Instant Offers and iBuyers

With advances in technology and new ways to utilize data, some companies have sprouted up to create different ways to sell your property.

Basically, they utilize automated valuation models (AVMs) to make quick offers on homes, allowing

them to close in a much faster than typical timeframe, and then resell them.

From a seller’s standpoint, it can eliminate some hassle and uncertainty, but with high “transaction fees” ranging from 7% to 14%, and the likelihood that they will sell the home for more than they paid you for it, you are simply exchanging that smooth and quick transaction for a portion of your equity.

Companies that offer this kind of service are only in limited markets across the country right now. They operate by having homeowners fill out a short questionnaire with information on their home. They feed that data into their AVM, which kicks back an offer price. They make the homeowner a cash offer to close in a short timeframe (typically about a week) and specify what the fee will be to proceed through to closing. Once they own the home, they will repair and spruce it up, and list it for sale on the open market.

It may be tempting to consider such an offer, but keep in mind that this is a straight numbers play. They are determining a price that allows them the room to cover the costs of the transactions as well as the repairs, while still making some profit. Their profit will either come from the fee you’ve paid or from acquiring your home at a below market price – although it could possibly be a combination of the two.

 n analysis on one company’s transactions showed they were selling homes at an average 5.5% appreciation, on top of their transaction fee. That’s a lot of money to leave on the table for a little convenience.

There are other companies beginning to test alternative listing models as well, utilizing technology and AVMs to make ‘instant offers’ on homes, or to help buyers acquire and move into their next home before selling their current one. As always, it’s important to read the fine print and understand what you are agreeing to before using the service.

Hi folks,
If you are going to be selling your home in the near future or are just curious about its value in today’s market, give me a call or use the button below. I will email you a comprehensive market analysis of your home. There is no obligation on your part and it is totally free.

My phone number is 760.476.9560.

What is my Home Worth

Not ready to move yet but want to keep an eye on your homes value, I have a monthly update that is customized to your home and neighborhood. Click the link below to see what is included in the report and to sign up:

Monthly Update

Pricing Your Home for Sale

Because pricing your house correctly is so important, I promised to tell you all about what to avoid and how to get it right.

First- what to avoid:

  • Advice from friends
  • Advice from real estate agents working in a different community
  • Zestimates

And… please do ignore everything you hear about what your neighbor got for / paid for a house in your neighborhood last year – or even 3 months ago. Markets can and do change rapidly, so those prices have nothing to do with today’s prices.

Your friends probably mean well, but unless they’re agents working in your neighborhood, the information they have will not be accurate. The same is true for real estate agents in other communities.

National news reports national trends, but real estate is always local. Prices are affected by everything from neighboring business, to the jobs market, to the school district, to nearby zoning, to the price of utilities, to views, to access to transportation, and more.

Two neighborhoods less than a mile apart can have very different values.

What about Zestimates? Aren’t they accurate?

No. They have the same problem. The computer program that generates those estimates can compare many things, but has no way to calculate the wide variety of details that affect price. Agents across the country have found that Zestimates can be as much as 30% off the mark – either way.

How can you get it right?

By hiring a real estate agent who is familiar with your neighborhood, and who will prepare a true market analysis, taking all factors into consideration. It’s much the same as a fee appraisal, because it is based on comparison to homes as much like yours as possible. It also takes current market conditions into account.

If you’d like to know the current value of your home, get in touch. I’ll be happy to prepare a market analysis, so you know just where you stand.

What is my Home Worth

Zillow’s Zestimate; How accurate is it?  

First of all, what is the Zestimate?

Zillow is using an AVM ( Automated Valuation Model) to come up with your home’s value. AVM’s are a service that can provide real estate property valuations using mathematical modeling combined with a database. Most AVMs calculate a property’s value at a specific point in time by analyzing values of comparable properties. Some also take into account current asking prices, previous surveyor valuations, historical house price movements and user inputs (e.g. number of bedrooms, property improvements, etc.)

An AVM typically includes:

  • An indicative market value (capital value or rental value) for a single residential property.
  • Information on the subject property and recent history of like properties.
  • Comparable sales analysis of like properties.
  • Current like properties being actively marketed.

Besides Zillow, lenders, appraisers and mortgage investors use AVMs in risk management fields, estimating home equity, and quickly coming up with approximate property valuations in a portfolio. Fannie Mae now purchases qualified homes without an appraisal only using and AVM value.

So how accurate are AVM’s and Zillow in particular?

According to Zillows website here is how accurate their off market Value is:

Active listings accuracy:

Here are 3 recent sold properties with the sale price and the Zestimate:

The Zestimate is off from 6 – 9%. Overvalued 2 properties and undervalued 1. According to Zillow itself, their off market valuation is significantly worse then the active listing valuation. That is because they get a lot of help from a real estate brokers listing price to dial in the value.

I don’t doubt that AVM’s will get more accurate in the future, but for now, the Zestimate is only that, an estimate.

If you are going to sell, get a professional Real Estate Brokers price opinion to dial in your homes value.

What is my Home Worth

Curious about your Home’s Value?

Hi folks,
If you are going to be selling your home in the near future or are just curious about its value in today’s market, give me a call or use the button below. I will email you a comprehensive market analysis of your home. There is no obligation on your part and it is totally free.

My phone number is 760.476.9560.

What is my Home Worth

Not ready to move yet but want to keep an eye on your homes value, I have a monthly update that is customized to your home and neighborhood. Click the link below to see what is included in the report and to sign up:

Monthly Update

Am I personally liable if I default on my mortgage?

A: The primary source of a mortgage lender’s recovery in the event the property owner defaults is the real estate held as collateral, not the owner personally.

To satisfy an unpaid mortgage debt, the lender is forced to first sell the secured property by completing one of two types of foreclosure sales to satisfy the amounts owed:

  • a judicial foreclosure; or
  • a nonjudicial foreclosure.

Occasionally, the fair market value (FMV) of the property is insufficient to satisfy the debt through bidding at the foreclosure sale. If the high bid is less than the debt owed on the mortgage, the lender suffers a loss, called a deficiency. However, to collect on a deficiency, the mortgage lender is very limited in California. The most common type of foreclosure action in California is nonjudicial. When a lender completes a nonjudicial foreclosure sale though a trustee’s sale, they are barred from recovering their loss on the mortgage, except for intentional waste to the secured property.

Further, California has established anti-deficiency laws which bar lenders from collecting losses due to any type of foreclosure sale on a non-recourse debt, also called purchase-money debt.

Nonrecourse debt includes:

  • Purchase-assist financing secured by a one-to-four unit residential property occupied by the buyer;
  • Carryback seller financing evidencing the installment sale of any type of property which becomes the sole security for the debt; and
  • Refinanced purchase-money mortgages, to the extent the funding is applied to discharge the purchase-money mortgage (including fees and costs associated with the refinance transaction).

Every other type of mortgage is a recourse debt. The homeowner with a recourse mortgage is personally responsible for the payment of the debt. Recourse debt includes:

Business-purpose mortgages secured by any type of property; and

All mortgages secured by a:

  • Second home;
  • Property containing five or more residential units;
  • Commercial property; and
  • One-to-four unit, owner-occupied residence when the mortgage is a home equity line of credit (HELOC) to the extent funds were advanced for purposes other than the purchase, construction or remodel of the property.

When a recourse second mortgage is wiped out by the foreclosure sale of a first mortgage holder, the wiped-out lender may pursue a money judgement against the property owner to recover the debt.

The exception: mortgages insured by the Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) are subject to government recovery of these unpaid mortgage debts and have recourse against the homeowner. However, the FHA and VA rarely pursue deficiency judgments, though they have legal authority to do so.

What is a 1031 Exchange?

A: An owner of real estate used in their trade or business or held for investment is not taxed on the profit they realize from the sale of the property when they purchase like-kind replacement property in an Internal Revenue Code (IRC) §1031 reinvestment plan, also called a §1031 transaction or exchange.

Two classifications of real estate make up §1031 like kind property in reinvestment plans:
• investment property, also labeled as capital assets; and
• business-use property, which is property held for productive use in a trade or business.

§1031 investment property includes:
• residential and commercial (passive) rental real estate requiring active management;
• investment (portfolio) real estate not requiring active management; and
• vacation homes held for profit or resale.

Business-use property is real estate used to house an owner’s trade or business and includes hotel or motel operations.

However, before business-use property qualifies as like-kind property, it must be owned for at least one year before it is sold or exchanged. Business-use property is unlike investment property which has no holding period requirement before disposition.

After one year of ownership, the business-use property may be sold and replaced in a §1031 reinvestment plan by purchasing either business-use property or investment property. Similarly, investment property may be sold and replaced by either business-use property or investment property in a §1031 reinvestment plan.

Conversely, while a principal residence is a capital asset, it does not qualify as §1031 property since it is neither used in a business nor held for passive or portfolio investment purposes.

Further, properties transferred — exchanged ––between related persons in a §1031 transaction must be held by both persons for a minimum of two years after acquisition.

What is a Homestead?

A: A homestead is the dollar amount of equity you have in your home that you qualify to exempt from creditor seizure.

The dollar amount of the homestead you hold in equity in your home has priority on title over most judgment liens and some government liens, but not your mortgages.

Two types of homestead protections are available to California homeowners:

  • The declaration of homestead, which is recorded; and
  • The automatic homestead, also called a statutory homestead exemption, which is not recorded.

Both homestead arrangements provide the same dollar amount of home equity protection in California. However, you need to record a declaration of homestead to receive all the benefits available under the homestead laws.

These benefits allow you the right to sell, receive the net sales proceeds up to the dollar amount of the homestead and reinvest the funds in another home.

As a homeowner, you qualify for one of three dollar amounts of net equity homestead protection:

  • $75,000 equity as an individual homeowner with no dependents;
  • $100,000 equity as a head of household; or
  • $1750,000 equity if you are:
    • 65 years or older;
    • Disabled; or
    • Age 55 years or older with an annual income of no more than $25,000 or
    • A combined gross annual income of no more than $35,000 if married.

The homestead declaration needs to be signed, notarized, and recorded to take effect. Your recorded homestead does not affect your creditworthiness.
Any one of several individuals may sign and record the homestead declaration, including:

  • You as the owner of the homestead;
  • Your spouse; or
  • The guardian, conservator, or a person otherwise authorized to act on your or your spouse’s behalf, such as an attorney-in-fact.

What disclosures do sellers need to make when selling?

A: Sellers, through various forms and reports, disclose any conditions known to them which might negatively affect the value and desirability of the property for a prospective buyer.

Mandated property disclosures include:

  • The Transfer Disclosure Statement (TDS): As the seller of a one-to-four unit residential property, you are required to furnish prospective buyers with a TDS setting forth the physical conditions and any other value-affecting facts regarding the property, its improvements and its surrounding area. The TDS is handed to prospective buyers as soon as practicable (ASAP) — when negotiations to purchase your property commence.
  • The Natural Hazard Disclosure (NHD) Statement:The NHD statement is a mandated form prepared by a third-party NHD expert used by you and your agent to disclose public-ably available natural hazard information such as potential flooding, fire hazards and earthquake fault zones.
  • The Lead-Based Paint (LBP) disclosure: The federal LBP disclosure form is required for all pre-1978 residential construction. LBP disclosure rules set forth the requirements for you to disclose any known LBP hazards and the buyer’s right to investigate them.

You may obtain additional reports to best disclose your property’s conditions to a prospective buyer. These reports, which your seller’s agent will advise you about, provide additional information to include in the TDS:

  • The Home Inspection Report (HIR): A home inspectorconducts a physical examination of your property to determine the condition of its components and systems. On completion of their examination, they hand you an HIR on their observations and findings. In turn, you use the HIR to prepare your TDS, and then attach it to the TDS to avoid claims of misrepresentation against you and your agent.
  • A Structural Pest Control (SPC) report: A report disclosing the existence of termites or structural damage due to a termite or fungal infestation.
  • Whether you or the buyer will pay for corrective actions and repairs outlined in the SPC report is negotiated between you and the buyer in the purchase agreement.
  • A neighborhood security disclosure: A form disclosing the known security conditions or criminal activity affecting the property and its surrounding area.

Further, your duty to disclose your knowledge about adverse conditions cannot be waived by your placing an “as-is” disclaimer in the purchase agreement.

Property cannot be sold “as is” without disclosure. Note: you and your agent are both liable for monetary losses in pricing or costs incurred by the buyer due to the failure to disclose defects you or your agent knew or should have known existed when you entered into the purchase agreement.

What are digital signatures?

Digital signatures are like electronic “fingerprints.” In the form of a coded message, the digital signature securely associates a signer with a document in a recorded transaction. Digital signatures use a standard, accepted format, called Public Key Infrastructure (PKI), to provide the highest levels of security and universal acceptance. They are a specific signature technology implementation of electronic signature (eSignature).

What’s the difference between a digital signature and an electronic signature?

The broad category of electronic signatures (eSignatures) encompasses many types of electronic signatures. The category includes digital signatures, which are a specific technology implementation of electronic signatures. Both digital signatures and other eSignature solutions allow you to sign documents and authenticate the signer. However, there are differences in purpose, technical implementation, geographical use, and legal and cultural acceptance of digital signatures versus other types of eSignatures.

In particular, the use of digital signature technology for eSignatures varies significantly between countries that follow open, technology-neutral eSignature laws, including the United States, United Kingdom, Canada, and Australia, and those that follow tiered eSignature models that prefer locally defined standards that are based on digital signature technology, including many countries in the European Union, South America, and Asia. In addition, some industries also support specific standards that are based on digital signature technology.

How do digital signatures work?

Digital signatures, like handwritten signatures, are unique to each signer. Digital signature solution providers, such as DocuSign, follow a specific protocol, called PKI. PKI requires the provider to use a mathematical algorithm to generate two long numbers, called keys. One key is public, and one key is private.

When a signer electronically signs a document, the signature is created using the signer’s private key, which is always securely kept by the signer. The mathematical algorithm acts like a cipher, creating data matching the signed document, called a hash, and encrypting that data. The resulting encrypted data is the digital signature. The signature is also marked with the time that the document was signed. If the document changes after signing, the digital signature is invalidated.

As an example, Jane signs an agreement to sell a timeshare using her private key. The buyer receives the document. The buyer who receives the document also receives a copy of Jane’s public key. If the public key can’t decrypt the signature (via the cipher from which the keys were created), it means the signature isn’t Jane’s, or has been changed since it was signed. The signature is then considered invalid.

To protect the integrity of the signature, PKI requires that the keys be created, conducted, and saved in a secure manner, and often requires the services of a reliable Certificate Authority (CA). Digital signature providers, like DocuSign, meet PKI requirements for safe digital signing.