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This section of our website is here to provide you with as much real estate information as you might want about Riverside and Riverside County real estate.

Informal, short, and right to the point. Opinions, vital statistics, suggestions, screw-ups, and editorial comments about the occasionally insane world of professional real estate…and we have a sense of humor as well, so enjoy.

Does a Seller Have to Get a Termite Clearance?

Westcoe Realtors, Riverside Ca…Our question today comes from an internet reader, who sounded very confused on what exactly does a seller have to provide a buyer in the way of a termite report or clearance. So, to answer his question (and possibly yours), here is all you need to know about termite reports.

First…the answer to our question above is….NO, the seller does not have to provide a termite clearance…but if you haven’t purchased a home in the past 5 years or so, this will come as a surprise to you.  Please allow us to explain.

Years ago, the seller in almost all cases was required to provide a termite report and clearance if there was a new loan being created in the purchase of the property (as opposed to an all cash offer).  The reason for this was that the new lender wanted to make sure the home was free of termites, thereby protecting their interest in the property.

About 10-15 years ago (don’t quote me on this), termite reports were split into 2 sections, creatively called “Section 1”, and “Section 2”.  With this split, Section 1 items were termite issues that currently existed in the home, that were causing problems right now.  Section 2 items were conditions that existed, but were not yet causing a problem, but might in the future.

When this split happened, it became practice for the seller to be responsible for the repair of Section 1 problems, and the buyer was responsible for any Section 2 items if they wanted them repaired.  As far as the new lender was concerned, they only cared about the termite issues that existed at the time of the loan…hence, the Section 1 repairs.

However, in January of 2014, for some reason that shall remain locked in the minds of the lending “powers-that-be”, lenders stopped caring about the termite report!  To be specific, they no longer required a termite clearance.  In fact, they didn’t even require a termite report.  Maybe the figured out that it would take termites light years to actually destroy a house…but who knows?  The bottom line is that the seller was no longer required to mess with termites.

So, as a result of this 2014 change, how does it stand now?

Easy…everything becomes negotiable between the buyer and the seller.  Sometimes the buyer wants just a report, but no clearance…sometimes the buyer wants both, and sometimes the buyer could care less about termites.  Every purchase is different, and any repairs or costs the seller will pay simply becomes part of the negotiations between buyers and sellers.  Most of the time, this issue is easily resolved, and the principals can move on towards closing escrow.

In the end, if you are a buyer and termites are a big issue with you, then by all means at least ask for a report so you know what you are dealing with (reports cost about $50-$75).  If it is clean, then good for you…and if there are problems, then try to work it out with the seller.  Maybe they will pay for the corrections, and maybe they won’t…but at least you will know what is happening with regards to termite issues in the home.

Good luck, and thanks for reading our blog.  Let us know if there is any other real estate issue you would like us to address for you.


Why Lenders Won’t Lower Credit Standards

Westcoe Realtors, Riverside Ca…We had a question posed to us by one of our internet readers:  “I see that HUD is allowing lenders to make home loans to borrowers with lower FICO scores, but most lenders I check with still demand a higher FICO score.  What gives?  Why aren’t the lenders doing what HUD says they can do?”

Good question…and here’s why local lenders are not climbing on board with HUD’s latest “help.”

The bottom line here is that HUD can say all they want about credit guidelines, but since the local lender still retains the responsibility if the borrower on a loan fails to make the payments, then the local lenders will call their own shots on lending criteria.

To simplify, understand that no matter what HUD says, the local lender will pay the price if a housing loan goes bad…not HUD.  This is a result of all the “new lending protections” enacted by the Dodd-Frank act after the housing crash of 2007.  Therefore, in today’s lending world,  many times, if a housing loan goes bad, and the borrower fails to make the payments, HUD can force the original lender to make-up HUD’s losses, or worse yet, pay a fine.

This was all done to keep the local lenders in check, and to keep them from making so many of the bad loans that led up to the crash of 2007.  However, since the government is so good at constantly proving the “law of unintended consequences”, the net result is that in 2016, lenders are now afraid to make a loan to anyone who might look like they may be a lower credit risk…ie; borrowers with lower FICO scores (a FICO score is a numerical rating that reflects a person’s credit history…the lower the score, the worse the credit history…and the worse the credit history, the bigger chance the borrow will get in trouble with the new loan.)

So…HUD looks magnanimous in their pronouncements about helping people get loans by lowering their credit requirements, but until they also accept the responsibility for these loans if they go bad, don’t hold your breath for the local lenders to start lowering their credit standards.

Look at it this way.  Dad says his 10 year old can stay up until midnight on school nights, so the child does as Dad says.  I mean, it’s OK, right?  However, soon the child’s grades plummet because he is sleeping through class, and Dad goes nuts and punishes the child for getting bad grades.  The kid says he was only doing what Dad said he could, but Dad is holding the child responsible for Dad’s new sleep policy.  Eventually, the child blows Dad off and starts going to bed early enough to get some sleep.

Now you get it.  Until Dad takes the responsibility for his new sleep policy, don’t expect the child to follow suit…and don’t get mad at the local lenders when they refuse to be a part of HUDs new plan.  Can you really blame them?

Such is the way of life in our current lending world.

As always, thanks for reading our blog, and don’t hesitate to contact us with any questions you may have.

Stock Market and the Housing Market Are Not the Same

Westcoe Realtors, Riverside Ca…So…when the stock market takes another ridiculous roller coaster ride as it has the past few weeks (think Brexit), some of our clients want to know if this has any bearing on our local real estate market.  The concern is that if the stock market is “tanking”, is the housing market far behind?

In short, NO…there is almost no connection between the daily machinations of the stock market, and the strength of the housing market…and here is why.

The stock market feasts on the short term.  Oh sure, there are great long term investments that can be made in the stock market, but the media hype of the Dow Jones average on the nightly news is all about what happened today…right now.  The focus is on the “micro” events of the day, and as we all have seen, what crashes today rises from the ashes tomorrow…and by the end of the week, it’s as if nothing ever happened.

On the other hand, the housing market is all about the long term, and not about what happened today.  Sure, there can be news today that can have a long term affect on housing, but most of the time, the daily peaks and valleys of the stock market are ignored by the housing market.  That’s why people flock to real estate as a long term investment, not a short term investment.

Think of the housing market like a cruise ship, and the stock market like a speedboat.  Both can get you where you want to go, but one will be slow and steady, the other can go in circles before it reaches it’s destination.

As a specific example, this latest “Brexit” news that had the stock market all twisted up will actually be a good thing for real estate.  In the big picture, Britain leaving the European Union has our economy very uneasy at the moment…lots of chatter about what this all means for business.  As a result, the Fed will continue to keep interest rates low, which will be an additional boon for real estate.  Already, 30 mortgage rates have dropped a little, and there are some pundits predicting home loan rates dropping into the 2.5% range with all is said and done.

Who knows if all that will happen, but the important take away here is that there is no direct connection between our housing market and the stock market.  Wall Street can shout the sky is falling all they want, but for those of us in the real estate business, the only thing we see falling is interest rates!

Take care, and as always, we appreciate you reading our blog.  Let us know if there is anything you would like to see us address in this space.

Why Does a Seller Need to Disclose Any Insurance Claims Within the Past 5 years?

Westcoe Realtors, Riverside Ca…We had a buyer ask one of our agents this very question this past week, and we thought you all might like to know the answer…because it can affect a buyer’s pocketbook!

To begin, yes…a seller is required to let any prospective purchaser know if the seller has filed any insurance claims on the property within the past 5 years.

First, this is done so that the buyer can have any inspections done to the home to make sure that whatever issue the seller had is indeed totally repaired.

For example, if there was a flood in the home (overflowing toilet while the seller was on vacation for instance), then the seller would show the buyer paperwork on all the work that was done by the insurance company to rectify the flooding.  However, the buyer may be very sensitive to, let’s say, mold, and because of the buyer’s sensitivity, said buyer may want to have additional inspections done on the home before removing any contingencies.  If there was no requirement for the seller to disclose the insurance claim, if the flooding occurred 4 years ago, then maybe the seller would assume all was well, and not think they needed to disclose a problem that had been fixed for over 4 years.

However, the above is not the real reason a seller must disclose any claims within the past 5 years.  Here is the real reason this disclosure must be made.

It is made because if the seller has made numerous claims on the property within the past 5 years, then the buyer more than likely will find homeowners insurance on this property to be more expensive than normal.

All home insurance claims are logged onto a central site, that can be accessed by any insurance company.  Think DMV here, where any insurance company can check out your driving record before offering you auto insurance.  Houses work the same way…there is a central site an insurance company can check before offering a homeowners insurance policy.

So…if a particular property has had numerous claims within the past 5 years, then the buyers new insurance company may be leery about issuing a policy on a house that obviously has some issues.  In a case like this, the buyer may have trouble getting insurance at all (depending on the number of claims), or if they do, then the new insurance company will probably bump the price of the insurance way up to cover some anticipated claims.

Therefore, the seller’s disclosure of the number of claims puts the buyer on notice to check things out with the buyers new insurance company.

Also, as an FYI, this central reporting site also tracks the name of the seller filing all these claims…and when this seller tries to get new insurance (if they acquire a new home), THEY may find the rates very high as well.  The thinking here is that the insurance company cannot be sure if the previous house was the problem, or if the seller was the problem.

Either way, the insurance company is going to price insurance accordingly, since they don’t want to lose money on either  a bad house, or a potentially negligent seller who files a lot of insurance claims.

We hope this helps if you ever find yourself in this “insurance” situation in the purchase of a home.

Can a Buyer Change Financing During Escrow?

Westcoe Realtors, Riverside Ca…When a buyer makes an offer to purchase a seller’s home, there is great consideration given to how the buyer financially intends to complete the sale…and the type of financing the buyer intends to get can have a definite bearing on the seller’s desire to accept the buyer’s offer.

So…once an offer has been accepted and escrow is opened, can the buyer simply change their financing to something new…something different than what was originally stated in the purchase agreement?

In short…yes…but they do so at their own risk, and the seller is not obligated to go along with this change.  Allow us to explain.

The type of financing a buyer chooses to purchase a home can be a very big deal to the seller…and can be a good reflection on how easy (or hard) the loan will be for the buyer to obtain.

As an example, if a buyer stipulates in the original offer that they are putting 50% of the price down in cash, and getting a new loan for the other 50%, this is a loan that should be very, very easy for the buyer to obtain…which would mean this is just one less thing a seller has to worry about.

However, if the buyer was only putting 5% down, and getting a new loan for 95%, then this loan is more difficult to obtain, and there are more things that could go wrong.  It doesn’t mean that the loan won’t get approved and funded, but it is certainly trickier than the 50/50 loan above.

Or…if the buyer has stated they will purchase “all cash”, and then decides to get a loan, this is a very big change…and a very big deal.  Or perhaps they buyer said they would be getting a conventional loan, and now wants to get an FHA loan…again, another big change.

So…in the situation where a buyer chooses to change financing options during the escrow period, (for whatever reason), the buyer can do this, but the buyer is still obligated to close the escrow on time…and if the buyer cannot do this, then there could be financial consequences for the buyer.

In the standard Purchase Contract, the actual wording is as follows:

“Seller has no obligation to cooperate with the buyers efforts to obtain any financing other than that specified in the Agreement, and the availability of any such alternate financing does not excuse the buyer from the obligation to purchase the property and close escrow as specified in the agreement.”

This clause is there to keep buyers from saying one thing to get their offer accepted, and then doing another.

The bottom line here is that all these financing issues need to be addressed by the buyer PRIOR to the offer to purchase, so that when the offer is written, everyone has done their homework and is on the same page.  As the saying goes…”changing horses in mid-stream” is not a good idea.

Take care, and as always, thanks for reading our blog.

How Long Can a Seller Take to Accept, Reject, or Counter a Buyers Offer?

Westcoe Realtors, Riverside Ca…This is a very interesting question, and one that has major relevance in today’s real estate market.

Most of the time, everyone operates on the assumption that a seller who puts his home on the market is ready to sell, and therefore, is capable of giving a buyer who makes an offer an answer rather quickly.  The answer may be NO…it may be YES…or it may be a counteroffer on some point in the offer…but at least the buyer has an answer and can proceed accordingly.
BUT…what happens when the seller, for whatever reason, takes too long (days, etc.) to answer the buyer?  What are the buyers options?

First, understand that in the standard Real Estate Purchase Agreement (RPA), the default time a seller has to get back to a buyer is 3 days from the date the buyer signs the RPA.  Of course, the buyer is free when making the offer to shorten or lengthen this time frame, but most of the time, everyone rolls with the 3 day time period.

Secondly, there are lots of legitimate reasons why a seller could take more than 3 days to get you an answer.  It could be they are out of town for a couple of days…or someone is sick and it’s best to wait until they feel better…or there is a family emergency…or who knows what.  In cases where there seems to be a legitimate reason for this delay, it’s probably in the buyer’s best interest to simply wait until the time is right for the seller.  After all, the buyer wants the seller’s cooperation on the offer, so showing some patience might be the best way to get the seller in a receptive frame of mind for the offer.

However, how about the situations where the seller is perhaps playing a “game” with the buyer?  Perhaps the seller is trying to solicit other offers to get buyers in a bidding frenzy…or waiting to see if they a get a better offer…or testing the waters to see what they should do next…again, who knows what.

In cases like this, what can the buyer do?

Well, the bottom line here is that a buyer has two choices when and answer is not forthcoming in a timely fashion:  Suck it up and remain patient if you want the house, or pull your offer and go somewhere else.

We wish there was a third alternative, but in the end, it’s the seller’s house and they can be as difficult to work with as they want.  Yes, we get it…what you really want to do is scream at someone who is so self-centered as to play with your time and emotions, but that won’t get you very far.  This is why you should have a real estate agent…someone who will be a buffer between you and the seller…someone who can calm you down, and remind you it’s in your best interest to remain patient and not “lose it”, because we seldom find that yelling at the seller enhances your offer!

So…if you ever find yourself in this situation, our best advice is to remain patient, resist the urge to pull your offer or scream at the seller, and take solace that when you eventually purchase the home, the seller does not come with the house!!

Trust us on this one…staying cool goes a lot further.

Take care, and as always, thanks for taking the time to read our blog…and let us know if you have any real estate issues you would like us to address in this space.

Buyers & Sellers: How do You Find a Good Home Inspector?

Westcoe Realtors, Riverside Ca…A home inspection is a very important part of a real estate transaction.  Generally, no one involved with the sale has much knowledge about construction or the workings of a home…not the buyer, not the seller, and not the real estate agents.

So…you need someone who does understand how a house “works”, and that is the Home Inspector.  The question is…how do you find a good one?

Well…finding a good home inspector is like finding a good auto mechanic.  You want someone who will tell you the truth, but use some common sense in the application of that truth.

As an example, consider the 3 stereotypical auto mechanics when it comes to discussing the brake pads on a car.

Type 1 auto mechanic scares you to death by telling you the pads are worn, and you would “sure hate to have them go out when you are on the freeway”, and that perhaps to be safe and not hurt your loved ones, you better replace them now before anyone gets hurt, etc.

Type 2 auto mechanic tells you the pads are worn, but not too badly, and that you are good for another 5,000 miles, but they just wanted you to know what you will probably need to do next time…but don’t worry, you are fine for now.

Type 3 auto mechanic looks at the outside of the car, asks you if it is still stopping, and then says don’t worry about it until you can no longer stop when you want!

Ok…perhaps this is a little simplistic, but the idea here is that everyone wants the type 2 mechanic…and in the real estate business, everyone wants the Type 2 Home inspector.

As an example, consider stucco cracks in a home.  Most stucco houses have stucco cracks in the outside walls, especially those walls that face the hot sun.  Over time, as the sun beats on the wall, the stucco can crack a bit.  Mind you, these are not 1″ huge cracks, but rather simply the very small hairline cracks that run up the wall.

The “Type 1” Home inspector will note the cracks, and then go on a big rant about “settling foundations”, or “geological slippage”, or “poor footings”, etc.  These inspectors will get a buyer so worked-up about the house falling down on them that the buyer will cancel the purchase of a perfectly good home for them and their family.

Mind you…no one wants any home inspector to ignore any problems with a home.  That is uncool and unprofessional.

It’s just the inspector needs to know their job well enough to properly decide what is important, and what is not.  Some Home inspectors are so afraid of getting sued that they cover their you-know-what by saying things like the phrases noted above.

Back to our normal stucco cracks.  A “Type 2” Home inspector would note the cracks, and explain to the buyer that these are normal in Southern California.  They would also suggest that there is no further examination necessary in their opinion, but leave the choice of increased scrutiny to the buyer.  In essence, no harm, no foul.

A “Type 3” Home inspector would never even note them on the report.

So…how do you find the right, Type 2 Home inspector?  Our best advice is to ask either someone you know who has perhaps just bought a home and had an inspection done, or ask for a referral from a Realtor.  As professionals in this industry, we use Home inspectors all the time, and from trial and error, have learned to eliminate the Type 1 & 3 inspectors, and work with the Type 2 professional.

Remember…the goal here is to properly find out if there is anything wrong with the home, so as a buyer, you can make the best informed decision about your purchase.  No one wants any buyer unhappy with a home purchase, but we also know purchasing a home can be stressful…and the last thing a buyer needs is a home inspector unnecessarily adding fuel to their fear by not exercising any common sense when it comes to the house.

Good luck, and may you have nothing but “Type 2” professionals in all aspects of your life!

How Long After Close of Escrow is a Seller Liable for Repairs

Westcoe Realtors, Riverside Ca…We live in an age of disclosure.  Most everyone gets that.  There are a variety of disclosure forms a seller must provide for a buyer, but after this is done, and the buyer has approved the disclosure forms and closed the escrow, does the seller have any continuing obligations for any repairs that are discovered later?  In other words, is the seller obligated for any continuing repairs after they no longer own the home?

Well, mostly the answer is “NO”, but not always…and here is why.

Early in the escrow period, the seller must disclose to the buyer any known defects with the home, or any defects in the past in which the seller has made repairs.  With regards to repairs, you don’t need to disclose when you repaired a leaky faucet with a new washer, but you would be wise to disclose, for example, major roof repairs, or major flooding, etc.  Common sense goes a long way here.

Anyway, the buyer will look at your disclosures, and in almost all cases, couple the sellers disclosures with the home inspection the buyer hires a professional to do, and from there, the buyer will ultimately be satisfied with the condition of the home and close…or not and the escrow will fall out.

Assuming the buyer closes the escrow, what happens when about 30 days later, there is a big rain, and the roof leaks?  Who pays for the repairs?

Well, we are not attorneys, and every situation is different, but here is a general answer to this situation.  If the seller never had any issues with the roof leaking, or had issues but disclosed them to the buyer, then this comes under the heading of “stuff happens”, and the buyer will need to do the repairs.  Yes…it’s possible the roof problem existed when the seller owned the home, but if it hadn’t rained for 9 months, then there would be no way the seller could have known about the leak…hence the buyer inherits the leak.  The thought process here is that the seller is only responsible for what they know, or should have known, and with 9 months of no rain, the seller couldn’t have known the roof now had a problem.

HOWEVER…if the buyer hires a roofer, and the roofer says he had given a bid to the old seller about this problem…or there is evidence of roof repairs that were never disclosed to the buyer, or there were buckets in the attic under the leaks, etc…then the seller obviously knew about the leaks at some point, and should have told the buyer.

In this case, if the buyer had been for-warned about the past problems, then they could have hired a roofer to inspect these issues, and that may have affected the buyers desire to close the escrow.

As another example, pools can work the same way.  Seller doesn’t say disclose anything negative about the pool, and then 30 days later, the pump breaks, or the pool is losing water at a rate far above normal evaporation.  In this case, the seller would still be OK unless in getting bids to solve the problem, the buyer is told by the pool company that the seller had been informed of the issues before they put the home up for sale.  Obviously, the seller knew and failed to disclose.  Hence, the seller has a problem.

The bottom line here is that in normal situations, the seller does not have to panic about issues that come up after the close of escrow (assuming it’s not 1 or 2 days after the close) as long as they were forthright with all their disclosures…but if the seller “forgot” to disclose something ( either by accident or deliberately forgot), then the seller has a problem.

Our advice to sellers when filling out disclosure forms is this:  When in doubt…disclose.  Stick with this rule, and you’ll be fine.

Seller Property Questionnaire (SPQ)…What is This?

Westcoe Realtors, Riverside Ca…When we represent the seller on the sale of their home, the Seller Property Questionnaire (let’s call this the SPQ…quicker to type) is one document that generally makes a seller roll their eyes.

Why?  Because it’s 4 pages long, looks like a pain-in-the-rear, and has enough legal “stuff” on the front page to choke a horse.  So what is a seller to do?

Easy…ask your agent how to fill it out…but in the absence of an agent, or if your agent is not particularly helpful (shame on you for using them), then perhaps the following will be of some assistance…because like it or not, if you are selling a home, you will probably need to fill out this SPQ form.

First, understand that like most disclosure forms, this one is there to help you, so don’t fight it.  It really is fairly simple.  Remember…one size fits all (so we are told), so this form needed to cover anything that may be happening in your home…and trust us, no home has all of what they ask for, so you will get to skip a bunch of stuff.

So…here is what you need to know.

On the first page, there are 10 questions with YES or NO answers.  Read them and answer.  They are simple questions, and by signing your standard purchase agreement with the buyer, you agreed to provide them with this information…so just do it.  YES or NO…pretty simple.  If there is a question you are not sure about the answer, then leave it blank, and explain why you left it blank in the space provided at the end.

OK…now move on to pages 2,3, and 4.

All you need to know here is that the form will reference a series of questions and prompt you for your answer.  For example:  questions about appliances, electrical systems, any water or mold issues, any pet or animal problems, landscaping and pool questions if they apply, etc.

Remember, this disclosure form is there to help you, so just answer the questions…and our best advice we can give you for any disclosure form is this:

If you are unsure if you need to disclose something, JUST DO IT.    It is far better to “over-disclose” than to “under-disclose” since saying too much will not get you in trouble later with a lawsuit for failing to tell the buyer about something that might have been important.

So…with regards to the SPQ, don’t let the 4 pages of small print freak you out.  Take your time and you will be fine.  It’s only when a seller is in a hurry that mistakes happen.

Homebuyers: Don’t Panic…Fed Interest Rate Hike Won’t Hurt You

Westcoe Realtors, Riverside Ca…OMG…the Fed raises it’s rates by 1/4%, and the media would have you think the world is about to stop spinning!  Look out Henny Penny, the sky is falling…and with it, your ability to get a home loan for whatever type of property you wanted to buy.  So long…there goes the American dream of home ownership.

Well Toto…we are in Kansas…the sun will come up not only today, but tomorrow as well (even with El Nino, the sun is out there somewhere), and the interest rates on 30 year fixed rate home loans remain LARGELY unchanged!

Please….please…please understand that the Fed interest rate hike is all about what banks are charged to borrow money from the Fed, and will have nothing to do with 30 year loan rates.  The Fed rate hike of last week will only have an effect on short term rates (think credit cards, auto loans, etc.), not long term rates, like home mortgages.k

As a matter of fact, in case you hadn’t noticed (and why would you…the media has you ducking for cover), in some cases, interest rates for 30 year home loans have dropped since the Fed made their announcement…and where was that on the National news?  Trust us on this one…you can still borrow today the same amount you could borrow yesterday.  Our 30 year rates did not move up.

The moral to this interest rate story is that once again, don’t get too wrapped up in whatever the national media has to say about housing.  Their job is to garner ratings…and they can do that by scaring people.   After all, what sounds better as a new headline:  Potential home loan rate hikes negatively affect millions of home buyers…..or…Fed rate hike to have no effect on home loans.

Media buzz wants the former….the truth lies in the latter.

Take care, and as always, if you have any questions you would like to see addressed in this blog, let us know…we are happy to help in any way we can.