Archive for the ‘Real Estate’ Category

July 30, 2016


Many people enjoy single family homes that are not under the rules and regulations of an association.  However, there are some association practices that would benefit the average homeowner.  Every year the association prepares a budget for the upcoming year.  This is the basis of the Homeowners Association (HOA) dues.  As one would expect, the budget projects the costs for repairs and maintenance of the complex for the next twelve months.  But it contains something more.

A number of years ago, when HOAs faced expensive replacement costs, homeowners would be hit with a special assessment that needed to be paid immediately.  This practice created a heavy burden on many and California began requiring the associations to prepare reserve studies every three years.  From those studies, a portion of the dues is now earmarked for a reserve account.  So when the roof needs to be replaced, the pool resurfaced, or private streets repaved, the funds are already in a reserve account.

A homeowner can create a similar study.  First, make a list of major replacement projects that must be done every several years. Assign the useful life left on each project and the cost of doing that project today.  The annual reserve amount for a project is determined by dividing the cost by the useful life.  When a project is done, it gets added back to the list with a new useful life.  Costs should be updated every few years.

Project Remaining Useful Life (in years)  Cost  Annual Reserve (Cost/Life)
Paint exterior 3     5,000  $   1,667
Replace roof 15   15,000       1,000
Resurface pool 7     8,000       1,143
Replace water heater 4     1,200          300
Total Annual Reserves  $   4,110
Monthly Reserve  $      342


January 31, 2016

Much has been written about the housing market of the last decade, but many still have trouble understanding where we are now as opposed to then.  This is just a microcosm look at one home model built in the Wildwood area of Thousand Oaks, California.house_money_pile_shutterstock_83573653

The tract is Wildflower built between the years 1976 and 1979.  The model, a two-story, four-bedroom, three-bath home of 2,150 square feet, is called Plan 400 or Wild Rose.  This model made up about 30% of the tract which was comprised of four models and has proved very popular with a downstairs bedroom and full bath plus an indoor laundry.  Highs and lows reflect differences in locations within the tract and the degree of improvements made to individual homes.  Since this snapshot is dealing with one model, the median and average prices are very close.  The market still needs to increase over 10% to reach 2005 levels.


Year Low Medium Average High # of
2003    465,000    514,000   505,600    525,000 5
2004    615,000    672,500   707,167    835,000 6
2005    750,000    760,000   765,360    789,900 5
2006    725,000    746,000   746,750    770,000 4
2007    612,000    690,000   690,167    750,000 6
2008    505,000    587,000   568,400    635,000 5
2009    569,000    597,000   588,667    600,000 3
2010    600,000    602,500   602,500    605,000 2
2011    550,000    590,000   618,333    715,000 3
2012    515,000    535,000   535,000    555,000 2
2013    620,000    629,000   638,250    675,000 5
2014    612,000    616,000   616,000    620,000 2
2015    620,000    679,250   687,125    770,000 4

November 14, 2015

(or How to make it difficult for your neighbor to sell his home)abandoned_house_royalty_free_080916-026182-569042

  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

March 23, 2015

When considering buying a home, one of the first topics of conversation is the down payment (and closing costs) – how much is needed and where is it coming from. Do you know what’s OKAY and what’s NOT okay? While not everything is covered here, these are the most common money sources mentioned.

house_money_pile_shutterstock_83573653Acceptable Sources of Money

  • Deposit accounts, vested retirement accounts, stocks, bonds, trust funds
  • Gifts (minimum investment requirements)
  • Sale of asset (home, car, boat – proof required)
  • Secured loans: Vehicle, 401k, home equity
  • Rent-to-own: Credit toward down payment cannot exceed the difference between Market Rent and the Actual Rent paid for the last 12 months.
  • Seller contributions: Certain percentage of the sales price depending upon LTV (loan to value ratio) & Occupancy
  • Down payment assistance: Grant funds or community loans

Money in MattressUnacceptable Sources of Money

  • Undisclosed, interested-party contributions
  • Payment abatements
  • Sweat equity
  • Funds that have not been vested
  • Personal unsecured loans
  • Cash

The bottom line – Buyers will have to PROVE with documentation the source of their Down Payment funds. “Unacceptable sources” of these funds make it difficult to get approved for a mortgage loan. For this reason, speaking with a loan professional should be at the top of your To-Do list when contemplating the purchase of a home.

Rich and Jan McMillen

March 21, 2015

Water Heater 1Effective April 16, 2015, higher energy factor ratings will be required by the National Appliance Energy Conservation Act (NAECA) on virtually all residential gas, electric, oil and tankless water heaters.

For homeowners, these changes will ultimately result in a better, more efficient product with lower operating costs, but the upgrades come with some cost. Changing the capacity and insulation factor of the water heater increases overall size of the unit. If your water heater is installed in a tight space now, there is a good chance that the new models will not just slide into place. This might mean relocating the water heater to a new location or retrofitting the current space to accommodate the upgraded model. Upgrading the venting to the new standards also affects replacement; expect increased installation times to adapt current venting to new EF requirements. The addition of the new electronics could result in increased maintenance costs due to increased complexity of design. Expect a few extra visits to fine-tune the water heater for optimum performance and possibly working out the bugs in new technologies.

When products become more complex, it is less likely that they will be purchased and installed by the do-it-yourself consumer. Also, some homeowners may now take notice of tankless technology as it already incorporates the demands of the new NAECA guidelines. The units are wall-hung, meaning that they will readily fit into tight spaces that cannot accommodate the new and larger tank water heaters.

 Rich and Jan McMillen

October 30, 2011

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

October 13, 2011

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

September 5, 2011

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

September 1, 2011

 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


August 30, 2011

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