyers were given the wiring instructions to give to their bank.

Being a techie and doing most of his banking online, he was used to sending wire transfers to family through the Bank of America website.  So as soon as he got to his computer, he completed the online form and felt comfortable that he had completed the task.  Unfortunately, what he actually sent was an ACH (Automated Clearing House) payment which is commonly called a wire transfer though that is not correct.

Though both ACH payment and the wire transfer are performed through the Federal Reserve Bank System, each is handled by different departments at a bank.  Also, a wire transfer is the movement of funds in real time.  Escrow usually has these “good funds” in a matter of hours so the transaction can proceed immediately.

The ACH payment is a batch-process; it is stored and forwarded for future settlement.  In other words, it takes longer (in this case three days) and they are not “good funds” as required by the title company.  Therefore, their wire was rejected today by the title company and sent back to Bank of America.

Our clients were told by a bank clerk that it could take up to a week for the funds to be put back into their account and then properly wired.  Unfortunately, that runs afoul of the deadline for closing as set by the conditions of approval for the short sale by the seller’s mortgage holder.

Following our advice, our clients went to their Bank of America branch and talked with the manager this time.  They were there for two hours as the manager not only talked to her ACH department, but the one at Union Bank (the title company’s bank).  She verified that the latter had received an authorization to return the funds which are to be transferred back tonight.  Once received, the funds will still need to be cleared through the electronic fraud department and reviewed, but there is now an escalation process in place.

The manager will be monitoring the situation tomorrow, and will execute the correct wiring instructions as soon as the funds are available.  At worse, this will push the closing until Tuesday, but we will still be on this side of the deadline date.

Rich and Jan McMillen

www.TOHomes.com

TOP TEN WAYS TO LOWER THE VALUE OF YOUR NEIGHBORHOOD

(or How to make it difficult for your neighbor to sell his home)

1. Don’t mow the grass or water it.  Two foot high dead weeds are always a neighborhood downer.
2. Let juniper hedges and ivy overgrow the public sidewalks.  This will keep nosy people from walking past your house while giving rats a nice place to live.
3. Park all your cars and other vehicles on the street.  Come on – you need your garage to store your beer can collection and the driveway is for your skateboard ramp.
4. Have your dog bark incessantly – day and night.  Better yet – let him go on a morning romp through the neighborhood sans leash, of course.
5. Turn up the volume on your music and TV especially when suffering from insomnia.  If you can’t sleep, why should anyone else?
6. Don’t clean your pool.  Mosquitoes are a great way to scare away pesky humans.
7. Why replace your wood shake roof just because it’s leaking.  After all, isn’t that what pots and pans are for?
8. Don’t paint your house, fix broken windows, replace the banged up garage door, take down holiday decorations, or bring in the trash cans.  Who in their right mind would want to buy a house in close proximity to yours?
9. Don’t replace the almost non-existent asphalt driveway as your neighbors have.  Use the money instead as a down payment on a four-wheel drive vehicle for those rainy days when the mud makes it difficult to get to your front door.
10. Never smile or have a kind word for potential neighborhood buyers.  Let’s face it – no one’s Dream Home includes surly neighbors.

Just remember these actions can come back to bite you.  If you should need to refinance, take out an equity line, or sell your home, your value will be based on neighborhood sales during the past few months.  If your actions or neglect caused prior sellers to have to accept lower values for their homes, that will lower the value of your property as well.

Rich & Jan McMillen

www.TOHomes.com

THE TENANT TRAP

Landlords love a good tenant.  You know the tenant that pays his rent on time and rarely complains.  In fact, maybe the tenant even takes care of minor repairs without involving the landlord.  An owner doesn’t want to lose a tenant like that so he may offer rewards to stay.  The most common incentive is not raising the rent.  Though this is a good thing for a renter, it could create a financial trap for him in the future.

In the Conejo Valley, the median rent for single family home with three bedrooms and two bathrooms was $2,200 in 2005.  Currently, it is now $2,500.  This is a two to three percent annual rent increase for the area.

If a tenant leased his home in 2005 and had no rent increases during the last several years, his budget may be squeezed if the landlord did decide to bring the rent to market value or to sell the house requiring the tenant to find another place to live.  For a home based on the median values, the tenant would now be required to pay an additional $300 a month ($3,600 a year) for a similar property.  For a tenant that has rented his current residence for ten or fifteen years with minimal or no increases, the bite can be financially devastating.

We believe tenants need to stay abreast of the rental market even though they are comfortable in their current homes.  We recommend to our rental clients that, if their rent is not increased each year, each month they put aside an amount equal to what a rent increase could have been.  This way, once the tenant is facing a higher cost, he has already budgeted for it.  He will even have accumulated some savings to help with the additional costs of a move if necessary.

If a tenant does have their eye on buying someday, this Rent vs. Buy website can be helpful in deciding if it is time to go from being a Tenant to a Homeowner.

Rich and Jan McMillen

www.TOHomes.com

USERS, MAINTAINERS, IMPROVERS – OH, MY!

After viewing thousands of homes over the years, we have noticed that there are three basic types of homeowners: Users, Maintainers, and Improvers.  You know them; you see them; they live in your neighborhood.  Some times they live in the same house together.

The User tends to defer maintenance as long as possible.  Problems are addressed only when they reach the threshold of being difficult to live with.  Even then, a bare minimum or a patch repair will be done.  Holes in walls and leaky faucets are likely to go unnoticed.

However, when a door knob on the double front-entry doors is no longer functional, the User will replace it, but it may not match the rest of the hardware. There may be evidence for months that the water heater is not working properly, but until there is no hot water in the morning shower, it is of minimal concern to the User.  Once the problem needs to be addressed, a permit will probably not be pulled, and the installation may not be to current code.

Over time, a User’s home becomes the “fixer”.

A Maintainer repairs problems immediately.  If a light burns out; he will immediately put in a new bulb.  If a door knob is loose, he will tighten it.  If it needs to be replaced, he will make sure that all the hardware matches.  If a tile gets cracked, and a replacement would be too noticeable, he would redo the whole counter or floor.  Maintainers often strive for energy efficiency so they may do a straight swap of single-pane windows with newer dual-pane ones.

If the original cabinets are starting to show too much wear, these may get a new face or even replaced.  However, the results are rarely above current builders’ standards.

Though a Maintainer’s home shows “pride of ownership”, he is often disappointed when buyers don’t show the same enthusiasm for his choices and don’t make the same offers they do on an Improver’s home.

The Improver is every REALTOR’s^® dream.  Compared to new construction, hers is the home with the builder’s upgrades.  An Improver told us once that the interior and exterior of a home should be changed at least every twenty years to keep it at current standards and styles.  She does a project every year.  Sometimes it is just one room, such as the kitchen or the family room, and sometimes it a more encompassing endeavor.

One such project entailed having the acoustic ceilings removed.  She did it for the more contemporary look; but she had to pay more since they tested positive for higher levels of asbestos.  Despite the extra cost, she said it was worth it.  Often Improvers know that they will not get dollar for dollar out of all their improvements, but they do it for the pleasure equity.

An Improver goes the extra emotional step when tackling a project.  Instead of just replacing new windows for old, the living room may get a bay window or a picture window while the kitchen will be brightened by a garden window.  French doors replace original sliding doors.  Their curb appeal is given an extra boost when the cracked driveway is replaced with stamped concrete or pavers.  They are not content to just paint a room; they add crown molding.

An Improver’s home is usually the one with the “WOW” factor.

Rich and Jan McMillen

 

www.TOHomes.com

SO YOU THINK YOUR HOME IS IN A TRUST

 Many homeowners have their homes in their trust for tax and legal purposes or to avoid probate.  However, when refinancing a home, a lender will usually require the property to be taken out of the trust and put back into the owner’s name so the owner will be responsible for the loan, not the trust.

 This is well and good, but homeowners often forget to put the property back into the trust once the refinance is complete.  This can cause huge legal and tax consequences!

 Recently we sold a home that had been in a trust until the owner decided to take advantage of low-interest rates and refinance.  At that time, she signed in front of a notary a quit claim deed taking the property out of the trust and another one putting it back in.  The former was recorded with the trust deed and the latter was put aside until that transaction was finished.  Unfortunately, it was filed away with all her other paperwork.

 Sadly, a few months later, she died.  The heirs were also the subsequent co-trustees of the trust which they believed was properly in place.  They put the home on the market and very quickly a buyer was found and escrow was opened.  Everything was going smoothly, getting past the buyers’ physical inspection of the home and their loan process.  Then the call came from the title insurance company – no deed was ever recorded with the county putting the property back in the trust!

 Before considering the alternative, probate, the heirs decided to search their mother’s paperwork hoping that there was a non-recorded deed somewhere.  With the help of friends, they went through boxes upon boxes taken from their mother’s home.  Finally they located the paperwork refinancing the home, and in that stack, they found an unrecorded notarized deed! Subsequently, it was recorded to officially put the house back into the trust.  There was an extra step or two required by the title insurance company, but the transaction closed soon after.  The sellers were happy and the new owners thrilled.

 We recommend that homeowners seek legal and tax advice from an attorney and/or an accountant regarding the method of taking title to real estate.  If you do put your home in a trust and then refinance, make sure that the deed putting your home back into the trust is then recorded.

 

Rich &Jan McMillen

 

www.TOHomes.com

 

TOP TEN PHYSICAL INSPECTION ITEMS

Selling a home can have a lot of emotional ups and downs.  That roller coaster ride does not end with a signed contract.  Sellers have been known to lose their lunch on the Physical Inspection Plunge.  Safety issues will usually be recapped in a report and these are especially of concern to buyers.

Following are ten common problems discovered during the physical inspection:

1. Furnace – Flex gas line entering furnace is not to code as it can break during an earthquake
2. Electrical – GCFI missing in kitchen, bathroom, garage, or outside; outlets not properly grounded or polarities reversed; wiring that is not up to code (e.g. added garage lighting and automatic garage door openers); open junction boxes (often found in the attic)
3. Water Heater – not properly strapped, anchored and braced; pressure valve release not exiting to exterior.
4. Fireplace – cracks in fire box or chimney; gas fireplace missing a damper clamp; spark arrestor missing on chimney.
5. Dishwasher missing air gap. 
6. Smoke detectors missing or non-functioning.  There is no carbon monoxide detector (now required). 
7. Windows and doors do not open, close and lock easily.
8.  If there is a pool or spa, the gates to yard are not self-closing. 
9. The door to garage is not fire-rated and self-closing. 
10. Holes are in firewalls between garage and house.

Since these are safety issues, owners should keep themselves safe and not wait until their home is on the market to address them.  Protect yourself today!

 

Rich & Jan McMillen

 

www.TOHomes.com

 

HOW WILL CALIFORNIA PAY FOR A FIRST-TIME BUYER CREDIT?

The California First-Time Buyer Tax Credit is designed to be an economic stimulus plan.  Following is the typical scenario that the State is banking on:

Several years ago, Mark received an inheritance from his grandfather and decided to purchase a two bedroom, one bath condominium for $150,000.  This home served him well, but three years ago he married Jane and last year they had a son.  Suddenly, there is barely room to turn around.  So Mark and Jane have made the decision to buy a larger place.   Little did they know that their move could help stabilize their state’s economy.

Mark and Jane live in California where the first year’s property tax basis is the purchase price due to the infamous Prop. 13.  Thereafter, it goes up only two percent each year.  As time passes, long time owners usually see that they pay substantially lower property taxes than their newer neighbors.  (A declining market may give a temporary retrieve, but that would be another blog.)

In order to purchase a new home, Mark and Jane need to sell their condominium.  Cindy is a first-time buyer.  She falls in love with their home and purchases it for $200,000.  Cindy is excited because she qualifies to receive a tax credit of up to $10,000 for first-time buyers in California that will be spread over three years, or a maximum of $3,333 a year.

Now Mark and Jane are ready to find their new home.  Tom and Patty bought a three bedroom, two bath townhouse ten years ago for $250,000.  Their three children are now all in school so Patty has resumed her career as a nurse.  With the extra paycheck, Tom and Patty want to buy a four-bedroom home with a yard for their dog Scooter.  They are thrilled when Mark and Jane fall in love with their townhome (“It has a garage”) and buy it for $350,000. 

So now Tom and Patty are house hunting.  Their search leads them a lovely four-bedroom home owned by Hal and Sylvia who bought it fifteen years ago for $300,000.  They strike a deal for $500,000 allowing Hal and Sylvia to look for their dream home. 

With a property tax rate at one percent of tax basis (again Prop. 13), these three transactions will increase annual property tax revenues by $3,500, easily covering the annual first-time buyer tax credit and after three years it is all tax revenue.  But let’s take the chain one transaction further.

Hal and Sylvia have spent twenty years building a business from nothing.  Their hard work has paid off and now they want to reward themselves by buying their dream home.  They find a beautiful ranch home on a third acre of land with a three-car garage, RV access, views, and a pool.  They immediately offer Linda, the original owner, $800,000.   She happily accepts it and cashes out to move to Colorado to be close to her son and grandchildren.  She and her recently deceased husband had purchased the place thirty years earlier at $300,000.  This sale is now an additional $5,000 in the state’s coffer. 

Further each of these transactions will also create additional revenue that could be subject to taxation, i.e. sales commissions, escrow fees, title insurance premiums, inspection fees.  However, it is most important for the state to stabilize the property tax base if they are to stabilize our economy.  In the process, California will be helping every one of its homeowners retain value in their homes. 

Buyer	Purchase Price	Tax Basis Before Sale	Increased Tax Basis	Increased Property Taxes
Cindy	200,000	150,000	50,000	500
Mark & Jane	350,000	250,000	100,000	1,000
Tom & Patty	500,000	300,000	200,000	2,000
Hal & Sylvia	800,000	300,000	500,000	5,000
Increased Property Tax Revenue				8,500

 Rich & Jan McMillen

www.TOHomes.com

RENTER BEWARE!

We received a phone call from a woman yesterday asking us about a rental of a property we had listed.  Rich told her that it was for sale but not available as a rental.  She told us that she found an ad for a four-bedroom rental over 2,500 square feet listed in craigslist.com for only $1,300 monthly (an absurd amount for this area).  She immediately emailed rent1own@gmail.com as instructed in the ad for more information.  She received instructions to go by an address which is our listing.  Lucky for this woman we had just put our sign up on the property (until then it had only been on internet sites) so she decided to call the number listed on it instead of sending an email.

Due to the current economic times, there have been a lot of rental scams in craigslist.com lately.  There are always people out there looking for a way to make a quick buck by taking advantage of others.  In this case, an unscrupulous person disguised our listing (used our description but not our pictures) as a rental trying to get potential victims to send money or cashier checks in the guise of security deposits and first month rents.  By posting low rents, scammers know that some people will send the money before seeing the inside of the property to secure it as soon as possible.  The scammer is long gone before the victim even knows that they have been victimized.

Rich & Jan McMillen

www.TOHomes.com

A BIRD IN HAND!

No day is typical in the life of a real estate agent.  Recently, we had a home in escrow that needed to be fumigated for termites.  Normally not a problem, but in the rafters of a breezeway between the house and garage, there was a nest of turtle doves.  When the buyers first viewed the home, they spotted the mother on her nest and felt it was a sign of good fortune.  Now that two fledglings faced imminent peril, the buyers were concerned of bad karma.  Therefore in the days before the tenting, we were on the phone trying to find someone to rescue these baby birds to no avail.  So an hour before the tenting crew was to arrive, we attempted with virgin gloves to remove them ourselves.  To our wonder and jubilation, just as we reached for them, they took flight!  The house was fumigated, escrow successfully closed, and the buyers are settling into their new home.

Rich & Jan McMillen

www.TOHomes.com