Documents to keep after close of escrow

  • Your buyers final closing statement-you will need this for tax purposes.
  • Sellers will receive a substitute 1099-you will need to claim your sale on your tax return.
  • All transaction documentation. ( I provide my clients with a complete transaction CD with the documents in pdf format within a few weeks of closing.)
  • All loan documentation.
  • The deed and title insurance policies.  Expect these to arrive within 3-4 weeks after closing.  Make sure to put them in a safe deposit box, or other firesafe box for safe keeping.
  • Insurance policies to prove coverage.  These should be kept in safe place in your property, such as a fireproof box.

How to look for hazard insurance

Obtaining hazard insurance on property has gotten more difficult, so please get started immediately on securing hazard insurance on your property.  This is because of the extraordinary losses that insurance companies have paid out from disasters and mold claims.  Obtaining insurance for properties that are older, have brick foundations, are mixed use or commercial buildings, or multiple unit buildings can be even more challenging. 
Since lenders require hazard insurance to be in place prior to close of escrow; unknown claims discovered prior to close and after you are in a purchase contract could be frustrating and expensive should you not be able to close escrow until insurance is secured.  While you are in contract, the sellers through their agent, should disclose (or be asked to disclose) any claims on the property and if possible, order a CLUE report from their insurance carrier to disclose any claims that may have been made.  The seller can order one from www.choicetrust.com, or their insurance agent can provide one; we cannot get one on their behalf.

If you are purchasing a condominium, there is a master insurance policy on the complex and this is an issue of which you should not have the same concern as when you are buying the entire property.  You should still consider getting a condominium contents policy, however, to cover the contents in the case of fire, theft, or other disaster.  Be sure to note that you may need an ‘HO-6’ policy that would cover appliances, kitchen cabinets, fixtures and finishes.

When shopping for insurance, make sure you talk to several insurers.  Generally, you will have a better grasp on what are important features in policies by talking to multiple people because you’ll know what features and exclusions each policy have.  Here are some things to consider:

  1. Look for exclusions in coverage.  For example, rental property coverage is much more limited; you will need a specific landlord policy and perhaps a separate liability or umbrella policy.
  2. Earthquake insurance is extra if available.  It is offered by the California Earthquake Authority 30 days after you close escrow.
  3. Look for dollar limitations on claims.  Even if a policy claims to be guaranteed replacement, there are caps on the policy-find out what they are to avoid being under-insured.
  4. Special items of value might have to be scheduled separately; things like antiques, jewelry, computers, or firearms in order to be covered.
  5. If an insurer offers actual cash value, make sure you ask what this means.
  6. Understand the liability portion of your policy and what it covers and does not.  You may need a separate umbrella policy if it is not sufficient.
  7. Look at the deductible on your policy.  By raising it, you may be able to reduce your premiums.
  8. Discounts are generally given when multiple policies (i.e. house and auto) are issued by the same company-check into whether this is possible.
  9. Discounts are also sometimes given when you have smoke detectors, alarm systems, dead-bolt locks, etc…  Also see if group discounts are given.
  10. Many insurers may not insure properties that are not bolted to their foundations, do not have circuit breaking electrical systems, or are on brick foundations; this will limit the available insurers for your property, which may also be more expensive coverage.  For tough to insure properties, this may be a government sponsored plan, such as the California Fair Plan.
  11. Be sure to review your policy limits annually to stay up to date.  Insurance might have some sort of cost of living rider, but it is usually not sufficient to maintain adequate insurance coverage.
  12. Make your home safer and keep up maintenance.  Keep roofs in good repair, take care of items which could lead to a claim such as cracked and heaving sidewalk tripping hazards, consider seismic retrofitting.
  13. Be careful in the claims you make.  Insignificant work may be better taken care of out of your own pocket, rather than risk being canceled by your carrier, or making your property difficult to sell when a new buyer has to get insurance.
  14. For personal property, it would be unusual to have an insurer offer replacement value-be sure and ask.

Items in list above inspired by Realtor Online Magazine, reprinted with permission of the NAR, copyright 2003.  All rights reserved.

Selecting how to hold title to your new property

The form of ownership chosen in your purchase, known as the vesting (holding title), will determine who may sign various documents and future rights of the individuals in the transaction; it can have an effect on one person buying as well as multiple people. You may have already heard some of the terms, joint tenancy, community property, tenants in common, sole ownership, or held in trust.

These rights associated with each type of vesting involve such matters as: real property taxes, income taxes, inheritance and gift taxes, transferability of title, exposure to creditor’s claims and significant probate implications in the event of death.

Before you can close escrow (or get loan documents), you must have selected a method of ownership.  Please get started on that process as soon as you begin the search for property.  Living trusts for instance, can take months to set up, so your preparation is important.

I urge you to speak with your attorney and/or tax advisor as soon as possible for vesting questions.  Your advisor may make recommendations which require partnership agreements, trust documents, wills, or other such documents.  Since these decisions and the accompanying documents may take time to be generated, I urge you to start this process immediately so that they may be accomplished prior to close of escrow.

Will an insurance claim affect my sale?

Obtaining hazard insurance on property can sometimes be a challenge.  This is because of the extraordinary losses that insurance companies have paid out from disasters and mold claims.

Since lenders require hazard insurance to be in place prior to close of escrow, unknown claims discovered prior to close could be frustrating and/or expensive through a delayed close date, or renegotiating the purchase price should the buyer in contract on your property not be able to close escrow.

Its prudent to order a CLUE (Comprehensive Loss Underwriting Exchange)  report from your insurance carrier to disclose any claims that may have been made on the property over the last five years.  Your insurance agent, for a small fee, can order this document for you, or you can order it yourself online from www.choicetrust.com-you can obtain one free report a year by signing up on the site, which does require a social security number to order the report.

Should I remodel, or sell my property?

Personal circumstances generally will lead you to the decision between remodeling the home you’re in or buying a different, more suitable home. Perhaps a career or familial change is creating the need for more space.  You may be in a larger home already, and you don’t need the space, or taking care of it has become a burden. You may be on the track of accumulating properties as part of a retirement portfolio.

To help you move you forward with the decision between staying or selling, you should first obtain an understanding of the cost, time, and discomfort involved in the remodel; the second is learning how much you can afford in a new home, taking into consideration your current equity, and how your financial picture may have changed since you last purchased a property.

Here are some reasons you may want to stay in your location and remodel:

Remodeling may be easier than moving to another property.

You may love the location of your property and may not be able to find a better replacement.

You have an established property tax rate you want to keep.  There are options to keep you tax rate if you want to scale down and are over 55 years old.

You may be preparing your home for sale.

Before beginning, consider what you are doing to the property:

  • Are you creating value; i.e. adding a bedroom, bathroom, or updating the kitchen?
  • Are you building for yourself; i.e. are you doing improvements that are specific to your needs, not taking into consideration future resale?
  • Are you overbuilding; i.e. spending too much money that you will not get out of the property when you finally do sell it?
  • The bottom line is to do the things that are right for you; just do it with your future goals in mind.  Remodeling always costs more than you think, so make sure you have a good, reliable contractor who lives up to their promises.  You may have to pay more for a good contractor, but it will pay off in less stress and problems for you.
  • Get an outside opinion from an architect, home designer or design build contractor on things you can do to your home.  You may be surprised at options you may not ever have considered.   You may spend some money for this opinion, but the result could be a better project and money saved in the long run.
  • At the end of the information-gathering phase, you may find remodeling is not the answer, and a move up property may be a better option.

The process of starting a financial plan

Don’t wait to get started with your financial plan

 

After years of managing my own finances (and starting to get serious about retirement), I decided it was time to get a professional look at how I’ve been doing.  It had been over 20 years since meeting with a planner for the first time who suggested what I felt, was an impossible plan.  I couldn’t have afforded what he suggested and he gave me no direction or support in doing something.  In the end, it made me take no action at all and I suspect that that situation is true for many of us, who ultimately, bury our heads in the sand rather than take any action that may at least start the process.

 

I got referrals to four or so financial planners, had a phone conversation about my goals with three of them, then selected one to do the final plan.  I went into the process with eyes wide open, a flexible mind and hopes for a silver bullet investment.  I selected a fee-based planner so that I would not be solicited to buy investment vehicles

 

What I found:

 

There is no silver bullet.   My planner suggested my main investment should be an IRA.  I was very lukewarm about that because of how volatile the stock market has been.   If you can invest in an IRA over the long-term, it may work alright for you, but the closer you are to retirement, the harder it is throw the dice given the market’s volatility.

 

Getting a projection of expenses and retirement contributions up to retirement helps set priorities and is absolutely crucial in staying focused.  Once you know that, the after retirement income and expenses can be calculated.  The planner I worked with looked at this projection each year up to the time I thought my heirs would take over.  This component was probably the most important thing that came out of my meeting.  If that doesn’t spur you into action, I don’t know what will.

 

The planner gave me an annual financial goal that I felt was too unattainable (just like 20+ years ago!).  You have to make your saving attainable, or you won’t do it.  Just get started with what you can and watch it grow.  Once you see progress, you may be able to commit to more.

 

Social security is not likely to be enough income in your retirement.  The time to start saving could have been a long time ago, but that time is gone, so get started now.

 

Consider looking at a whole-life insurance policy taking an indexed-strategy in mind as an investment tool.  The income will grow and can be withdrawn when needed after retirement.  The other nice thing is that your principal is protected, which is not true in an IRA.

 

Pay yourself first.  This can get set up as a automatic payment into an online bank account, which has a higher interest rate than the brick and mortar banks.

 

Take a careful look at the tax implications of your choices.  IRAs are a key part of retirement savings, however the taxes can be high when you are required to start taking distributions.

 

Plan for big purchases like a principal residence, rental property, or car.

 

Take a look at long term disability insurance to protect your income during your earning years.  My planner did not have a high opinion of it, because it took away from money that could be used toward investments.  I felt strongly that I should maintain such a policy.

 

Take a look at long-term care insurance to take care of you if you cannot take care of yourself.  Health care costs are astronomical and can deplete all you have worked for pretty quickly.  You should look at how you plan on financing your incapacity as well as your capacity.

 

Do challenge your planner.  You are the one that must live with the choices you make.  Read information on the internet, talk to friends and get their opinions.  The more you read and talk to people, the more your own plan will start to materialize.

West Portal Property Values

West Portal Property Values on Fire

By Eric Castongia

Residential Sales Specialist

 

It may be hard to believe, but the market has actually gotten more accelerated than the last time I filled you in.  Signs of recovery started quickly at the start of 2012, over the course of the first few weeks of  February.  In 2012, we saw multiple offers, over asking prices and steady appreciation.  In the fall, it slowed a bit and then in January of 2013, we were off to the races again; this time with prices even higher and offers more aggressive.  We are seeing no contingencies on the part of buyers in an effort to look more appealing to a seller.  It’s hard to believe that it was as recent as 16 months ago buyers were reluctantly in the market and were able to negotiate as they pleased.

At the close of the first quarter of this year, we had one active (it just came on the market and hasn’t taken offers yet), eight pending (not yet closed) and 13 sold (closed) properties.

Of the 13 sold, 10 received multiple offers (77%) and all 10 sold over their asking price.  The amount of over bids ranged from as little as $5,000 to as much as $241,000 (really).  Conversely, $70,000 is the largest amount under in which one listing sold.

For a little perspective, at the close of the first quarter of 2012, we had eight sold (closed) properties.  Of the eight, five received multiple offers (63%) and four of them sold over their asking price.  The amount of over bids ranged from as little as $14,000 to as much as $52,000. Conversely, $69,000 is the largest amount under in which one listing sold.

We were coming out of a slow market in 2011, so $52,000 over asking at that time was really good; now we can get a sense of the level of competition there is in the market one short year later.  Buyers who win in competition are setting the market, those who are not, are following it.

We did not have any short sales and foreclosures on the market in this neighborhood this quarter; it was down citywide too.

Interest rates remain historically low.  Part of the panic in the mind of buyers now is getting to take advantage of the low interest rates while they can.

The market is still being driven by a supply and demand problem (lack of inventory).

For West Portal and Inner Parkside up to Ulloa, prices were up from the end of last year to now (one quarter!) 12 to 18 percent.  This percentage is based on one specific property profile that had the most activity-two bedroom, one baths with rooms and baths down.  That segment had eight of the 13 sales in the first quarter.

The area that I call North of Ulloa, has seen a big change in property values for the better.  This area got hit the hardest when the economy went down and it has regained much of what it lost.  I figure approximately 17 percent in the past year.

Interestingly, North of Ulloa typically has the most sales in the neighborhood, but that is not true in the current analysis; they had only three of the 13 sales, which is exactly opposite of expectation.  Notably, seven of the eight properties pending in the first quarter due to close in the second are all in this area.  Once these properties close, I think we will get a better sense of how this part of the neighborhood really appreciated in the last quarter.

This may be a great time to sell but a few words of warning: 1) buyers still take a hard calculating look at what is available, if there is more than one fatal flaw in the property, they may pass you by, and 2)  Iist price is still critical; it must seem like it is a good value in order for buyers to be motivated to act.  Pricing a little under neighborhood expectation is still the best way to net you the most on your sale.

Eric Castongia, Residential Sales Specialist at Zephyr Real Estate provided the information in this article. The content of this article is an interpretation of data from the San Francisco Multiple Listing Service and Eric’s observations in the marketplace.  Eric can be reached by e-mail at Eric@SFHotBuy.com, or via mobile phone at (415)307-1700. DRE Lic. No. 01188380