A listener asked: When selling your home to purchase another, should you buy a new home for the same price, or is it acceptable to buy one for less and keep the difference? Should I stage my house for sale or not? What types of repairs should I consider making? What are the home contingencies in a conventional purchase? What types of inspections should I get when buying a home?
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Episode Transcript
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Speaker 1 (00:00):
You're listening to KFI AM six forty on demand.
Speaker 2 (00:04):
Justin Worsham back one last Time, Last Chance for Romance
talking Southern California real estates. This show will be the
end of my audition to see if this show is
something that they think is worth giving a time slot too.
Speaker 3 (00:17):
We'll see how it goes.
Speaker 2 (00:19):
I want to kick things off with some questions that
I got actually online via social media during the week.
So this first question was, when selling your home to
buy another one, should you buy for the same price
or is it okay to buy for less and bank
the rest? So I think that the I'm going to
(00:39):
try to hit what I think is the intent of
the question, and I think that this might be a
little bit of a financial advice which I am really
only licensed to help people buy and sell homes. I
am not licensed to give financial planning advice or anything
like that. So take this in the spirit in which
it's intended, just a guy who has been through this
and tell you my experience. In my opinion, I don't
(01:01):
see really a downside for selling your home for more
and then buying a less expensive home. Like to me,
one of the benefits of buying the very expensive real
estate here in southern California is that you can kind
of ride it out. I've seen a lot of people
do it where they ride it out as their retirement plan. Now,
I wouldn't feel comfortable with making advice that you should
(01:22):
make it your retirement plan and that be your only
sole plan for retirement, because you never know what's going
to happen. But like there's been people who have bought
houses trying not to vomit in like the seventies in
southern California for like one hundred thousand dollars, and now
those houses are worth like one point eight million dollars
and they're selling them and they're moving to Texas. In fact,
I was coming back from a show choir trip. My
(01:44):
son is in show choir in high school here, and
I sat next to a couple who was going to
They were on their way to Dallas because they were
looking to buy a home. They're selling their one point
four million dollar house here in southern California and they're
going to buy a big old lot of land and
a nice house to retire on, and they're still going
to have probably a half a million dollars to spare.
So if that is your plan. Yes, that makes sense.
(02:07):
The thing you do have to consider is the tax ramifications.
The other thing I want to say in regards to
this before I forget, is if it's an investment property,
which is probably not the intent of this question, but
for the sake of giving out the information. If this
is an investment property, A lot of people aren't aware
of a ten thirty one exchange, So what ten thirty
(02:28):
one exchange is? You have to say you're going to
do a ten thirty one exchange before you list the home.
Make sure you tell your realtor I am going to
ten thirty one exchange this say, it only qualifies if
it is an investment home. You might be able to
get away with it if it's a second home, but
if it is your primary residence, it will not work
for you.
Speaker 3 (02:46):
It is only for investment purposes.
Speaker 2 (02:48):
And what it lets you do is it lets you
sell your investment property by another property of equal or
lesser value or equal or greater value, sorry, equal or
greater value, and equal or greater debt. Low right, it
has to have It can't be like you can't take
money out of it. Is really what we're looking at here.
So you have to buy. You could buy more property,
you could spend more money, and you defer any capital
(03:09):
gains tax that you would have onto that new purchase.
So some real estate investors that I know, what they
do is they continue to scale up with their investment
properties using this ten thirty one strategy, and then their
intent is to eventually leave that property to one of
their heirs, and then when they go, so goes the
tax burden. Now, again, not a tax guy, you should
(03:30):
definitely if that sounds like something that could work for you,
you need to first talk to your tax preparer and
get some information from them, and then I would consult
with a realtor and then let them do some legwork
and help point you in directions to get all the
information for that. The other thing I wanted to say
in regards to like buying and selling homes is that
(03:51):
for a lot of people in southern California, it's hard, right.
It's because the inventory is so low. Finding the new
home you're going to live in is hard to do.
So you oftentimes don't want to wait and then sell
your house and then rent for a year, because then
you feel like you've just kind of thrown away that
rent money that you've had, so you try to figure out, well,
how can I make this work? Because you need the
(04:12):
proceeds right when you sell your house. You need the
three maybe eight hundred thousand dollars or more that you
have in the house you're living in. You need the
money that you've built up to put down on the
new house. So a lot of people don't know about
a bridge loan, and a bridge loan is something that
a few lenders do, not a lot, so they're hard
to find. So definitely reach out to your realtor or
(04:33):
talk to me, and I could recommend some people if
you'd like, but you want to get referred to somebody.
And what that does is that there's a difference. Right,
so whatever the down payment is on the new house,
if you have that inequity, they give you a small
second loan and it's at a higher interest rate. So
almost everybody that I pitch this too that doesn't want
that can't like completely buy their new house without selling
(04:55):
their old one. They always talk to a bridge loan
person and I have yet to have somebody who's like that.
It seems like a good plan. The interest rate and
the fees always seemed to be a turn off to them,
but to me, I still think that this is a
great way to kind of mitigate the stress of trying
to get out of your house and get into a
new one. You can also buy homes and I'm going
to probably go into more depth on this in the
(05:16):
next coming up in another segment about contingencies. But you
could sell your home contingent on your ability to replace
the home, and then when you go to buy a home,
you could buy it contingent on your ability to sell
your previous home.
Speaker 3 (05:30):
But the big thing that you want to.
Speaker 2 (05:31):
Do anytime you sell your home is you want to
talk to your tax prepare about that capital gains. And
the reason I say this is because I helped a
client buy a house out in Portwaanimi quite a few
years ago. And the person who owned this condo it
was near the beach, that was a second home, and
when they went to sell it, they talked to I
believe it was a bookkeeper. And if you're a bookkeeper,
(05:54):
I'm not saying this to make it a derogatory thing,
but they talk to somebody who basically helped them balance
their checkbook, not like a CPA or an official accountant,
and what they got was bad info, and so when
they went to sell their house, they found out that
they are according to the real turn what he told me,
they were going to get hit with a seventy thousand
dollars capital gains tax. So they came back to me
(06:15):
to ask my client. We were supposed to close in
September of that year, in like a few weeks, and
they said, can we extend escrow to close in the
first week of January because at least that would have
put them in a new tax year that they felt
like they could have been better set up if they
could have deferred that money to a later time. But
unfortunately for these people, my client had actually liquidated some
(06:37):
tax or some stocks, so he paid a short term
capital gain on those stocks, and it was basically all
of the money that he was paying. So this was
just about three quarters of a million dollars I think
it was somewhere around, yeah, somewhere around three quarters eight
hundred grand, and he liquidated stocks to buy that, so
he also had to pay capital gains taxes. So in
this case, again I'm not a lawyer, but this is
what I opposed to the other agent. I said, because
(06:59):
what happens in this kind of a circumstance is that
there's liquidated damages, right that you have to cover. So
if a seller decides to change their mind and they
don't want to sell the house anymore, they have to
cover expenses that the buyer had have to There's a
lot of weeds in this, so just take this as
a grain of salt. Let me get the whole thing
out here. So what I said is, yeah, your client
has a hit of seventy thousand dollars, so they may
(07:21):
not want to sell the house to my client.
Speaker 3 (07:22):
But here's the problem.
Speaker 2 (07:23):
If you don't sell the house to my client, my
client is already liquidated stocks to the tune of probably
more or equal to your seventy thousand dollars burden, and
so your client is going to be hit with this
bill either way. So it's probably better for them to
at least sell the house and then take the tax hit.
And then the other thing that happened to me personally
on my home I talked to and this is not
(07:44):
my guy that I mentioned, Chris Reddick at Edward Jones.
This is part of the reason why I now go
to Chris Reddick and he is my guy. He is
in my trust to manage my funds for my family
if something happens to my wife and I, because I
trust him so much. I talk to three different financial
advisors that were not again and my guy who I
use now, and they all said that I could liquidate
some retirement.
Speaker 3 (08:05):
So I had an eye run.
Speaker 2 (08:06):
I could liquidate it, and I could use it because
I was a new first time home buyer, because it
had been five years since I bought my first home,
and I could use that without any penalty. It was
a program that the government had put out where they
would let you withdraw money from your retirement and use
it to as a down payment on a house because
they wanted you to have a house. What these financial
advisors did not tell me because it's not really their
(08:27):
area to be honest and in their defense, but it
was still bad advice and they shouldn't have given it.
They didn't tell me there was a ten thousand dollars cap,
so I liquidated I think it was about seventy grand
in retirement, and so I had to pay taxes and
penalties on sixty thousand dollars of that, and I didn't
find out until the following year when I went to
file my taxes. So all of that to say, anytime
(08:48):
you were planning to sell your house, make sure you
talk to your tax prepare and in my opinion, to
go back to your question, there is no downside that
I can see to selling your house for more and
making your next house life expensive. So would we come back.
I have another question from a listener, and then I'm
probably going to try to get to, if I can
at the end, whether or not you need to stage
(09:09):
your home when you go to sell it, So we'll
be talking about that.
Speaker 1 (09:12):
You're listening to KFI AM six forty on demand.
Speaker 2 (09:17):
Justin Worsham here with you till four o'clock today talking
Southern California real estate. This is the last day of
my audition to have this show, so I'm trying to
get to as many of your questions as possible.
Speaker 3 (09:27):
If you have a question you'd like to be answered.
Speaker 2 (09:29):
I also think they make for the best segments on
the show. So if you're listening on the iHeartRadio app,
hit that microphone in the top right corner and that
lets you send me about a twenty five second message
and we get that here. So if you have a question,
please shoot it my way. I just make sure you
leave your head shot before you leave. That's very important
for ro really. Oh okay, oh okay, we're going to
make it like a laundro mat up in here, like
(09:50):
on the wall, yeah, or startboard, I don't know, but
wall of shame. So this question comes from Sandy. She
sent me this today on Instagram, and I think it's
a great question. She says, is it a good idea
to put your house on the market, then take it down,
relist it a few months later, then take it off
the market again, then a few months later for the
third time, put it on the market. Or doesn't it
(10:12):
make it look like something is wrong with the house?
I guess in her experience this has been going on
since October. And then she said, very nice, she said,
prayers and crossing fingers that you get the show on KFI.
Many of my friends and family absolutely love your real
estate advice and knowledge.
Speaker 3 (10:26):
Please. Oh okay, there we go. All right, so thank you.
Speaker 2 (10:31):
That was a pseudonym, by the way, So anyway, the question,
the answer is, in my opinion, yes, So there was
a time that pre dates Zillow.
Speaker 3 (10:39):
Redfinnrealtor, dot com and all of.
Speaker 2 (10:41):
These new websites that really give buyers so much information,
so much information that what they could do is they
could see all of those times that you're taking a
house on and off the market. So if you're listening
to this going, well, why would somebody even want to
do that? It's because there's something that there's a stigma
that comes with days on the market. And what days
(11:02):
on the market means is that that is when you
signed an agreement with the listing agent to start marketing
your property and putting it out on the MLS or
multiple listing service. Okay, so there was a time during
the pandemic where if a house was on the market,
which is weird to say, like eight days or ten days,
it was considered a stale listing and then you were
only looking at offer are only probably going to get
(11:23):
offers below list Right now, the average days on the
market in most parts of southern California is going to
be around twenty eight to thirty depending on what kind
of a house, like if it's a condoor a town home,
it's probably going to be a lot longer. Depending again
on where you are in southern California, so people are
going to see that you're putting it on and off
the market. So I would not recommend that. But I
(11:46):
also don't feel comfortable going against the advice of your realtor.
So if your realtor is telling you this is what
they think you should do, and you feel like you
could trust your realtor, then great. But I feel like
if you've done this three or four times and you're
really not getting offers, then there's something isn't right there,
something doesn't feel right. Some circumstances where I would completely
support this. Again, there's a lot of variables here, but
(12:07):
let's say your realtor came to you and said it's
November first. I think at this point it's going to
be better for us to pull the house off the
market and not come back on the market until maybe
mid January or early February. I would support that decision
because the holidays traditionally are a slower time. You don't
get a lot of buyers out there looking around the holidays.
The pandemic did kind of mess that up. Our industry
(12:29):
used to just almost die from November to December and
then start to pick up in January and then really
pick up in May. But the pandemic kind of put
this like hiccup in it, and it did what streaming
services have done to production schedules, right Like there used
to be downtime where they would shoot shows, and now
they don't have that because streaming services just put shows
out year round.
Speaker 3 (12:47):
There is no real season for that anymore.
Speaker 2 (12:50):
So that would be the reason that I would be like,
that makes sense, but any other I can't think of
another example of where you'd want to do it. And
I think it maybe doesn't look like there's something wrong
with the house, but it more makes it look like
either you or your realtors.
Speaker 3 (13:04):
Trying to play games.
Speaker 2 (13:06):
And the buyers that are out there looking at these
websites are going to see that information, and I, as
a realtor, am definitely going to see that information. Some
realtors you might not catch it because not a lot
of realtors. I don't think it's not common practice for
them to look at the history of the home. When
I first started, I didn't, but now I do because
I just got tired of having so many times my
clients tell me things about who owned the house before
(13:28):
them and what it sold for before I even thought
to pay attention to that, So I just felt like
it made me look a little less informed than my client,
and I don't think that that's how it should be personally.
So the other question I wanted to get to is
should I stage my home or not? So there's varying
degrees of this. This is I always give people the good, better, best.
So the best scenario for you to sell your home
(13:51):
would be to move out of it completely, vacate it,
let your realtor stage it, and that way they could
show it whenever you want. That's the best, right, Oh,
I'm sorry. Also, you should deletely renovate your kitchens and bathrooms.
That's the best. The better version is the one I
accidentally just gave. That's the one where you move out
and you stage it. Maybe you put a fresh coat
of paint on the interior, clean up the outside, right,
(14:11):
that is the better option. The still good option is
you're continuing to live in the home, but you gotta
you gotta tweak some stuff, right, You gotta clutter, take
everything off the countertops. You want your kitchen counters to
be almost barren, not all your appliances. A lot of
times What ends up happening is people shift all their
stuff to the garage, and that's totally fine. I've shown
so many houses that look gore. I did it yesterday morning.
(14:32):
I showed a house that was like beautiful on the inside,
and we opened the garage door and you could not
walk in that garage at all. There wasn't a path
for you. That's very common. People don't aren't usually put
off by that at all. So pictures, what I always
tell clients is you don't want it. You want to
don'tant to have pictures of any of your family because
people who are looking at the house, they don't always
want to know about the people that live there before them,
(14:53):
like it just it makes it feel like you're intruding
on them.
Speaker 3 (14:56):
The more kind of like there's no.
Speaker 2 (14:57):
People or any memories that looks like exist in house,
Like I know, as sad as it, it'd be like
the people who like to measure their kids. That could
also be rough, but that's different than a picture. What
I tell clients, because it's hard to pull all those
pictures off and feel like you just have empty walls,
is I have them go online and print like landscapes
or artwork or something just to put in front of
the family photos in the frame, so that way you
(15:19):
could keep all your same frames up, but you're just
covering the pictures of the people. If there's just like
a little five x seven or something on a dresser
or something, then just get that and put it in
the drawer. I also hire a home organizer for clients
who need to stay in their home when I'm listing it,
and she comes and builds a system for them to
get it ready to show. Like they go through and
clear everything out and she says okay, she looks at
(15:39):
it and teaches you how to declutter the house and
then says, okay, when it's time to show, you're going
to take all this stuff put it in this bin,
and then this bin is going to go in there.
If you don't have access to that, then definitely build
a plan to get the house ready to show. And
it's going to be a hassle, like you're probably going
to be cleaning your house every day. The other thing
to think about is you might want to take some
of the furniture out of your living room. Like right now,
(16:00):
I know that after my kids are out of high school,
I'm gonna move like, I plan to probably get a
bigger house. So I was, like, we're buying, we needed
new couches. So I bought couches that have no business
being in my living room right now. They have like
recliners in them, and like one of the back seatbacks
goes into like a tray and a cup holder, and
there's everybody in my family now has a reclining seat
(16:21):
in these like two big couches, and they take up
so much space in my living room it's disgusting. So
if I was when I sell my house, I can't
have those couches in there. So just look at your
living room, like especially the common areas beds and bedrooms
not that big a deal, but as long as people
can walk around the bed and get a sense of
the space, but definitely in your living room, you want
to think, is it easy for like four or five
(16:41):
people to walk through the space without feeling like it's congested,
Because if it feels like it's congested, it feels like
the house is too small. And people make decisions to
buy a home almost solely on how they feel. It's
really about making people feel comfortable. One of the most
interesting things that came from a stager that I use
is that we had a house that was It was
(17:02):
a house that I flipped, and the house next door
was not attractive. And what was nice about this living
room in this house is the whole wall was just windows,
and so it let all this beautiful light in. But
there was this spot where you would be walking through
the house. And the stage was telling me when we
were talking about how she was going to stage the house.
She goes, I'm gonna put an ugly painting there, and
I go, wait, wait, wait, and she was just talking
to herself. I said, why would you put an ugly painting,
(17:25):
ugly anything? And she said, it's because I want people
to look at that artwork and go what is that?
And as they walk past it, they're going to see
the beautiful kitchen, and I've drawn their eye away from
the window where the ugly house is on the other side.
So if you see an ugly painting in a house,
just look at the opposite direction, I guess, and you'll
see what they were probably trying not to get you
(17:45):
to look at. But how people feel when they're walking
through a home, I cannot tell you enough. It is
so important. That's why The biggest turn off for buyers
is smells. So if you have pets, do a deep
clean man. That's what I do for my clients. I
have the house deep clean before we do the photos.
And you want to try and freshen up, put little
like scented oils in the air filter on your central
heating and air conditioning system. Definitely talk with your HVAC
(18:07):
person to make sure that they're okay with you doing that.
But that's what I do because it gets like a
nice smell of like apple cinnamon. That's the one I
like to have inside a house.
Speaker 3 (18:14):
All Right. When we come back, I want to go
over contingencies.
Speaker 2 (18:18):
These are the ways that you can get out of
buying buying a home if you're in the middle of
a contract.
Speaker 3 (18:24):
Right.
Speaker 2 (18:24):
I think it's something that it's in every single deal,
but I don't think everybody understands what they are and
how they work and what impact they have on the deal.
So we'll be talking about contingencies when we come back,
and please keep sending your questions.
Speaker 1 (18:37):
You're listening to KFI AM six forty on demand.
Speaker 2 (18:40):
Justin Worsham with you talking Southern California real estate until
four o'clock today. I was talking if you're just joining,
I was talking about staging your home, whether or not
it's a good idea. Obviously it's a great idea. But
the thing I wanted to say that I didn't get
to I missed in my notes was that there's no
real data that I like to have data. I like
to be able to say, if you stage your home,
you're gonna make this much more money. But we would
(19:02):
have to have two identical homes and all the same
buyers and all that stuff. But I do have an
anecdote that I do think staging made all the difference.
I was helping a client in Sierra Madre who had
a beautiful one point four or five million dollar house.
This is quite a few years ago, and the client
did not want to stage the home. I was picking
it up because he had a previous listing agent that
could not sell it. And he said, he goes, well,
(19:24):
the house sells itself, and I felt bad, But I
was like, it's not doing a really good job, to
be honest, because you're coming to me and to stage
a house that size. It was about sixty five hundred
dollars at the time. Right now, you should plan to
pay about four dollars a square foot to stage a home.
Obviously that could vary if it gets really big, but
just as a loose number. And I firmly believe that
him not wanting to pay that sixty five hundred dollars
(19:46):
cost him about forty five thousand dollars because he had
to take a forty five thousand dollars below list offer.
And I just I really think that if you because
like I said the last segment, it's all about feeling,
It's about how people feel. If they feel fancy, if
it feels nice when they're in there, then that's great.
So what I want to talk about this segment was
all of the contingencies. So I'm going to start off
with what I would call contingencies in a conventional purchase.
Speaker 3 (20:09):
So this is run of the mill.
Speaker 2 (20:11):
Ninety percent probably of the houses have these three contingencies.
And what a contingency means, if you don't know, is
that to me is your ability to back out of
the deal as the buyer. So in a traditional setup,
the seller cannot back out of the deal unless the
buyer breaches the agreement. So that's important to know. But
buyers usually get three contingencies. They get inspection, they get appraisal,
(20:34):
and they get loan, and then I'll explain some of
the other ones that I know as well. So let's
start with inspection, because that's usually what starts off the
ESCRO process.
Speaker 3 (20:41):
What the ESCRO process.
Speaker 2 (20:42):
What that mean is that you've submitted an offer as
a buyer, your offer was accepted, and now in this market,
you have about twenty one to thirty days on average
to figure it out. Am I buying this house and
doing everything you need to do to get the house
ready for you to buy? So anyway, inspection that is
your chance to hire experts to look at the house.
So when looking for a home inspector, most of the
(21:03):
time you're going to get a recommendation at least one,
if not three. Realtors should really be giving three. To
be honest, I don't do that. I give one because
I just my guy is so great. I think I
talked about him when I did the first show. He
was Mike Brooks is his name, and he's a phenomenal
inspector in my opinion, He's done virtually all of the
houses that I've ever helped with a client. He does
(21:24):
my flips he did the house when I bought my house.
What I recommend that you do is talk to your
realtor ask them who they recommend for an inspection. I
recommend you do this when you're starting the process, to
look and have them send like a sample report from
a previous transaction. They can redact the address and the
buyer's name. But what you want to do is you
just want to look at the report and make sure
(21:45):
that it's easy for you to at least process. When
I say easy for you to process, I'm not expecting
you to understand everything that's in there. That you shouldn't
be able to do that, but you should be able
to read it and understand what's being said to the
point where you can ask questions about things that you
don't understand, because sometimes they could get really convoluted. And
I look at them all the time. So an inspector
(22:06):
should be on a raised foundation home. They should be
going underneath the home, they should be going up in
the attic, I think in my opinion, and I'm sure
there's home inspectors if you're listening out there, that maybe
could argue this, But I just feel like a really
good general home inspector is going to spend at least
two to three hours in a single family home and
maybe one to two hours in a condo.
Speaker 3 (22:26):
Okay.
Speaker 2 (22:27):
The other part of your inspection contingency is your insurance.
Right you want to make sure and right now, that's
a big deal. That's why I'm having veto pay Aletta
the third come on from Farmer's Insurance. He's a friend
of mine. He's going to be talking homeowner's insurance in
the second hour of the show today because it's become
a very big issue here in California. So as soon
as your offer gets accepted, your lender, your realtor is
(22:49):
going to tell you find insurance. Find somebody who can
get you that insurance. The other part of your inspection
contingency is if the house needs some kind of repairs,
you can look into getting bids from contractors.
Speaker 3 (23:00):
There's going to be home improvement plans.
Speaker 2 (23:01):
Like I had a client whose full plan was to
buy a house and build an adu above the garage.
Within two days of the offer getting accepted, he made
a call and found out how difficult it was going
to be to get permits for him to build the
adu on top of the garage ADU is an accessory,
dwelling unit or guest house, and he was like nope.
So within three deals, before we even had a general
inspector look at the house done, we're out.
Speaker 3 (23:24):
We didn't.
Speaker 2 (23:24):
We're not, like, he didn't want to buy the house,
and so we use that to back out of the deal.
The other contingency that you get in a standard purchase
is an appraisal. The easy way to say this is
that you're just saying my offer is contingent, basically saying
I'm making this offer under the assumption that my lender
is going to have an objective third party that is
a licensed appraiser come and visit the home and then
(23:44):
compare it to other homes to make sure that it
is worth at least what I am willing to pay
for or what I've offered to pay for the house.
So that's really to protect the lender more than anything.
The other thing people get hung up on is that
if there's comps comparable sales recently that look like it's
more than what you're offering on the house, usually you
almost always get in a praise value at value, you're
(24:05):
not going to get twenty thirty thousand. In all of
the hundreds of deals that I've done, I've had one
deal and it was this year that the house actually
praised for sixty thousand dollars more than what we're under
contract for. So it's almost always going to be value,
sometimes not so much now. During the pandemic especially, we
got lots of houses that were appraising below value what
you were are below what you were.
Speaker 3 (24:24):
Offering, and so that main thing's a little tough.
Speaker 2 (24:27):
But if the if the house doesn't a praise, then
what you usually will do is you'll go back to
the seller and say, hey, can I meet you in
the middle, or can I get the price knocked off?
Speaker 3 (24:35):
Like that kind of thing.
Speaker 2 (24:36):
When I bought my house back at twenty thirteen, entirely
different market than what we're in now, is still recovering
from the crash, my house appraised for like seventy thousand
dollars less than what I was offering, and the bank
took it because it was a short sale. The third
contingency is a loan contingency. That's the gist of it
is is that I'm making this offer contingent on the
path fact that I can get a loan from somebody.
(24:56):
And the only time that I've ever seen a buyer
use this to get out out of a deal is
that towards the end they were unfortunately, these folks got
injured in a car crash and so they were put
on leave and they couldn't work, and so they do
what's called a verification of employment, and by day I
mean the lender. They want to make sure that you
still have your job before they let you buy this
home and commit to this loan for you. So if
(25:18):
that happened then and now you can't get a loan,
then in most cases you can back out of the
deal at that point. Some other common contingencies that'll come
up is there's contingency on sale. So what I'm saying
is I have a house, right, So I have my
house and I want to buy another house, but in
order to buy this new house, I have to sell
the house I'm living in now. So I'm making my
offer on the new house I'm trying to buy and
(25:40):
saying I'm only going to be able to buy this
house if I could sell my old house, right. So
that's another contingency for the buyer. The contingency that could
come up for the seller. Right, So when I'm the
seller of that that same example, I could tell the
buyer of my property that I'm only going to sell
you my house. If I could buy another property. I
have to be able to buy another home. So when
(26:03):
we come back, I want to tell you a little
bit more about what those contingencies on purchasing a replacement property,
and then I want to go into more detail about
the inspections, so we'll talk more about that.
Speaker 1 (26:13):
You're listening to KFI AM six forty on demand.
Speaker 2 (26:17):
Justin worshing with you here talking Southern California real estate
till four o'clock today. Coming up in the next hour,
I got veto Paeletta, the third from Farmer's Insurance. He's
going to be giving us some information about why the
insurance industry is changing in California and just be there
to answer questions. If you want to hit a talk back,
go ahead and send it our way. But I was
wrapping up talking about contingencies in the last segment. Then
(26:39):
I want to get into the different kinds of inspections.
So what I was saying, as a seller, you can't
really back out of a transaction unless the buyer breaches
the agreement, but there are some contingencies. So if you're
a seller, you can sell your property contingent on your
ability to buy a replacement property. And I wanted to
go into this in a little more detail because this
contingency has a little special tweak to it in that
(27:02):
it gives you the ability to basically extend escrow when
you remove this contingency. So whenever I have used this contingency,
I have always said that we can extend es grow
by up to fourteen days, but I think that the
default might be like twenty one or something, or fifteen,
but you can always change the number to make it specific.
But anyway, and the reason I say this is because
(27:24):
it got intense in a listing I had a while
ago where the buyer done their inspections right, and my
client was trying to buy a house but it was
still getting it was being finished, like it was being
built still, and it wasn't going to be ready in time,
and they needed to stay in their house for like
eleven more days. So what I was trying to talk
to the buyer's agent and say, like, what's the amount
(27:45):
of time that my clients could stay in the house,
And this agent was not very friendly, Like, they weren't
very helpful.
Speaker 3 (27:52):
They thought they were really.
Speaker 2 (27:53):
A big deal in my opinion, and were constantly asking
me to solve their client's problems, which was another issue
that I have but anyway, so they were like, no,
there's nothing that we could do.
Speaker 3 (28:03):
Nothing we could do whatsoever.
Speaker 2 (28:04):
There is no room to wiggle unless you pay for
like these crazy storage fees and all of this stuff
like just came at me with all this information, and
I instantly knew that this realtor had forgotten that there
was a contingency upon purchase of replacement property, and that
I could just extend escrow without getting the buyer's permission.
It was already pre agreed as a term in the deal.
(28:25):
So I just said okay, and then I moved. And
you could probably say this is shady. I wouldn't call
it shady. I would call it taking care of my client.
But what I did was I let them finish. We
negotiated a credit for the inspections, and I let them
remove all their contingencies. And then when I removed our
last contingency, I extended escrow by fourteen days, and they
(28:45):
lost their minds.
Speaker 3 (28:47):
They were threatening to sue. There was all this talk.
Speaker 2 (28:50):
Obviously, everybody consulted I'm assuming attorneys and other people, and
eventually found out that they really didn't have a lot
of grounds to sue. Technically, again, not a lawyer don't
have the ability to get that advice. But it sort
of worked out for my clients. Sure, I would love
for there to be less tension in a deal, but
I just want people to be aware of that because
it was a way for me to help my client
(29:12):
take care of it. And it's a tool that's in
the tool belt, and I think that people should know
that those are out there so they can ask the
realtors about them. So now what I want to talk
about is inspections. What kind of inspections did you get
when you.
Speaker 3 (29:22):
Buy a home.
Speaker 2 (29:23):
I talked a little bit last segment about a general inspection.
This is just everything like this inspector will crawl under
the house, tell you what kind of plumbing is underneath
the house.
Speaker 3 (29:32):
They'll crawl up in the attic.
Speaker 2 (29:33):
A lot of inspectors will look at the serial number
on the heating and air conditioning system and tell you
the year it was manufactured. They'll tell you about the
level of insulation. There's lots of things that, in my opinion,
you should not be concerned about, because almost across the board,
I see tons of houses that have signs of rodent intrusion,
and what that means is that there's small amounts of
(29:54):
rodent droppings that they can see on top of the insulation.
The inspectors' jobs are to tell you everything that is wrong,
and their job is to go through and find things
that are wrong. So this is a thing where you
kind of have to go with your gut. If you're
a first time home buyer, there's a lot that's going
to scare you when you hear an inspection report.
Speaker 3 (30:10):
One of the things I love about my home inspector is.
Speaker 2 (30:12):
That he's very good at giving all of the information,
even quotes building code to support what he says, which
most inspectors don't do because they don't like the added liability.
Speaker 3 (30:21):
But he will do that.
Speaker 2 (30:21):
But at the end he'll say, and a lot of
inspectors to this, they'll say things like, this is nothing
that I wouldn't see in any other home. And I
think that's important for buyers to remember, is that sure
there are some red flag issues, and it also has
to be about your comfort. I'm not trying to say
you should do something that you're ultimately uncomfortable with. But
also it's important to consider that just because you don't
buy that house doesn't mean that the next house you
(30:42):
get an offer accepted on isn't going to have similar
things that it needs. The other inspection that I recommend
people getting is a sewer inspection. This is where they
send a camera underneath the clean out in front of
the house. Now, sometimes buyers think that they're looking at
all of the plumbing underneath.
Speaker 3 (30:57):
And that's not really what they do.
Speaker 2 (30:58):
Sometimes they have to go through an air vent on
the top of the roof, and that does go through
a lot of the plumbing underneath the house. But really
what you're looking for is the part of the sewer line,
the waste leaving the house, water and everything else that
you are responsible for. So they look from where the
house ends and it goes to the city connection, and
you'll see signs of like small root intrusion. They'll tell
(31:18):
you what kind of what the pipe is made of,
and that's a really important thing because that's a three
hundred dollars inspection that could lead to a ten thousand
dollars repair, So definitely you want to get a sewer.
Termite inspection is probably the cheapest of the standard inspections
that I recommend buyers get. It's usually about one hundred
to one hundred and fifty dollars in my experience, and
(31:39):
most of what you actually get in the termite inspection
almost all the time they see signs of termites, but
very rarely do they actually see the termites themselves. I've
learned from exterminators that almost every place here has termites
or has had termites at some point.
Speaker 3 (31:53):
The termites move in when the.
Speaker 2 (31:55):
House is just sticks, it's just the exposed framing, and
then we seal it in with stucco and drywall, and
then they live in the walls, and they don't actually
like to destroy the structural integrity of the wood because
that means carpenter ants can build, move in, and they
eat the termites.
Speaker 3 (32:09):
And another exterminator told me.
Speaker 2 (32:11):
That it takes over fifty plus years before any termite
damage could cause really bad structural damage to a home,
So you.
Speaker 3 (32:19):
Want to get that.
Speaker 2 (32:19):
But the big information you get, in my opinion, from
a termite inspector is actually dry rot wood they go
around and poke with like a ski pole and find
dry rot. And then if you have a shower pan,
they also test to make sure that the water gets
held and only goes down the drain to see if
there's any leaks in the shower pan. It's not a
perfect test, but they check a lot of that. You're
always going to see some kind of debris underneath the
(32:40):
house that a termite is going to come in. If
you have a condo, I would only I usually only
recommend clients get a general inspection. I used to have
them get a general inspection and a termite, but the termite.
Most of the time, the condominium, the HA takes care
of the exterior and they're just looking for signs of
water damage, and a general inspector can find that same information.
(33:00):
They'll see the same If there's signs of water damage,
they're going to see it. Now optional inspections. This is
going to be dependent on your fear or concern or
might be specific to the house.
Speaker 3 (33:11):
So chimney.
Speaker 2 (33:12):
So I always recommend people get a chimney inspection. Mostly
because I had a client I'm going to name drop here.
He was the guitarist for The Black Eyed peas and
was my neighbor and I helped him sell his house.
And I do pre inspections on my listing. That's where
you expect it beforehand and share that with the buyers.
And he had lived in his house for twelve years
and he didn't know he could totally use his chimney.
It was totally fine. He was told it was decorative
(33:34):
and that's just a cya thing. So I recommend you
get your chimney inspected. Especially if you really want to
use it, then definitely do it. If you're not going
to ever use it, then it doesn't matter. You could
save yourself to the three hundred bucks foundation inspection. I
usually wait to hear from the general inspector when he
crawls underneath the house. And this is on a raised
foundation house, not a slab. Those are harder. I don't
(33:54):
think I've actually seen a foundation inspection on the slab.
I'd have to talk to somebody. We do him a
lot for raised foundation that's where you have a crawl
space underneath the house, and those are usually about in
my experience, two to four hundred bucks, depending on where
you're getting it from. And I wait for the general
inspector to see something and say, you're going to want
to have a foundation person look at this to see.
Although the one place that I always get foundation inspections
(34:17):
is in Pasadena because it was developed it's such a
long time ago. You get a lot of what they
call river rock foundations where it's just these big cobblestones
that were stacked up and then they had mortar packed
in in between the rock and houses sit on that.
Speaker 3 (34:30):
And because those are so old, if I have.
Speaker 2 (34:32):
A client buying a house in Pasadena, I consider that
to be a standard inspection.
Speaker 1 (34:36):
Pool.
Speaker 3 (34:37):
A lot of general inspectors will look at pool.
Speaker 2 (34:39):
I used to have a separate pool inspector, but he
got so expensive. It's like four hundred dollars is the
cheapest one. I've got, the average of like six to
eight hundred dollars. The most I've ever seen was nine
hundred and fifty. And they're coming out and they're assessing
the pool equipment. And I'm fortunate in that my general
home inspector, I feel he's qualified enough to give enough
detail for what you're looking for, So I don't do
(35:00):
a lot of those anymore. And then the big ones
are out of fear is mold and lead. So I
always find that it's important that buyers know that they
are going to find some signs of mold.
Speaker 3 (35:12):
Like if you poke a hole through some.
Speaker 2 (35:13):
Drywall behind a kitchen sink and a bathroom sink, they're
probably going to find some signs of mold almost across
the board. So it's really important to listen to the
inspector and ask them like, what is this dangerous and
understand too that the inspector is in a weird spot
because they don't want to tell you it's not dangerous.
And then something like all of a sudden somebody has
like asthma develops, and then now you're angry at them
(35:35):
and you want to sue them. So they're always going
to try to cover their own butts on that, but
so you're going to have to feel it out. If clients,
if you have like very a lot of issues with breathing,
you're sensitive to allergies and stuff like that, then maybe
it's a good idea. But in my experience, the clients
that want to get a mold inspection is because they've
had some kind of issue with mold previously. But more
than that, it doesn't really come up lead inspection. So
(35:57):
this really applies for houses that were built prior to
nineteen seven, because after then, that's when they didn't use
lead based paints on the home. And I brought I
wanted to include this because I had something that somebody
said that blew my mind. The lead inspectors. These people
bought this old house that was built in like eighteen
ninety and they wanted to get the paint inspected because
they had a small child. And the inspector told me,
(36:18):
he's like, I can't inspect every surface in that house.
It would cost you a fortune. And I know I'm
going to find something. So he's like, really, it's about
targeting areas that are specific. So I want to say
that is that like, I don't think it's something that
people should come out of the gates. You know, I
would encourage you to do some more research on how
to protect yourself from lead based paint, because that might
be a better way to spend your money just to
(36:39):
paint over it and protect it and talk to somebody
who knows how to deal with that than it is
to spend hundreds of dollars just to have somebody test
something that they go, yeah, we're gonna find it.
Speaker 3 (36:48):
That's a for sure thing, all right.
Speaker 2 (36:50):
We are going to come back and I'm going to
talk to Veto, right am I at that time already,
Holy spokes, we are. We're going to talk to Veto
pay a letter the third from Farmers Insurance and talk
Homeowners Insurance when we come back.
Speaker 1 (37:01):
KFI AM six forty on demand
You're listening to KFI AM six forty on demand.
Speaker 2 (00:04):
Justin Worsham back one last Time, Last Chance for Romance
talking Southern California real estates. This show will be the
end of my audition to see if this show is
something that they think is worth giving a time slot too.
Speaker 3 (00:17):
We'll see how it goes.
Speaker 2 (00:19):
I want to kick things off with some questions that
I got actually online via social media during the week.
So this first question was, when selling your home to
buy another one, should you buy for the same price
or is it okay to buy for less and bank
the rest? So I think that the I'm going to
(00:39):
try to hit what I think is the intent of
the question, and I think that this might be a
little bit of a financial advice which I am really
only licensed to help people buy and sell homes. I
am not licensed to give financial planning advice or anything
like that. So take this in the spirit in which
it's intended, just a guy who has been through this
and tell you my experience. In my opinion, I don't
(01:01):
see really a downside for selling your home for more
and then buying a less expensive home. Like to me,
one of the benefits of buying the very expensive real
estate here in southern California is that you can kind
of ride it out. I've seen a lot of people
do it where they ride it out as their retirement plan. Now,
I wouldn't feel comfortable with making advice that you should
(01:22):
make it your retirement plan and that be your only
sole plan for retirement, because you never know what's going
to happen. But like there's been people who have bought
houses trying not to vomit in like the seventies in
southern California for like one hundred thousand dollars, and now
those houses are worth like one point eight million dollars
and they're selling them and they're moving to Texas. In fact,
I was coming back from a show choir trip. My
(01:44):
son is in show choir in high school here, and
I sat next to a couple who was going to
They were on their way to Dallas because they were
looking to buy a home. They're selling their one point
four million dollar house here in southern California and they're
going to buy a big old lot of land and
a nice house to retire on, and they're still going
to have probably a half a million dollars to spare.
So if that is your plan. Yes, that makes sense.
(02:07):
The thing you do have to consider is the tax ramifications.
The other thing I want to say in regards to
this before I forget, is if it's an investment property,
which is probably not the intent of this question, but
for the sake of giving out the information. If this
is an investment property, A lot of people aren't aware
of a ten thirty one exchange, So what ten thirty
(02:28):
one exchange is? You have to say you're going to
do a ten thirty one exchange before you list the home.
Make sure you tell your realtor I am going to
ten thirty one exchange this say, it only qualifies if
it is an investment home. You might be able to
get away with it if it's a second home, but
if it is your primary residence, it will not work
for you.
Speaker 3 (02:46):
It is only for investment purposes.
Speaker 2 (02:48):
And what it lets you do is it lets you
sell your investment property by another property of equal or
lesser value or equal or greater value, sorry, equal or
greater value, and equal or greater debt. Low right, it
has to have It can't be like you can't take
money out of it. Is really what we're looking at here.
So you have to buy. You could buy more property,
you could spend more money, and you defer any capital
(03:09):
gains tax that you would have onto that new purchase.
So some real estate investors that I know, what they
do is they continue to scale up with their investment
properties using this ten thirty one strategy, and then their
intent is to eventually leave that property to one of
their heirs, and then when they go, so goes the
tax burden. Now, again, not a tax guy, you should
(03:30):
definitely if that sounds like something that could work for you,
you need to first talk to your tax preparer and
get some information from them, and then I would consult
with a realtor and then let them do some legwork
and help point you in directions to get all the
information for that. The other thing I wanted to say
in regards to like buying and selling homes is that
(03:51):
for a lot of people in southern California, it's hard, right.
It's because the inventory is so low. Finding the new
home you're going to live in is hard to do.
So you oftentimes don't want to wait and then sell
your house and then rent for a year, because then
you feel like you've just kind of thrown away that
rent money that you've had, so you try to figure out, well,
how can I make this work? Because you need the
(04:12):
proceeds right when you sell your house. You need the
three maybe eight hundred thousand dollars or more that you
have in the house you're living in. You need the
money that you've built up to put down on the
new house. So a lot of people don't know about
a bridge loan, and a bridge loan is something that
a few lenders do, not a lot, so they're hard
to find. So definitely reach out to your realtor or
(04:33):
talk to me, and I could recommend some people if
you'd like, but you want to get referred to somebody.
And what that does is that there's a difference. Right,
so whatever the down payment is on the new house,
if you have that inequity, they give you a small
second loan and it's at a higher interest rate. So
almost everybody that I pitch this too that doesn't want
that can't like completely buy their new house without selling
(04:55):
their old one. They always talk to a bridge loan
person and I have yet to have somebody who's like that.
It seems like a good plan. The interest rate and
the fees always seemed to be a turn off to them,
but to me, I still think that this is a
great way to kind of mitigate the stress of trying
to get out of your house and get into a
new one. You can also buy homes and I'm going
to probably go into more depth on this in the
(05:16):
next coming up in another segment about contingencies. But you
could sell your home contingent on your ability to replace
the home, and then when you go to buy a home,
you could buy it contingent on your ability to sell
your previous home.
Speaker 3 (05:30):
But the big thing that you want to.
Speaker 2 (05:31):
Do anytime you sell your home is you want to
talk to your tax prepare about that capital gains. And
the reason I say this is because I helped a
client buy a house out in Portwaanimi quite a few
years ago. And the person who owned this condo it
was near the beach, that was a second home, and
when they went to sell it, they talked to I
believe it was a bookkeeper. And if you're a bookkeeper,
(05:54):
I'm not saying this to make it a derogatory thing,
but they talk to somebody who basically helped them balance
their checkbook, not like a CPA or an official accountant,
and what they got was bad info, and so when
they went to sell their house, they found out that
they are according to the real turn what he told me,
they were going to get hit with a seventy thousand
dollars capital gains tax. So they came back to me
(06:15):
to ask my client. We were supposed to close in
September of that year, in like a few weeks, and
they said, can we extend escrow to close in the
first week of January because at least that would have
put them in a new tax year that they felt
like they could have been better set up if they
could have deferred that money to a later time. But
unfortunately for these people, my client had actually liquidated some
(06:37):
tax or some stocks, so he paid a short term
capital gain on those stocks, and it was basically all
of the money that he was paying. So this was
just about three quarters of a million dollars I think
it was somewhere around, yeah, somewhere around three quarters eight
hundred grand, and he liquidated stocks to buy that, so
he also had to pay capital gains taxes. So in
this case, again I'm not a lawyer, but this is
what I opposed to the other agent. I said, because
(06:59):
what happens in this kind of a circumstance is that
there's liquidated damages, right that you have to cover. So
if a seller decides to change their mind and they
don't want to sell the house anymore, they have to
cover expenses that the buyer had have to There's a
lot of weeds in this, so just take this as
a grain of salt. Let me get the whole thing
out here. So what I said is, yeah, your client
has a hit of seventy thousand dollars, so they may
(07:21):
not want to sell the house to my client.
Speaker 3 (07:22):
But here's the problem.
Speaker 2 (07:23):
If you don't sell the house to my client, my
client is already liquidated stocks to the tune of probably
more or equal to your seventy thousand dollars burden, and
so your client is going to be hit with this
bill either way. So it's probably better for them to
at least sell the house and then take the tax hit.
And then the other thing that happened to me personally
on my home I talked to and this is not
(07:44):
my guy that I mentioned, Chris Reddick at Edward Jones.
This is part of the reason why I now go
to Chris Reddick and he is my guy. He is
in my trust to manage my funds for my family
if something happens to my wife and I, because I
trust him so much. I talk to three different financial
advisors that were not again and my guy who I
use now, and they all said that I could liquidate
some retirement.
Speaker 3 (08:05):
So I had an eye run.
Speaker 2 (08:06):
I could liquidate it, and I could use it because
I was a new first time home buyer, because it
had been five years since I bought my first home,
and I could use that without any penalty. It was
a program that the government had put out where they
would let you withdraw money from your retirement and use
it to as a down payment on a house because
they wanted you to have a house. What these financial
advisors did not tell me because it's not really their
(08:27):
area to be honest and in their defense, but it
was still bad advice and they shouldn't have given it.
They didn't tell me there was a ten thousand dollars cap,
so I liquidated I think it was about seventy grand
in retirement, and so I had to pay taxes and
penalties on sixty thousand dollars of that, and I didn't
find out until the following year when I went to
file my taxes. So all of that to say, anytime
(08:48):
you were planning to sell your house, make sure you
talk to your tax prepare and in my opinion, to
go back to your question, there is no downside that
I can see to selling your house for more and
making your next house life expensive. So would we come back.
I have another question from a listener, and then I'm
probably going to try to get to, if I can
at the end, whether or not you need to stage
(09:09):
your home when you go to sell it, So we'll
be talking about that.
Speaker 1 (09:12):
You're listening to KFI AM six forty on demand.
Speaker 2 (09:17):
Justin Worsham here with you till four o'clock today talking
Southern California real estate. This is the last day of
my audition to have this show, so I'm trying to
get to as many of your questions as possible.
Speaker 3 (09:27):
If you have a question you'd like to be answered.
Speaker 2 (09:29):
I also think they make for the best segments on
the show. So if you're listening on the iHeartRadio app,
hit that microphone in the top right corner and that
lets you send me about a twenty five second message
and we get that here. So if you have a question,
please shoot it my way. I just make sure you
leave your head shot before you leave. That's very important
for ro really. Oh okay, oh okay, we're going to
make it like a laundro mat up in here, like
(09:50):
on the wall, yeah, or startboard, I don't know, but
wall of shame. So this question comes from Sandy. She
sent me this today on Instagram, and I think it's
a great question. She says, is it a good idea
to put your house on the market, then take it down,
relist it a few months later, then take it off
the market again, then a few months later for the
third time, put it on the market. Or doesn't it
(10:12):
make it look like something is wrong with the house?
I guess in her experience this has been going on
since October. And then she said, very nice, she said,
prayers and crossing fingers that you get the show on KFI.
Many of my friends and family absolutely love your real
estate advice and knowledge.
Speaker 3 (10:26):
Please. Oh okay, there we go. All right, so thank you.
Speaker 2 (10:31):
That was a pseudonym, by the way, So anyway, the question,
the answer is, in my opinion, yes, So there was
a time that pre dates Zillow.
Speaker 3 (10:39):
Redfinnrealtor, dot com and all of.
Speaker 2 (10:41):
These new websites that really give buyers so much information,
so much information that what they could do is they
could see all of those times that you're taking a
house on and off the market. So if you're listening
to this going, well, why would somebody even want to
do that? It's because there's something that there's a stigma
that comes with days on the market. And what days
(11:02):
on the market means is that that is when you
signed an agreement with the listing agent to start marketing
your property and putting it out on the MLS or
multiple listing service. Okay, so there was a time during
the pandemic where if a house was on the market,
which is weird to say, like eight days or ten days,
it was considered a stale listing and then you were
only looking at offer are only probably going to get
(11:23):
offers below list Right now, the average days on the
market in most parts of southern California is going to
be around twenty eight to thirty depending on what kind
of a house, like if it's a condoor a town home,
it's probably going to be a lot longer. Depending again
on where you are in southern California, so people are
going to see that you're putting it on and off
the market. So I would not recommend that. But I
(11:46):
also don't feel comfortable going against the advice of your realtor.
So if your realtor is telling you this is what
they think you should do, and you feel like you
could trust your realtor, then great. But I feel like
if you've done this three or four times and you're
really not getting offers, then there's something isn't right there,
something doesn't feel right. Some circumstances where I would completely
support this. Again, there's a lot of variables here, but
(12:07):
let's say your realtor came to you and said it's
November first. I think at this point it's going to
be better for us to pull the house off the
market and not come back on the market until maybe
mid January or early February. I would support that decision
because the holidays traditionally are a slower time. You don't
get a lot of buyers out there looking around the holidays.
The pandemic did kind of mess that up. Our industry
(12:29):
used to just almost die from November to December and
then start to pick up in January and then really
pick up in May. But the pandemic kind of put
this like hiccup in it, and it did what streaming
services have done to production schedules, right Like there used
to be downtime where they would shoot shows, and now
they don't have that because streaming services just put shows
out year round.
Speaker 3 (12:47):
There is no real season for that anymore.
Speaker 2 (12:50):
So that would be the reason that I would be like,
that makes sense, but any other I can't think of
another example of where you'd want to do it. And
I think it maybe doesn't look like there's something wrong
with the house, but it more makes it look like
either you or your realtors.
Speaker 3 (13:04):
Trying to play games.
Speaker 2 (13:06):
And the buyers that are out there looking at these
websites are going to see that information, and I, as
a realtor, am definitely going to see that information. Some
realtors you might not catch it because not a lot
of realtors. I don't think it's not common practice for
them to look at the history of the home. When
I first started, I didn't, but now I do because
I just got tired of having so many times my
clients tell me things about who owned the house before
(13:28):
them and what it sold for before I even thought
to pay attention to that, So I just felt like
it made me look a little less informed than my client,
and I don't think that that's how it should be personally.
So the other question I wanted to get to is
should I stage my home or not? So there's varying
degrees of this. This is I always give people the good, better, best.
So the best scenario for you to sell your home
(13:51):
would be to move out of it completely, vacate it,
let your realtor stage it, and that way they could
show it whenever you want. That's the best, right, Oh,
I'm sorry. Also, you should deletely renovate your kitchens and bathrooms.
That's the best. The better version is the one I
accidentally just gave. That's the one where you move out
and you stage it. Maybe you put a fresh coat
of paint on the interior, clean up the outside, right,
(14:11):
that is the better option. The still good option is
you're continuing to live in the home, but you gotta
you gotta tweak some stuff, right, You gotta clutter, take
everything off the countertops. You want your kitchen counters to
be almost barren, not all your appliances. A lot of
times What ends up happening is people shift all their
stuff to the garage, and that's totally fine. I've shown
so many houses that look gore. I did it yesterday morning.
(14:32):
I showed a house that was like beautiful on the inside,
and we opened the garage door and you could not
walk in that garage at all. There wasn't a path
for you. That's very common. People don't aren't usually put
off by that at all. So pictures, what I always
tell clients is you don't want it. You want to
don'tant to have pictures of any of your family because
people who are looking at the house, they don't always
want to know about the people that live there before them,
(14:53):
like it just it makes it feel like you're intruding
on them.
Speaker 3 (14:56):
The more kind of like there's no.
Speaker 2 (14:57):
People or any memories that looks like exist in house,
Like I know, as sad as it, it'd be like
the people who like to measure their kids. That could
also be rough, but that's different than a picture. What
I tell clients, because it's hard to pull all those
pictures off and feel like you just have empty walls,
is I have them go online and print like landscapes
or artwork or something just to put in front of
the family photos in the frame, so that way you
(15:19):
could keep all your same frames up, but you're just
covering the pictures of the people. If there's just like
a little five x seven or something on a dresser
or something, then just get that and put it in
the drawer. I also hire a home organizer for clients
who need to stay in their home when I'm listing it,
and she comes and builds a system for them to
get it ready to show. Like they go through and
clear everything out and she says okay, she looks at
(15:39):
it and teaches you how to declutter the house and
then says, okay, when it's time to show, you're going
to take all this stuff put it in this bin,
and then this bin is going to go in there.
If you don't have access to that, then definitely build
a plan to get the house ready to show. And
it's going to be a hassle, like you're probably going
to be cleaning your house every day. The other thing
to think about is you might want to take some
of the furniture out of your living room. Like right now,
(16:00):
I know that after my kids are out of high school,
I'm gonna move like, I plan to probably get a
bigger house. So I was, like, we're buying, we needed
new couches. So I bought couches that have no business
being in my living room right now. They have like
recliners in them, and like one of the back seatbacks
goes into like a tray and a cup holder, and
there's everybody in my family now has a reclining seat
(16:21):
in these like two big couches, and they take up
so much space in my living room it's disgusting. So
if I was when I sell my house, I can't
have those couches in there. So just look at your
living room, like especially the common areas beds and bedrooms
not that big a deal, but as long as people
can walk around the bed and get a sense of
the space, but definitely in your living room, you want
to think, is it easy for like four or five
(16:41):
people to walk through the space without feeling like it's congested,
Because if it feels like it's congested, it feels like
the house is too small. And people make decisions to
buy a home almost solely on how they feel. It's
really about making people feel comfortable. One of the most
interesting things that came from a stager that I use
is that we had a house that was It was
(17:02):
a house that I flipped, and the house next door
was not attractive. And what was nice about this living
room in this house is the whole wall was just windows,
and so it let all this beautiful light in. But
there was this spot where you would be walking through
the house. And the stage was telling me when we
were talking about how she was going to stage the house.
She goes, I'm gonna put an ugly painting there, and
I go, wait, wait, wait, and she was just talking
to herself. I said, why would you put an ugly painting,
(17:25):
ugly anything? And she said, it's because I want people
to look at that artwork and go what is that?
And as they walk past it, they're going to see
the beautiful kitchen, and I've drawn their eye away from
the window where the ugly house is on the other side.
So if you see an ugly painting in a house,
just look at the opposite direction, I guess, and you'll
see what they were probably trying not to get you
(17:45):
to look at. But how people feel when they're walking
through a home, I cannot tell you enough. It is
so important. That's why The biggest turn off for buyers
is smells. So if you have pets, do a deep
clean man. That's what I do for my clients. I
have the house deep clean before we do the photos.
And you want to try and freshen up, put little
like scented oils in the air filter on your central
heating and air conditioning system. Definitely talk with your HVAC
(18:07):
person to make sure that they're okay with you doing that.
But that's what I do because it gets like a
nice smell of like apple cinnamon. That's the one I
like to have inside a house.
Speaker 3 (18:14):
All Right. When we come back, I want to go
over contingencies.
Speaker 2 (18:18):
These are the ways that you can get out of
buying buying a home if you're in the middle of
a contract.
Speaker 3 (18:24):
Right.
Speaker 2 (18:24):
I think it's something that it's in every single deal,
but I don't think everybody understands what they are and
how they work and what impact they have on the deal.
So we'll be talking about contingencies when we come back,
and please keep sending your questions.
Speaker 1 (18:37):
You're listening to KFI AM six forty on demand.
Speaker 2 (18:40):
Justin Worsham with you talking Southern California real estate until
four o'clock today. I was talking if you're just joining,
I was talking about staging your home, whether or not
it's a good idea. Obviously it's a great idea. But
the thing I wanted to say that I didn't get
to I missed in my notes was that there's no
real data that I like to have data. I like
to be able to say, if you stage your home,
you're gonna make this much more money. But we would
(19:02):
have to have two identical homes and all the same
buyers and all that stuff. But I do have an
anecdote that I do think staging made all the difference.
I was helping a client in Sierra Madre who had
a beautiful one point four or five million dollar house.
This is quite a few years ago, and the client
did not want to stage the home. I was picking
it up because he had a previous listing agent that
could not sell it. And he said, he goes, well,
(19:24):
the house sells itself, and I felt bad, But I
was like, it's not doing a really good job, to
be honest, because you're coming to me and to stage
a house that size. It was about sixty five hundred
dollars at the time. Right now, you should plan to
pay about four dollars a square foot to stage a home.
Obviously that could vary if it gets really big, but
just as a loose number. And I firmly believe that
him not wanting to pay that sixty five hundred dollars
(19:46):
cost him about forty five thousand dollars because he had
to take a forty five thousand dollars below list offer.
And I just I really think that if you because
like I said the last segment, it's all about feeling,
It's about how people feel. If they feel fancy, if
it feels nice when they're in there, then that's great.
So what I want to talk about this segment was
all of the contingencies. So I'm going to start off
with what I would call contingencies in a conventional purchase.
Speaker 3 (20:09):
So this is run of the mill.
Speaker 2 (20:11):
Ninety percent probably of the houses have these three contingencies.
And what a contingency means, if you don't know, is
that to me is your ability to back out of
the deal as the buyer. So in a traditional setup,
the seller cannot back out of the deal unless the
buyer breaches the agreement. So that's important to know. But
buyers usually get three contingencies. They get inspection, they get appraisal,
(20:34):
and they get loan, and then I'll explain some of
the other ones that I know as well. So let's
start with inspection, because that's usually what starts off the
ESCRO process.
Speaker 3 (20:41):
What the ESCRO process.
Speaker 2 (20:42):
What that mean is that you've submitted an offer as
a buyer, your offer was accepted, and now in this market,
you have about twenty one to thirty days on average
to figure it out. Am I buying this house and
doing everything you need to do to get the house
ready for you to buy? So anyway, inspection that is
your chance to hire experts to look at the house.
So when looking for a home inspector, most of the
(21:03):
time you're going to get a recommendation at least one,
if not three. Realtors should really be giving three. To
be honest, I don't do that. I give one because
I just my guy is so great. I think I
talked about him when I did the first show. He
was Mike Brooks is his name, and he's a phenomenal
inspector in my opinion, He's done virtually all of the
houses that I've ever helped with a client. He does
(21:24):
my flips he did the house when I bought my house.
What I recommend that you do is talk to your
realtor ask them who they recommend for an inspection. I
recommend you do this when you're starting the process, to
look and have them send like a sample report from
a previous transaction. They can redact the address and the
buyer's name. But what you want to do is you
just want to look at the report and make sure
(21:45):
that it's easy for you to at least process. When
I say easy for you to process, I'm not expecting
you to understand everything that's in there. That you shouldn't
be able to do that, but you should be able
to read it and understand what's being said to the
point where you can ask questions about things that you
don't understand, because sometimes they could get really convoluted. And
I look at them all the time. So an inspector
(22:06):
should be on a raised foundation home. They should be
going underneath the home, they should be going up in
the attic, I think in my opinion, and I'm sure
there's home inspectors if you're listening out there, that maybe
could argue this, But I just feel like a really
good general home inspector is going to spend at least
two to three hours in a single family home and
maybe one to two hours in a condo.
Speaker 3 (22:26):
Okay.
Speaker 2 (22:27):
The other part of your inspection contingency is your insurance.
Right you want to make sure and right now, that's
a big deal. That's why I'm having veto pay Aletta
the third come on from Farmer's Insurance. He's a friend
of mine. He's going to be talking homeowner's insurance in
the second hour of the show today because it's become
a very big issue here in California. So as soon
as your offer gets accepted, your lender, your realtor is
(22:49):
going to tell you find insurance. Find somebody who can
get you that insurance. The other part of your inspection
contingency is if the house needs some kind of repairs,
you can look into getting bids from contractors.
Speaker 3 (23:00):
There's going to be home improvement plans.
Speaker 2 (23:01):
Like I had a client whose full plan was to
buy a house and build an adu above the garage.
Within two days of the offer getting accepted, he made
a call and found out how difficult it was going
to be to get permits for him to build the
adu on top of the garage ADU is an accessory,
dwelling unit or guest house, and he was like nope.
So within three deals, before we even had a general
inspector look at the house done, we're out.
Speaker 3 (23:24):
We didn't.
Speaker 2 (23:24):
We're not, like, he didn't want to buy the house,
and so we use that to back out of the deal.
The other contingency that you get in a standard purchase
is an appraisal. The easy way to say this is
that you're just saying my offer is contingent, basically saying
I'm making this offer under the assumption that my lender
is going to have an objective third party that is
a licensed appraiser come and visit the home and then
(23:44):
compare it to other homes to make sure that it
is worth at least what I am willing to pay
for or what I've offered to pay for the house.
So that's really to protect the lender more than anything.
The other thing people get hung up on is that
if there's comps comparable sales recently that look like it's
more than what you're offering on the house, usually you
almost always get in a praise value at value, you're
(24:05):
not going to get twenty thirty thousand. In all of
the hundreds of deals that I've done, I've had one
deal and it was this year that the house actually
praised for sixty thousand dollars more than what we're under
contract for. So it's almost always going to be value,
sometimes not so much now. During the pandemic especially, we
got lots of houses that were appraising below value what
you were are below what you were.
Speaker 3 (24:24):
Offering, and so that main thing's a little tough.
Speaker 2 (24:27):
But if the if the house doesn't a praise, then
what you usually will do is you'll go back to
the seller and say, hey, can I meet you in
the middle, or can I get the price knocked off?
Speaker 3 (24:35):
Like that kind of thing.
Speaker 2 (24:36):
When I bought my house back at twenty thirteen, entirely
different market than what we're in now, is still recovering
from the crash, my house appraised for like seventy thousand
dollars less than what I was offering, and the bank
took it because it was a short sale. The third
contingency is a loan contingency. That's the gist of it
is is that I'm making this offer contingent on the
path fact that I can get a loan from somebody.
(24:56):
And the only time that I've ever seen a buyer
use this to get out out of a deal is
that towards the end they were unfortunately, these folks got
injured in a car crash and so they were put
on leave and they couldn't work, and so they do
what's called a verification of employment, and by day I
mean the lender. They want to make sure that you
still have your job before they let you buy this
home and commit to this loan for you. So if
(25:18):
that happened then and now you can't get a loan,
then in most cases you can back out of the
deal at that point. Some other common contingencies that'll come
up is there's contingency on sale. So what I'm saying
is I have a house, right, So I have my
house and I want to buy another house, but in
order to buy this new house, I have to sell
the house I'm living in now. So I'm making my
offer on the new house I'm trying to buy and
(25:40):
saying I'm only going to be able to buy this
house if I could sell my old house, right. So
that's another contingency for the buyer. The contingency that could
come up for the seller. Right, So when I'm the
seller of that that same example, I could tell the
buyer of my property that I'm only going to sell
you my house. If I could buy another property. I
have to be able to buy another home. So when
(26:03):
we come back, I want to tell you a little
bit more about what those contingencies on purchasing a replacement property,
and then I want to go into more detail about
the inspections, so we'll talk more about that.
Speaker 1 (26:13):
You're listening to KFI AM six forty on demand.
Speaker 2 (26:17):
Justin worshing with you here talking Southern California real estate
till four o'clock today. Coming up in the next hour,
I got veto Paeletta, the third from Farmer's Insurance. He's
going to be giving us some information about why the
insurance industry is changing in California and just be there
to answer questions. If you want to hit a talk back,
go ahead and send it our way. But I was
wrapping up talking about contingencies in the last segment. Then
(26:39):
I want to get into the different kinds of inspections.
So what I was saying, as a seller, you can't
really back out of a transaction unless the buyer breaches
the agreement, but there are some contingencies. So if you're
a seller, you can sell your property contingent on your
ability to buy a replacement property. And I wanted to
go into this in a little more detail because this
contingency has a little special tweak to it in that
(27:02):
it gives you the ability to basically extend escrow when
you remove this contingency. So whenever I have used this contingency,
I have always said that we can extend es grow
by up to fourteen days, but I think that the
default might be like twenty one or something, or fifteen,
but you can always change the number to make it specific.
But anyway, and the reason I say this is because
(27:24):
it got intense in a listing I had a while
ago where the buyer done their inspections right, and my
client was trying to buy a house but it was
still getting it was being finished, like it was being
built still, and it wasn't going to be ready in time,
and they needed to stay in their house for like
eleven more days. So what I was trying to talk
to the buyer's agent and say, like, what's the amount
(27:45):
of time that my clients could stay in the house,
And this agent was not very friendly, Like, they weren't
very helpful.
Speaker 3 (27:52):
They thought they were really.
Speaker 2 (27:53):
A big deal in my opinion, and were constantly asking
me to solve their client's problems, which was another issue
that I have but anyway, so they were like, no,
there's nothing that we could do.
Speaker 3 (28:03):
Nothing we could do whatsoever.
Speaker 2 (28:04):
There is no room to wiggle unless you pay for
like these crazy storage fees and all of this stuff
like just came at me with all this information, and
I instantly knew that this realtor had forgotten that there
was a contingency upon purchase of replacement property, and that
I could just extend escrow without getting the buyer's permission.
It was already pre agreed as a term in the deal.
(28:25):
So I just said okay, and then I moved. And
you could probably say this is shady. I wouldn't call
it shady. I would call it taking care of my client.
But what I did was I let them finish. We
negotiated a credit for the inspections, and I let them
remove all their contingencies. And then when I removed our
last contingency, I extended escrow by fourteen days, and they
(28:45):
lost their minds.
Speaker 3 (28:47):
They were threatening to sue. There was all this talk.
Speaker 2 (28:50):
Obviously, everybody consulted I'm assuming attorneys and other people, and
eventually found out that they really didn't have a lot
of grounds to sue. Technically, again, not a lawyer don't
have the ability to get that advice. But it sort
of worked out for my clients. Sure, I would love
for there to be less tension in a deal, but
I just want people to be aware of that because
it was a way for me to help my client
(29:12):
take care of it. And it's a tool that's in
the tool belt, and I think that people should know
that those are out there so they can ask the
realtors about them. So now what I want to talk
about is inspections. What kind of inspections did you get
when you.
Speaker 3 (29:22):
Buy a home.
Speaker 2 (29:23):
I talked a little bit last segment about a general inspection.
This is just everything like this inspector will crawl under
the house, tell you what kind of plumbing is underneath
the house.
Speaker 3 (29:32):
They'll crawl up in the attic.
Speaker 2 (29:33):
A lot of inspectors will look at the serial number
on the heating and air conditioning system and tell you
the year it was manufactured. They'll tell you about the
level of insulation. There's lots of things that, in my opinion,
you should not be concerned about, because almost across the board,
I see tons of houses that have signs of rodent intrusion,
and what that means is that there's small amounts of
(29:54):
rodent droppings that they can see on top of the insulation.
The inspectors' jobs are to tell you everything that is wrong,
and their job is to go through and find things
that are wrong. So this is a thing where you
kind of have to go with your gut. If you're
a first time home buyer, there's a lot that's going
to scare you when you hear an inspection report.
Speaker 3 (30:10):
One of the things I love about my home inspector is.
Speaker 2 (30:12):
That he's very good at giving all of the information,
even quotes building code to support what he says, which
most inspectors don't do because they don't like the added liability.
Speaker 3 (30:21):
But he will do that.
Speaker 2 (30:21):
But at the end he'll say, and a lot of
inspectors to this, they'll say things like, this is nothing
that I wouldn't see in any other home. And I
think that's important for buyers to remember, is that sure
there are some red flag issues, and it also has
to be about your comfort. I'm not trying to say
you should do something that you're ultimately uncomfortable with. But
also it's important to consider that just because you don't
buy that house doesn't mean that the next house you
(30:42):
get an offer accepted on isn't going to have similar
things that it needs. The other inspection that I recommend
people getting is a sewer inspection. This is where they
send a camera underneath the clean out in front of
the house. Now, sometimes buyers think that they're looking at
all of the plumbing underneath.
Speaker 3 (30:57):
And that's not really what they do.
Speaker 2 (30:58):
Sometimes they have to go through an air vent on
the top of the roof, and that does go through
a lot of the plumbing underneath the house. But really
what you're looking for is the part of the sewer line,
the waste leaving the house, water and everything else that
you are responsible for. So they look from where the
house ends and it goes to the city connection, and
you'll see signs of like small root intrusion. They'll tell
(31:18):
you what kind of what the pipe is made of,
and that's a really important thing because that's a three
hundred dollars inspection that could lead to a ten thousand
dollars repair, So definitely you want to get a sewer.
Termite inspection is probably the cheapest of the standard inspections
that I recommend buyers get. It's usually about one hundred
to one hundred and fifty dollars in my experience, and
(31:39):
most of what you actually get in the termite inspection
almost all the time they see signs of termites, but
very rarely do they actually see the termites themselves. I've
learned from exterminators that almost every place here has termites
or has had termites at some point.
Speaker 3 (31:53):
The termites move in when the.
Speaker 2 (31:55):
House is just sticks, it's just the exposed framing, and
then we seal it in with stucco and drywall, and
then they live in the walls, and they don't actually
like to destroy the structural integrity of the wood because
that means carpenter ants can build, move in, and they
eat the termites.
Speaker 3 (32:09):
And another exterminator told me.
Speaker 2 (32:11):
That it takes over fifty plus years before any termite
damage could cause really bad structural damage to a home,
So you.
Speaker 3 (32:19):
Want to get that.
Speaker 2 (32:19):
But the big information you get, in my opinion, from
a termite inspector is actually dry rot wood they go
around and poke with like a ski pole and find
dry rot. And then if you have a shower pan,
they also test to make sure that the water gets
held and only goes down the drain to see if
there's any leaks in the shower pan. It's not a
perfect test, but they check a lot of that. You're
always going to see some kind of debris underneath the
(32:40):
house that a termite is going to come in. If
you have a condo, I would only I usually only
recommend clients get a general inspection. I used to have
them get a general inspection and a termite, but the termite.
Most of the time, the condominium, the HA takes care
of the exterior and they're just looking for signs of
water damage, and a general inspector can find that same information.
(33:00):
They'll see the same If there's signs of water damage,
they're going to see it. Now optional inspections. This is
going to be dependent on your fear or concern or
might be specific to the house.
Speaker 3 (33:11):
So chimney.
Speaker 2 (33:12):
So I always recommend people get a chimney inspection. Mostly
because I had a client I'm going to name drop here.
He was the guitarist for The Black Eyed peas and
was my neighbor and I helped him sell his house.
And I do pre inspections on my listing. That's where
you expect it beforehand and share that with the buyers.
And he had lived in his house for twelve years
and he didn't know he could totally use his chimney.
It was totally fine. He was told it was decorative
(33:34):
and that's just a cya thing. So I recommend you
get your chimney inspected. Especially if you really want to
use it, then definitely do it. If you're not going
to ever use it, then it doesn't matter. You could
save yourself to the three hundred bucks foundation inspection. I
usually wait to hear from the general inspector when he
crawls underneath the house. And this is on a raised
foundation house, not a slab. Those are harder. I don't
(33:54):
think I've actually seen a foundation inspection on the slab.
I'd have to talk to somebody. We do him a
lot for raised foundation that's where you have a crawl
space underneath the house, and those are usually about in
my experience, two to four hundred bucks, depending on where
you're getting it from. And I wait for the general
inspector to see something and say, you're going to want
to have a foundation person look at this to see.
Although the one place that I always get foundation inspections
(34:17):
is in Pasadena because it was developed it's such a
long time ago. You get a lot of what they
call river rock foundations where it's just these big cobblestones
that were stacked up and then they had mortar packed
in in between the rock and houses sit on that.
Speaker 3 (34:30):
And because those are so old, if I have.
Speaker 2 (34:32):
A client buying a house in Pasadena, I consider that
to be a standard inspection.
Speaker 1 (34:36):
Pool.
Speaker 3 (34:37):
A lot of general inspectors will look at pool.
Speaker 2 (34:39):
I used to have a separate pool inspector, but he
got so expensive. It's like four hundred dollars is the
cheapest one. I've got, the average of like six to
eight hundred dollars. The most I've ever seen was nine
hundred and fifty. And they're coming out and they're assessing
the pool equipment. And I'm fortunate in that my general
home inspector, I feel he's qualified enough to give enough
detail for what you're looking for, So I don't do
(35:00):
a lot of those anymore. And then the big ones
are out of fear is mold and lead. So I
always find that it's important that buyers know that they
are going to find some signs of mold.
Speaker 3 (35:12):
Like if you poke a hole through some.
Speaker 2 (35:13):
Drywall behind a kitchen sink and a bathroom sink, they're
probably going to find some signs of mold almost across
the board. So it's really important to listen to the
inspector and ask them like, what is this dangerous and
understand too that the inspector is in a weird spot
because they don't want to tell you it's not dangerous.
And then something like all of a sudden somebody has
like asthma develops, and then now you're angry at them
(35:35):
and you want to sue them. So they're always going
to try to cover their own butts on that, but
so you're going to have to feel it out. If clients,
if you have like very a lot of issues with breathing,
you're sensitive to allergies and stuff like that, then maybe
it's a good idea. But in my experience, the clients
that want to get a mold inspection is because they've
had some kind of issue with mold previously. But more
than that, it doesn't really come up lead inspection. So
(35:57):
this really applies for houses that were built prior to
nineteen seven, because after then, that's when they didn't use
lead based paints on the home. And I brought I
wanted to include this because I had something that somebody
said that blew my mind. The lead inspectors. These people
bought this old house that was built in like eighteen
ninety and they wanted to get the paint inspected because
they had a small child. And the inspector told me,
(36:18):
he's like, I can't inspect every surface in that house.
It would cost you a fortune. And I know I'm
going to find something. So he's like, really, it's about
targeting areas that are specific. So I want to say
that is that like, I don't think it's something that
people should come out of the gates. You know, I
would encourage you to do some more research on how
to protect yourself from lead based paint, because that might
be a better way to spend your money just to
(36:39):
paint over it and protect it and talk to somebody
who knows how to deal with that than it is
to spend hundreds of dollars just to have somebody test
something that they go, yeah, we're gonna find it.
Speaker 3 (36:48):
That's a for sure thing, all right.
Speaker 2 (36:50):
We are going to come back and I'm going to
talk to Veto, right am I at that time already,
Holy spokes, we are. We're going to talk to Veto
pay a letter the third from Farmers Insurance and talk
Homeowners Insurance when we come back.
Speaker 1 (37:01):
KFI AM six forty on demand
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