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Sandi Bauman
Chico Realtor

2571 California Park Drive Suite 200 Chico, CA 95928
cell: 530-864-5407
email: [email protected]

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Chico Buyers and Sellers: Is a Lease Option the Right Option?

 

by Mike Wiegert

“Mortgage Meltdown” or “current mortgage crisis” are terms we commonly hear these days to describe an astonishing lack of real estate financing options. 100 percent financing, stated income and loans for borrowers with marginal credit, once common two or three years ago are now a thing of the past. In fact, these frivolously used loan programs were largely responsible for the hyperinflation in real estate prices seen during the first five years of the new millennium and the now subsequent alarming rate of foreclosures and short sales. Due to a lack of “easy” financing programs, we’re starting to see some of the creative techniques of home selling once popular in similarly slow real estate markets creeping back into use. One of the most commonly used methods of acquiring real property in times of stringent financing requirements has been the Lease Option Purchase.

A lease option basically means you are leasing or renting a Chico property with an option to buy it at a future date. The future price of the property should be fixed at the time the lease-option is signed.

Usually there is an up-front payment of some amount to purchase the option. The amount can vary. Sometimes the monthly payment is larger than normal and the excess is used to purchase the option. In some cases, the option money can be applied toward the down payment for the later purchase of the home.

The problem with most lease option agreements is that although most buyers using this type of sales agreement actually do intend to purchase or execute the agreement within the stipulated period of time, they rarely end up buying the home. Buyers using the lease option agreement most often do so because they cannot qualify for a home loan. Although they expect their financial issues to change, most of the time they find that they still cannot qualify. The process of qualifying for a mortgage requires a gamut of components, ie., credit, documentable income and savings verification. A would be buyer using the lease option agreement means well, but frequently is unable to resolve adverse credit issues and subsequently is unable to complete the transaction and loses the option money consideration.

BUYER BEWARE: A buyer wishing to enter into a lease option agreement may do so with all good faith. A well written lease option agreement will include a provision whereby upon the onset of the agreement, a Preliminary Title Report is issued by a Chico Title Company disclosing all the known liens, encumbrances and legal claims that may be attached to the property. The best title report in the world isn’t going to reveal that the Seller may be in financial trouble and a foreclosure may be just around the corner. Although the lease option agreement will stipulate that the Seller is to continue to make the monthly payments and taxes and maintain the property insurance, it’s certainly conceivable that a less than honest Seller may elect to accept a buyer’s option money and discontinue paying on the property.

A few months down the road, an unsuspecting buyer may find that the home in Chico is now in foreclosure and after the title reverts to the bank or an auction buyer, they may be faced with an eviction notice.

Of course, the buyer will have legal recourse against the seller but may not have the financial means to proceed against the him. In most cases, the seller will have used the option money deposit to resolve other financial difficulties and not have the resources to remedy a judgement against him. A possible solution to this dilemma, is for the parties to agree to leave the option money in a neutral escrow, until such time that the option is either executed or the lease option agreement is terminated.

Whatever creative proposals are considered, as always, when engaging in a complicated real estate transaction, do so with a trusted real estate professional or attorney who can explain all the ramifications of the sale.

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How NOT to Pick a Real Estate Agent!

Hiring the right real estate agent in Chico can mean the difference between a successful transaction and a potential financial and emotional disaster.

For most people, finding the right real estate agent is a difficult process. Successful Realtors and mortgage brokers alike witness the frustration and despair of buyers and sellers that are poorly represented. Honestly, it’s painful to watch. Save yourself the nightmare! Read on.

I ran across an article written by Rob K. Blake over at The Mortgage Insider Blog who sounded an awful lot like me! His article explained how NOT to hire a realtor, while mine specified how TO hire a Realtor!

Rob: Real Estate Help – How NOT to Pick a Real Estate Agent

Sandi: How to Hire a Chico, CA Realtor and Make More Money!

Rob says “Don’t be lazy. Do your own research. A significant chunk of finding good real estate help is getting educated yourself.”

Rob and I agree that your family, friends, and neighbors may not be your best choices when hiring a Realtor. Don’t feel obligated to entrust the largest investment of your life to Aunt Ethel, Cousin Clyde or neighbor Nate, just because you “know” a Realtor.

Rob made a very astute observation when interpreting information from the Bureau of Labor Statistics.

If the average Chico real estate agent earns about $35,000 per year, they are only completing about 5 transactions!

Ouch!

Rob says, “Five closed deals per year hardly makes one a “pro.” In my mind, it makes them a rookie and at that pace, they’d stay a rookie for over 20 years. Hire the most experienced professional you can lay your hands on! The best way to determine experience is by the number of transactions an agent is handling monthly or yearly. The agent’s production is going to give you the best indication of how committed they are and how much real estate help they’ll provide.

I fully agree that experience and competence are highly critical attributes to consider when searching for a Realtor. However, I would also urge you to consider that not ALL top producers will be a good fit for each consumer. Some are ethical, nice people… some are not.

Depending on what you’re looking for in a Realtor, it’s important that you also connect with your real estate agent of choice on a personal level.

Shake their hand, look them in the eye, listen to them talk, and READ their blog! You can gain a lot of perspective about how your Realtor will work to protect YOU by investing just a few valuable minutes getting to know them.

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Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico Realtor? Call Sandi Bauman 530-864-5407 or email [email protected] Specializing in REO, residential, relocation, investment & ag property.

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What is a Good Faith Deposit, and Why Do I Need One?

I’m always a little surprised when I sit down to write a purchase offer on Chico CA Real Estate for a new buyer, and they don’t have their checkbook with them!

Good faith deposit in Chico, CAIt seems that many buyers don’t know that they are expected to submit a good faith deposit with their offer to purchase a property. I often hear “Oh…. um… JEEZ! I forgot my checkbook!” Unfortunately, in California, a contract must have consideration (a deposit) to be valid.

A good faith deposit is an amount of money that the buyer submits with the offer to show that he or she is acting in good faith and intends to fulfill the terms of their agreement.

The deposit basically says to the seller, “I want your house badly enough, I’m willing to put my money where my mouth is!”

The amount of an acceptable good faith deposit varies widely by region.

In Chico, CA, a good rule of thumb is to offer about 1% of the purchase price for every 30 days in escrow. In other words, if you are offering on a $300,000 home and you are requesting a 60 day escrow, a $6,000 deposit will probably fit the bill. This is a very loose rule, however, and each transaction should be considered carefully. For instance, in a strong buyer’s market, it is likely that a buyer can offer a smaller deposit without too much grumbling from the seller. However, in a competitive situation where the property is bringing in multiple offers, a buyer can help make his offer more appealing by providing a more substantial deposit.

Your good faith deposit is typically held by the broker who is writing the offer for you. If I was acting as your buyer’s agent, I would accept the check on the seller’s behalf. Chico Homes would then hold it in a separately maintained trust account until your offer was accepted by the seller. Within 3 days of acceptance, the deposit is required to be deposited with the title company that will be handling the escrow. Your check should always be made out to the title company, not the agent you are working with, or the company where they are employed!

The seller is only entitled to keep your good faith deposit in the event that you, the buyer default on the contract.

It is important that you are very clear as to the terms you are agreeing to. If the contract says you have 17 days to complete your investigations, and you decide on day 25 that you no longer want the property because the house next door has barking dogs, you may sacrifice your deposit! Be sure to work with your trusted Realtor to adhere to the terms and timelines specified in the contract.

If the transaction proceeds without issues, the deposit is typically applied to the closing costs the buyer will incur during the escrow. In the event that both buyer and seller agree to terminate the contract, the buyer can receive his deposit back minus any inspection costs that he may have agreed to.

Have more questions? I’m happy to answer them! Sandi 530-864-5407

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Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico CA Realtor? Call Sandi Bauman 530-864-5407 or email [email protected] Specializing in REO, residential, relocation, investment & ag property.

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Short escrow? Get your ducks in a row BEFORE you make an offer.

There is no disputing the fact that Chico, CA is currently in what is commonly known as a “Buyer’s Market.”

That is FABULOUS news for all the buyers out there who have patiently been waiting for this day. The inventory is high, the prices have dropped, and the interest rates are still phenomenal!

Now is the time to get a great deal! fall leaf floating on Cal Park Lake, Chico CA

A “Buyer’s Market” is a wonderful thing. A Chico, CA home that might have cost $400,000 in 2005 may only set you back $350,000 today. On average, prices seem to have corrected between 10 and 15 percent for residential properties.

I have noticed a growing trend with buyers. In an effort to get the absolute lowest price on a property, they attempt to entice the sellers with a very short escrow period. For some sellers, a quick sale in this market is a dream come true! They need out from under that house payment, and will gladly accept less than asking price just to be DONE.

However, when representing a seller, I have had to caution against signing the first contract we see, simply because the buyer promises to make it the pain go away with a 10 day escrow. The offer to close in 10 days is an empty one if the buyer has not done his homework.

The following items must be taken into consideration to close an escrow quickly:

  • Is the buyer preapproved?
  • Is the lender local and knowledgeable about our issues and resources?
  • Is the lender willing to commit to closing on time?
  • What kind of loan product is the buyer applying for? A VA loan, for instance, is highly unlikely to close in less than 30 days.
  • What inspections does the buyer request? Well potability tests may require 14 days or more to obtain results.
  • Can we get the appraisal completed immediately?
  • Will repairs be required by the lender to fund the loan? If so, is there a contractor available to bid, complete, and final the work within a days notice?

An escrow that closes quickly can be a wonderful solution for both the buyer and the seller, but it doesn’t happen without forethought, preparation, and a willingness for all parties to be focused on immediate results.

If you are a buyer, hoping to get the best deal of the year by offering to close quickly, get your ducks in a row BEFORE you make an offer. No seller in their right mind will accept your offer if you aren’t prepared to close the deal.

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Shopping for Chico foreclosure property? Give me a call- I’m currently working with several REO departments on bank-owned Chico property. Sandi Bauman 530-864-5407

Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico CA Realtor? Call Sandi Bauman 530-864-5407 or email [email protected] Specializing in REO, residential, relocation, investment & ag property.

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How to Hire a Chico, CA Realtor and Make More Money!

It’s often fascinating to hear how people go about hiring a Chico, CA Realtor to represent them in the sale or purchase of a home. More often than not, I hear things like:

“Jeff has those big bulletin boards all over town- he must be REALLY successful!”

“Ann is our next door neighbor.”

“Bill is my co-workers son. He just got his license, and we thought we’d help him out.”

“Julie always has her picture in those real estate magazines, she must sell a lot of homes!”

Yikes!

A real estate investment is arguably one of the biggest, most costly financial decisions a person will make in their lifetime.

As such, it is critical to choose carefully the professional that will be guiding you through the complex transaction. As nice as it would be to give “Bill” an opportunity to learn the trade, are you willing to put your financial security on the line for him? “Ann” might be the best neighbor in the world, but the worst Realtor in town! One of the biggest mistakes I see people making when hiring a Realtor is ASSUMING that an agent is a top producer, simply because he or she is good at advertising. In truth, the agent might not have sold anything all year!

Ideally, you will find yourself a competent, proven professional who is knowledgeable about the industry, the local Chico, CA market, and your needs as a consumer. By doing so, you will make more money!

“How do I go about hiring the right Realtor?” you might ask.

I suggest that you conduct a minimum of 3 interviews with agents you are considering to represent you. That’s right– INTERVIEWS! Ask the tough questions, and take notes on the answers. Compare the experience, professionalism, and general attitude of each agent.

Here is a great list to get you started:

1. Are you a FULL time Realtor?
(IMHO you can find VERY good part timers… you should just know up front who you’re hiring.)
  

2. What is your total sales volume this year?
(Consider that an average Chico, CA house is around $350,000).

 
3. How many transaction sides have you closed this year?
(The top 20 producers in Chico, CA will close an average of 30 per year).

4. How do you rank in your company?

5. What price range does your typical listing fall under?
(If your house is worth $1 mill, you don’t want to hire a $200k agent!)

6. How do you rank in comparison to the other 400+ Realtors in the Chico MLS area?

7. Do you have a personal web site or blog site?

8. Tell me about your Internet marketing programs.
(Do you understand and cater to the 92% of buyers that utilize the Internet?)

9. Tell me about your traditional marketing methods.

10. Are you currently active in your local Board of Realtors?
(Do you keep yourself current on local issues and network with other Top Producers?)

11. Do you offer Exclusive Buyer Agency?
(Will you explain all levels of agency representation, how they apply, and how affect me?)

12. What real estate specialty designations have you received or are you pursuing?
(Do you find continuing education to be valuable?)

13. Before we agree to work together will you do a ‘listening presentation’ so you can learn about all of my ‘wants’?

14. Are you equipped with the newest tools of the trade?
(the latest in software such as Relay, smart phones, scanners … all of those high-tech things that will help you be an industry leader?)

15. Do you have systems in place to insure that you contact me regularly with useful information?
(Will you continue your relationship with me even when I am not buying or selling real estate?)

16. What percentage of your business comes from referrals and how important is this for you?
(In other words, how much time do you spend prospecting versus working on finding me a home?)

17. What sets you apart from all of the other Chico, CA Realtors that I know??

It stands to reason that a top producing agent has a certain level of proven skill, knowledge, and ability to work with people, all of which are crucial elements to getting you the most money possible from your sale or purchase. Your job, as a consumer, is to be aware and responsible for whom you are hiring to represent you. After all, you are the one who will inevitably suffer in the long run!

One last bit of advice: you need to genuinely like the person you hire! Throughout the course of a transaction, you may spend a considerable amount of time with your Chico, California Realtor. Make sure that you are comfortable communicating with the individual, and that you feel he or she truly has your best interests at heart. Many are great sales persons, but lack the personal connections that are critical.

 

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Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico CA Realtor? Call Sandi Bauman 530-864-5407 or email [email protected] Specializing in REO, residential, relocation, investment & ag property.

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Sandi Bauman (Chico Homes): Real Estate Agent in Chico, Butte County, California
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