Real Property vs. Personal Property

In a Real Estate transaction many First-time Homebuyers are unaware of the legal definition of property, what constitutes property, and which kind of property is included with the sale or purchase of a home. For example, say you just bought your first home. You had fallen in love with the antique light fixtures and free standing stove in the kitchen. However, as you walk into your new home you realize all antique light fixtures have been disconnected and are missing and your free standing stove is also gone. You can see the importance of understanding property definitions and the magnitude of a clearly defined contract. According to Real Estate Law in California by Bowman/Milligan, Real Property is lands, buildings, or immovable property; whereas Personal Property (chattel) is moveable property (aka. anything that can be moved or picked up). These definitions become convoluted when personal property becomes real property by means of attachment. This means anything attached (bolted, screwed, nailed, glued ect.) to the Real Property may become the Real Property. There are hundreds of situations and variables where Personal Property becomes Real Property and Real Property becomes Personal Property. For example, crops may be real property unless under a lease hold and then becomes personal property during harvest. However whose personal property the harvest becomes (whether Buyer or Seller) needs to be specifically defined in the contract.

In this blog, I am talking only about Personal Property in a typical residential transaction. Over the years many agents have succumb to paying for the replacement of personal property for their clients (including myself) for missing items in the contract which was not in writing and overlooked as part of the purchase. My Seller, in her world travels, had collected porcelain fixture plates which covered most of the electrical switches in the home. Upon the final walk-through, the Buyer noticed all the porcelain plates had been replaced with generic plastic switch plates. Now my Seller had never mentioned her attachment to these covers or indicated her intentions to remove them prior to close of escrow. The switch plate dilemma escalated into a major issue with the Buyer and Seller. The Seller would not sell the house with the plates attached and the Buyer was not buying the house without them (apparently the fixtures were worth $250,000 to the Buyer and the home was a nice addition). In order to keep the transaction alive, the selling agent and I found and paid for the most expensive porcelain switch plate covers money could buy. I could write fifty pages or more about the imprecise aspects of personal property vs. real property, but in a nut shell “if in doubt get it in writing.” Technically, according to California Law, the Buyer owned those fixtures upon executing the contract. Don’t ever assume everyone is on the same page when it comes to real estate transactions. More times than not, they are not even in the same library.

Legal Short Sale Loopholes

As many short sales that I’ve done over the years, one stands out among the others for its uniqueness and surprisingly happy ending. The situation was this: the Trustor’s (the ones in trust to pay back the loan) were behind on payments and notice of default was filed. A reasonable loan modification was not an option because the husband had taken a major pay cut due to business down-sizing. They were referred to me and after looking at their options we realized their only chance to save some credit (if any) was to try for the short sale approval. This is where the Lender is asked to reduce the amount owed by the Trustor in order to sell the property. The house debt was in the $900K price range and was short selling for $450K. You need to understand however, that the lender (note holder) generally only manages the account whereas an investment group or individual normally purchases the note. Usually the investor would not agree to take such a large hit on their investment, but they will if they foresee taking a larger hit in the future.
After speaking at length with my clients, I found they really wanted to stay in their home because of schools, close friends, a previously built pool, landscaped back yard and so on. I started questioning my clients about their parents or possible friends/investors interests. Come to find out their parents were looking for an investment property! After meeting with their parents I inquired whether or not they would be interested in buying the home, therefore, keeping their daughter and son-in law as tenants and possibly selling the house back to the children at a future date. The parents were excited about the idea.
At this point I am wondering what I’ve gotten myself into with potential disclosures to the lender, lender fraud allegations, misrepresentation and the list went on. I ran this scenario by CAR (California Association of Realtors) attorneys, my own attorney and a couple of other lenders in the field. The resolution was this: no disclosure was required under those circumstances and the lender did not care who bought the property as long as the property was bought. The appraisal price came in at $450K which is what we sold it for and my clients and their parents were elated with the outcome. The point of this story is there are so many potential avenues with the short sale process; you only need to look at all the possibilities. Knowing when to move on and let go can be very difficult, but (not to sound cliché) if there is a will there can sometimes be a way. Don’t give up!

Eminent Domain Question #1

AT WHAT POINT IN NEGOTIATIONS WOULD EMINENT DOMAIN BE OFFICIALLY IN ACTION?

The point in negotiations when I would consider an action in Eminent Domain would be after the entity has made sufficient attempts to negotiate with the owner. If negotiations with the owner prove to be futile whether the owner is unavailable, unresponsive or out of touch with respect to value or cause of action, Eminent Domain would officially be in action when the entity has filed for possession and posted money into court procedures based upon the backing of an appraisal report. At this time the owner could question the necessity of the project and whether the taking is in fact for a public use.
On numerous occasions I have been the negotiator between my client and the entity and have attempted to avoid Eminent Domain actions which are usually very costly and time consuming for all involved. An example where negotiations proved beneficial to all
was in 1985 when Cal Trans was widening I-80 for the new Hwy 65 bypass. My client’s home was located on Westwood Dr. in Rocklin and Cal Trans needed thirteen feet of her back yard. Mrs. Cox (my client) was confused at first about condemnation proceedings under the law of Eminent Domain. I read Cal Trans material and realized Mrs. Cox property was inevitably going for public use; however, under the laws of Eminent Domain just compensation is required and I advised Mrs. Cox of such. At this point it is important to understand that while the Eminent Domain proceedings are moving forward the actions can be stopped at any time when a mutual agreement is accepted. Mrs. Cox hired an attorney and her attorney asked me to appraise the value of the lost property. Cal Trans agreed with my analysis and both parties were able to reach a mutual agreement in negotiations and Eminent Domain actions were avoided.

Buyers Contemplating a Short Sale

While looking for a home, there are many things to do in order to position yourself in a favorable light to the Seller or REO bank. Just as important though is knowing what properties and which Seller’s to pursue. I see First Time Home-buyers get taken down the prime rose path and afterwards are disgruntled on the whole buying process. Short Sales, if handled correctly, can be an all around good thing but you’d better know what you’re getting into before you start or inevitably waist months of your time. If you find a short sale home you like, there are questions you need to ask yourself and the listing agent that will save you lost time and inspections fees. 1. Has the short sale been approved by the lender/investor and is the appraisal part of this approval? 2. What is the time frame for the bank to sign a short sale payoff? 3. Is there mortgage insurance on the property (if there is this will negate the short sale)? 4. Is the listing agent an expert with short sales and can prove his experience? If these questions are asked and answered upfront you may then be in the running as a short sale buyer; however, i do highly recommend that you locate an agent that is truly familiar with the short sale process because this is just the beginning of a complicated process.

There are lots of arrangements of branches to short sales but like I said, they can be a good deal.

The Benefits of Owning Rather Than Renting in 2009

I have three daughters who have numerous things in common: they're in their twenty somethings, they've put themselves through higher education, they work full time, they're beginning to start new families, and all three of them are Renters. They've voiced their frustrations about "throwing their money away" by renting and wished there were ways to utilize their hard earned income to benefit themselves and their families for the future. I have advised them to take advantage of this year's beneficial environment for First-time Homebuyers. With the current low mortgage rates, the changes in home prices , and the new Homebuyer Tax Credit, buying instead of renting is one of the smartest decisions Renters in their twenty somethings can make for their future.

First-Time Homebuyers Save in Out-of-Pocket Costs
Let us assume Renters pay on average $1,855 for a 3bed/2 bath home. Now include $20 per month for renters insurance and Renters pay a total of $1,875 per month. In contrast, First-time Homebuyers on average only pay $1,340 per month for their mortgage payment and $290 for their taxes and insurance (PITI) totaling $1,630 per month. Based on data analysis by California Association of Realtors(C.A.R.), First-time Homebuyers save $245 per month by not renting. They save $2,940 annually and a whopping $14,700 in out-of-pocket costs within five years. Just think, you can use those saving to finally pay off those enormous school loans, put it towards your kid's college fund, or start that small business you've always wanted too.

Tax benefits for First-time Buyers
We all know that homeowners can itemize and deduct their mortgage interest and property taxes from their taxable income; however, this year the Stimulus Bill gave a first time Homebuyer Tax Credit of 10% of the purchase price of homes up to $8,000. Though the First-time Buyer Tax Credit is set to end on 11/30/09, legislation is considering a six month extension to continue boosting California's housing market.

These tax benefits substantially increase the advantages of being a First-time Homebuyer this year. For example, consider two households each earning $48,900 (the minimum income needed to buy the statewide average entry-level home cost of $248,000). The household that is a First-time Homebuyer will gain $15,800 in tax deductions in 2009, not including the $8,000 one-time Tax Credit on that home price. The household that's continued to rent (without the Tax Credit) will usually only be eligible for $10,900 (IRS Standard Deduction). According to a C.A.R. report, First-time Homebuyers in 2009 save over five years $11,440 more so than Renters in tax savings.

These benefits are only a few of many reasons why Renters should seriously consider the gains this year has to offer for First-Time Homebuyers. I urge my daughters and all twenty somethings to look at the positives in this economic upheaval and while they still can, take advantage of this unique market environment.


(Although I'm not a Certified Public Accountant I am a real estate consultant; however, any tax questions should be directed to your tax advisor.)

Real Estate 101

Today I have a huge percentage of clients Ive sold too in 1980 and have since sold to their children. By the looks of it, I’m starting to sell their grandchildren homes. These types of relationships have been earned for countless reasons. I have strong local roots and connections and have always given my knowledge freely to clients, friends, and family over the years. My 30 years full time experience extends from creative financing, sweat equity, FHA, VA, Cal Vet to Conventional loans in excess of $10 million. I have been told many times to write a book on my real estate experience and though I’m not writing a book or trying to polish my own apple, I do have a high level of education in real estate including residential, commercial, development, and building. Ive found the majority of my business has not been about commissions but about answering everyday people's questions concerning the ever-changing multi-faceted world of real estate. I have decided to write blogs weekly about real estate information people should know but usually don't. Besides these tips of the trade I would like to help answer any real estate questions you have with no obligation whatsoever. I don’t always have the answer, but I sure do know where or how to get it. Please feel free to contact me and let’s see how I may be able to help you.