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LA Digs - Northeast LA Real Estate Blog

Welcome to LA Digs, the real estate and Northeast Los Angeles community blog written by Realtors Tracy King and Keely Myres.

Here, we share tips, market updates, and local news bits to keep you informed on what's happening in Northeast Los Angeles and the surrounding neighborhoods. Read on to learn about the latest in your neighborhood!

Real Estate Myths and Misunderstandings


If the Buyer backs out, I can keep their deposit, right?


 

That is what Sellers assume, but today’s California Association of Realtors Residential Purchase Agreement (RPA) is a little more complex. If the Buyer and Seller have initialed the Liquidated Damages clause, the Buyer has removed the Inspection Contingency, and the Buyer cancels for no reason, then yes, the Seller may keep up to the amount of the Earnest Money Deposit (EMD). However, it is extremely rare that a Buyer would actually forfeit their deposit with all the loopholes available today.



1. Any new disclosure from the Seller’s side can trigger a new disclosure period.


2. From the CAR website FAQ: Q 8. Does a liquidated damages clause automatically entitle the seller to the buyer's deposit if a transaction does not close?


A No. As already stated, a liquidated damages clause only determines the amount of money a seller can recover from a buyer, and then only if the seller can prove that the buyer breached the contract. A buyer may fail to close a transaction for a variety of acceptable reasons (e.g., where the buyer's obligation to purchase was contingent on the buyer obtaining financing, and the buyer could not reasonably obtain financing). To recover liquidated damages, the seller generally must prove in court or arbitration that the buyer's failure to close the transaction was wrongful.


 

Bottom line, in a real estate transaction today, there are no guarantees that the buyer will close the escrow until you receive the call that the recording is confirmed. As Bette Davis said in All About Eve, “Fasten your seat belts, it’s going to be a bumpy night.

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Seller Questions: Why Won't They Just Make an Offer?

We hear this from sellers all the time. We discuss reducing the price after we have marketed the property for several weeks and have received no offers. Sellers don’t want to reduce their price because they are hoping that they will get lucky and some desperate buyer will pay their price. We talk about how buyers don’t want to make an insulting offer and anger the seller. The seller claims they would not be offended (food for another blog). So they say, if a buyer likes the house, why don’t they make an offer?

I have discovered the truth about this: buyers don’t make offers on properties they think are overpriced because they are conditioned not to! A prospective buyer called me about a listing that has been on themarket about 3 weeks. She wanted to know if we were planning to reduce the price soon. I chatted with her about the house, which she had seen at an open house and she loved it. But she felt it was priced too high. However, she said she knew that often a house would come on too high and they would reduce it if no offers came in.

What does this tell us? This woman has been looking for a house for a while and has been seeing patterns in the marketplace. She has seen significant price reductions happen fairly soon after a house hits the market. She has seen enough properties that she has an opinion about what she believes the value is. Also, she didn’t want to insult the seller by making a low offer, she wanted to find out if the seller's price was negotiable by seeing him make a reduction.


What kind of offer would she want to make? It turns out that she thinks it’s about $100,000 too high. I told her that the seller was not in a position to sell it for that much less. I also told her she might want to look at homes priced under $450,000 if that was her price range.

After we hung up, I thought of a listing I have that is coming on the market next month. I called her back and told her about it--a cute house in the hills of Highland Park near Eagle Rock that will come on at $399,000--a short sale that has been tenant occupied for a year. She said she would be interested if it was just as nicely done as the one she had seen.

Who knows if this buyer is at all realistic about values, but she does have an educated opinion. She may be hoping that $400,000 will buy her a perfectly done house in a nice neighborhood in Eagle Rock--a not very likely possibility. When my new listing is ready for the market, you can be sure that I will call her to tell her about it and find out just how serious she is.

But the lesson here is for sellers: buyers don’t want to begin a negotiation on a negative note by making a low offer. They have seen a lot of properties have price reductions after being on the market a fairly short time. When they see a price drop, they know that a seller is willing to negotiate and are more likely to make an offer at that point. So if you have been trying a higher price and it hasn’t brought any offers, consider making a price reduction to stimulate activity, because often that is just what a buyer is waiting for.

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A Seller Success Story: 2030 Estes Road

Once in a while, everything comes together and the sale of a home exceeds everyone’s expectations. How does this happen? Is there a formula that can be used to at least maximize the odds?

Some necessary components:

  • A great house -- good bones, proper updates, a private, idyllic setting, a very livable floor plan, a prestigious location in the area.

  • A seller who knows how to prepare his home for sale, how to present the property during the showing phase of the sale, and, of course, how to choose a Realtor who will work with him to strategize the best plan to sell the house for the most money in the least amount of time and with a minimum of hassle.

  • A Realtor with the market and real estate knowledge to conceive and execute the plan.

  • A team of dedicated people to carry out the plan. This team includes the seller’s willing family, neighbors, and  competent professionals (Realtor’s staff, photographer, escrow and title companies, etc.) to execute the marketing and sale.


When I first met my Success Story Sellers in February, 2011, the highest sales in Eagle Rock in the past few months had been $749,000 for a much larger house and $675,000 for a house that was a foreclosure but was bigger and a popular Mediterranean style. The house at 2030 Estes was unlike any other house that had sold in the area in years, so how were we to arrive at the probable sales price? The sellers were hoping for more than $750,000 and I truly believed it should sell for much more. But how to get such a number when sales comparables were so low? Even if we found people willing to pay our price, it would never appraise for that value in the current conservative lending environment.

Out-of-the-box thinking was required. If the house sold for a price that wouldn’t appraise, we simply would insist that in order to be considered, an offer had to remove any appraisal contingency. We listed the property for $749,000, the same as the highest sale in the past few months.

Preparing the house for sale included planning how to deal with the seller’s family which included a dedicated and fabulous wife, two young boys, a dog, and a lot of personal stuff. After packing up or selling much of the stuff, the wife packed up the boys and took them away for the 8 days we were on the market. For every showing or open house, the dog went to the neighbors. More neighbors were enlisted to move their vehicles that had been parked on the street. The house looked like a Dwell magazine cover story for all showings.

We had five open houses in eight days including brokers’ open houses and a twilight open house. By the ninth day, we had 15 offers, 14 of which had no appraisal contingency. By the time counter offers came back, we had three offers over $900,000! The highest offer was for cash, closing in 10 days. Long intense story short, we closed 11 days later for $925,000, as-is, no repairs or termite work to be done.

As I said, this was an ideal situation: great house, great sellers, great team altogether. It’s rare to have it all. But isn’t it good to know that a house can sell with multiple offers way over the last highest sales price in this uncertain market?

Here is what the seller of 2030 Estes Road had to say:

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Thank you to Kendyl Young for her fabulous video shooting and editing skills!
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