Earthquake retrofitting 101

I grew up in California,  where earthquakes are reasonably common place; earthquake drills in school de rigeur. California had the reputation for being earthquake country.  And California started addressing earthquake issues in building codes back in my childhood. 

In Oregon, building codes started requiring houses be bolted in foundations in 1976, but it was not until 1994 that Portland adopted a seismic section of the city building code.  Note the difference between bolting foundations and a complete seismic code which addresses  things like sheer walls and securing water heaters.

So here we are in 2014 and not much has changed.  Portland's old houses sit mostly on concrete foundations of varying condition and quality.  Very few, aside from homes constructed after 1976, have been bolted to their foundations.  What has changed is the available knowledge of an impending earthquake; a big one. 

We're also seeing a slowly growing awareness among home inspectors, home owners and home buyers of the value of earthquake retrofitting. 

 This blog is the first in what I'm sure will turn out to be a series of bogs on earthquake retrofitting. Here are a few basics to start you off. 

These are the general requirements for earthquake insurance for single family homes:  1) Bolting of the sill plate and/or floor joists of the structure to the cement foundation.  2) Adding plywood to brace sub-floor wall areas of homes with cripple-wall construction. 3) Attaching the floor joist walls to the first-floor framing of homes with cripple wall construction. and 4) Strapping/anchoring water heaters to resist horizontal displacement.

Given a concrete foundation in reasonable condition can be bolted to the framing for somewhere between $3000 - $7000.  Brick, block, or houses with crumbling foundations can cost much more, between $50,000 to $200,000. Ack!

In the next earthquake blog, I'll talk about precautions one can take, other than retrofitting the structure of the house, to lessen the impact of an earthquake.  Stay tuned.

Oh, and some of the information for this posting came from Steve Gemmell and his company, Earthquake-Tech.

When your house is no longer your home

Life changes, such as a  new job, graduate school, divorce or marriage, often cause folks to rent out their home, while moving to another.  Sometimes, when you move out, you think you'll be moving back in, so it doesn't seem like a big deal. 

But to the IRS,  "big deals" may be happening.  I'm not an accountant, and I don't know the tax code.  But here are a few things I have seen. 

In general, when you sell a personal residence, even if you sell for a gain, there is an exemption so you don't pay taxes on the gain; something like $250,000 of gain for a single person and $500,000 of gain for a couple.  So, most likely, if you sell your home, make a bunch of money and don't reinvest it in another home,  you're okay.  But...when you move out of your house and rent it out, you are functionally, converting your residence to investment property.  There are intricate rules (this is the IRS after all), but depending on how long you lived there and rented it out, when you sell, any gain will most likely be taxed as regular income.  That means, whatever your tax rate is, will be applied to the gain when you sell.  Ack!

And, that rent you've been getting?   That rent is income, and should probably be claimed on your taxes as such.  Now, with investment property there are several nice tax deductions that help lessen the tax hit of the rental income.  And, you may well depreciate the property.  But, you'll need to be claiming the income.

Rental property is often the threshold beyond which folks choose to have their taxes prepared by an accountant.  Especially if you are a new landlord, a professional guide through that part of the IRS code can be a good idea. So if you kinda ended up as a landlord unintentionally, think about getting some help.

ps.  Many people intend on becoming landlords, purchaser property with that specific intent and embrace tax strategies around investment property.

Still busy

The Portland market continues to suffer from low inventory, with only 2.8 months of houses on the market.  At our current rate of sales, it will take 2.8 months to sell all the properties on the market. We haven't seen lower inventory since May of 2013. This, with listings up 17.4% from March 2014.  As market times have decreased, the increased inventory is absorbed.

Pending sales were up 11.5% from March 2014, but down 4.0% from April of 2013.  Closed sales rose 15.4% from March 2014, and showed a slight increase of 0.8% from  April 2013.  Spring of 2013 was a kickass market, maybe even a bit too kickass.  So being "flat" compared to last year is fine by me.

Our market time got a tad shorter in April; 77 days vs. 85 days in March.  April 2013 had a market time of 91 days.

The median year to date sales price is $275,000, up 10.0% from the median year to date sales price in April 2013 of  $250,000.

So, prices continue to increase, we've had a slight increase in the number of houses on the market, but the pace of sales and number of active buyers make for a busy real estate industry.  There is still a lot of cash in the market, making it harder for first time buyers, with low down payments, to compete.

There is still time to get your place on the market if you've been thinking of selling. Give me a call. 503-312-8038.  Buyers, there is hope, with 2143 closed sales in Portland last month, clearly some folks are getting their offers accepted.


Read the full report for the Portland Metro Area

Why zillow "can't get no respect"

Zillow is a mega huge website with a bunch of real estate data. The site has some fun tools.  It pulls data from a variety of places, the risk of which is a crappy quality of data.  I do take a peek at zillow when I'm working on pricing a property, not because I value the "zestimate", but because I know my client will have looked there.

Most of zillow's real estate pricing is based on using comparables, similar to how real estate agents and appraiser consider value.  But zillow hasn't figured out how to account for things like busy streets, unique locations and views (unless all the comparable properties share that feature).

My house, for instance, is on a busier street. So zillow always thinks its worth quite a bit more than I.

I had a recent listing sell, and found the zillow information to be rather amusing.  The house was listed at $307,000. We closed the sale at $320,000 just weeks ago.  Zillow's zestimate lists the value at $299,872.  You'd think, within a certain amount of time, that big daddy data masters, zillow, would take the sales price from an open market listing as the value. The commonly accepted definition of real estate value is" what a buyer will pay and a seller will take, when a property is sold on the open market".

Maybe zillow's definition is different; what a buyer will pay and a seller will take minus 6.25%?

Have you been eyeing your zestimate?  I'm glad to give you  a more informed opinion. Give me a call at 503-312-8038 or email leslievjones@gmail.com.

Can you sell Mom's house?

Several folks in my generation are helping their aging parents relocate to more supportive living situations. This often means selling an existing property and making commitments to lease or purchase in the new digs.

Aging folks are in various states of cognitive ability, physical ability, and cooperate in the process to varying degrees.  Some elderly are thankful to be relieved of the burden of their own house or condominium and look forward to an easier lifestyle with more social and engaging opportunities.  Others feel pushed from their home too soon.

Just as folks are in varying states of ability and cooperation, property is owned a variety of ways; living trust, family trust, with a now deceased partner or spouse.  And often who has authority to sell the property varies; the person on title, a trustee, a co-trustee, durable power of attorney, or a power of attorney specific to the of that property and so on.

Often the elderly and their family think these papers are in order, and are caught by surprise when a real estate agent, escrow company or real estate attorney needs more or different documentation.  Getting such papers in order at the last minute is hard, and can often come with some delays.  I highly suggest revisiting such arrangements even if you think it is all good. A quick consult with a real estate attorney ( I can suggest a few) is well worth avoiding the panic and hassle later.

Here are a few things I have seen, and we have experienced in our family.

 Often property is held in trust. Trusts offer a variety of benefits.  Only trustees of the trust have the authority to sell the property.  Sometimes heirs are successor trustees; and have the authority to sell the property in case of the trustee's death. BUT, successor trustees don't have that authority if the trustee is still around...even if the trustee is incapacitated.  With a trust, there can be co-trustees, who both have authority to sell the property, and only one co-trustee's signatures are needed.  Some trustees will have named someone to act in their place in case they are incapacitated, and even spell out who is empowered to make the judgment about the trustee's capacity to act - sure hope that specific doctor is still practicing when the time comes. Powers of attorney do not work with trusts.

Powers of attorney, when used in selling property, need to be pretty specific.  A smudgy, old power of attorney from 20 years ago, before the owner was even in title to the property probably won't work.    Ideally, a power of attorney should refer to the specific property or transaction.  A durable power of attorney is needed if the person has, since signing it, become incapacitated (because of a physical or mental problem). 

The rise of elder abuse is a sad reality.   Escrow companies, the folks who handle the actual closing of real estate transaction  (in Oregon), and real estate attorneys, are on the look out for folks taking advantage of the elderly. In addition, in closing a real estate transaction, the escrow officer is notarizing the signature of the seller; that the seller has the mental capacity to comprehend the transaction, or that person signing (co-trustee, power of attorney etc) has the authority to sell the property.  I have seen escrow officers refuse to notarize the signature of an elderly person; feeling the seller didn't comprehend what was happening.  This happens at the very end of the transaction, when making alternative arrangements is challenging at best.

If you aren't sure how a property is owned, I can get you a copy of the vesting deed.  If we find the property is owned by a trust, you'll want to locate  a copy of the trust agreement or a certificate from the trustee so that we know whether the person claiming to be the trustee is actually the trustee.   If the property is not owned by a trust, and you have a power of attorney, I'd be glad to run it by an escrow officer and/or their legal counsel to be sure it'll do the job.

I am not an attorney and don't know all the ins and outs of this stuff. I do know, when papers are not in order, there is much frustration and delay. As with many things, a bit of preparation and prevention goes a long way.

Portland Market Update - busy busy

With the recently released stats for March 2014, we see the Portland market continues to suffer from low inventory, with only 3.1 months of houses on the market.  At our current rate of sales, it will take 3.1 months to sell all the properties on the market. We haven't seen lower inventory since July of 2013.  And this, with a 31.3% increase in new listings from the month before. 

Activity, that is the number of pending and closed sales, is down a bit.  Pending sales were up 37.1% from February, but down 3.6 % from March of 2013.  Similarly, closed sales rose 26.6% from February, but were down 4.0% from March 2013.  Remember, February had that snow storm, which slowed our business.

Our market time got a tad shorter in March; 85 days vs. 100 days in February.  March 2013 had a market time of 112 days.  But, looking at pending and closed sales in the Cleveland and Grant High School areas, I see median days on market of seven days for days for houses with pending sales and 12 days for houses with closed sales. Wow.

The median year to date sales price is $271,600, up 9.9% from the median year to date sales price in March 2013 of  $247,100.

Good houses are still in short supply, and potential buyers are out in force.  We are in, what is usually, the peak of our active market time.   By mid-June, we can start to see some summer slowing; school is out and vacations start.  Give me a call if you are planning to sell this year and we can map a plan.  Thinking of buying?  Better get started on that loan pre-approval.

Read the full report for the Portland Metro Area

A peek inside the mystery of multiple offers

I listed a house recently that drew five offers in as many days.  It was a nice, three bedroom two bath ranch, built in 1974 in a good close in neighborhood.  The systems were all reasonably new and were high quality, when installed in 2009.  It was listed at $307,500.  This was at the upper end of where comparable houses had sold.

This house did not have wood floors, a fireplace, built-in, granite etc.  A nice, but perhaps slightly humble house.  I predicted it would be a classic first time buyer house; drawing buyers with low down payments using first time buyer loans (FHA insured, or even 0% down).

I put the listing live in our multiple listing service at 10:00pm on a Thursday.  By Friday at 5:00pm we had one very nice offer, with conventional financing and over $100,000 down payment.  Wow.

Now, think about this from the seller's perspective for a moment.  The house has been on the market for less than 24 hours. There have been no open houses, the Craig's list ad isn't in yet, no advertising placed.  Do we really expect a seller to accept the first offer, that quickly?  Some do.  But most often, the house is the seller's biggest asset, and a seller would like to at least know the property has been on the open market and had full exposure.  The seller and I agreed that we'd wait to review offers until Tuesday afternoon. That would give us time for a Sunday open house, and a few days for buyers to have a chance to look at the house.

My phone and email were barraged by buyer's agents asking if it was still available.  I communicated to the agent who wrote that first offer, when we'd be reviewing offers.  I told anyone who called, texted or emailed, that we had an offer, and that we'd be reviewing offers Tuesday afternoon.  Over the next few days, four more offers came in. All of them had conventional loans, all of them were subject to the buyers approval of professional inspections and all of them had down payments over $65,000.

As the subsequent offers knew there was an offer on the table, I contacted the agent who wrote the first offer and let him know we had others. This gave his client a chance to re-write his offer knowing there was competition.  Remember, when that first offer was written, there were no competing offers.  Indeed, buyer #1 came back with a higher offer.

Did I create a "bidding war"?  I don't think so.  My intent was to level the playing field for all potential buyers.  The agent for buyer #1 seemed to appreciate the opportunity for his client.  I did not, play offers off each other.  I did not make a series of phone calls telling agents if they raised their offer a tad,it might be the one.  That, is what I think a bidding war looks like.  And that behavior is why many agents won't submit an offer until just before the time offers are being presented.  They don't want their client's offer to be "shopped", or used to get better offers.  By contacting the agent of buyer #1, I did use the existence of other offers to get a higher offer. 

Some would say I didn't do a full job for my seller client if I didn't shop the offers. Maybe so. But in my experience, it is rarely a good idea to push buyers to the tip top when they are in an emotional state.  They'll often regret going that high, and are sure to feel entitled to "make it up" in the home inspection negotiations.

An aside, a risk with these high offers is a seller feeling invincible since they had all those offers, and a buyer feeling like they paid too much. Should any issues need to be negotiated on the inspection, buyer and seller enter those negotiations miles apart. 

In preparation to sit down with my client, I prepared a cover sheet for each offer, focusing on the essentials of each offer.  I printed each offer and all the accompany documents; pre-approval letter, any agent cover letter, any letter written by the buyer to the seller, signed property disclosures etc.  Though I had asked for offers an hour in advance of my appointment with the seller, the last one came in 1/2 an hour before the appointment.  I was racing to get those packets together.

Many of these offers were VERY similar.  But there were differences.  Differences in down payment, in asking the seller to pay buyer closing costs.  Only one buyer wrote a letter to the seller, and boy was it a good letter. The letter made the buyer come alive and gave the seller a mental picture of who would be in the house.  Including the dog's name and some verbal images of how  owner and dog would enjoy the house and neighborhood brought tears to the seller's eyes.  Really.  I've seen some letters that include pictures of the buyers, kids, dogs etc.  Corny? Maybe, but it works.  This buyer letter was SO much more powerful than any agent comments about their buyer client.

In the end, my client carefully considered each offer.  The highest offer was the increased offer made by buyer #1.  This was also the only buyer who had written the letter and who's agent had taken the time to have the buyer sign the property disclosures and included them with the offer (most agents wait to submit disclosures until after an offer has been accepted).

Whether you are a buyer or a seller, I'd love to help you navigate this busy market. Give me a call at 503-312-8038 or email at leslievjones@gmail.com