Property Buyers do not like to be surprised by undisclosed "material" facts after a sale has closed.  Most real estate lawsuits are the result of Sellers not telling the Buyer about all known (current and past) issues regarding the structure and the land prior to the close of escrow.

Exposure:  If the Seller does not disclose a material fact about the house, you can bet the neighbors
will do so.  Sellers move away, but longtime neighbors love to discuss known defects with a new owner.  That is how many issues are exposed.

Sellers have a serious obligation to disclose in writing any and all defects, (a.k.a. "material" facts) which may or may not ultimately affect the transaction.

RULE #1: 
       If in doubt, disclose it!
Ask yourself:  If you were the Buyer would you want to know?

REALTORS® provide several disclosure forms to Sellers when the property is listed.  Completing the questionnaires must be taken seriously to avoid a lawsuit.

Tips to follow:
1. Spend time reading the numerous real estate transfer disclosure statement forms, and make sure you understand every question before answering.
2. Make sure you use the most    current disclosure forms available.
3. Do not allow anyone to fill out the forms who is not on the title*.

*NOTE:  In a property sale on behalf of a decedent, the Trust is exempt from completing disclosure forms unless the Trustee is aware of a material fact, which then must be disclosed.

4. Specifically state every detriment
you know about the house and the property, presently or in the past.
5. Disclose very clearly if you, or the previous owner, did not get permits* for additions or modifications.
*IMPORTANT:  A permit is worthless if it is not "Finaled" or signed-off by a City inspector after the work is completed.

6. Disclose neighborhood noise   issues or other nuisances.
7. Always obtain a copy of the reports after the Buyer has signed, prior to the closing.

Correct it:  If you are in the middle of a transaction, and escrow has not closed, go back and amend your disclosure statement if a fact is missing or incorrect.  A change may result in principals renegotiating, but whatever it costs the Seller now will be much less than winding up in court. 
Excerpts taken from: Broker Agent News.

Double-dip is this year's buzz word for another possible downward turn in the economy and housing prices.  Following the financial crash at the end of 2008 home prices fell about 30% throughout CA, restoring affordability to a once wildly overvalued market.

Since the spring of 2009 certain U.S. regional areas have improved modestly.  However, the L.A. market has fared even better with the median price rising about 10.8%.  But, now that the tax credit incentives have expired, some analysts expect the sputtering demand (L.A. volume is down 20%) and bloated inventory to trigger a housing recession with prices possibly slipping back to below the April 2009 lows.

What is causing the stagnation in the U.S. housing recovery with mortgage rates at 50-year lows?  Here are six reasons why the housing market has not recovered, according to a U.S. News article:
1. Lack of job growth, which holds the key to a recovery.
2. Creation of new households has stymied with unemployed families moving in with others.
3. Foreclosures continue to add to an over supply of inventory.
4. Credit qualifications are tight for a borrower although money is available.
5. Uncertainty of home price stability for new Buyers.
6. Buyers who need to sell a home to purchase another have uncertainty in an unstable market.

That said, there is no indication that the Los Angeles area need worry about a double-dip in prices this year.  The land of sunshine with a plethora of housing "deals" will continue to keep prices creeping upward.  Although unemployment in CA is the third highest in the nation (Nevada and Michigan rank one and two), there are still plenty of qualified buyers and investors who are actively looking for a home.

Keep in mind:  SoCal had the longest housing upswing ever witnessed with continuous years of double-digit price increases.  That screeched to a halt with a deep recession, second only to the Great Depression.  As a result the recovery will take longer.  But, real estate transactions continue in L.A.  If you are motivated to move, then sell.  If you want to buy, then take advantage of this market and the available deals. Buyers:  your time is now.

Each property sale normally includes a Wood Destroying Pest & Organisms Inspection conducted by a licensed inspector.  Each report, normally obtained by the Seller, is broken into two areas: Section One (evidence of issues) and Section Two (potential issues).  Sellers usually pay for the work in Section One, but this is negotiable.  Buyers are expected to pay for Section Two.

Prior to funding a loan many lenders require that the Section One work be completed:  Fumigating the house, repairing damage and other reported issues .
Areas of concern include:
1. Subterranean and dry-wood termite infestation and damage
2. Excessive moisture in sub areas from rain or sprinkling system
3. Leaks in the roof or around the eaves
4. Leaks under the house stemming from the bathroom and kitchen areas
5. Substantial cracks in cement of garage or foundation (where critters can enter)
6. Dry rot or fungus on wood or any wood structure

Most of the above findings can be remedied without a problem, albeit costly at times.  What is cause for concern are dry rot or fungus issues on wood, when there is intertwined wood (i.e. trellises) or wood that is attached to something  (i.e. door and window frames).  When the report requires replacing wood, this type of work can lead to a domino effect of repairs.  What seems like a minor repair may be less costly to simply remove the whole structure (a wood overhang on a patio or a wood deck).

Sometimes fungus can be scraped off infected wood.  However, the Buyer will require the wood repairs to be primed and re-painted.  Matching colors to faded wood may require an overall paint job. 

When selling a home:
1. Get a termite inspection immediately by a registered company.
2. If dry rot or fungus is spotted, get a few quotes to determine the extent of repairs or replacement.  Often wood work is sub-contracted and costs may be estimates and exclude painting.
3. A report will note water drainage issues around the property which may need attention.
4. If there are inaccessible areas (packed garages), these should be cleared prior to inspection, as any Buyer will require a complete report.
5. Determine if it is cost effective or beneficial to remove the affected wood item prior to listing.  Or, declare upfront that the Buyer will be responsible for the Section One wood work as they may have plans to remove a deck or a trellis anyway.  Make it a non-issue with Buyers.

NOTE:  All inspection reports must be issued to a Buyer, no matter how many are obtained.  Each pest inspection is reported to the Structural Pest Control Board in Sacramento.

A wise property owner should have a periodic termite inspection to ward off major problems before any evidence is apparent.  Call me for trustworthy inspectors.

This column is normally devoted to specific residence information.  However, it has been such an unusual year, let's review what is going on with property sales in SoCal.  Starting with national headlines declaring the number of home resales are at a fifteen year low...not since 1995.

Here in SoCal, the number of closed sales declined 21% since last year, however, the median price increased 10.8%.  Local zip codes have generally witnessed single-digit price increases.

The major buzz this year is the increase in high-end sales over 2009.  As of mid-year there were 96 sales of $5+ million; 33 sales of $10+ million and four sales over $20+ million.  Overall, an 18% increase in high value estates since last year. 

National news does not necessarily apply to coastal regions.  One factor does apply overall - the Buyer "deal."  Interest rates are at 50-year lows and Buyers are finding extraordinary values.

With those two factors, why is volume down even in SoCal?
Unknown economic direction permeates hesitation everywhere. 

The City Council of Los Angeles approved one additional day for lawn watering, now three times a week instead of two.  Always be mindful of wasting water. 

Take time to personally ensure your sprinklers are working properly.  Check that water is spraying onto greenery, not cement.  Check for broken sprinkler heads to ensure water is not gushing into the air like a spouting whale.

As a  homeowner, take control and conserve water.

 

Sellers should obtain a wood destroying pest (a.k.a. termite) report and a retrofitting report immediately after listing their home for sale.  These reports and other Seller disclosures should then be submitted to the Buyer with the first Counter after an offer is submitted.

A Buyer will want to obtain their own specific inspections, so getting a general inspection in advance by the Seller is not necessary or required.

Deriving a property value is not a science, there are no absolutes.  Obtain five estimates and five different values will result for the same property.  A property valuation, or appraisal, is a guesstimate at best utilized by a lender to determine if a home is fund worthy; by a homeowner to substantiate an increase in basis and to learn about current values; or by a County assessor to adjust property taxes.

There are several ways of obtaining a valuation, and a few are worth discussing.

- Online Internet Estimates:  Zillow.com, Cyberhomes.com and Eppraisal.com are Web sites created in recent years to offer free home estimates.  The search is available to everyone by inputting a property address for an "online" appraisal.  What these computerized sites offer is an automated assessment of estimated value.  In other words an objective, black and white numbers only guesstimate based on area sales.  No consideration is given for upgrades, features or location.

- Out-of-Area Appraisers:  While professional appraisers are extremely important to the real estate industry, a licensee who is not familiar with the subject area can be detrimental.  Appraising a property too low means a possible deal breaker since a lender does not acknowledge market value.  Conversely, valuing a property too high means unrealistic Seller expectations, or property taxes that are out of line.  Professional appraisers often contact the listing agent to obtain specific input about the subject property.

- REALTOR® Valuation: 
Yes, even "seasoned" veterans can also be incorrect about a property's worth (remember, there are no absolutes).  However, a real estate agent has the best grasp on worthiness.  Agents know the area  and what Buyers want in homes today.  There are nuances of a property that can enhance or detract a home's value.

Depending on the purpose of a valuation there are certain things to note:
- Web site values are only a start, and can often mislead a property owner.
- Require a lender to use a local appraiser, which is a reasonable request.
- Always consult with a REALTOR® to assist in obtaining a property appraisal.  Ask to see the comps and an explanation of why each property was used in the estimate.  It is easier to speak to an agent than an appraiser or assessor.  

Foreclosures and Buyer tax credit incentives have little impact in the Westside real estate market.

Common transactions for financially troubled homeowners in this area are "short sales" when homes sell for less than the amount of the remaining mortgage debt.  Lenders agree to sell a property at a loss, but Sellers' credit scores still take a big hit.  Savvy Buyers can obtain the property for cents on the dollar, thus lowering property values in the area.

Tax credits were applied to homes under $800,000 or newly constructed, neither are easy to find in the Westside.