Get it in Writing

For any agreement to be enforceable it is always best for it to be in writing.  Whether you are buying, selling, exchanging or leasing real estate, the agreements should absolutely be in written form.

The phrase “get it in writing” is not only good advice but it is also a warning when it comes to any Real Estate transaction.  There should be no ambiguity or room for disputes as the transaction moves forward. 

The real estate business makes use of many different types of contracts including listing agreements, leases, sales contracts and exchange agreements,  just to name a few.  Realtors understand the various contracts inside and out.  In the course of their business, a Realtor’s expertise in the use of contracts is critical to effectively carry out their responsibilities to sellers or buyers.

General business skills and the successful art of negotiation are tied closely to the use of contracts.  The proficient Realtor knows how to write a contract to ultimately attain their client’s needs and goals.  The way a contract is written originally may just be a starting point for negotiations.  Normally you do not initially ask for what you really want.  The use of contracts coupled with artful negotiation can help you to accomplish the end result that you want.  A written agreement is an important point of reference for both parties.  When you have a written agreement it will spell out the terms and conditions in advance and define the scope of the agreement.  Having a written understanding can prevent potential confusion.  Having everything in writing is critical so that after the initial offer, and potential counter-offers you have a clear understanding of what has been agreed upon.

 If you were to try to negotiate verbally the words could be interpreted differently by each party.  You also run the risk of selective memory or temporary amnesia.  Generally the less negotiated verbally, the better.  You can undermine your strategy by talking too much.  Involving yourself in lengthy discussions is usually detrimental to your ultimate goal.

Get it in writing.  Make sure your Realtor is knowledgeable about contracts and experienced in the arts of presentation and negotiations.

 

This article was originally written for and appears in the San Francisco Examiner. Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for  60 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

Common Ways of Holding Title

We are often asked “How should we hold title?”  It seems like it should be an easy question to answer, but it definitely is not.  Since real estate is usually the most valuable of our assets, the way people take ownership of their property can be very important. We are not attorneys and we are not intending to give legal advice, but thought that a broad brush explanation of the more common forms of California residential ownership might be of interest.

The way you hold title can have an impact on income taxes, inheritance taxes, gift taxes, transferability of title, and exposure to creditors.  How you hold title can also have probate implications.  The best form of ownership depends on your individual circumstances.

Joint tenancy exists when two or more people are equal owners with undivided interest in a property.  The main characteristic of joint tenancy is the right of survivorship.  When a joint tenant dies, their interest in the property goes to the surviving partner(s) in the property.

Tenancy in common involves two or more individuals sharing interests in a property. The interests do not have to be equal. There is no right of survivorship.  The other partners do not necessarily have any claim to a decedent’s share.  If one partner dies they can leave their interest in the property to anyone they choose.

Community property is a very popular form of holding title in California.  Holding title as community property is for married couples or domestic partners.  When one partner dies, the other partner automatically inherits the decedent’s interest.  Some married couples do have separate property that is not part of their community property.  These are usually properties that were owned or inherited prior to the marriage.

Community property with right of survivorship is also a form of vesting title by spouses or domestic partners.  It has the same advantages of community property ownership, but adds the benefit of the right of survivorship.

Revocable Living Trusts have gained popularity in recent years.  This is mainly because a living trust does not have to go through probate after an individual passes away.  Probate court can be costly and take a long time to be settled.  With a trust assets can be passed on to the beneficiaries without being held up in probate court.  There are costs associated with setting up a trust that other forms of ownership do not have

Other ways of vesting title that are regularly used are Family Limited Partnerships (FLP) and Limited Liability Companies (LLC).  There are several other forms of vesting title, but these are the most common forms of ownership.  All property owners should discuss how they hold title very carefully with their attorney or tax professional.

 

This article was originally written for and appears in the San Francisco Examiner. Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for  60 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

Becoming Financially Literate

A basic understanding of money is rarely acquired through today’s educational system.  If one does not take business related classes, the subject of money is usually overlooked.

 

In order to become a prudent consumer or an investor, either in the stock market or in real estate, your financial skills need to be sharpened.  Most of the financial problems we face are avoidable if we understand how money really works.  The knowledge of accounting skills can be invaluable.  Understanding percentages and interest rates is a must.  Do you really understand the difference between and asset and a liability, or the power of compounding interest?

 

Credit can be your best friend when investing.  Using “other people’s money” will provide you with capital that is necessary to make money.  But, using credit for non-investment activities or consumer items can be devastating to your financial well being.  For example, credit card debt can kill you if you carry a balance.

 

We have all known people who make approximately the same amount as others from their daily work activities, but some are able to manage the money better and have investments.

 

We also know that you can never, or rarely, become wealthy from our jobs or from working for income.  Earning daily and monthly income from your job is the first step.  We need to support ourselves; however, you must put money aside for investment purposes along the way.  So that eventually your money is working for you.

 

Your ultimate goal is to build assets, which produce income and grow over time.  Most of us work the first four months of the year for the government to pay taxes.  Then pay taxes again when we purchase something.  Then what ever is left over is needed to support ourselves.  You must pay yourself first and save that portion until it becomes enough to invest in something that will grow, work for you, and ideally have some tax shelter.  One of the most common problems customers have is how to get the initial down payment.  Consistent, dedicated, saving initially is the answer.

 

Real Estate can be ideal for accumulating wealth.  While you’re saving be sure to educate yourself as much as possible.  The wealthy understand money and how it works, that’s how they have become wealthy. 

 

The majority of wealthy people have made their money through real estate.  Some may make money through some other vehicle, but investing in real estate is usually the end result and where the wealth is held.

 

Education and knowledge is power.

 

This article was originally written for and appears in the San Francisco Examiner. Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for  60 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

Interest Rates and Compounding Interest

Understanding interest rates and their effect on the new personal residence you want to purchase is part of the process of becoming “business fit”.  If you are considering purchasing income property, understanding how mortgages work and the importance of interest rates is critical to successful real estate investing. 

Albert Einstein evidently thought that the effect of compounding interest was so dramatic, that he referred to it as the “8th Wonder of the World”.  He said, “He who understands it, earns it… he who doesn’t… pays it”.

Compound interest is interest computed on the accumulated unpaid interest as well as on the original principal.  Compounding interest involves adding interest to the sum of the principal and any previous interest in order to calculate interest in the next period, or interest calculated on both the principal and the accrued interest.

Understanding basic mathematics is crucial when investing.  I know most of us think we understand the concept of interest, but when it is applied to different investment possibilities the impact and results vary dramatically.

Leverage and compounding interest are probably the two best keys to real estate investing. If you are saving money compounding interest will greatly benefit you. If you are borrowing money it can be terrible.

Using leverage, or borrowed money, when purchasing real estate allows you to make a larger investment than you would normally be able to.  Leverage produces much greater returns on the dollars you invest, but involves paying interest.

Educating yourself on the various types of real estate mortgages can be of great value to the success of your investing.  Do you really know the impact of interest only mortgages verses (30) year or (15) year fully amortized mortgages?  Take the time to ‘pencil out’ an example of the mortgage you presently have on your home and look at the balance of principle owed after 5, 10,15, and 20 years.  You may be shocked.  Obviously, you pay your loan off in half the time with a 15 year mortgage verses a 30 year mortgage.  See what the balance owing on a 15 year loan is after 8 years verses 8 years on a 30 year loan.  Just think, if someone told you that you didn’t need to make a mortgage payment on your home for the next 15 years, wouldn’t that put a smile on your face?

Understanding various forms of interest and their effects can be very helpful.  When you combine the power of leverage with compound interest, we know from both experience and basic math that you can make phenomenal returns.  Real estate investors who understand the true importance of “interest” on their investments benefit the greatest.

 

This article was originally written for and appears in the San Francisco Examiner. Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for  60 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

Real Estate Millionaires

Real Estate Millionaires

Becoming a millionaire has always been part of the American dream, or at least achieving a certain level of financial success.  One of the surest paths to financial prosperity is through the acquisition of real estate.  Those of us living in the Bay Area have certainly seen, first hand, the benefits of real estate ownership.  Usually, there is nothing quick about getting rich with real estate. A lot of real estate seminar promoter’s promise fast, easy, get rich quick, approaches to real estate.

Some speculate in real estate, buying a tired or run down property and fixing it up and turning or flipping it, trying to make a profit. This type of speculation can be profitable, but most people do not have the building or construction background to accomplish this effectively. If you have to hire the various trades’ people it can get real expensive fast and erode potential profits. If you are borrowing the cash to purchase the property and then borrowing additional funds for the project the holding costs can eat up profits in a hurry. If there is some profit, then remember about your silent partner in the project, the State and Federal government wants their fair share, it is considered a short term capital gain.

Most people who do well with real estate are long term investors not speculators. The secret is to become a high net asset individual, not necessarily a high income person. It is true that it does take a significant capitol to be a successful investor, or at least it is a lot easier if you have access to capital. But, over time it becomes financially easier as your investments grow.

A lot of us would like to achieve millionaire status. However, due to inflation the status of millionaire isn’t as exclusive as it once was. Maybe having financial independence is a better way of achieving your financial goal.

Starting with a business plan, being well organized and keeping your monthly expenses or overhead cost low is the first step.

In 2017, it was reported that there were roughly 13.6 million people with $1 million dollars or more in the United States. It is estimated that by 2021 there will be 18 million millionaires. Another commonly use term is multi-millionaire; this is having two million dollars, or more, in net assets. Having two million or more dollars puts you in a little more exclusive club. Only a small minority of millionaire households are indeed multi- millionaires.

When you’re investing, it is helpful to have goals along the way to gauge your progress. Achieving becoming a millionaire is a good goal.

51% of people with a net worth over $50 million dollars live in North America. There are more millionaires in the United States than any other Country in the world. Real Estate investing has made more people millionaires than any other field of endeavor.

 

This article was originally written for and appears in the San Francisco Examiner. Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for  60 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

The Changing Dollar

We were cleaning out our desks and found a newspaper article dated November 18, 1974. 

The heading was “Today’s $40,000.00 house will be worth $125,000.00 in 1984” – Wow!  What a prediction.

When it comes to making investment decisions we believe that you should view present opportunities as if you were looking back from the future.  Try to do now what you will wish you had done as you look back from a future date. 

Continued inflation should always be kept in the back of your mind.  As the purchasing power of the dollar has decreased in the past, the market value of real property has continued to increase in terms of current dollars.

Real property has always been one of the best hedges against continued inflation. 

Holding too much cash in the bank, or in fixed obligations payable in cash, is a certain way to lose purchasing power.  As prices go up, the value of your money will go down.  Investments in real estate, on the other hand, protects you from the declining value of the dollar.  It is a great idea to invest in real estate at a young age.  Time can be your greatest ally or your worst enemy.

You should not be afraid of borrowing money to buy real estate; it is the only “good” debt.  

Future inflation will make your home worth more in terms of dollars and add to your equity without affecting the mortgage.

As hard as it is to believe, today’s real estate prices will seem like bargains in the years to come.  Don’t you wish you had purchased a piece of property 20 years ago, 10 years ago, 5 years ago? 

 

Oh, that article dated November 18th, 1974 was inaccurate in its predictions.  The $40,000.00 house wasn’t worth $125,000.00 in 1984; it was worth between $175,000.00 and $200,000.00.  AND TODAY IT IS WORTH OVER $1,400,000.00!

 

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 55 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

 

Outlook for 2018

As the overall economy has improved, California real estate sales had a solid gain in 2017. Prices and sales on the peninsula have far outpaced the rest of the state.

 The Bay Area’s median sales price is approximately $850,000 which is over 50% higher than the statewide median of approximately $550,000.

Prices on the peninsula exceed overall Bay Area prices significantly.

The Bay Area has experienced extremely strong job growth and this is expected to continue in 2018. High paying technology related jobs are attracting talent from around the nation, and the world. These people contribute to the strong demand for peninsula properties.  This demand is additionally fueled by continuing historically low interest rates.

 

This strong demand has been coupled with a very limited supply of available properties.  The number of active listings on the market has remained at near historically low levels.  Unlike many areas in the state, we do not have available land to use for increasing  the housing supply.

Historically homeowners who either want to upgrade or downsize have been a constant source for homes on the market.  Limited inventories have made selling current homes risky due to a lack of buying opportunities available if their current homes sell.  Thus, remodeling has become a very popular alternative and remodeling construction business is at an all time high. Many baby-boomers are retiring but not putting their homes on the market like retirees have in the past. Rather than pay excessive capital gains taxes they remain in their homes that have relatively low monthly costs.

Most experts feel that peninsula real estate prices will grow at a rate of 4% to 6% in 2018 and sales volume will remain approximately the same as 2017.  Both strong demand and limited supply will likely mirror 2017.  Purchasing a home locally will continue to be less and less affordable.

If you own a home today you should be very pleased.  If you can afford to purchase today you should.

You will always be very happy that you did.


 

 

This article was originally written for and appears in the San Francisco Examiner. Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 55 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

 

The Duplex Advantage

We feel that more people should consider purchasing a duplex instead of a home.  Whether you are in the market to purchase a home or investment property, the duplex fits both needs with a multitude of advantages.

 Buying a duplex can often be more affordable than a single family home and still offer the comfort and privacy.

The first time home buyer, especially, should consider the purchase of a duplex.  If you found a newly constructed duplex the asking price would be on the high end, due to the cost of land and the high cost for labor and materials. However, there are many opportunities to purchase an existing duplex property in the $1,200,000 to $1,500,000 price range in our area.

Buying a duplex is like buying a home with cash flow. 

You can live in one side and have your monthly costs relatively constant. The other side can be rented out to greatly help with the overall cost of the purchase, your property taxes, insurance, and maintenance costs.  You receive the interest write off on the residence portion that you live in and you get even more tax advantages on the rental side as investment or rental property.  A single family home is not nearly as affordable and does not give you as many options.  The vacancy factor in the Bay Area is practically non- existent.  You will have no problem renting out the side that you do not live in.

A duplex home will give you faster equity build up. 

As time goes by, the rental income will increase.  You always have the option to continue residing at the property, or you can borrow against it and with other savings purchase a single family home or another duplex. 

A duplex home gives you a great rental property for the future. 

If you move to a new residence, you then rent out the unit you were living in, converting the property to entirely income producing real estate and realize even more income, and additional tax shelter.

There are many exciting advantages to owning a duplex. 

You should always consult your certified accountant before you invest in any real estate.

 

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

 

Understanding the Golden Rule of Renting...Mutual Respect

You are getting ready to look for an apartment, duplex, or a house to rent.  You drive your favorite neighborhoods looking for “For Rent” signs, searching for just the right place to call home for an extended period of time.  You have looked on the internet and scanned the news papers for rentals on a daily basis.  You feel you are prepared to sign a rent or lease agreement; but wait, have you really taken the time to review the landlord/tenant laws and maybe a rental or lease agreement beforehand?  It would be advantageous for you to understand your rights and obligations under the agreement you are about to enter into.  Preparing yourself in advance can help prevent some stress associated with finding a new place to live.

The best advice for both tenant and landlord is to enter into the contract with mutual respect of each other and the property.  Each should be considerate of the other’s situation and interact accordingly; basically do unto others as you would have done unto you.

I have heard of outrageous landlord conduct, including: discrimination, invasion of privacy, refusing to fix dangerous conditions or failing to return security deposits when a vacated unit has been left clean and undamaged.

Conversely, rental property owners all have at least one nightmarish story of tenants with bad behavior, ranging from late payments and property damage to breaking the law and police involvements.

As a tenant, you should understand that the property owner has a large investment in the property and that he is providing the tenant a roof over their heads.  Being a tenant, you should have a right to your privacy.  You should be able to depend on the owner to fix and repair those things that can occasionally go wrong and the landlord should call and make an appointment before entering your home.  When ready to vacate, in common decency and fairness, you should return the property to the owner in good condition.

In the long run, the renter is best served if they try and establish a positive relationship with the property owner from the beginning.  If the property owner has delivered a well maintained property, and makes all necessary repairs, the owner has the right to expect that the tenant will: pay the rent on time, get along with neighbors, and keep the rental property well maintained inside and out.

I have found over the years that the vast majority of problems can be solved if both parties are honest with each other from the beginning.  I don’t mean to oversimplify the problems that can develop, but if each party takes responsibility for their own actions, the chances are that good landlord/tenant relationships can develop and be of advantage to both.

 

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

Waiting for a Good Deal

Everybody wants to get the best price they possibly can.  Price is important, but how important is it compared to other factors?

 

Some feel that buying property in the winter months, when the skies are gray is the best time to get a good deal.  In reality, one should be as well prepared at all times and start actively looking no matter what month of the year it is.  You just never know when the right property will come up.

 Make sure that you are pre-qualified for your loan in advance.  Your offer will be taken more seriously if you show proof of a loan from a bank.  Don’t make any large purchases such as cars, boats, or RVs; these will dramatically impact your ability to borrow.  If your credit score is less than perfect, work on improving it to get the best loan rate.  

Do your homework and know what comparable prices are for similar homes in specific locations.  You will begin to see that larger homes with certain amenities have higher selling prices than smaller properties with fewer amenities.   Drive through neighborhoods to see what areas appeal to you.

Become aware of what’s presently on the market.  Check to see if any properties have been on the market for over 30-60 days.  See if there are properties that have been taken off the market that didn’t sell. 

If you are shopping for a home, you have to realize that you most likely will not get the perfect home at the very best price.  You need to be flexible and look at value.  Take into consideration that the home will appreciate over time.  Remember, the perfect home doesn’t exist.  You will need to make compromises.    

Locking in today’s price is probably one of the most important things to consider.  Also, look at today’s interest rates.  These 3.5% to 4.5% rates will not be around forever.  Today’s high prices may look like a bargain one or two years from now. 

Don’t obsess with trying to time the market and figure out when is the best time to buy.  Trying to anticipate the housing market is impossible. 

The best time to buy is when you find the property you like and can afford. 

The single most important factor is jumping in and making the purchase you are able to make.  It may not be perfect, but you are invested in real estate.  

The sooner you start enjoying the security of owning a home the better and enjoying the tax benefits of home ownership.  You don’t have to worry about your house being sold out from under you.  You can start to improve your property, increasing its value.  Purchasing real estate is one of the safest long term investments a person can make.

 

Real estate is cyclical; it goes up and it goes down and then back up again. 

The longer you hold your real estate, the less important the purchase price becomes.  You will only be sorry tomorrow if your wait and don’t buy real estate today.   Yes, price is important, but the cost of waiting to purchase can be much more expensive.

 

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

 

Evaluation of Income Properties

Income and expense figures are used to establish values for income properties. These figures should reflect the current market conditions in a given geographical market area, given normal or typical management of the property.  Specific, actual figures should be used whenever possible.  If this information is not available, then typical figures for the specific market should be used.  Neighborhood data can be collected to estimate typical rents, vacancy, and expense ratios.

Gross income is the total rental income for a property, less any vacancies, plus any other miscellaneous income.  The property’s net operating income is the gross income less typical operating expenses.

Obviously, it is best if you are able to locate similar properties in similar neighborhoods to do your comparisons.  If you can locate properties that have sold, using their multipliers and overall capitalization rates can help you arrive at a value for another property.  Cap rates are widely used in real estate because they provide a simple and consistent method to determine a percentage return on investment.  Realtors and investors determine pricing for an investment given an expected rate of return. 

Typically investors add or subtract from the financial calculations to adjust for varying amenities.  Location, age, condition, recent capital improvements, curb appeal, all play an additional role in the evaluation process.  When a Realtor evaluates a building the process is often as much an art as a science.

Like anything else, once you become familiar with the terminology and practice, the calculations for the value of income properties become easier.  Realtors often develop short cuts to quickly analyze a property “by the seat of their pants.” The most common is the Gross Rent Multiplier (GRM).  This is normally used to determine if a property deserves a closer evaluation and consideration.

 

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

Critical Mass

The term “Critical Mass” is derived from nuclear physics.  However, the term is often used in other fields to describe the point at which the size, number, or amount is large enough to produce a particular result.  

When the term is used in the world of real estate, it usually refers to the point that an investment becomes self-sustaining.

You can analyze a business and establish what critical mass is for that business.  Every business has a point at which it really begins to make money. Critical mass in this regard is that revenue point in every company after which every dollar earned flows virtually straight to the bottom line.

When an individual decides to become a real estate investor, in essence they are starting a business of accumulating rental property that will generate a monthly income stream and begin building equity.  With real estate investments most costs remain stable and rental increases are mostly increased cash flow.

As you are building your real estate portfolio, during your working years, you take a certain amount of risk.  You have to use leverage when acquiring and building your investments.  Once you have reached your goal, you will want to reduce your risks and lower your exposure to financial mistakes.

So what happens when your real estate holdings reach critical mass?   Your investments take on a life of their own: your income will multiply and continue to grow as your investments create their own momentum.

We have many clients that own six or more duplexes, or the equivalent.   If their property is worth $6 million and it appreciates at 5% per year, that is a $300,000 increase in equity per year.  That is the same as saving $25,000 per month!  In addition, when the rents on twelve units are raised by $100 per month each, that adds $1200 per month, or $14,400 per year in increased cash flow.

Critical mass means different things to different people.  Critical mass for Donald Trump is probably different than what it is for you.  Critical mass for most individuals is the point at which your assets reach a “tipping point” and become self-sustaining entities.  For most people obtaining financial independence is the goal; not having to rely on a job to maintain the lifestyle you desire.

 

Critical mass and growth equal increased income.   Let’s put it this way…

You know that you have reached “Critical Mass” when you go to sleep at night and you know that you’re still making money while you sleep. 

Critical mass is not earned income. Critical mass is strictly a function of assets you hold creating your personal financial happiness, peace of mind, and serenity.

 

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

 

Close of Escrow

A real estate buyer should never give the purchase money directly to the seller.  In turn, the seller should never deliver a signed deed directly to the buyer.  For the protection of both parties, the use of an escrow holder is absolutely essential.  In real estate transactions escrow is a process that assures that both parties have fulfilled their contractual obligations before the transaction is finalized.  The escrow will also provide a detailed written accounting of every aspect of the transaction.  The escrow holder, usually a title company, is a disinterested third party with no biases. 

Escrow holders have the responsibility of holding any funds and preparing legal contractual obligations; the escrow holder delivers the funds to the seller and records a properly executed deed in favor of the buyer.  The actual date of recordation is referred to as the “close of escrow”.  The period of time prior to the actual close of escrow, when the escrow holder is collecting instructions from both the buyer and the seller and preparing the settlement statement, is the escrow period.

Understanding the time line of the escrow process is very helpful.  A number of tasks need to be completed by independent parties and then processed by the escrow holder.  An appraisal needs to be completed, all the buyers’ financial documents need to be reviewed, the lender needs to process the loan application and supporting documents to approve the loan.  The loan “docs” including the note, deed of trust, all disclosures and addendums, have to come together.  The buyers sign the loan documents and the lender funds the loan to the escrow company.  Recording of the grant deed is scheduled after the funds are received.    The close of escrow occurs when the grant deed is recorded with the County Recorder’s office.  

The settlement statement that the escrow holder prepares during the escrow period specifically outlines in detail the closing costs that a buyer and seller are obligated to pay.  There are non-recurring closing costs and recurring closing costs.  Non-recurring closing costs are one time charges and fees incurred in transferring ownership; processing loan papers and searching and insuring title, for example.  Recurring closing costs, or pre-paid items, are costs which will re-occur regularly, such as real estate taxes and property insurance premiums.  These are examples of just a few of the many non-recurring and recurring closing costs.

Your Realtor can prepare an example of a buyer’s or seller’s estimated closing statement for you prior to purchasing or selling your home.   The estimate will help you understand the process and outline the costs you will likely incur.  Understanding this process will greatly reduce any anxieties a buyer or seller may have and will help make the buying or selling of real estate an easier and more enjoyable process.

 

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

 

Bay Area Housing Costs

Multiple forces are fueling the Bay Area and specifically the Peninsula area’s real estate market. 

Low interest rates, robust population and employment growth, limited housing supply, and the impact of the expansion of the high tech industries are among the reasons real estate in the Bay Area is so expensive.

Some attribute the high increases in property values to foreign investors. It is a little unclear how much influence foreign investors may be having on prices.  Early data suggest that the number of foreign buyers in the Bay Area housing market has dropped this year compared to last year. 

Many home buyers are viewing housing as more of an investment tool rather than just a home, and realizing that purchasing real estate and holding the property has many advantages.   This is a philosophy that we have preached for the 50+ years we have been in business. We own, manage, sell and exchange quite a bit of residential income property.

Many buyers are holding onto property and taking advantage of the high rental rates.  There has been a new resurgence in investing in local real estate for the long term, and receiving all the benefits that rental income property has to offer.

There are certainly many contributing factors that come into play.  The lack of available buildable dirt plays a major role in the value of real estate on the Peninsula.  There is no single reason for our high values, it is a combination of factors that are not found in other locations. 

There is no doubt that the impact of the high tech industries on local real estate is the single most significant factor in our strong market.  San Francisco and the Peninsula are the strongest high tech markets in the country.  The software services industry has created most of the new jobs and growth.   The high tech industry’s expansion dwarfs growth in other sectors of the economy.

Basically all areas of real estate are impacted by the tech industries; office rents, office prices, as well as housing costs have risen sharply over the last several years.  The Bay Area is still considered to be in the expansive phase of the tech industry.

We feel that the housing market will remain strong on the Peninsula for the foreseeable future.

 

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

 

"As Is" Sales

Often, there are some misunderstandings and/or misconceptions held by the general public regarding the so called “As Is” sale of real estate.

Often sellers feel that if they say they want to sell their home “As Is” that it means it absolves them from any responsibility or liability for existing defects with the property. 

When a seller states that they are selling the property “As Is” this does not relieve the seller of certain responsibilities and laws relating to the sale or transfer of ownership of real estate.  In an “As Is” transaction where the seller does not warrant the condition of the property, the seller is still required to disclose all known material facts to the buyer.

As of January 1, 1987, sellers are required by law to furnish prospective buyers with a complete “Real Estate Transfer Disclosure Statement” in transactions of real estate containing one to four residential units.  This law requires that sellers of real estate property disclose in writing, all conditions and problems that the seller knows or should know exist.

Things that a seller needs to disclose to a buyer include: environmental hazards, encroachments and adjoining property issues, structural modifications made without permits, soil problems, flooding, zoning violations, neighborhood noise problems, CC&R’s if the property is a common interest development, just to name a few.  The law requires that a transfer disclosure form (“TDS”) be filled out by the seller and provided to the buyer.  

The purpose of this article is not to cite specific laws, but to explain the general obligation sellers have to disclose any and all known defects that would affect the marketability or value of a particular piece of real estate.  There are some exceptions to the law, however for most buyers and sellers of real estate it is imperative to realize the importance of full disclosure.

A property being sold “As Is” is really being sold “As Is” as disclosed.  A buyer should always obtain independent professional property inspections to satisfy themselves as to the condition of the various aspects of a property.  A Real Estate professional is well versed in the disclosure laws and how they pertain to you.

A seller should not be concerned with pointing out problems with their property.  Often sellers are relieved by how their disclosures are received by potential interested parties.   What a seller should be very concerned about is not disclosing any defect, which is a material fact, which affects the value of the property. 

A COUPLE OF COMMONLY ASKED QUESTIONS REGARDING THIS LAW ARE:

 Are landlords who have never lived on the property exempt from filling out the disclosure statement?      

 NO

 Does the real estate transfer disclosure statement required apply to “For Sale By Owners”?      

YES

Does a buyer have the right to cancel the transaction when the disclosure statement is furnished after the buyer has signed the offer to purchase?

YES, within the time allowed.

If you have any questions regarding this or any other aspects of purchasing, exchanging, or selling real estate, give your real estate professional a call.
 

 

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 55 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

 

This article appeared in the San Francisco Examiner.

How to be a Good Tenant

This is a subject that we, as Realtors with 40 plus years experience, understand well.  We have seen both good and bad tenant  behavior. Don’t get us wrong, there are plenty of poor quality landlords to go around; so we’re not insinuating issues that come up are caused only by tenants.   We realize that an unprofessional landlord can be a nightmare for tenants.   However, in this article we are going to touch on a few of the things that tenants might consider doing that would greatly improve their renting and leasing experiences.

First and foremost, pay your rent on time.  If you are going to be a few days late, call and let your landlord know so they do not have to guess where the rent is.  Remember that your rent usually goes toward the property owner’s mortgage and other payments that must be paid in a timely manner.  If you can do it, pay your rent a day or two early.  The difference in your money being in your account for an extra day or two is far less important than the good impression an early payment will make to the property owner.

Secondly, establish good credit.  Having excellent credit will show that you have a good understanding of budgeting and living within your means.  When screening rental applicants most landlords will favor the prospective tenant with a high credit score.  Remember that everyone who bills you keeps track of your payment history.  This is one of the main things that credit reporting agencies look at in establishing your credit score.

Thirdly, keep the property neat and clean.  The property owner has a very large amount of money invested in the property.   There’s nothing that makes a property owner happier than to see a tenant respecting their property and having good housekeeping.  We realize that with busy schedules most people do not have a lot of extra time.  However, making a concerted effort to keep carports, garages, and yards free from storage items and clutter can go a long way toward helping keep a property looking good.  If an owner sees that a tenant is taking pride in the place they live, they are much more likely tospend the money to makeimprovements to the property.  

 

 It’s true that some property owners do not spend the money that’s necessary to keep up their property.  When you are initially looking for a place to rent, it is important to really take notice of the condition of the property.  If it is very well maintained, and you are accepted as a tenant, you might mention to the landlord that you will do your best to keep the property in the same well maintained condition. There is no question that the owner is responsible for making prompt repairs to the property.  However, if you have the skills to make some minor repairs, make them. 

 

Lastly, the less contact you have with the landlord, the better.  Avoid calling the landlord over minor issues such as disputes with neighbors or repairs that you could easily fix yourself.    Owning property is a big responsibility.  Frequent calls from a tenant might make a landlord feel that you do not appreciate their property or their commitment as an owner.

 

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 55 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

 

This article appeard in the San Francisco Examiner.

Real Estate Mistakes

Often people ask us what are the biggest mistakes we see people make when buying or selling real estate.  The first, we would have to say, is not being prepared before entering  the market.  It is important to do your homework in advance.  There is endless information available in bookstores and online.

However, don’t over analyze when you are selecting the right investment for you and your family needs.  Don’t attempt to second guess what will happen to the market.  Always think in terms of location.  Buy the best location you can afford.  You don’t necessarily need the best house on the block.  In fact, often buying a house that needs TLC in a great neighborhood is the best choice.

Don’t overlook the livability of the home.  Is the floor plan right for you?  Can you change the floor plan to improve upon it?  Curb appeal is extremely important.  Does the home have curb appeal or can you create it?  Make a list of the amenities that are important to you.  For instance, do you want a family room, formal dining room, two car garage, large back yard, etc.  When this is done prioritize the list.

Always have professional inspections done before finalizing your purchase.  Buying  property is stressful enough – you don’t need additional, unexpected surprises after you own the home.  Be patient, finding the right property usually does not happen overnight.  You will know when everything feels right. 

Speaking of professional help, make sure beforehand that you are confident and comfortable with your Realtor.  You will need to rely on your Realtors’ experience, knowledge of the market, and negotiating skills.  Understanding the tax implications of your real estate transaction should also be part of your preparation.   You should always verify your calculations with your accounting professional.

The biggest single mistake is not buying at all.  If you can afford a home or investment property, but you don’t make the purchase, you will never realize the benefits of ownership.  Tax deductions, appreciation, and building equity and are just a few of the  advantages of property acquisitions.  We’ve never have heard a person say that they are unhappy that they bought their home five or ten years after they purchased it.  However you will be sorry tomorrow if you do not buy real estate today. 

 

This article was written for and appears in the San Francisco Examiner.

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

Something to Talk About

People often ask us how to get started in real estate investing.

We both started in our early 20’s and had the same mentor; our two Brokers and Founders of Terrace.  What they strongly advocated was the principle of buying sound investment properties to keep and hold and to re-mortgage the property’s increased value – then re-invest and, in the course of time, accumulate an increasing number of appreciating assets for future security.

 The basic concepts of good real estate investments are open to all people with reasonable assets, with minimum risk of loss; even if your only asset is your personal residence.  

An investment strategy that is conservative and sound has little chance of failure.  For a loss to take place, it would be have to be an extraordinary market situation.  If the whole investment market fell, then the whole economy of the country would be in jeopardy.  But if you have some capital set aside for such an event, you can “hold on” until the market recovers.

The fact that it is possible for people to loose sums of their investment capital is a disturbing thought.  Investments are meant to profit people and enrich their lives not to cause distress and hardship.  We do not object to real estate speculation or gambling if, indeed, that is what people intend to do.  Some have been very successful buying, remodeling, and “flipping” real estate, especially on the Peninsula.  But when they call it investing, this is a cause for concern.  A genuine investment occurs only when it provides a means of materially increasing one’s wealth without reasonable risk of loss.  It is certain that there will be short term setbacks in market conditions, but you must plan and be able to sustain these times and be looking at the long term and the big picture.

Most big investors are familiar with this concept.  For example, after a tremendously appreciating real estate market of the mid 1980’s in New York City, the market had a huge set back in the late 1980’s and early 1990’s.  Then again, the 2007 real estate downturn occurred.  The big investors “battened down their hatches” and if necessary, worked out new arrangements with their lenders and “weathered the storm”.  Slowly the market came back to where it was and now has surpassed what anyone thought was possible. The dollar amount of properties in downtown New York, as well as everywhere else, in the 1980’s seems very low compared to present day prices. 

With high taxation of income and inflation eating away the real value of capital, I believe real estate is not only the safest and surest way to become wealthy, but in our opinion, the only way. 

 
 
This article was written for the San Francisco Examiner. 
Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.

Transfer Disclosure Statements

The Transfer Disclosure Statement, commonly referred to as the “TDS” disclosure, is a form that is legally required to be filled out by the seller of 1-4 residential units, as prescribed in Civil Code 1102.6.

This disclosure statement concerns the transferors (sellers) real property.  The “TDS” is a disclosure of conditions pertaining to a property.  This document is one of the seller’s disclosures that buyers receive during their contract contingency period.  In addition to relying on the TDS, buyers are also encouraged to obtain any and all other inspections necessary to satisfy themselves as to the specific, as well as overall, condition of the property.  It is always a good idea to get a general property inspection and a pest control inspection at a minimum. 

The seller is required to provide information on the TDS with the knowledge that even though it is not a warranty; buyers may rely on the seller’s information in deciding whether or not to purchase the property.   The “TDS” form asks the sellers many questions about the property.  The questions range from asking for an inventory of all of the amenities the property has such as dishwasher, washer/dryer hookups, heating systems, satellite dishes, sump pumps, etc. to questions about improvements made to the property.   The seller is asked well over 100 questions regarding the amenities and their working condition. 

The seller is also asked about other possible conditions that could affect the value or desirability of the property such as encroachments, room additions, structure settling, soil and drainage problems, zoning, and neighborhood problems.  This list of questions goes on and on.  The purpose of this required disclosure is to protect both buyers and sellers.  It is important that all parties understand all aspects of the property prior to the transfer of ownership.

There are a few situations where the transfer disclosure statement is not required: court orders, foreclosures, trustee sales, guardianships, and conservator-ships are just a few.   But, by and large, the “TDS” is required by law in most real estate sales.  For more specific information, please contact your Realtor. 

 
 
This article was written for the San Francisco Examiner. 
Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.