Thursday, January 4, 2018

What Does an Administrator Of A Redwood City Probate Estate Do With An Offer Unlikely to Close?

BY 
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
November 26, 2016 06:08 PM



REPORT



Redwood City Probate Sale
In a Redwood City Probate sale, sometimes the highest offer turns out not to be the best offer, but until it does not close, it is impossible to know that. So what do  you do if you are the Administrator of a Redwood City Probate Estate and you are faced with very different competing offersrs.
There is not one right answer, but here is an example and some things to keep in mind when making your decision. Remember the guiding principle here is that I am making the assumption that you have full authority to sell the home and court confirmation is not mandatory. If the sale has to be confirmed by the Probate court then this blog does not apply to you. The Administrator of the Redwood City Probate Estate with full authority gets to make the decision as to which offer is accepted, but that decision must be sent to all the heirs of the estate in a Notice of Proposed Action. If any heirs object, the sale may have to go to Probate Court for confirmation and an over bid process which will cause months of delay.

The Administrator of the Redwood City Probate Estate is charged with getting the best price and best terms for the house for the heirs to the estate. Best price is easy to determine, best price is not.

Take an example of what happened in one of my Probate listings in Redwood City.

I was hired to sell a home in Probate in Redwood City. The home had major cracks in the walls, a broken heater, bad plumbing, broken windows, major floor slopes, a garage that was leaning, and the house basically looked like it was being held up by termites holding hands.

The Probate Court sent out a Probate Referee who said the value of the house was $575,000.

The Administrator of the Redwood City Probate Estate hired me to sell the house. I suggested getting inspections. The foundation inspector said the foundation was no good and would cost ninety thousand dollars to replace.

We decided to list the house at $650,000 because the market was rapidly appreciating and the house had a lot of charm and a great location even though it needed so much work. Other homes in the neighborhood were selling in the $800-$900,000 range.

The seller received 3 offers for the Redwood City Probate home.

  1.      $650,000 As Is, no property contingency, 14 day loan contingency.
  2.      $600,000 As Is All cash, no inspections or contingencies of any kind, close as soon as the heirs sign a Notice of Proposed Action.
  3.      $800,000, All Cash, No appraisal contingency, 5 day property contingency.

This $800,000 offer seemed too good to be true. I told the seller that with a 5 day property inspection I expected the buyer would come back and try to re negotiate the price even though all the inspections were done and we knew very little, if anything could be salvaged. At that point if the price was over $600,000 then it was worth the risk.

It was also possible the buyer had never seen the house, had no idea what he was doing, and was making high ball contingent offers on many properties with the hope someone would take his offer and then he could decide if he wanted the property. He was as likely to cancel the contract as not.

The Administrator of this Redwood City Probate Estate decided she had to take a chance on the $800,000 offer. She knew it was a long shot, but if she did not accept it the other heirs could accuse her of not taking the best offer for the estate because she was in a hurry to close escrow and get her money. She knew that for them the higher price was worth it even if they had to wait longer.

So the highest offer was accepted and 4 days later the contract was cancelled. The buyer discovered how much work needed to be done, despite supposedly reading all the reports, and dropped out.

The offer for $600,000 was then accepted as the buyers were still interested and closed escrow 14 days later.

The heirs all agreed that they gave it a shot at getting more than the house was worth, and were willing to take market value for the house.

So, if you are an Administrator of a Probate Estate sometimes the highest price offer may not seem like it will close, but taking a chance on it can be the best thing for the estate, and if it does not work out at least you have fulfilled your fiduciary duty.

Marcy Moyer
Keller Williams Realty
650-619-9285
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What Do Higher Interest Rates Mean For Silicon Valley Real Estate

Palo Alto home for sale 

Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
November 28, 2016 10:46 AM



REPORT
After the election I started watching Bloomberg TV instead of the news/opinion channels I had been watching.  I guess I just got tired of all the yelling, in addition to the fact that I felt the need to try and get some clarity on what might happen to the economy, and more specifically the Silicon Valley housing market.

Besides the much needed civility I found on Bloomberg, I quickly came away with the understanding that no matter who the different reporters and commentators said they thought would be winners and losers in a new political environment, there was one thing everyone agreed on. Interest rates are going up. PERIOD, end of story. Janet Yellen was going to raise interest rates anyway, due to the favorable economic environment. But added to what would have happened, regardless of the election outcome, everyone agrees that we appear to be headed for an inflationary period.

I am old enough to have purchased my first home when interest rates were 19% and the most valuable homes were those that had assumable mortgages as 13% or less. Hopefully we are not going back to those days.

But we are going from interest rates in low 3% to now over 4% and presumably still rising. So what does this mean to the Silicon Valley housing market?

Common wisdom is that as interest rates go up housing prices go down since the ability for a borrower to pay also goes down. We have seen this in the past, but the decrease in price is not always proportional to the increase in rate.

Take this example.

A Million dollar loan: 30 year fixed

At 4.150%:  $4861 a month

At 5%:  $5368

At 6%:  $5996

At 7%:  $6653

The difference for each jump of 1% in interest translates into about a 10% increase in monthly payment.

For a conforming loan of $400,000 30 year fixed

At 4%:  1910
At 5%:  2147

At 6%:  2398

At 7%:  2661

Again, the difference for each 1% in increased interest rates equates to about a 10% increase in monthly payment.

So, in order to make waiting a money saver, If interest rates go up 1% pt. housing prices must go down over 10%. At a 2% pt hike housing prices must go down over 20%, and at a 3 pt climb they must go down over 30%.

Do we expect this to happen in the Silicon Valley housing market in the near future?

No one can say for sure, but let’s look back at housing rate drops during the big crash of 2008-2010/2011 in some different neighborhoods.

These are average prices for all residential real estate. Some segments fell more than others, but on average I looked at what the mean sale was for single family homes, town homes and condos in four locations: Palo Alto, East Palo Alto, 94087 (Sunnyvale west of El Camino), and Willow Glen.


High before crash:  $1.3 million

Low after crash       $1.2 million



High before crash:   $628,000

Low after crash:       $295,000



High before crash:    $779,000

Low after crash:        $717,000



High Before crash:     $793,000

Low after crash:         $637,000



What so these numbers tell me about the Silicon Valley housing market, and by extension you?

If you are planning on buying in one of the areas where prices held up fairly well during the crash, then waiting for prices to drop as interest rates rise may not be to your advantage.

If you are planning on buying in a location that did not hold up well during the crash then an increase in interest rates may get you some savings in the long run or maybe bigger, better property.

My only concern would be that places like East Palo Alto that suffered so badly during the crash may not drop as much with higher interest rates since the location is so convenient to Facebook and Google. That may put enough pressure on these east of 101 neighborhoods to keep the prices supported more than they were in the crash.

I believe the same may be true in San Jose as companies like Google and Apple move south where there is more available space. In neighborhoods like Alum Rock or South San Jose where there is a lot of investor activity it may be better to wait until prices fall.

If you have any questions about buying or selling a home in the Silicon Valley please feel free to contact me.

Marcy Moyer
Keller Williams Realty
650-619-9285
www.marcymoyer.com

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Buying Pescadero Probate Property Where Animals Graze Without A Lease

BY 
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
December 07, 2016 11:58 AM



REPORT

Pescadero Probate realtor

Pescadero Probate realtor
 Anyone who has looked for acreage in places like Pescadero, Gilroy, or Morgan Hill has probably come across a situation where a neighbor or friend has horses or goats or cows who graze the property. You ask to see the lease and the response you get is often, “There is no lease, they have an informal agreement that Ms X gets to keep her livestock on the property in exchange for the livestock grazing Mr Y’s land.

Mr Y does not have to pay the high cost of keeping the grasses and weeds cut and Ms X does not have to pay the high cost of boarding and feeding her livestock. It is a win win, and for decades no one has formalized the agreement.

Then, unfortunately Mr Y dies and his heirs need to sell the Probate acreage in Pescadero, or Gilroy, or Morgan Hill. There is no documentation of the agreement and no one is sure what Ms X’x rights are, or what the estate has to do to terminate the relationship. Or maybe the buyer of the Pescadero Probate acreage’s , Mr and Mrs Z’s don’t understand what their  responsibilities are if they want Ms X to continue grazing, but don’t want her to have full tenant’s rights. In other words, Mr and Ms Z still want to use the land, so they do not want to lease out a portion of the Pescadero or Gilroy, or Morgan Hill land. They just don’t want to have to pay someone to mow it.

The answer to this dilemma is for Mr and Mrs Z to grant Ms X a license for Ms X’s horses to graze on a portion of the Pescadero Probate property they are buying. The license can be terminated at any time by the owners of the property. There are no tenant’s rights for exclusive use and Mr and Mrs Z do not need to give any notice or have any cause to terminate the agreement. The right to graze horses is a personal privilege and is not tied to the property in question. The horses do not have any exclusive use and Mr and Mrs Z can use the grazed property any time they want.

If Ms X had a lease then she and her horses would have exclusive right to use the property and Mr and Mrs Z would have to give notice to enter that portion of the property and could not tell Ms X to leave whenever they want.

It is a distinction that is important to preserve the rights of Mr and Mrs Z to use their new Probate property in Pescadero, or Gilory, or Morgan Hill.

I suggest if you are going to do this you consult a lawyer before closing escrow on that gorgeous view property in Pescadero, or Gilroy, or Morgan Hill, or anywhere else you may find it.

If you have any questions about buying or selling property, especially in Probate in San Mateo, Santa Clara, or Alameda County please feel free to contact me.

Marcy Moyer
Keller Williams Realty
650-619-9285
www.marcymoyer.com
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Is It A Good Idea To Buy a Daly City Investment Property With a Loan?

BY 
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
December 11, 2016 10:09 AM



REPORT

Daly City Rental Property
As I said before, I think this is a good time to buy rental property in the Bay Area. To read my thoughts click here.
I also believe that investments are a great idea in the north Peninsula because I believe that the bio tech industry will do well in the coming years. The combination of the anticipated loosening of regulations, advances in immunotherapies, the Cancer Moonshot project, the proximity to bio tech centers in the Mission Bay area of San Francisco and Genentech in South San Francisco, and the relative affordability of Daly City, South San Francisco, and San Bruno make these cities a great option for investors.

But the question at hand is, is it a good idea to purchase a Daly City rental property with a loan?

There are two basic ways to make money from a Daly City rental property, cash flow and appreciation.

An investor who buys a Daly City rental property with cash has the advantage of being able to take advantage of both cash flow and hopefully appreciation.

If you, as the investor of a Daly City rental property obtain a loan to purchase the property you will need to decide how where on the scale of cash flow from major negative to somewhat positive you want to be.

In general the expenses on a bay area rental property should run you about 35% of the income.

So, for example if were to buy a one bedroom condo in Crown Colony in Daly City right now it will cost about $400,000.

Expenses would include:

HOA: $352 a month

HO6 insurance: $50 a month

Property Tax: $400 a month

Misc. $100 a month

Total Monthly Expenses = 902

Market Rent: $2200

Net profit before mortgage: $1300

So, in order to be cash flow neutral the mortgage cost must be $1300 a month.

If you get a non -owner occupied loan for 4.5% then the mortgage needs to be $160,000 or less.

A 40% loan to value is not necessarily what you want to do, but if you believe that you can handle a negative cash flow and that prices will go up, then getting a mortgage to buy a Daly City  investment property in a good idea.

If you were to pay for this condo in cash and have a $1300 a month profit which would be a $15,600 profit a year.

At a $400,000 purchase price that is 3.9% cap rate which is quite good for a rental property in Daly City.

If you were to purchase a studio in Crown Colony in Daly City the numbers would be

Purchase price: $315,000

Income: $1800 a month: or $21,600 a year

Expenses:

HOA:  $330

HO6 Insurance: $45 a month

Property Tax: $315 a month

Misc. $100 a month

Total Expenses:  790 a month 

Net profit before mortgage: $1000 a month

Amount of loan that will make you cash flow neutral:  $125,000 or a 39% loan to value

If you were to buy with cash you would have a 3.8% cap rate, again very good for a Daly City rental property.

So the bottom line here is that buying a Daly City rental property with a loan is fine if you think the negative cash flow is doable, and you will get it back with tax advantages like depreciation and value appreciation. I would suggest that you buy one ASAP before the interest rates go up even more than potential decrease in price. For my explanation of this click here.

If you cannot handle the negative and you do not have enough down payment to make the cash flow neutral then this is not the right investment for you at this time.

If you want to search for rental properties to buy click here.

Marcy Moyer
Keller Williams Realty
650-619-9285
www.marcymoyer.com

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