Q: In 1989, my parents were overjoyed to buy a single-family home after years of saving up for a down payment. The joy was short-lived. According to my father, the property lost $1,000 a month in value for 60 months. That was a lot of money at the time. Their Bay Area house appraised for $240,000 at purchase. Years later, the home sold in a bank-approved short sale. They lost their 20% down payment. It was devastating. My parents eventually received an IRS 1099 Form for $20,000 as mortgage debt relief.
As rates rise, my in-laws are nudging my husband and me to buy a home. I’m not thrilled. The four of us went home shopping last weekend. The standouts were a small single-family home in an older neighborhood, a large house in the mountains above Silicon Valley and a one-bedroom condo with a view, den, and large balcony. We could afford the condominium on one of our incomes.
I’m dubious of all the positivity showering upon us. Aside from the economic news, what are the potentially expensive surprises we could encounter when owning a condo, an older house or a mountain property?
A: During that recession and the others that followed, I had conversations with hundreds of distressed homeowners. Millions of Americans lost their homes to foreclosure. Your parents, like many others, decided to protect their credit by selling their homes, with the mortgage holder’s approval, at an amount lower than is owed. Meaning the financially distressed homeowner was short in paying off their home loan. Before the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers had a $20,000 gain if their mortgage lenders reported a $20,000 loss, aka short sale. Read more here.
As adults, cohorts of Generation X and millennials who grew up in a distressed property avoided or delayed homebuying. That trend is changing.
Many states passed a bill concerning condominium balconies. Most agents are unaware of this trend. These nationwide balcony laws have deadlines for inspections, costs and repairs. All homeowners will share the costly repairs recommended by engineers. View California Senate Bill 326.
A new trend sweeping California is unknown to most agents. The older clay and cast iron sewer lateral pipes can develop fissures. The replacement is expensive. A lateral sewer line inspection is mandated in some cities during a home sale. Visit the East Bay Regional Private Sewer Lateral Program at https://www.eastbaypsl.com/.
Hillside or mountain properties have disclosures new to homebuyers and suburban-selling agents. It is overwhelming — well water, septic tanks and private roads, to name a few. All of which need ongoing maintenance. Perhaps you are not surprised by the cost of fire insurance. If that is the case, you will be at the expense of creating a defensible space combined with home hardening. Agents will be surprised at the cost of complying with 2020’s California Assembly Bill 3074. After all, that compliance to defend against wildfire most often falls on the surprised homebuyer. Read this.
Questions, concerns or inquiries? Realtor Pat Kapowich is a Certified Real Estate Brokerage Manager and career-long consumer protection advocate. His hometown of Sunnyvale, California, is where he is based. Office Landline: 408-245-7700, [email protected] Broker# 00979413 www.YouTube.com/PatKapowich