Evaluating The Kitchen

If you are spending $2,000,000+ for a home, you deserve a built-in refrigerator! Check its age though, because they are expensive to replace. Sub-Zero and Thermador refrigerators will last for 20 years and are made in America. GE fridges are American-made too, but they don’t carry the same swagger. If you’re selling your home and don’t want to spend the money, then at least buy a counter-depth fridge that will partially disguise your thriftiness.

Here are thoughts on evaluating the kitchen:

Kirsten Jordan knows to look out for signs that a home is priced too high based on the current state of the kitchen — even if it looks brand new.

“When a home has a brand new, on-trend kitchen and is priced at the top of the market, I make sure to read that kitchen closely,” she said. “Did they renovate to sell? You can tell by the quality of the materials and construction. Maybe it’s because of social media but Americans have become too focused on what’s trendy. Quality should be your first priority. Quality retains value.”

One area to pay close attention to is the cabinets.

“Look at the kitchen cabinet’s quality,” Jordan said. “Is there dovetailing? Are the drawers soft-close? Is there a maker’s mark? If not, they’re probably builder’s grade — that means particle board construction and wood veneer cabinet faces, which don’t wear well. The kitchen might look great today, but in four years you’ll need upgrades and if it’s not your aesthetic there’s no way to refinish — you’ll need to rip it all out. That kitchen could cost you thousands more in the not-so-distant future.”

Another thing to take into account is the appliances.

“You can tell a lot about a seller from the quality of appliances they’ve selected,” Jordan said.

She recommends using AI to determine the quality of the kitchen appliances.

“Your phone now has a visual look-up feature where you can snap a photo and search it using AI,” Jordan said. “Use this tool to look up the appliance, quickly find reviews and see if there’s a Reddit thread about issues with the components. If you want to go really deep, search in Google News for information about any recalls. You can also buy a $30 subscription to Consumer Reports. Their expert team tests all the appliance brands for you and then provides unbiased reviews.”

Sometimes the kitchen upgrades needed are relatively minor, so it’s still worth buying the home with a negotiated sales price. Other times, it’s better to just walk away.

https://www.gobankingrates.com/investing/real-estate/real-estate-agent-trick-to-negotiate-20-percent-off-list-price/

 

Seller Disclosures

There used to be a belief that any defects that had been fixed, or things that happened to previous owners weren’t required disclosure items for today’s home sellers. But it’s gotten very specific now – and beginning July 1st, AB-968 takes effect.  If the home is being sold within 18 months of purchase, all the contractors and their contact information need to be disclosed too on any repair over $500:

Did You Know ~ All About Historical Disclosures:

  • Past defects, even if repaired by the seller or others, are to be disclosed. Not only that; the seller should provide all relevant information regarding the repairs to any prospective buyer. They must also disclose any improvements or modifications made to property with or without the benefit of permit.

  • The disclosure would include, but not be limited to,  the person(s) who performed the repairs (i) the property owner (ii) a licensed contractor  or (iii) an unlicensed tradesperson.  The documentation would also include all related documentation for all repairs   /improvements/modifications to the property.

  • The authority here  may be found in the  Seller Property Questionnaire (“SPQ”),  Question Number 5. This paragraph specifically prompts the seller to provide whatever material documents they have in their possession.  Questions 7A/8A of the SPQ  also address the importance of full disclosure. The Disclosure Information Advisory (“DIA”) is an excellent tutorial for sellers and should be reviewed with the homeowner before the disclosures are completed.

  • Let’s think about it; if a seller and/or their agent fail to disclose past defects and/or repairs, the buyer will not have the information they need to make an informed decision. For example,  if a past roof leak, flooding, or other water intrusion issues/repairs are not disclosed the buyer may not choose to inspect for other damage that could have occurred as a result, such as environmental hazards or wood / drywall damage that may not be visible. The informed buyer may wish to verify that the repairs were done correctly by a licensed professional, and/or ask for more details on the repairs themselves or the tradespersons or contractor that performed the repairs. It doesn’t matter how long ago the information was obtained; if you’ve got it produce it and by all means document delivery with a Receipt for Reports or similar documents.

  • The fact that a neighborhood or property specific defect exists, even if “well known” by the local residents and real estate community, disclosure is still required.  The buyer may be from out of the area or simply unaware of the issue.

  • Full and accurate disclosure is always the best practice and remember Gladys Kravitz is lurking and just ready to pounce on the buyer and share all that she knows.  You can count on Gladys to be the town crier.

  • When it comes to improvements and modifications to the property the same logic applies. Some homeowners take great care to ensure that all modifications and improvements and even repairs are made with the benefit of permit, comply with code, and are performed by licensed contractors, many others do not.

  • The key is disclosure! The buyer needs to know what they will be dealing with once they become the property owners. In order to make an informed decision, the buyer needs to have sufficient information to do so.

  • Neither agents nor sellers should “cherry pick” or “decide”  what documents are relevant, no matter how well intended. All disclosures, investigatory reports, and inspections, estimates, invoices and receipts, environmental analysis, invoices, estimates, surveys or maintenance records that are in the possession of the listing agent and/or seller are to be provided to the buyer in their totality.  Regardless of when they were obtained and whether the disclosure packet is delivered prior to an offer being written or after the sale is ratified.

  • Last note on this subject for now; disclosures should be thorough and accurate and ought never be minimized or glossed over. Explanations should be clearly stated for the buyer’s review.

Reducing Capital-Gains Tax

My blog post on avoiding the capital-gains tax by minimizing your annual income was wrong – the IRS includes your gains as income too (thanks WC!). It leaves home improvements as the best way to reduce the taxable gain – hang onto your receipts:

https://www.cnbc.com/2024/05/07/reduce-capital-gains-taxes-on-your-home-sale-.html

While I’m on errors and omissions……a while back I said that the Homes.com agent account costs $1,500 per month. I checked it out more closely and found that they don’t have a standard cost of service – it is based on the agent’s production. The $1,500 was for my 104 sales in the last four years (I didn’t sign up – for that kind of money, I could be driving a brand new Cadillac!).

Fire Insurance in California

This is getting to be a real problem, and there doesn’t appear to be a Plan B. Hat tip to Richard!

As home insurers flee California, the state’s last-resort insurance plan is warning that it’s being pushed toward insolvency, forced to cover a rapidly growing number of properties that have lost traditional coverage and unable to collect enough in premiums to cover potential losses.

The number of homes and commercial properties in high-risk wildfire areas covered by the California FAIR Plan has more than doubled, from 154,000 in 2019 to 375,000, and liability exposure has ballooned from $50 billion in 2018 to $336 billion in February, its president told lawmakers at an insurance committee hearing last week.

“These are huge numbers,” California FAIR Plan President Victoria Roach told the committee. “And they continue to grow. … As those numbers climb, our financial stability comes more into question.”

Roach added that one bad wildfire or even a series of smaller fires could overwhelm the plan’s resources, forcing it to bill all the state’s insurers for liabilities it cannot cover, which they in turn would pass on to all their insured home and business customers as higher premiums.

“It’s a gamble,” Roach said. “We are one event away from a large assessment, there’s no other way to say it, because we don’t have a lot of money on hand, and we have a lot of exposure out there.”

Roach said the FAIR Plan has cash on hand “somewhere in the neighborhood of $700 million.”

The FAIR Plan’s financial instability has emerged as collateral damage from the state’s insurance market meltdown. Major carriers have discontinued or restricted coverage in recent years following a series of costly wildfires — 14 of California’s 20 most destructive wildfires burned the state in the last 10 years. That’s forced property owners who’ve lost coverage onto the FAIR Plan in rapidly growing numbers — with 1,000 applications now every work day.

Elected Insurance Commissioner Ricardo Lara last fall announced plans for a major overhaul of the state’s home insurance regulations and already has rolled out proposed new rules to speed approval of rate increases and allow computer catastrophe modeling to factor into them. Those changes are on track by the end of the year, Lara said.

But it isn’t coming fast enough for both consumers and insurers. State Farm, the state’s largest insurer, last year rocked the market by declaring it wouldn’t issue new policies in California. The company dropped another bomb when it announced this week it will begin shedding coverage of 72,000 California homes and apartment buildings over the next year. Those customers are expected to end up on the FAIR Plan as well.

The state created the California FAIR Plan in the 1960s in response to insurers refusing to cover inner-city businesses following riots in Los Angeles’ Watts neighborhood. It’s a nonprofit association of all the state’s authorized property insurance providers, chartered to provide temporary basic insurance for properties deemed so high risk that companies refused coverage.

The FAIR plan isn’t tax supported, and its bare-bones coverage — just fire and smoke damage — is paid from policy premiums that can be much more expensive than regular insurance because the risk pool is much higher.

The plan also isn’t subject to the insurance regulation under Proposition 103, the check on rates voters approved in 1988. But it is regulated by the state legislature and its rates approved by the elected insurance commissioner, though not under the review of consumer groups, which can intervene on regular policies.

Roach said that the FAIR Plan has encountered the same problems as regular insurance providers in getting policy rate increases approved to provide enough revenue to cover its risk exposure. Approvals take too long and don’t allow the plan to include the cost of reinsurance — which helps insurers absorb losses — or to factor in catastrophe risk models.

“Our rates are never actuarially sound because not all of our expenses are included in that ratemaking,” Roach told lawmakers. The plan must file for rate adjustments every two years, and she said its last increase requested in 2021 should have been “around 70%” but the plan asked for 48.8%. The insurance department approved only a 15.7% increase, she testified.

At the same time, the huge increase in properties needing last-resort coverage has greatly inflated the plan’s risk liability.

Read the full article here:

List-Price Accuracy Gauge

Once a home is for sale but not selling, how do you know what to do?

Both buyers and sellers can apply my List-Price Accuracy Gauge:

Once the home is on the open market, if it is……

  • Getting visitors and offers, you are within 5% of being right on price.
  • Getting visitors but no offers, you are 5% to 10% wrong on price.
  • Not getting visitors, then you are more than 10% wrong on price.

It’s nothing personal, it’s just a simple guide to know how close the price is to being right.

The serious buyers rush out the first week to take a look, but after that it’s crickets, with only an occasional visitor. It is tough for sellers to cope, or make adjustments. But once the initial urgency has expired, you have to do something – don’t just sit there.

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How quickly should sellers make adjustments? The DOM clock is ticking!

0-14 days on market – Hot property, and when the sellers have their maximum negotiating power.

15-30 days on market – Buyers get suspicious, want to pay under list.

30+ days on market – Buyers will be expecting deep discounts, or ignore it altogether.

After being unsold for two weeks, sellers will suspect that something is wrong. But it is natural to resist changing the price and instead blame everything else – especially the listing agent.

Sellers, and agents, need to shake that off and act quickly to keep the urgency higher. The first price reduction should be for at least 5% and happen in the first 15-30 days for maximum effectiveness. If the home doesn’t sell in the next two weeks, then another 5% is in order, and by then the fluff is eliminated.

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Where do sellers go wrong?  They don’t properly price in the negatives.

Typically sellers just pick apart the comps to convince themselves why their home is the best around, and then settle on a list price that will show everyone who’s the boss.  If you don’t have any negatives, then you probably will get your price!  But typically sellers are forced to come to grips with the negatives of their house, and adjust accordingly.

Do sellers have to lower their price? No, not neccesarily.

There are other alternatives:

1.  Make your house easier to show.  Listing agents who insist on buyers jumping several hurdles just to see the home aren’t realistic about today’s market conditions. Make the home easy to see!

2.  Fix the problems.  New carpet and paint is the best thing you can do: 1) it looks clean, 2) it smells new, 3) you have to clean out your house to install it, and 4) you are managing a business transaction now – it is the logical solution.  Utilize staging too.

3.  Improve the Internet presence. Have at least a 12-25 hi-res photos and a simple youtube tour.

4.  Wait for the market to catch up.  If unsold for 60+ days, cancel and try again later – probably next year.

5. Reset the Days-on-Market stat.  As long as the MLS allows agents to refresh their listings, then it’s in the best interest of the seller to reset the DOM.  It is a gimmick, and instead sellers should concentrate on creating real value for buyers – that’s what will cause them to pay more.

The longer it takes to sell, the more discount the buyers will be expecting – usually about a 1% off for each week on the market.  When other homes are flying off the market, the buyers’ obvious conclusion is that your price is wrong, and they load up the lowball offers.

Even if you complete one or all of the five ideas above, don’t be surprised if you need to lower the price too. Keep it attractive!

Home Designs for Dogs

Isn’t it interesting how some people know what dogs think and feel? Or are they just selling something?

“It’s always a good idea to give your dogs a dedicated bed or other comfortable perch that’s a spot only for them—it will make them feel so adored. There are so many fabulous ones on the market, and you can have fun with them by covering them in a fabric that matches the room or doing a pop of color that stands out.

“You can also place an upholstered ottoman at the foot of your bed which is a great way to keep your pup pampered without having to share your bed. Add in a throw to make it that much cozier and more comfortable. And if your dog has a chaise or chair they love in your home, give into it, and let that be theirs. Just cover it in a durable fabric or even slipcover it so that it’s easier to clean.”

https://www.mansionglobal.com/articles/home-design-with-the-dog-in-mind-b9a4cdf6

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