The holiday season is such a festive time of year. December is full of events “all-things-social.” Mix in holiday shopping, traveling, preparing to travel, packing to travel…life gets busy this time of year! I recently called a good friend in Phoenix who told me three quarters of her real estate office is out of the office. I asked “is the office having a holiday party?” Her response was amusing. “No, they are out. Everyone’s coming back after the 1st.” As we continued to talk I mentioned to her that real estate can slow down this time of year. Without missing a beat she responded, “We slow down, but some of us have to get things done. I’m having one of my best months right now with customers who need to close before year end.” She made a really good point. For some sellers, renters, exchangers the holiday season doesn’t give their obligations a break till after the New Year. For example, I’m still getting calls from customers who really need a house rental by the 1st of January. Add that two local agents contacted me recently with two new listings in which the sellers need to close quickly. Then I was contacted by two loan officers who are featuring special loan deals this month including no money down and no document programs for new home buyers. So much for taking a break at the in December! The amazing thing that I have learned over the years about real estate at the holidays is this: buyers and renters have so little competition they practically control the deal! If you think about it, where are most people you may know today? Online shopping? Traveling? Running down to the grocery store to pick up holiday food supplies and beverages for the big meal? Getting ready for tonights party/concert/program? One example I can share recently was on a new home lease listing in Inglewood. After speaking with the owner he explained to me, that even with the house only on the market for 3 days he would be willing to drop the asking rent $100/mos. just to get a renter in by year end. 3 days on market! It takes AT LEAST one weekend and a full week for the public to find a new listing, let alone set up an appointment for a showing! This rarely happens in the spring, summer or early fall in my market. Another example is of a seller that I made an offer on a single family house that needed major remodeling work. A real fixer upper as you can imagine it. Needs everything. I asked the seller for several concessions including a very delayed closing to allow the bank (which FOR SURE will be working slowly at the holidays) to fund the deal into early February if needed. The seller’s response was very generous and said “this sounds fine to me.” WHAT OTHER TIME OF YEAR WOULD THIS HAPPEN?!?!? Ahhh the holidays. Yes, even with the shopping, the parties, the meals, those oh-so-social events that make the spirit of the season so rich and festive, there is still work to be done and deals to be had. Except this time of year, it can really feel like a one person audience. I don’t know about you but I like the odds of getting deals closed at the holidays more than any other time of the year. Happy Holidays everyone and a joyous New Year!
Need help getting your deal done? Contact me at email@example.com!
Paul Krause is a licensed California Realtor #01835890 and General Contractor #1029575 and is based out of Los Angeles, California.
California’s passing of SB1069 (link here: http://sd10.senate.ca.gov/news/2016-09-27-gov-brown-signs-wieckowskis-accessory-dwelling-units-bill-provide-more-affordable) took the old concept of renting out one’s garage/storage space and made it legal. Although restrictions exist, the new law is one more sign that housing affordability is just as much a concern for Californians as housing availability. Homeowners looking to reduce the cost of home ownership have always considered whether to rent out a room or make an illegal garage conversion. With the law being put into effect it is likely to keep the residential fixer-upper contractors busy for a while. There are 3 BIG advantages a garage conversion has over renting out a room in your main house. My top three are:
PRIVACY – There is nothing more odd than sharing a space with a roommate in your home, if its your home and its been years since you have non0family roommates. The occasional run in at the bathroom or refrigerator can be as meaningless or annoying as you make it out to be, but you have to prepare for it either way. For some that will feel odd and even find yourself asking “why am I sharing this house with this person? Oh yeah, that’s right – Because its the only way I can pay the mortgage and have enough money left over to have a life!” The detached garage/storage space solution eliminates the social complexity of sharing space because everyone has their own space and well defined boundaries.
SCHEDULES NEVER CONFLICT – Come and go as you please in a detached garage/storage space situation but NOT so when you rent out a room. If you have a renter that keeps off hours, to some extent so will you. An owner really needs to focus on lifestyle questions in the renter interview process to better understand if a roommate will functionally “work out” or result in a toxic living environment. Additionally, schedules can change. A change in a persons job, profession, relationships, etc. can turn a once functional lifestyle arrangement into dysfunctional arrangement if both parties are not willing to make compromises.
PAYING YOUR FAIR SHARE – A detached garage/storage space arrangement makes it easier for the renter and the owner to determine what a fair rent is because the market can be compared much more easily for a converted garage. Renting a room is almost impossible to find a comparable rent because no two houses are the same. Additionally some owners do not want renters using in-home laundry facilities and would rather they go to the local laundromat to help keep utility usage down. Splitting utility billing can also be tricky because renting a room (maybe 100 square feet) is not really renting a room but also the hallway, the living room, the family room, the kitchen, etc. By going the converted garage/storage space route an owner and renter can agree more easily on what parts of the property will be included in the lease and which ones are not.
Thanks for reading!
This question was posed to me this weekend when my son asked me how I do my job. Working in real estate I work with people from all walks of life. More recently I engaged services with graduate student name Maria (hiding her real identity). Maria is a full time working professionals seeking a graduate degrees through night school and online learning classes. Maria was very concerned about how the deferral of her student loans would impact her affording a new home. This is not uncommon. The government has reported student loan debt well into the trillions of dollars (https://www.forbes.com/sites/zackfriedman/2017/02/21/student-loan-debt-statistics-2017/). When I asked about her plan to pay off her loans she answered that; “…hopefully when I graduate I will be able to apply for a higher paying job.” This leant me to think about my conversation with my son. In the 80’s an important job skill was resume writing. In the 90’s job interviewing. In the early 2000’s it was networking. Although these all have importance I am learning that financially independent people learn how to creatively financially engineer every aspect of their lives. New technologies with crowdsourcing in order to finance real estate, movie, even business acquisition and start up projects is only one example of creative financing. Let’s also not overlook job skills as a fair “trade” to acquire a service or asset. One example would be to take an equity position in the purchase of a house in exchange for providing services to remodel and oversee the construction of the house. One partner buys the house and provides funding for the rehab costs while the other does all the work. This is a strategy I recently used for a house purchase of a single-family remodeling project in southern California. With my skills in sourcing materials and labor, my partner can focus on finding funding sources that ensure this project can be completed. Over the next two weeks I will be discussing additional creative solutions to financially engineer real estate transactions.
So now you have made years of payments to your mortgage and slow steady appreciation of the market has improved housing prices. But a recent layoff has just caused a sudden job loss. The severance being offered will only last a few short months. A review of personal finances reveals that the house payments that the job supported will be almost impossible to carry through the transition from your outgoing job to a new one. So you make the decision to downsize your lifestyle till you get solid footing with a new job. However after you put the house up for sale you notice the offers are well below your asking price. This is where selling TERMS through a Seller Carry-Back could make the difference between selling your home and not at all! This is a real scenario:
Selling Price = $400,000
Bank Loan = $150,000
Seller’s Equity = $250,000
You up one morning to find an email from a local builder that believes the house has tons of potential. Their plan is to add square footage and remodel the kitchen and bathrooms based on the pictures in your listing. But the buyer thinks the price is too high. Additionally the builder already has multiple projects in process and cannot borrow all of the funds he would need to finance the purchase and remodeling. What can you do? Offer TERMS. Here is how this recent sale took place. A seller made an offer to the builder buyer, so that, if the builder would pay the $400,000 asking price, the seller would offer a promissory note of $250,000 with no interest and no payments for the amount of the Seller’s Equity till the builder completed the remodel and sold the house. The builder would assume the payments on the sellers existing $150,000 Bank Loan. The builder took the deal and opened escrow. With the house payments being assumed by the builder, the seller could breathe a sigh of relief. The whole project would last six months, and resulted in the creation of a newly remodeled home that sold for over $730,000! The seller closed with the builder for the $400,000. The builder paid back the $250,000 promissory note (the house equity) and the $150,000 Bank loan when he sold the house to a couple that was looking for a new home in that neighborhood. By selling the house with TERMS the seller created several opportunities:
- The seller was able to sell the house for $400,000.
- The buyer builder did not have to qualify or apply for a $400,000 loan to buy the house.
- The builder assumed the monthly payments on the Bank Loan.
- The builder was obligated to a “Promissory Note” for the seller’s equity ($250,000) with No interest and No payments till he finished and sold the house.
- The builder only had to obtain a construction loan for $125,000 to remodel the house to improve the property. This reduced the builders out of pocket borrowing costs and reduced the amount of leverage he would need to re-sell the house.
- The buyer builder made a profit in the tens of thousands of dollars by only borrowing $125,000 using a seller-financing and a seller carry-back strategy, instead of borrowing the entire $525,000 to achieve the same sales price of $730,000!
This deal is an example of a complete WIN-WIN for both buyer and seller and solved the problem for each party involved!
Closing times are lengthening. The time-to-close averaged 40.5 days from November 2015 to November 2016 compared to 36.7 days the year before, according to data from the National Association of REALTORS®. NAR called the longer times in closing “unexpected” in a recent blog post.
Read more: New Closing Rules Remain a Challenge
NAR began tracking closing delays following the implementation in 2015 of new mortgage disclosure rules, known as TRID or Know Before You Owe. The new mortgage rules changed the settlement process by adding new closing documents and timelines. Closing times have remained elevated since the implementation of the new rules.