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  • San Diego Castles Realty
  • 10636 Scripps Summit Court, Suite 153
  • San Diego, CA 92131
  • P: 858.530.2374
  • F: 858.876.1701
  • E: info (at) sandiegocastles.com
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California home buyer tax credits. Blink and you may miss them.

Monopoly money at Christmas
Creative Commons License photo credit: HowardLake

As reported by the California Association of Realtors (CAR):

The $100 million allocated for California’s first-time homebuyer tax credits may be depleted in about 10 to 20 days or sooner, according to C.A.R.’s Economics team.  California’s Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time homebuyers and for homes that have never been previously occupied.  However, the total tax credit allocation for all taxpayers is $100 million for first-time homebuyers and $100 million for new homes, both on a first-come, first-served basis.

C.A.R.’s forecast of 10 to 20 days to deplete the $100 million allocation for first-time home buyers is based on estimated May sales figures and other parameters.  It does not take into account the possibility that buyers scheduled to close escrow in April may delay closing until May to take advantage of the tax credit.  If a shift in closings from April to May occurs, the first-time homebuyer tax credits may be depleted even more quickly than indicated above.

Emphasis was added – by me. I touched on this last week, so I can’t say that I am surprised. As for the emphasis, watch out. We are seeing many “strategic delays” by buyers already committed to a purchase in order to take advantage of the free money. If you are one of them, you had better act fast. The state tax credits, it seems, are a very limited time offer.

Affiliates vs. Affiliations – Advantage Broker or Customer?

BFF Sterling Silver Charm
Creative Commons License photo credit: Dazzled Beader Designs

Surveys consistently show that the vast majority of home buyers and sellers prefer one-stop shopping for their real estate transactions. The big brokerages promote this heavily as an advantage only they can bring to the customer. Is that true?

One-stop shopping is the tie-in of the many ancillary services a buyer or seller may need to complete their transaction. In California, this would typically include escrow, title, home warranty and home financing services to name a few. These service providers, collectively, generate many billions of dollars of income nationally every year. In order to capitalize on this gold mine, many larger brokerages have formed their own separate companies to provide these services. These are called affiliates and, if you have ever worked for or done business with a large brokerage, you may be familiar with the concept. In fact, the use of affiliate services was probably promoted heavily to you in part because they represent a sizeable source of income for large brokerages, particularly given the downturn in real estate sales over the past five years.

Although the Real Estate Settlement and Procedures Act (RESPA) prohibits any brokerage from requiring their agents to use, or from forcing their clients to use, one or more of their affiliates, you can be sure they promote them to their agents on a regular basis. As an agent formerly with a large firm, I can tell you that we were reminded pretty much every week of the importance to the broker’s financial success, and therefore ours, of supporting the company’s partnering profit centers.

On the surface, this big brokerage one-stop shopping seems reasonable and convenient, which is why so many people like it. However, as a consumer, there are several things to be aware of. For starters, are you getting the best pricing? Of equal importance, are you getting the highest level of expertise, professionalism and service?

As a smaller, independent brokerage, we are under no pressure to use affiliates (as we have no financial relationships with ancillary service providers).  We work with many, some being associated with the larger brokerages while many others are independent. The important distinction is this – Our clients still enjoy one-stop shopping. But, rather than having affiliates, we have affiliations.

What’s the difference between affiliates and affiliations?  A lot, actually. Because there is no pressure for us as agents to use a “partner” company’s services, nor is there a temptation for us as brokers to promote one service provider over another because it would be beneficial to our profitability, our agents are free to shop and use any ancillary service provider of their and their client’s choosing. Absent the pressure to recommend the guy who shares the anchor suite or the table at the management retreats, we are left only to recommend the companies providing the best value and greatest competence. Having affiliations versus affiliates removes bias, and the client benefits.

This is not to say that big brokerage affiliates are inferior. To the contrary, there are some we actually prefer, especially when it comes to lenders. One of our favorite mortgage brokers works for a big brokerage affiliate, and we recommend him regularly to our buyer clients. Rather, it’s the total freedom to advise our clients honestly and without prejudice about the choices they have, based on the experiences we have had and the relationships we have built over our many years of representing home buyers and sellers. They are relationships measured by performance, by both cost and benefit to our clients, not by potential benefit to our corporate bottom line.

If you are a seller interviewing agents to list your home or a buyer interviewing agents to represent you in your purchase, you undoubtedly consider all aspects of that agent’s capabilities and strike a balance between cost, quality and experience. Similarly, you should do the same when agreeing to the various other service providers who will be assisting in your transaction. One-stop shopping is an enormous convenience, and a great one-stop shopping experience can be delivered to you by any agent regardless of the size of their company or the nature of their third-party relationships.

But, often, you may find that the choices offered by the agents who are unshackled of affiliates but who simply have solid, tested affiliations are far greater. A broker’s own escrow company may be the best thing since sliced bread – or not. It’s not that affiliates are bad, but that affiliations are what matter. In the end, it should always, only be about what is best for you, the client.

No programmers on payroll? Mapping home sales on a shoestring.

It’s another beautiful San Diego morning, and I should be going for a run — or closing out a couple of transaction files. Instead, I had this sudden urge to make maps.

I have used MapAList in the past. It’s a rather addictive little tool that allows you to take any spreadsheet and map the results. It has been handy for plotting our closed sales to create this very compelling visual. (Sorry, new agents, I haven’t updated the data to reflect all of your own hard work in the Scripps Ranch ‘hood, but that will happen eventually.)

This morning, when I arguably had better things to do, I got a bee in my bonnet to replace the old, crusty tabular sold statistics on our web site with a map-based version using this tool. Alas, I am not Zillow or Redfin with large sums of venture capital and rooms full of full-time programmers, so this is a rudimentary manual method of providing data. However, for our more locally focused site, it works.

And maps make my happy.

Here is what the sales of detached homes in Scripps Ranch look like for March:

You will notice if you click on any of the markers that I really got my geek on. MapAList allows two fields to appear in the “bubble,” but with a little spreadsheet magic (and a quick trip to their FAQs), I was able to get all of the vitals to appear. I did the same for attached sales, which you can see here.

The only question remaining is whether or not I dutifully update these on a regular basis. That’s the plan. Wish me luck.

A Refresher on the Mystical Zestimate

There is such a thing as a free lunch. Thanks to Zillow’s star of stage and screen, Spencer Rascoff (I can’t turn on CNBC without seeing he’s grinning likeness these days), I and a room full of die-hard real estate professionals in search of the truth were treated to a session on Zillow’s offerings. Mostly, I was there for a refresher on the mystical Zestimate. The yummy veggie sandwich was a bonus.

If you are a home buyer, you know the Zestimate as the indisputable, final word in a property’s value – unless, of course, it seems high. Then you just disregard it as so much drivel. Ditto home sellers who peer from the opposite end of the looking glass. To sellers, when it’s a big, attractive number, the Zesimate is revered on par with a tablet delivered from Mt. Sinai, while lower numbers are discounted quicker than a spiral ham on the day after Easter.

As for agents, well, Zestimates are a bane to be tolerated.  Steve likens them to the proverbial broken clock – right a couple of times a day. But we continue to get whopped upside our little broker noggins with these magic numbers at open houses, at showings and at listing appointments. So, for all of you who are currently reloading the Zestimate bazooka for the next time you run into me in the produce aisle, here is what Zestimates are (and aren’t), according to the nice man who fed me yesterday.

From the Zillow web site (and you have to look hard to find it):

A Zestimate home valuation is Zillow’s estimated market value. It is not an appraisal. Use it as a starting point to determine a home’s value.

Well, no. I don’t use it as a starting point to determine value, nor would I recommend that the consumer do. But, Zillow also provides a “value range” that is more useful.

The Value Range is the high and low estimated market value for which Zillow values a home. The more information, the smaller the range, and the more accurate the Zestimate.

Here are the talking points for what makes a Zestimate and the factors affecting their accuracy:

  • Zestimates are developed using a complex, magic algorithm and a lot of big, scary computers.
  • Factors considered in the algorithm include past sales in the area, past sales of the particular property, tax records, and probably a bunch of other stuff I forgot to write down.
  • Zestimates are not the midpoint of the “value range.” (Don’t ask me why.)
  • Homes in areas with a lot of comparable, recent sales will enjoy a more accurate valuation, as will homes with more recent prior sales.
  • Homes which are unique, which haven’t turned over in a long time, or for which the tax records are incomplete (no square footage, wrong data) will have the most flawed Zestimates.
  • When a home is listed for sale, the property information is updated to reflect the information provided in the listing. So, if the tax assessor shows that your home has two bedrooms and your listing reflects twelve, the information is updated.
  • When a sale records, the Zestimate is adjusted to reflect the sale price (duh).
  • This one is pretty cool. When a sale records, the algorithm notes the difference between the prior Zestimate and the actual sale price. This “delta” is then used to adjust the property’s Zestimate in the future. In other words (and I am sure Spencer will correct me if I got this wrong), if my home had a Zestimate of $500,000 yet I sold it for $550,000, then the delta is 10%. When that ornery little algorithm determines my Zestimate to be $600,000 next November, it will adjust it and deliver a valuation of $660,000 to reflect that my home was indeed special.

As time goes on, Zestimates will become more accurate.  They have to, because there will be more actual sales data from which to draw. But the valuation tool will always be a best guess, if even a very smart one. Until Zillow’s computers are able to join me for a walk-through and see the living room where the tenants have been changing the oil in their Harleys or the master bathroom where the fixtures were imported from the Versaille Palace, the Zestimate only be like that broken clock.

How accurate are they? Here is Zillow’s own chart.

Screen shot 2010-04-06 at 8.31.23 AM

In San Diego, the median error is 13.1%, which means that the Zestimate can be expected to fall within an approximate 26% range of value. Only 40% of the homes sold in San Diego sold within a 10% striking distance of their Zestimate, and 63% within 20%. Obviously, if the my own broker price opinions had this degree of accuracy, I would be summarily drummed out of the corp and living in a refrigerator carton in Placerville.

That being said, consumers are going to continue to arm their value arguments with their own Zestimates when it is convenient. Just be aware of the limitations. Unless Zillow is willing to buy your home, the Zestimate is not a reflection of your home’s true market value. It’s just a “wag” which will get a little better over time.

Afterword

Just for fun, I pulled up one of our listings in Scripps Ranch. This home is currently offered at $579,000.(Subliminal message: You should buy it.)

ScrippsTrail

Screen shot 2010-04-06 at 8.08.58 AM

The Zestimate shows a value of $645,000 which, had it been right, would have resulted in 18 hungry buyers throwing body blocks as I refilled the brochure holder last weekend. As it is, this home is still available. At least they gave me a $129,000 “value range” within which to maneuver, even if the range is in slightly smaller print.

New California Stimulus Program – County Recorder takes an April vacation.

Most of you (the ones who have been cheating on us and reading other blogs) are probably aware of a limited time chance in California for home buyers to double-dip. From the California Association of Realtors (CAR):

Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state home buyer tax credits.  To take advantage of both tax credits, a first-time home buyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive.  Buyers who are not first-time home buyers may use the same time frames to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.

Which brings us to the Law of Unintended Consequences. State legislators who failed Logic 101 and who, due to lost revenues and government cutbacks, apparently now find themselves without calendars didn’t anticipate the effect of the little overlap. What was presumably intended as a stimulus measure has stimulated all buyers currently in escrow to delay their closing until May.

In case you missed the punch line, let me point out the obvious. These are people who were buying anyway! So, in effect, the broke State of California has just thrown untold millions out on the proverbial freeway.

We have several clients who are currently horse-trading with the sellers to get an extension of their closing dates to next month. And, don’t get me wrong. I don’t blame them. Who doesn’t like free money? It’s just that I can’t believe that the intent of the State tax credit was to hand out bonus prizes to people who had already made the decision to buy and had committed to a purchase. Why not make it retroactive? I purchased my home in 2000, and I could use a little extra cash.

On the subject of stimulus, what you may not be aware of are some lesser-know bills that are winding their way to the Governor’s desk.

AB 349-BS – Home buyers who enter contract on April 17th between 1:00 PM and 1:45 PM (GMT) and close escrow during the current administration will receive a free four-slice toaster in their choice of white or brushed steel finish (subject to availability), provided they did not sign the contract electronically or otherwise use modern means to communicate with their agent and the seller during the transaction in order to comply with current lender policies. “Modern means” may include e-mail, text messages, or handwritten notes written with other than a feather quill. Hand gestures are acceptable, but only if they are recorded for reel-to-reel playback.

AB 350-BS – For all home buyers closing escrow before 10:00 AM on any Thursday in May, the State will donate $1,000 to the homebuyer’s favorite school. Dubbed the “Textbook Buyback Program,” costs will be offset through elimination of campus water fountains, bathrooms, teachers and other non-essentials.

AB 351-BS – Home buyers who meet the requirements of both AB 349-BS and 351-BS and who can name all islands in the Lesser Antilles will receive a gift card for 10% off their next Amazon.com purchase. The State has set aside $12.83 for this program, which will sunset when funds run out on Tuesday. Buyers who think they may qualify should first read the State booklet, “Mean-Spirited Island Chain Names,” for more information.

AB 352-BS – The “Instant Winner Bonanza Bill,” this program awards prizes to lucky home buyers who can match the numbers on their first meter reading to the closing costs on their final settlement statement. For odd numbers, buyers will receive $1 million paid over 25 years. Those with matching even numbers will enjoy a free Grand Slam breakfast at Denny’s (no substitutions allowed; gratuity not included). There will be no costs to the taxpayer, as the program will funded through the elimination of power and potable water services to incorporated municipalities.

AB 353-BS – Under the provisions of this bill, for home buyers who can prove that they wouldn’t have bought a home anyway but just decided to do it now rather than in, say, July or August, because they wanted large sums of money and a new toaster, the State will just buy them the dang house (value to be determined based on Zestimate).

How’s that for stimulus?

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Office Location

  • San Diego Castles Realty
  • 10636 Scripps Summit Court, Suite 153
  • San Diego, CA 92131
  • P: 858.530.2374
  • F: 858.876.1701
  • E: info (at) sandiegocastles.com
  • CA BRE# 01853496

Broker Information

  • Kris Berg, Broker
  • CA BRE #01241572