San Diego Real Estate - San Diego Homes Sale: June 2010

Time is running out to take advantage of the $10,000 home buyer tax credits in California. There are two California tax credit programs.  One is for "first-time" buyers or buyers who haven't owned for a while, who are buying resale homes.  Funds for this program are almost gone.  The second is for buyers of "new homes", and just about half the new homes tax credit funds are still available.  Homes sale San Diego has not seen significant changes in buying behavior due to the California tax credit.

Starting May 1, 2010 the California state legislature offered a state tax credit of $10,000 to any home buyers who have not owned a home for the past three years, and who will promise to stay in the home for at least two years.  The legislature  allocated $100 million to that "first-time homebuyer" program, given on a first-come-first-served basis. That fund is down to its last few million.  A similar credit was offered a couple of years ago, and the tax credit funds were gone in eight weeks.  Looks like it will take a few less days this time around.

The new homes tax credit was also allocated $100 million, and so far there have been about 6,500 applications totalling just under $43 million.  At that rate the funds for new homes buyers will last through the summer.  There is no restriction on who may use these funds (first-time buyers or buyers who presently own but are moving).  But sales contracts for the new home must be signed between May 1 and December 31, and the new home purchase must close escrow by August 1, 2011.

Successful applicants for the tax credit will receive the $10,000 tax credit in three equal installments of $3,333 over the next three years of tax returns.  While a few thousand dollars is nothing to sneeze at, San Diego real estate experts predict very little impact on the market when the credits are depleted.  The median sale price of a house in San Diego is now around $360,000, up from $325,000 a year ago.

During my career as a San Diego Realtor, I've seen a lot of home buyers get burned by new home builders. An inexperienced home buyer alone at the builder's sales office is like a lamb at a wolfs' picnic. The buyer doesn't stand a chance. It's sad, yet completely avoidable. But most home buyers, and too many Realtors, don't know or enforce their rights to receive or to give representation during the new homes sale process.

First, many home buyers assume that they will save money if they go it alone with their new home purchase.  What they don't realize is that the home builder almost always offers to pay real estate fees to the buyer's agent.  This real estate agency fee or "broker co-op" is assumed in the developer's budget. The buyer won't pay more, but the builder will net more, if there is no buyer's agent involved.  There is no additional cost for the new home buyer to have proper representation.

Second, a common builder sales approach is to tell the buyer that their homes sale prices are not negotiable.  "So it won't do you any good to have an agent represent you in the transaction," the builder's agent at the sales office will say.  This is simply untrue.  Few if any home sellers, new homes builders or otherwise, won't negotiate.  Sale prices, upgrades, financing incentives, choice of home sites, timing, and other options are all negotiable; especially in today's market.

Third, many builders of new San Diego homes for sale blatantly attempt to turn buyers' agents away.  For example, the sign-in cards at the new home developments often state "Buyer's broker must accompany buyer on the first visit to the sales office" in order to receive compensation from the builder.  In an era when most buyers do their initial research online with Realtor-provided access to MLS listings, this "first visit" rule catches many buyers off guard.  There should be nothing wrong with a buyer driving around to check out properties before bringing their Realtor into the picture. And a buyer who steps into the new homes sales office without their Realtor should not be prohibited from having representation. 

Realtors and home buyers should know how to address this "first visit" issue when it arises. The San Diego MLS (SANDICOR) rules state that any property that is listed on the MLS with an offer of compensation to a buyer's broker is a "blanket unilateral contractual offer."  That offer of compensation cannot be modified our avoided by any "conditions precedent" or by requiring any performance, activity, or event as a condition of compensation (Sandicor Rule 7.12).  A new home builder policy to refuse to pay agents who don't accompany their client on the first visit is a "condition precedent." It's a violation of MLS rules, and it can be challenged by the agent.  Check your local MLS rules for a similar provision against conditions precedent.

Some builders think they can avoid the "condition precedent" rule through a technicality.  When there are multiple homes for sale in a development, the builder will list a property address in the MLS that is not actually "for sale" (i.e. the model home).  Then when the buyer puts in a deposit for a future home site, the builder will argue that the future home site was not listed in the MLS, therefore is not subject to MLS rules.  I would encourage agents to file arbitration against any MLS participant who makes that argument.  An arbitration panel of Realtors, many of whom have been shut out by new home builders in the past, would likely find in favor of the agent.  Even the threat of arbitration or litigation would likely cause the home builder to buckle and pay the commission.  So don't just walk away from representing a client who falls into the "first visit" trap.

Finally, it is unfortunate that some buyers' agents look at compensation from a new home developer as a "referral fee" rather than compensation for buyers' agency.  The new home builders encourage this misconception by buyers' agents.  "Just sign them in, you'll get paid, and we'll take it from here." That's the typical greeting received by buyers' agents who accompany a client to the new home sales office.  Don't do it!  If the agent accepts compensation, then the agent should also provide service.  If something goes wrong and the buyer becomes disgruntled, I would not want to be the agent who took the money and ran.  Chances are that you'll end up paying that money back... and then some.

As buyers' agents, our clients depend upon us to help them buy a home, whether it is a new home or resale.  With new home purchases, a qualified agent who is a skilled negotiator can save the client thousands of dollars on the purchase and get upgrades and options that the client would not otherwise receive.  There are also contingencies, disclosures, escrow documents, title policies, and other important items to review and explain to the client.  Many of these documents are drafted by the builder, containing language that is clearly in the builder's favor and to the detriment of the home buyer.  Without an agent to help, how would an inexperienced buyer know which contracts are standard and which are created exclusively for the builder's benefit? There are simply too many places for the client to go wrong.  A new home buyer will always appreciate having their agent at their side to represent them. New home buyers beware, and buyer's agents be aware! 

If you are considering purchasing a new home in San Diego County, or for the names of qualified new home buyers’ agents anywhere in the United States or Canada, call Geoffrey Schiering at Keller Williams Realty 619-200-7612.