patrick.net

DinOR is the genius behind the Geico Gekko.

Thanks to astrid, FormerAptBroker & Linda in LA-LA-LAND for responding to my Q about using a RE attorney vs. RE buyer's agent.

@FormerAptBroker & Linda in LA-LA-LAND:

I noticed that you both recommended using RE attorneys for investment properties, and have both personally used this approach in the past. Would you still recommend this strategy for a FTB buying his first house as a primary residence?

Keep in mind that --after all is said and done-- I am still just a greenhorn JBR and don't have any direct prior experience in the transaction process itself (though I've observed others, read religiously, and learned a great deal from you fine folks :-) ). I'm wondering if there isn't something of value that a (Surfer-X please cover ears) "qualified and honest buyer's agent" might be able to offer a greehorn FTB. Think George, or 'Deb' from Ben's blog. There have to be some decent people employed as agents out there, right....? Anyone, anyone....? Bueller....?

By the way you all, I'm going to be at Mijita in the Ferry Building in San Francisco on Sunday at 5:00pm. Anyone else who wants to show up and talk housing is welcome.

Patrick

HK has an excellent welfare system, much better than the US. A household of 4 with no jobs will rake in more than the equivalent here, and medicare coverage is 100% with almost nothing out of your own pocket.

I didn't know that. My sister and brother-in-law have lived in HK for 4-5 years now, and they've always told me that welfare is meant to be miserable, especially for housing if you have no family supports, etc. But they make good money as expats and don't need to worry about it enough to find out. Fair enough about the land auctions, (altho housing's very expensive), no military, etc. I believe land prices there are thru the roof, my sister has a 3 br place on the 20th floor of some high rise in an expat area, and that is supposed to be the 'HK dream' for most people - but they get a huge subsidy from Tim's employer. Many of the 'locals' don't have real furnishings in their living rooms, just a table with a PC on it - Kath lived in Happy Valley for a while and people in the building across the way used to just stare into the living room in fascination, heh.

For comparable income, Australia’s tax is way higher than the US. You guys don’t have the home mortgage interest deduction, capital gains tax is lumped in with the income tax unlike for us, is capped at 15%.

I really question this 'way higher tax' thing. Australia is a relatively low-taxing country, and every comparison I've seen pegs it down near US levels, and there are plenty of higher taxing countries in the OECD. You get the money back through redistributions too, 'middle class welfare' like family allowances, baby bonuses, free healthcare, almost free university tuition, etc.

You're right, there is no home mortgage deduction, the UK had it for a while and took it back off. I'd be concerned introducing it would feed into housing inflation all over again, and I would oppose it with politicians if they suggested it if there were no caps on pricing introduced at the same time - the realtors would just see it as another cash cow to milk. Altho investors can claim mortgage interest as a deductible expense, which is not that healthy either, as the Tax Office is subsidising landlords out of taxpayers money! Capital gains tax was recently halved on the sale of investment properties, but there is no CGT to pay on principal place of residence anyhow. Halving the CGT was also seen as regressive and undesirable in that it also rewarded specuvestors and encouraged more flipping, etc. CGT amounts make a miniscule difference to taxation rates, how many people are liable for CGT as a % of the taxpaying whole anyhow? Very very few. Not many people are avidly trading investment properties for capital gain, nor even shares. There is also a national 10% flat GST on goods and services, which replaced the wholesale sales tax system.

I think you'll find the tax regime is highly comparable in magnitude to the US, with a few subtle differences in detail. e.g. the states here collect neither income tax nor GST, it's all collected federally and then handed back to the states as grants, tho they still have a few things like petrol, tobacco and gambling excises...

HARM
A decent buyer's agent? My husband knew our agent for 30 years and I still think he was just trying to close the deal. Yes, he's a good guy, but bottom line. he's trying to put his daughter through college. He played hoops with my hub when they were teens...I don't think he outright lied to us...but he sure became friendly with the buyer...if fact that same buyer is selling that house through our agent today.
To purchase, you're better off using the sellers realtor...then they'll get double commision and REALLY push your bid...$$$ motivation. At least then you KNOW they don't have your best interest in mind...instead of deluding yourself ...as I did.

HARM Says:
"@FormerAptBroker & Linda in LA-LA-LAND: I noticed that you both recommended using RE attorneys for investment properties, and have both personally used this approach in the past. Would you still recommend this strategy for a FTB buying his first house as a primary residence? Keep in mind that –after all is said and done– I am still just a greenhorn JBR and don’t have any direct prior experience in the transaction process itself (though I’ve observed others, read religiously, and learned a great deal from you fine folks ). I’m wondering if there isn’t something of value that a (Surfer-X please cover ears) “qualified and honest buyer’s agent” might be able to offer a greehorn FTB. Think George, or ‘Deb’ from Ben’s blog. There have to be some decent people employed as agents out there, right….? Anyone, anyone….? Bueller….? "

There are "some" good people out there working as realtors, but if you want to actually "buy" a home you should try and work with a listing agent (since unlike all the other buyers working with other agents the listing agent will want you to buy the house). Your best bet as a first time buyer is to find a real estate agent who will set you up with internet access to the MLS then do your own home searching and make a deal with the listing agent of a home you like. Most residential deals are done on standard California Association of Realtors (CAR) forms and you really don't need a real estate attorney.

Michael Holliday Says: April 6th, 2006 at 8:05 pm
Thanks for the advice on buying low, selling high.

Just remember to spreadsheet all your costs realistically, also. Don't forget the costs of transfer, which can be high, say, 10-12% of purchase price, which will cut into any profit you hope to make straight up. Sometimes you can do private sales entering and exiting, etc, thus cutting out realtor commissions altogether, and advertise it yourself for less. Don't forget the cost of servicing the mortgage while you're in possession, particularly interest, obviously, property taxes, etc. Choose the finance product that suits you for the job, such as an interest-only ARM loan - why touch the principal or pay any more interest than the bare minimum if you're going to on-sell? Allow for disasters, cost overruns, and the time the finished property will be on the market, which could be weeks or months. Get a full, quality inspection done before purchasing so there won't be any nasty structural surprises. Think about the capital gains tax and other implications of being the nominal owner-occupier vs doing it as a business - altho if you do it several times a year and it is a significant source of income, the IRS will class it as a profit-making business and treat the sales proceeds as income, not as capital gain. I've heard it's not necessarily wise to create a company to purchase and do the work under, it can be an expensive waste of time - don't listen to spruikers carrying on about 'asset protection' or tax benefits under complex company-trust schemes, they're just selling you a pup, when you look at onerous annual reporting requirements, etc.

There are 'rehabbing get-rich-quick' courses and books out there also. Some of them probably offer realistic advice... Don't pay $5,000 to some spruiker tho... have a look at books at http://www.johntreed.com, he lives and works in CA area - he seems legit with sensible, affordable advice, and can tell you intimately about CA conditions. (trust me, i get no kickbacks, when you see how john reed operates.) he also gives advice, such as: if you're not comfortable dealing with and risking large sums of money, don't do it. if you are not very handy, don't do it. choose a niche that suits you best, e.g. if you are very into finance and legals in property, try to do something there rather than rehabbing.

Having said all that, you can potentially still make money out of it, some people do better by doing small-scale new development as infill instead of renovating, at a higher density, council zoning permitting. Also, you can find yourself in a bidding competition with ambitious builders, small-scale developers, and people who have just completed one of the abovementioned get-rich-quick courses...

Newsfreak
Back in 2003 it was a different market and yes it sounds like in your situation the buyers agent was working for the buyer. However, a lot more'bargain hunters' seem to have crawled out of the woodwork....and if you are looking to close a bargain deal in a declining market, you need the perfect combination of elements as both DinOr and George pointed out. You need a buyer that CAN actually sell for a lowball price, the house has been sitting on the market with no action, a desperate realtor that NEEDS the sale,significant cash in hand, and some good strategies to close the deal. Often houses that are FSBO are overpriced so negotiating with an owner would be rare. Foreclosure buying is a science with many pitfalls and that market can be full of hawkers and bargain hunters also. I truly believe the best scenario for closing that deal is to get the sellers realtor in your pocket. This does have to be disclosed to the seller, but that realtor can offer the seller a kick back of part of their commision. If you are going to try FSBO then having an atty draw up your contract is invaluable. Mine made a loophole so I could get out of the deal if I got cold feet..the seller didn't catch it when he signed.
In closing, what I'm trying to say is that in the long run, the atty ,in my experience, can be less expensive in the long run AND you KNOW he's on your side, unlike some random,lying, untrustworthy, realtor. :P