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The Basics of a Real Estate Contract

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If you are buying or selling a home you need to know the basics of a real estate contract.  This article lists the simple elements required in a real estate contract for it to be valid and enforceable. Keep in mind this blog is not meant to be legal advice. Do not use this blog to navigate the legalities of any situation or contract!

First, a quick dictionary explanation of what a contract is:

CONTRACT – An agreement between competent parties to do or not to do certain things for a consideration.

To have a valid contract for the sale of a home or real estate there must be eight elements. Those elements are:

  1. An OFFER

A real estate contract must have an offer. Basically, a buyer offers to purchase a home or real estate for a price or consideration.

2. An ACCEPTANCE

The contract must have an acceptance. This may happen right after the offer, or after some negotiations, but either way there must be an acceptance of the offer with the agreed terms.

3. COMPETENT PARTIES

The contract must be between competent parties with legal capacity. The parties involved must be of legal age and mental capacity. Minors, someone under the influence of drugs or alcohol, or an individual deemed mentally ill could affect the validity of a contract!

4. CONSIDERATION

Consideration is usually money, but can be other things of value like cars, promises or even love!

5. LEGAL PURPOSE

Legal purpose basically means the contract must have legal elements and be for legal purposes! A contract can’t include illegal elements for consideration, illegal uses, etc.. For example, you cannot sell a house for a pound of cocaine! If the contract has an illegal element, it could be invalid.

6. WRITTEN DOCUMENTATION

All real estate contracts must be in writing to be valid!

7. DESCRIPTION OF THE PROPERTY

A valid real estate contract must include a description of the property to define what is being transferred.

8. SIGNATURES BY PRINCIPALS or their ATTORNEY-IN-FACT

The real estate contracts must be signed by the buyers and sellers to document the agreement and terms.

 

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Could Trump Bump Real Estate Sales in 2017?

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It’s the first day of 2017. The final games of the NFL regular season are playing out, Mariah Carey is probably chasing the hair of the dog with some Bloody Marys, and many are nervous about what Donald Trump’s Presidency will look like.

Trump has already named Ben Carson as the HUD Secretary, and the Fed raised the baseline interest rates another quarter percent. The housing market can be volatile and has the potential to swing either way at this point, but well-known economist Robert Shiller believes Trump could have a positive effect on housing and real estate, according to this article on Bloomberg News.

In our local real estate markets here in Southern California, we’ve seen buyers race to lock in interest rates for their purchase, and more sellers realizing that now is a good time to list before the market gets flooded with inventory.

What about you? If you’ve considered selling, getting your home on the market now will help you beat other sellers before the flood of the springtime list-a-thon. If you’re a buyer, locking into that historically low interest rate may save you hundreds on your future monthly payments!

Check out some of our local markets:

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Or Do Your Own Search

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Christmas is over and 2016 is coming to an end

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Christmas day has come and passed. We here at Garrigus Real Estate hope you and your family had a special holiday and you enjoyed spending it with family and friends like we did.

Even though we still have the next week left of 2016 and the New Years Eve celebration ahead of us, we thought it might be a good time to start focusing on what 2017 will bring in the real estate and housing markets here in our communities, statewide, and nationwide. Here’s our short list of what to keep your eyes on in 2017:

1. Interest Rates

The Federal Reserve increased the benchmark interest rate for only the second time since dropping it to the rock bottom baseline during the housing and financial/economic crisis that started in 2007 and 2008. Interest rates and what a buyer is charged will of course determine what their monthly payment will be.  Overall, this means the cost of borrowing money just got a little more expensive.

2. Buyers response’s to interest rates

There are three basic reactions homebuyers can have to the rise in interest rates. They can either get nervous and back out of purchasing, get nervous and jump in full-force to get their purchase done before rates go even higher, or not care either way and keep shopping at their current state of urgency.

From our experience and perspective buyers are feeling the pressure to purchase now and get their homes bought before interest rates go higher. They know the rates are historically low and we will probably never see them this low again in our lifetime.

3. Home prices and inventory

If we are correct and buyers flood and fleece the housing markets to get in now, home prices could see a jump. Many homebuyers are already complaining of home values already out of their affordable range, so this is going to shake things up a bit, but ultimately home prices will see a rise in 2017.

The housing inventory also has been low for the last couple years so rising prices will encourage more sellers to list their homes for sale, and some will finally be able to sell for what they owe.

4. The Presidential election effect

No matter what candidate won the election it was going to have an effect on the housing market. With President-Elect Trump primed to take office in January it seems the financial and stock markets are optimistic of 2017. That optimism remains to be seen if it is correct or not in its forecast,  but the outlook will undoubtedly have an effect on housing, what it costs and how housing is shaped for the foreseeable future.

The general public also has it’s perception of where things are going because of the election. Trump supporters seem to be full of optimism, while his critics have a grim view of what our future holds. It will be interesting to see it play out, but don’t sleep on its gravity of the economy and housing.

5. Garrigus Real Estate and new beginnings

If you haven’t heard us brag yet, we started a new real estate company carrying our namesake! Yes, Garrigus Real Estate is a fledgling real estate brokerage but we’ve been in the real estate business for almost two decades collectively and we intend to run our business the way it’s always ran; we work hard for our clients and their interests. We have a strong dedication to ethical and honest representation, and we are committed to providing top-service for our home buyers and sellers.

So let’s welcome 2017 in with open arms, and we wish you and yours all the best in the year to come!

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An Honest Look at Real Estate Agents

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Many home buyers and sellers distrust real estate agents. We can’t say we blame them. Being in the real estate business for as long as we have, you see all kinds of rotten things some real estate agents try. But, just like other professions, many agents are ethical, even though some are not.

We have tried for years to warn our clients of the tricks that some agents pull, sometimes unsuccessfully. Take for example open houses. Every time we take a listing, a question that always comes up is “Will you be conducting open houses?” Our answer is obviously yes, especially if the home could sell faster and/or for more money for the seller. But we also warn that an open house is can be a tool used by  some agents to obtain new clients, NOT to sell the property.

Even though we are sincere, most home sellers have a hard time believing us about open houses, even if they trust us and know us well. But I recently found a video by 20/20 and ABC News about dirty little tricks some underhanded REALTORS and the real estate practices they employ.

So check out the video, but please remember not all real estate agents and REALTORS are bad. Many of us have good souls and genuinely care about our clients and their real estate transactions:

 

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Google gives Auction.com $50 mil.

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Yes, Google is once again trying their hand at real estate, but this time they’ve thrown their cash at an existing entity, Auction.com. You may, or may not be aware of this site. Either way, this is our take:

Auction.com has been great for small-time commercial real estate and rental investors. They auction of properties to the highest bidders via their website and the business model seems to work well. We have also seen Auction.com try to muscle in on residential home sales by convincing short narrow-thinking short sale lenders that the online marketplace can bring in a higher sales price than the more traditional sales method real estate agents use (which can by the way include Internet marketing!).

We had a short sale that they got involved in, tried to squeeze the buyers we found out of more cash -the buyers walked. Then Auction.com insisted the property be placed BACK on the market while they threw the listing up on their auction site. They did manage to get a higher sales price, but the short sale lender netted LESS than they would have gotten from the original buyer because Auction.com slapped the deal with a 5% buyers premium! Yeah, its safe to say Auction.com had no business being in that deal. I wonder how many other residential deals Auction.com didn’t belong in.

So now comes Google, with all their buying power and influence. I’m curious, and a bit scared, how this new relationship with Google and Auction.com will play out, and how it’ll affect the rest of the real estate industry.

To see the CEO of Auction.com talk about this move on CNBC click here:

http://video.cnbc.com/gallery/?video=3000252885

 

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Real Estate Agents and Their Commissions Explained

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dollar signEver wondered what a real estate agent makes from the sale of a house or property? Here you will get a break-down of real estate agents’ commissions:

Real Estate Agents and Their Commissions Explained

Many people don’t understand real estate agent commissions and how they are structured. We’ve been in the real estate business for some time now and are still amazed how little the general public knows about agents’ and brokers’ commissions, so we’re going to explain commissions in detail.

Please keep in mind this article refers to commissions in the state of California and will be speaking to how government rules and regulations affect commissions for realty professionals in that state. Your state may have different regulations. So let’s get started:

First, commissions are usually a standard 6% of the total sales price, but land is usually a standard 10%. So if a home sells for $100,000, the total commission amount would be $6,000.

Sound like a lot for the cost of sale? Let’s look how the commissions are broken up:

Say you’ve hired a REALTOR to sell your home. They work for a broker like Coldwell Banker, like we do. Now let’s say your agent advertises your home and another agent brings an interested buyer. That agent also works for another broker. That 6% will be broken up in 4 ways, essentially:

Your agent receives 1.5% of the sale, or $1,500. Your agent’s broker receives 1.5% of the sale, or $1,500. The buyer’s agent receives 1.5% of the sale, or $1,500 and the buyer’s agent broker receives 1.5% of the sale, or $1,500.

If your agent lists and sells 12 homes in a year, or one a month they make $1,500 a month, or $18,000 a year! So be kind to real estate agents; they really don’t make a fortune and the good ones actually work hard.

The breakdown of the commissions between agents, buyer agents and brokers are negotiated between them, but we used the example above for simplicity in the explanation.

Now here’s a little secret that’s really not a secret:

Commissions can be negotiated! In fact, if you real a standard listing agreement, it says right on the front page that commissions can be negotiated. The California Department of Real Estate requires that real estate agents and brokers are honest about this, and most are.

The other thing about real estate commissions is that each agent and/or broker has different opinions about negotiating commissions. Some will negotiate a lower commission and some will not. It just depends on the real estate professional and the details of the sale.

The explanation above is the basics of how commissions work, and there are other variables that can affect and complicated them, but this article was intended to give a simple description to exactly how REALTORS and brokers are paid.

If have questions or would like to talk with us, call (888) 9-List-It. That’s (888) 954-7848. Or use our Contact Us form below and we will get back to you as soon as possible:

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