[El Jefe]

There has been a lot of good information here, both pros and cons of representing yourself. SD-R has a lot of valid points as does Rustico and sdr.

The best advice that I can give anyone is to do their DUE DILLIGENCE. Now is the time to decide weather or not you want to do the due dilligence yourself or pay someone to do it for you. There is a huge amount of time that goes into researching a property before I put together a bid. As a start…

Who owns it, person/trust/entity?
Is it investment property or a primary residence?
When was it purchased?
How was it purchased?
First lein amount? Second lein amount?
Tax standing?
Has it been refi’d and for how much?
What is the true size of the house?
(FYI Listing agents really like to round up)
Has it changed hands many times or been held?
Are there any deed restrictions on the property?
Has the house been remodeled/expanded?
Are there any unusual easements…
ie paper streets, utilities etc?
Zoning?
Setbacks?
Height restriction?
etc… etc… etc…

Now do most of this again for all recent comps. From this information you can start to assemble a true value for the property you are interetsed in.

Don’t underestimate the amount of work it takes to put together a report on a prospective property. While I could do all this myself, in many cases I will use a broker to buy/sell, and I can say that they earn every dollar of their commision.

That said… if you want to go it alone, due your due dilligence. I cannot stress that enough. Heed sdr… if you walk in flying solo without doing your homework you will not be doing yourself a favor. It is the listing agents job to convice you that the flux capacitor in the new tankless water heater will save you millions in energy costs and that the reason that you can’t find any information on the santos mahogany flooring is that the tree is so rare that it’s not even in the bottany encyclopedias.

Assuming that you want to go it alone and have done your homework, that’s great. Open an escrow account and deposit your earnest money for your offer. I suggest a substantial earnest deposit, it demonstrates your intent to purchase. Anyone can open an escrow account for any reason they want. Set the terms of escrow such that the listing agent can verify the funds, and the funds are earnest money for the purchase of X property. You can get tricky and use the same earnest money for several concurrent offers, just spell it out in the terms of escrow, and on each of the offers. Get the official forms from the escrow/title company or use a LOI(letter of intent to purchase). Neither are legally binding, but most agents are farmiliar with the standard forms. The standard forms are mostly fill in the blanks. List the escrow account for verification. My advice is to put a short window of opportunity. All offers should expire in as little as 24 hours up to 72 hours. If this is your best price, put in a clause that all counter proposals are preemptively denied, effectively a take it or leave it. Designate listing agent to handle all contract work, and ask for full closing costs + 3% back at closing for acting as your own agent.

In the end, you need to remember that the listing agent has no emmotional ties to the property, and neither should you. Your goal should be to get the upper hand and the more things you know about the property that the agent doesn’t improves your position. Good luck.

[El Jefe]

There has been a lot of good information here, both pros and cons of representing yourself. SD-R has a lot of valid points as does Rustico and sdr.

The best advice that I can give anyone is to do their DUE DILLIGENCE. Now is the time to decide weather or not you want to do the due dilligence yourself or pay someone to do it for you. There is a huge amount of time that goes into researching a property before I put together a bid. As a start…

Who owns it, person/trust/entity?
Is it investment property or a primary residence?
When was it purchased?
How was it purchased?
First lein amount? Second lein amount?
Tax standing?
Has it been refi’d and for how much?
What is the true size of the house?
(FYI Listing agents really like to round up)
Has it changed hands many times or been held?
Are there any deed restrictions on the property?
Has the house been remodeled/expanded?
Are there any unusual easements…
ie paper streets, utilities etc?
Zoning?
Setbacks?
Height restriction?
etc… etc… etc…

Now do most of this again for all recent comps. From this information you can start to assemble a true value for the property you are interetsed in.

Don’t underestimate the amount of work it takes to put together a report on a prospective property. While I could do all this myself, in many cases I will use a broker to buy/sell, and I can say that they earn every dollar of their commision.

That said… if you want to go it alone, due your due dilligence. I cannot stress that enough. Heed sdr… if you walk in flying solo without doing your homework you will not be doing yourself a favor. It is the listing agents job to convice you that the flux capacitor in the new tankless water heater will save you millions in energy costs and that the reason that you can’t find any information on the santos mahogany flooring is that the tree is so rare that it’s not even in the bottany encyclopedias.

Assuming that you want to go it alone and have done your homework, that’s great. Open an escrow account and deposit your earnest money for your offer. I suggest a substantial earnest deposit, it demonstrates your intent to purchase. Anyone can open an escrow account for any reason they want. Set the terms of escrow such that the listing agent can verify the funds, and the funds are earnest money for the purchase of X property. You can get tricky and use the same earnest money for several concurrent offers, just spell it out in the terms of escrow, and on each of the offers. Get the official forms from the escrow/title company or use a LOI(letter of intent to purchase). Neither are legally binding, but most agents are farmiliar with the standard forms. The standard forms are mostly fill in the blanks. List the escrow account for verification. My advice is to put a short window of opportunity. All offers should expire in as little as 24 hours up to 72 hours. If this is your best price, put in a clause that all counter proposals are preemptively denied, effectively a take it or leave it. Designate listing agent to handle all contract work, and ask for full closing costs + 3% back at closing for acting as your own agent.

In the end, you need to remember that the listing agent has no emmotional ties to the property, and neither should you. Your goal should be to get the upper hand and the more things you know about the property that the agent doesn’t improves your position. Good luck.

[El Jefe]

in order to gain access to the MLS you need to join the local association of Realtors

This statement is in fact blatantly false… California law requires all Califronia MLS systems to be accessible to any state licensed broker or appraiser, regardless of NAR/CAR/SDAR affiliation. In San Diego the SDAR will give you access to Sandicor by simply filling out the form and chacking the box that you are unaffiliated… Feel free to review MLS application yourself, page 4…

http://www.sdar.com/pdf/memebership/broker/BrokerAppCombined2007.pdf

And by my calculations, the 3% you could save on a 700K avg SD transaction by representing yourself would be 21K. At ~800/yr for brokers license with MLS access, that 21K will last ohhhhhhhhhhh, 25 years.

[El Jefe]

in order to gain access to the MLS you need to join the local association of Realtors

This statement is in fact blatantly false… California law requires all Califronia MLS systems to be accessible to any state licensed broker or appraiser, regardless of NAR/CAR/SDAR affiliation. In San Diego the SDAR will give you access to Sandicor by simply filling out the form and chacking the box that you are unaffiliated… Feel free to review MLS application yourself, page 4…

http://www.sdar.com/pdf/memebership/broker/BrokerAppCombined2007.pdf

And by my calculations, the 3% you could save on a 700K avg SD transaction by representing yourself would be 21K. At ~800/yr for brokers license with MLS access, that 21K will last ohhhhhhhhhhh, 25 years.

[El Jefe]

I thought you had to OWN the property for 5 years in the case of converting back to rental use. Can you point to the IRS guidance that says you have to OCCUPY it as a personal residence for 5 years. I read Pub 523 for Tax year 2006 and didn’t see the 5-year personal use for the case of converting rental back to residence addressed.

Sorry… checked my notes… the 5 yr holding period only applies if the property was originally acquired through a 1031 exchange… My Bad!

This closed the loophole of 1031’ing a couple of crappy rental houses into a McMansion, moving in for 2 years and taking $500K off the top tax free.

FYI… to Summarize for anyone interested

President Bush signed H.R. 4520 into law on October 22, 2004.

New Holding Period Created

The provisions contained within H.R. 4520 created a five (5) year holding requirement for an Investor (Taxpayer) who wants to exclude capital gains from his taxable income pursuant to a 121 tax-free exclusion from the disposition (sale) of his primary residence that was originally acquired as rental or investment property as part of a prior tax-deferred exchange transaction.

[El Jefe]

I thought you had to OWN the property for 5 years in the case of converting back to rental use. Can you point to the IRS guidance that says you have to OCCUPY it as a personal residence for 5 years. I read Pub 523 for Tax year 2006 and didn’t see the 5-year personal use for the case of converting rental back to residence addressed.

Sorry… checked my notes… the 5 yr holding period only applies if the property was originally acquired through a 1031 exchange… My Bad!

This closed the loophole of 1031’ing a couple of crappy rental houses into a McMansion, moving in for 2 years and taking $500K off the top tax free.

FYI… to Summarize for anyone interested

President Bush signed H.R. 4520 into law on October 22, 2004.

New Holding Period Created

The provisions contained within H.R. 4520 created a five (5) year holding requirement for an Investor (Taxpayer) who wants to exclude capital gains from his taxable income pursuant to a 121 tax-free exclusion from the disposition (sale) of his primary residence that was originally acquired as rental or investment property as part of a prior tax-deferred exchange transaction.

[El Jefe]

Depreciation recapture on 1M worth of rental property could very easily bump one up into the AMT realm of paying 15% on gains + full fed income taxes on recaptured + state on the whole ball of wax.

Option 3 is now out as well. When converting back from rental to owner occupied, you must live there a full 5 yrs to get the write off. 2 of the most recent 5 only goes for owner occupied converted to rental.

The big question is what is your cost base on the properties?? If you depreciated little/none, I would eat the 24%.

If you depreciated enough to qualify you for AMT then your only real option is to 1031 or hold. Depreciation recapture is normal income and you will give 50% back to uncle sam in that case… that party is BYOV (bring your own vaseline)!

[El Jefe]

Depreciation recapture on 1M worth of rental property could very easily bump one up into the AMT realm of paying 15% on gains + full fed income taxes on recaptured + state on the whole ball of wax.

Option 3 is now out as well. When converting back from rental to owner occupied, you must live there a full 5 yrs to get the write off. 2 of the most recent 5 only goes for owner occupied converted to rental.

The big question is what is your cost base on the properties?? If you depreciated little/none, I would eat the 24%.

If you depreciated enough to qualify you for AMT then your only real option is to 1031 or hold. Depreciation recapture is normal income and you will give 50% back to uncle sam in that case… that party is BYOV (bring your own vaseline)!

[El Jefe]

If you have a little bit of free time on your hands and a 4 year degree then get your brokers license. The 4 year degree gets you out of any work experience requirement for a brokers license and the brokers license lets you belong to the MLS in CA without being a member of the CAR. The brokers license also lets you shop your own mortgages as a mtg broker, effectively giving yourself wholesale rates.

The money you save on 1 RE transaction will more than pay for an entire lifetime of MLS access & license dues.

[El Jefe]

If you have a little bit of free time on your hands and a 4 year degree then get your brokers license. The 4 year degree gets you out of any work experience requirement for a brokers license and the brokers license lets you belong to the MLS in CA without being a member of the CAR. The brokers license also lets you shop your own mortgages as a mtg broker, effectively giving yourself wholesale rates.

The money you save on 1 RE transaction will more than pay for an entire lifetime of MLS access & license dues.

[El Jefe]

You would really need to go back through the records and find out how much the original property sold for. Using round numbers…

avg new construction… nothing special is around +/- 200/sq-ft.

Arch/Eng ~50K
Permits ~25K +/-
Const. loan fees 10%

So 1800(200) + 50 + 25 + 10% = ~475K in const. costs

Now add in the property acquisition price to that figure.

If the guy bought it in 1999 for 225K he’s sittin pretty

If the guy bought it in 2005 for 650K he’s going to lose his ass.

[El Jefe]

You would really need to go back through the records and find out how much the original property sold for. Using round numbers…

avg new construction… nothing special is around +/- 200/sq-ft.

Arch/Eng ~50K
Permits ~25K +/-
Const. loan fees 10%

So 1800(200) + 50 + 25 + 10% = ~475K in const. costs

Now add in the property acquisition price to that figure.

If the guy bought it in 1999 for 225K he’s sittin pretty

If the guy bought it in 2005 for 650K he’s going to lose his ass.

[El Jefe]

A cracked slab in itself is not that bad and can be repaired, but the reason it cracked could mean a lot of headaches.

Most cracked slabs are the result of poor soil compaction when the big developers push the hilltops into the valleys to make it easier to grade their lots. This is bad as there is not much that can be done, and the soil will continue to compact for many years if the original compaction was really bad. This is mostly confined to the early mass developslums of the 80’s & 90’s… think early carmel valley/carlsbad/lacosta.

Other reasons could be expansive soil, under slab erosion(busted pipe), creeping hillsides, not enough steel in the slab, and many others… all with different solutions of varying effectiveness.

In the end it’s buyer beware.

[El Jefe]

A cracked slab in itself is not that bad and can be repaired, but the reason it cracked could mean a lot of headaches.

Most cracked slabs are the result of poor soil compaction when the big developers push the hilltops into the valleys to make it easier to grade their lots. This is bad as there is not much that can be done, and the soil will continue to compact for many years if the original compaction was really bad. This is mostly confined to the early mass developslums of the 80’s & 90’s… think early carmel valley/carlsbad/lacosta.

Other reasons could be expansive soil, under slab erosion(busted pipe), creeping hillsides, not enough steel in the slab, and many others… all with different solutions of varying effectiveness.

In the end it’s buyer beware.

[El Jefe]

Update.
Deal is off the table.
An unsolicited offer has been made at 1.5 mill.
Rumor got around the neighborhood that the family was looking to sell. Even though they are family friends, $400,000 is a big difference.
We will see if it closes.

If it doesn’t close, any advice on trying to attain that 1.1 mill purchase price.
As previously stated I thought the house would sell at 1.4.

I guess letting them know my offer stands is the only option.

My advice is to keep in contact. I see deals like this fall through all the time for many reasons.

If it truly is an unsolicited, site-unseen peek over the fence offer, the buyer will likely have 3-400K worth of adjustments to the offer before all the i’s are dotted and the t’s crossed. 1.1-1.2 may actually be a realistic offer for an older unimproved sunset cliffs house in this market. Cindy Wing had an REO listing 1 block of Sunset Cliffs Drive about 2 blocks from the end for ~1.25(IIRC) last time I talked to her… and she said it’s not generating much traffic.

If you really like the area keep looking. I do not agree that these houses do not come up for sale. I live in Point Loma and have bought/sold several houses here at great bargains. PL is an older community and the probate/trustee sale is your friend. At least half of this peninsula has one foot in the grave right now.

Oh yeah… with regard to your original post about unobstructed views, the only onobstructed view is one that you own. So if your property does not back right up to Sunset Cliffs Blvd, earmark some $$ and try like hell to get the max height deed restrictions necessary to maintain you view corridor if you buy at the bottom of the hill on the flatlands.

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