It’s early September and the mad rush of buying and closing so that kids are enrolled properly has dissipated. If you were not in a hurry, now is the time to make an offer. Now is the time to negotiate the price down because all indicators are that the resale market is down and inventory is building up! So, question for the month:
WHERE SHOULD I LIVE?
Whether you are a Baby Boomer/Senior Citizen (me), a Millennial (my kids) or a GenXYZer, sooner or later all of us become concerned with where our next home could/should/would be. And in this economy, that could indeed be a difficult decision to make. Even if we could live in that “$1,200/month bunk bed” (see my August news blog here https://julianatu.com/august-2019-newsblog), which I would hope is just a temporary solution, we all want somewhere permanent. To rent? Or buy? And where?
Remember my Uber ride through Phoenix which I mentioned in my July newsblog? Yes, housing in Phoenix and various parts of the Southwest is booming with rentals and single family home sales steadily rising. The business climate as well as the weather climate are contributing factors to the rising trend towards moving to that area. Of course, the over-appreciated market in California helps push the migration out towards Nevada and Arizona.
If you are looking at places of interest through zipcodes now, here is another article tracking Baby Boomer/Senior Citizens migration. Again, most cities are in the Southwest. The zip codes in the East Coast are few and far in between.
More than the weather, we know that migration gravitates to where the jobs are and in this chain reaction, housing availability and costs will be next in line. Amazon is a “prime” (pun intended) example of what happens when business influences the real estate market. Amazon’s inquiries into setting up a second headquarter threw cities into a bidding frenzy. Their final decision immediately started the feeding frenzy as dollar signs were plastered all over housing in the nearest towns. Homeowners, investors, everyone is looking greedily into how much appreciation there will be. Should the owners sell now or wait until it appreciates more? Are investors able to buy now in order flip when the time comes? This article confirms that housing pricing for Alexandria and Arlington, the 2 cities closest to Amazon’s new HQ2, will be a textbook case on how big business influences real estate.
Another evidence of correlation, is this article regarding home pricing near grocery chain stores. According to the study, “Properties near Trader Joe’s offer a 5-year home price appreciation of 33%…. And near a Whole Foods an … ROI of 41%.” Now that is a surprise. For those of us mapping purchase strategies, you might want to take that into account. However, I would imagine that it is much better than living in close proximity to a shopping mall…
On a larger scale, here is a short list of the best (Massachusetts) and worst (Mississippi) states to live in. The National Association of Realtors study earlier this year states that Madison Wi was the most popular city for Millennials to move to and stay. Also in the top five – Seattle, WA, Omaha, NE, Durham, NC and Grand Rapids, MI.
Besides the “where to buy”, the “how to buy” is just as important. Supposedly Lenders use price to income ratios to determine how much you can afford. From this article, the calculation of price to income ratio should be 2.6. This means that your affordability level is a house that does not cost more than 2.6 times your yearly income. If you make $120,000 a year, your best home affordability price would be $312,000. If Lenders really use this ratio strictly our whole real estate industry in the West Coast would be in jeopardy if you look at the most affordable and least affordable cities in the article. How do you overcome this? Make more income, of course, or cultivate a smaller appetite, or both.
If you are in the bracket of high income but no downpayment you could find a company like ZeroDown, a startup in the San Francisco area that is part of the iBuyer trend sweeping through the nation. A qualified party chooses a potential home, ZeroDown would purchase it and the party would make monthly payments to ZeroDown which will count towards their downpayment when they have the ability to purchase the property in the future. I am not so sure this investment model will work for ZeroDown in the long run, but there are a lot of iBuyer real estate investment companies out there right now selling their wares. Buyers/Borrowers beware!
A final consideration for you on where to live: Many young folks end up living with their parents. There is nothing wrong with that. If, however, you were feeling the inconvenience and if the original home has a large enough lot, how about a Tiny House, placed right on the grounds? These tiny houses are all the trend right now and, what is even better, if you are handy enough, you can buy this Tiny House as a kit right on Amazon and build it yourself!
YOU HAVE QUESTIONS, WE HAVE ANSWERS!
VIVA ESCROW Q & A SEGMENT
(We get some great questions left on our website!)
This month’s topic : Dealing with Supplemental Taxes in a Flip transaction
Question left on our website:
Hello. I’m about to put in an offer for a house, first time home buyer. How are supplemental taxes handled in escrow? The property is in Los Angeles county and it is a flip and I would imagine that the seller probably has supplemental taxes from when he bought the property back in November of 2018. Are supplemental taxes prorated? How is it prorated if so? Thank you very much for your help.
Our answer:
This is a great question and there is no easy answer! Supplemental taxes are issued by the County Tax Assessor’s office about 4-5 months after the property has changed hands. If a Buyer is purchasing the property within that time period there is a possibility that the supplemental taxes do not appear on the tax roll yet. If that is the case, those taxes would not be figured in and prorated along with the regular taxes at closing. When the supplemental taxes do come out and the Seller gets notification, then the Seller should be paying for it. If the Buyer got the notification then there are 3 scenarios:
- The Buyer can send it to the Escrow Company and ask them to review and if determined that the supplements are due to the Seller’s flip then forward it to the Seller for payment.
- If the Seller does not pay, the Buyer can submit notification to the County Assessor’s office to transfer these supplemental taxes to the Seller’s individual names and take if off the property tax roll.
- The Buyer can pay it and ask the Escrow Company to prorate it and ask the Seller to reimburse his portion.
If the supplemental taxes appears on the tax roll before the escrow closes then life is simple. The taxes would get paid and the escrow company would do the necessary prorations between Buyer and Seller.
Next month: How are supplemental taxes calculated?
In the spirit of my topic this month, here is my funny of the month, which I garnered from another newsblog so I make no claim but that of spreading the word:
A lawyer, who had a wife and 12 children, needed to move because his rental agreement was terminated by the owner, who wanted to reoccupy the home.
When he said he had 12 children, no one would rent a home to him because they felt that the children would destroy the place.
So he sent his wife for a walk to the cemetery with 11 of their kids.
He took the remaining one with him to see rental homes with the real estate agent.
He loved one of the homes and the price was right. The agent asked, “How many children do you have?”
He answered, “Twelve.”
The agent asked, “Where are the others?”
The lawyer, with his best courtroom sad look, answered, “They’re in the cemetery with their mother.”
MORAL: It’s not necessary to lie; one has only to choose the right words. And don’t forget, most politicians are lawyers.
You Have Questions? We Have Answers!
Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP
“Escrow is my FOREMOST language!”
The opinions expressed in this blog are solely the author’s.