March 2010 Newsletter

CLOSING COSTS: The closing costs (settlement costs) that go into the purchase/sale of a home has long been an issue of extreme interest for all parties, and even more so now with everyone’s financials and economics being so tight. Every dollar counts! Surprisingly, depending on whether you are in Southern California or Northern California, the standard of who pays what can differ considerably and lots of dollars come into play. For example:

Main Items of Concern Based on $500,000 price Southern California Northern California
Escrow fee $2,400.00 Each pay 50/50 Buyer
Owners Policy Title Ins $1,832.00 Seller Buyer
County Transfer Tax $550.00 Seller Seller
City Transfer Tax $2,250* / $3,400** Seller Each pay 50/50

* LA City / ** San Francisco. Only certain cities have transfer tax and costs vary considerably. Not all closing costs are delineated here and each company have their own published rates.

Granted, there are always exceptions to the above standard practice and the Counties that lie in the middle of the State may go one way or another, but as a comparison, with all else being equal, a Seller selling a property for $500,000 in the City of Los Angeles would end up paying $5,832 and the Buyer $1,200. If the property were in San Francisco, the Seller would pay $2,250 and the Buyer $5,932. The goal then is to sell in the north and buy in the south.

There is no doubt that the way settlement is handled for the purchase/sale of property is totally different throughout the country. Whereas the East Coast will have attorneys handling a “round table” closing, the West is the “Wild West” and California is sometimes consider “wilder” than the rest. Not only that, the way we handle escrows between the north and south in California is substantially different, too.

So whether you purchase or sell, be sure you get a breakdown of your closing costs early on directly from the settlement agent. Remember: The standard is that there is no standard!

HOME INSURANCE: Surprise! Your ability to purchase home insurance can be affected by who is living on the premises, whether you are a slob, or even if you have a mean dog. Unrelated people living under one roof give rise to possible crazy party scenarios, and if you are a slob, chances are you won’t upkeep the property. And of course, a mean dog can mean high liability issues. Most of us grumble and complain when our insurance billings come in, but we should be grateful that we do receive these bills. We don’t realize that sometimes, even at high rates, some carriers will actually refuse to insure. So who will pay hospital and lawsuit fees when your postman gets bitten by your Chihuahua? Check the article here.

NEW CREDIT CARD LAWS: By now you all probably know that Congress has enacted the Credit Card Act to prevent banks and lending institutions from gouging us on credit cards. The changes started last August with the mandatory 45 day notification of rate changes, the second part went on February 22nd, and the third part will take effect this August. This is all supposed to help the consumer to save on credit card expenses, but consider me cynical as I am so sure the credit card companies will find some way to make up what they will lose. For those who refuse to hand over hard earned money to these institutions of greed, there is only one way. Pay cash. Meanwhile, here is a link to what we need to know.

YOUR CREDIT RATING/FICO SCORES: This is probably a good place to insert a paragraph on how to manage your credit scores. In case you didn’t know that having late payments, filing a bankruptcy and having a foreclosure will kill your credit score, here is an article for you to review. We all need help, and the help starts with ourselves.

BANK FAILURE FRIDAYS: Every Friday evening, as I drive home, my local station will announce the banks that have been taken over by the FDIC that day. To me, this is more like a public service  announcement than a news bulletin, and boy, it sure depresses me. There have been something like 26 bank failures this year, and gee, it’s only been 2 months. Then they announce that the number of at risk banks went from 580 in 2009 to 702 this year, a 21% hike! And then – why am such a masochist? – I go to FDIC’s site which my friend Armen introduced me to here, to peruse through the failed bank list. Some may say, “Oh sure, Normal, Illinois or Germantown, Maryland, what’s that to do with me?” Well, let me then say that every bank closure affects us all and it is an indication of continued weakness of our economy. What did John Donne say? “No man is an island, entire of itself…” You can take the tolling bells all the way to the end.

And if listening to radio public service announcement doesn’t really do anything for you, try going to this link, in which the first paragraph says: “More than 700 banks, or nearly one out of every 11, are at risk of going under….”

DEFICIENCY JUDGMENTS: One of the most serious questions that Short Sale Sellers will ask me is whether or not the Short Sale Lender will come back and ask for repayment on the balance that they have been “forgiven”. In other words, will the Lender attach a deficiency judgment? Most major lenders -Bank of America, Wells Fargo, Chase – will put on all their short sale agreements that the Lender may pursue a deficiency judgment. Every Seller should read these agreements carefully and get advice from their legal counsel. If the loan was a purchase money loan, i.e., it was used to buy the home, then in California, the Lender cannot file a deficiency judgment. But a good 70% of the loans were given to refinance a previous loan so they would not be protected. If the Lender, in the course of reviewing the Short Sale, sees that the Seller may have other assets or income that can be used to make up the deficiency, well, then….. Now mind you, I am not an attorney, but I caution all the Real Estate Agents and the Sellers who are doing Short Sales to get good legal advice because in today’s economy, banks are losing left and right and are going after everyone to recoup their losses, not just Sellers, but also loan brokers, real estate agents, and even settlement agent/escrow holders. For more information, click here. Now, the second most serious question they ask is about the effect on their credit….and we all know the answer to that!

AIRLINE FEES: There is no free lunch, literally. As I am going on vacation in about 50 days (who’s counting?!) and with American Airlines’recent announcement of their $8.00 pillow/blankie charge, I thought I should check to see what fees I will have to bear over and beyond my flight cost, sales tax, airport tax, transportation tax, etc. etc. That are imbedded with my ticket purchase. Aagh! Surprise! Let me share the joy. Travelers beware! Like credit cards, it’s the hidden fees that are going to kill you or at least give you a lousy start to your vacation. Some airlines are charging:

*       $15 and up for first bag
*       $25 and up for second extra luggage
*       $50 and up for third extra luggage
*       $25 and up for overweight luggage
*       $50 and up for oversized bags
*       $5 and up for liquor
*       $3 and up for snacks and/or meal
*       $35 and up for pets
*       $25 and up for sending an unaccompanied minor (each way)
*       $10.00 or more seat choice !!!!
*       $8.00 for pillow and blanket – just added by American
*       $?? For using the restroom?!?!

Here is a handy site that will give you a reference chart…. FREE

PIIGS: What? Is this going to be a dissertation on all things swine? No, this is the newest acronym for 4 European countries that are in desperate economic measures – Portugal, Ireland, Italy, Greece and Spain – all members of the European Economic Community. You know how many homeowners are upside down on their homes right now? Greece is also in that position. It used to be that a country that is on the brink of bankruptcy would devalue their currency in order to bring some relief to the chaos of a down spiralling economy, Unfortunately, now that they are a part of the EEC that is not an option anymore. Greece can’t devalue the Euro. Not only that, they can’t get a bailout either without approval from others in the Community. So what’s a country to do about this? Sell their state owned buildings? Sell the Acropolis? Sell their islands? Anyone bidding for Santorini?

Well, this issue was a bit long, as I found much of interest out there and much that can affect our daily lives. Let me end this month’s newsletter with the following reminder from an anonymous (but smart) person:

“Every family has a choice of keeping up with the neighbors or with the creditors.”

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