Housing Stall in 2018 Has Homebuyers on Fence

Wouldn’t it be nice if all market stalls were this pretty?

Welcome to our world, where the new question du jour is “Is there a market crash on the horizon?”, or some equally broad request eliciting a prognostication beyond our worldly abilities. We say, “define horizon?”

Market Stall
Market Stall

In 2017 there was little discussion about the Peninsula housing market and its sustainability. Yet since June of 2018, it’s what everyone seems to be talking about. So, we want to know, what’s really going on?

It never ceases to amaze us how short term the memory is for so many buyers and many agents. We did a blog post in May of 2016 and again in July, about the stall in the market back then. Of course, that too was an election year, and that post is as relevant today as it was back then. Right when everyone thought the sky was falling, after the election and inauguration,  the housing market rebounded to where it had left off, bringing on more misery for buyers as multiple offers once again ensued.

But will that happen again? Will the forces of higher interest rates coupled with fewer tax deduction incentives cause a permanent slowdown in the housing market even after the mid-term elections?

We measured the time period between August 1stthrough October 1st to get an accurate read on the current market conditions.

In Belmont, there were 59 new listings in 2017. This year during the same duration there have been three less—at 56. And although we’re hearing buyers and even some agents espouse how many more new listings there are, there are actually fewer in the same period.

In San Mateo, looking a price reductions during this same period, in the Presidential election year of 2016, 24% of sellers lowered their asking price. In 2017 only 9.8% of sellers had to lower their initial asking price, and so far this year, another election year, 26% of sellers have lowered their asking price.

What is changing is the rate of absorption—or how many homes are selling. The Months of Inventory is a measurement of how long it would take to sell the current inventory of homes at the current pace of sales. Nationwide, this number typically stands around 6 months. In Belmont, that number has been below 1 month for most of the year, with a striking anomaly. The inventory stands at 1.3 months now, the same as it was in 2016 & 2017 during the same seasonal window.

In Belmont, during the same period in 2016-2018 the number of homes sales went from 33 in the presidential election year of 2016, to 43 last year in 2017, to 35 this year in the run up to the mid-term elections. That’s a decrease in sales of ~19% YOY, and that’s what is causing higher inventory levels—not the number of new listings.

On a more macro level, home sales in San Mateo County as a whole went from 752 units sold in 2016, to 734 in 2017 and this year 681 sales—an increased slow down each year-over-year.

How are seller’s weathering the storm? In 2017 Belmont homes sellers were receiving on average 112% of their asking price. That number dropped to 110% this year during the same period.

While in 2017, of the sellers who had to lower their asking price, they averaged a downward adjustment of only $89,000, this year that adjustment increased to $190,000—another sign of weakening demand.

How did the prices hold up overall during these two periods?

In 2017 the median price for a home in Belmont averaged $1,660,000 for these two months, while this year they averaged $1,821,000—indicating a 9.7% median home price increase YOY in Belmont.

What’s the take-away?

  • Home prices have begun to top out as fewer and fewer buyers can afford the median home price.
  • Government intervention in limiting the property tax deduction to only $10,000 per year and capping the mortgage interest deduction to the first $750,000 has a direct bearing on peninsula home values as the average cost to homeowners will now far exceed both of these caps.
  • Interest rates continue to creep up which will only further compound the ability of buyers to qualify for a Peninsula home.
  • We expect to see a more equilibrium in the market which will be less favorable to sellers while the playing field may finally be leveling.
  • Don’t expect prices to drop, but sellers can’t expect to get as many offers for as much over asking as their neighbor did a year ago.
  • Then there’s the stock market. We’ll let the experts talk about what’s going on there, but clearly with another huge unknown comes more uncertainty, and we can only imagine there will be further pull-back in the housing sector until the uncertainty wanes.
  • With strong job growth, buyers may want to buy now, as if history repeats itself, the Spring market will swing back in the favor of sellers.

 

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario

 

 

 

 

 

 

 

 

 

 

Belmont Home Values–Are They Sustainable in 2014?

Belmont Home Values for 2013–A Market Re-Cap

This year-end summary is where we bring you the re-cap for Belmont Home Sales. To say the least, Belmont sellers had a good year. After watching their home values drop for five years in a row (until 2011), they finally enjoyed some relief in 2012 and in 2013 as Belmont home prices reached a new high never seen before.

Here’s how it all stacked up.

This graph shows the median price in Belmont from 2012 through 2013. Many postulate about whether the market has returned to its previous high. To answer that, we looked at the median home trend in Belmont going back to 1998. Belmont’s median home price was over the million dollar mark for every month last year—save March. The closest we came to that was back in 2007 when we hit a period over the million dollar mark only twice. In many areas of the east bay and the country as a whole, they are still shy of the highs seen in 2006.

Belmont Median Price Trend 1012-2013

MEDIAN HOME PRICE

The median home price in Belmont last year, as reported by the Multiple Listing Service [MLS] in aggregate form, was up 19.5% from $949,230 in 2012 to $1,133,917 in 2013.  But not all areas fared the same.

 

 

 

 

 

 

This map show which areas of Belmont increased more year-over-year than others. If this seems odd to you, read the post we did on Which City is More Affordable—Belmont or San Carlos where we discuss some of the idiosyncrasies that have an effect on micro-regional values.

Belmont 2013 areas median Adjusted

 

If you’re like us and you are wondering why some areas of Belmont saw so much more appreciation than others, we took another step and looked into the size of homes selling in the respective areas during the two periods to see if that could account for the variance.

The red percent displayed on the map is the raw median price reported by the MLS and the blue percent is an adjusted percentage taking into consideration that either smaller or larger homes sold in the two periods.

These are our findings:

 

Areas

2012

2013

Variance

Raw Increase

Adjusted
Hallmark

2150

2280

6%

30%

24%
Skymont

2020

1830

-9%

20%

29%
Belmont CC

1840

1870

2%

15%

13%
Carlmont

1800

2029

13%

40%

27%
Sterling Downs

1190

1220

3%

27%

24%

 

This of course would indicate a raw median home price in Belmont of 26% and an adjusted one of 23.5%–much closer to the numbers reported in aggregate form from the MLS.

INVENTORY

The big brouhaha last year was over the lack of inventory. There were only seven fewer homes listed for sale in 2013 but 23 more sales than in 2012. Of course, this created fewer homes for buyers to choose from, which then led to bidding competition and prices going up at exponential rates.

DOM (Days on the Market)

The time it took to sell a home in Belmont last year almost dropped in half from 2012—from 37 to only 21 days.

PERCENT RECEIVED OF ASKING

The “Sizzle Factor”, or “How Hot Is the Market?” reached a new high with the average Belmont home seller receiving 108% of their asking price compared to 102% in 2012.

What can we expect in 2013? Probably more of the same. The median home price rate of appreciation should slow, as many homes which were under market value have regained much of their lost appreciation. We’d take a guess that appreciation will be closer to 14%-16% on average for Belmont—down about 5% from what we will imagine was the height of appreciation increases in 2013—we’ll see.

The factors to watch which could alter this trend will be the waning bond purchases by the FED which will serve to raise interest rates and may take away the ability for buyers to bid so much over the asking price in the latter part of 2014.

This begs the initial question of are these homes values sustainable and the answer is that depends. If the economy continues to improve and the rate of appreciation slows, than the short answer is yes—for now. But recent developments in China’s economy could have an impact on the rate of future appreciation and the U.S. economic rebound. Remember, what started the whole Bay Area recovery was jobs. If that changes, the game we know today could be over very soon.

 

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

 

Belmont School Enrollment May Force Buyers to Pay More For a Home

Does the Belmont school enrollment window force buyers to pay more for a home in the spring?

We see it every year in a growth market. Belmont home values skyrocket in the spring with multiple offer bidding battles, then the market calms down during the summer and trails off into the winter before starting the whole cycle over again.

Why the spring?

It has been postulated that since much of the driving force for competitive neighborhoods is the school A.P.I. scores, it only seems natural that folks would want to be settled into a new home and secure their home school attendance before the open school enrollment period ends.

In order to test this theory, we had to gather information on Belmont’s system for school enrollment.

The first (and most coveted) open enrollment period—the one which will give your child the best chance of getting into their home school—begins in mid February and ends at the end of that month. That’s a pretty short window to time a home purchase. But assuming one did, then the optimal time to purchase a home would be in December and January so that a close of escrow would occur prior to the end of the first open enrollment period. Since the district will accept a purchase contact as well (as proof of residency), one really needs to only be “in escrow” to get their child enrolled so a February home “sale” may also qualify for the first enrollment period.

If school enrollment periods have an impact on home prices through competing offers, one would expect the percentage that a seller receives of their asking price to be higher in December through the end of February to coincide with the initial open enrollment session.

The next enrollment period begins immediately following the first one at the end of February—the start of March—and goes all of the way until the middle of June. This second enrollment period is less desirable than the first one yet a much larger window of time—it also happens to coincide with the highest percent of asking prices received by sellers.

The final enrollment period begins the Monday after the last one ends and continues until school starts—which this year will be delayed until September 11th.

We plotted these two trends on a single graph to try and visualize a pattern. Clearly there’s a pattern of spring sellers enjoying the highest percentage of their asking price but the school enrollment window may have little effect on the amount a seller receives. If the enrollment window were the majority driving factor then the most competitive bidding should be in December and January as well as a bit into February. Yet in this graphic we find the highest percentage seller’s receive each year to be around May—well after the second enrollment period begins.

Of course May sales were likely consummated in April but still that’s well outside the early March 1 second enrollment opportunity.

There are a lot of other factors that come into play during the spring buying season and open enrollment periods, not the least of which is that the weather gets better.

Rather than there being one trigger that sends buyers into a purchasing panic, we’d venture an experienced guess that it’s a combination of factors that makes the spring home buying season so rewarding for sellers and attractive to buyers: The weather gets better, more homes become available so more buyers enter the market, football season has ended and Sundays are once again free to view open houses, tax season is around the corner and buyers are looking at huge tax bills while wondering how they could mitigate that with a mortgage, and the summer is approaching when many sellers want to get into a new home before the next school year begins.

Another interesting hypothesis that we have put forth involves simple frustration on the part of home buyers. It goes like this, buyers start looking for a home around early spring in earnest. They’re new to the game and thus miss out on multiple homes in multiple bidding situations. At some point they are so frustrated buyers go into winter hibernation only to thaw out the following spring more determined than ever not to end up empty handed again. It’s these buyers that step to the plate and pay whatever it takes to get the ideal home—often paying considerably more than past sales justify. And the cycle begins again.

Note: In order to plot the enrollment periods on this chart, we arbitrarily attributed a value of 100 to the first most coveted enrollment period, a value of 50 for through the next period, and finally 25 for the last open enrollment period. We assigned no value for walk-in periods of enrollment (e.g. Sept-Feb).

Belmont School Enrollment

 

As the graph illustrates, there’s only a quasi relationship of enrollment periods and the high percentage of selling prices, which once again, we feel has more to do with it being spring than the schools.

 

 

 

In this second graphic we used data for the same periods in 2004-2005 and again in 2012-1013 to see if last year was an anomaly. Note how similar the two period’s data points are even though they are separated by nearly a decade.

Belmont Recent Received of Asking
Belmont Percent Received of Asking

 

 

 

 

 

 

 

 

 

 

 

Disclaimer:

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Drew & Christine Morgan did not necessarily participate in these sales.

 

Belmont Home Values Rise Again in April But Sales Cool Off – Housing Report for April 2013

We’ll do a quick re-cap of the Belmont housing market for April 2013, since by now unless you’ve been living under a rock you’ve heard that the Peninsula housing market is back in full swing; and some would argue the swing is becoming dangerous to ride.

We’re probably a few years away from that precipice and we seriously doubt that the current run up of home values will continue at the frenetic pace we’ve seen in the last year. If the rate of appreciation settles down to sub double digit increases year-over-year the market will be more sustainable.

If you are some place where you can hear our audio accompaniment, we’ve recorded a short piece which helps explain some of the perplexing numbers for Belmont home values in April of 2013.

That’s a long way of saying we’ll be brief in our analysis this month. We’ll start with the big news which is probably not what you’d expect to hear…

[click on the sales for a full size chart]

Belmont Home Sales April 2013

SALES

Sales year-over-year dropped 30% in the month of April. In April of 2012 24 homes traded hands while in 2013 only 17 homes closed escrow.

 

New Listings

New listings were up 40% in 2013 over 2012 for the month of April.

Current Inventory

The inventory of homes available for sale in April of 2013 dropped 27% over last year at the same time.

Months of Inventory

The time it would take to sell off the entire current inventory of homes at the current rate of sales was virtually unchanged from 1.78 months of inventory last April to 1.76 months this year.

Do some of these numbers seem paradoxical? More new listings and fewer sales—is the market cooling off? If you’d like a more detailed discussion you may visit our blog page for a short podcast where we explain the correlation these numbers have to each other.

MEDIAN PRICE

The median home price in Belmont increased around 12% to $955,000 over last April when the median price was $849,500.

Reading between the lines—we see that the size home that sold in 2012 though was also 2,070 square feet as opposed to the homes which sold this April which were only 1,520 square feet. Effectively this means in 2013 you get a home in Belmont that is 26% smaller but cost you 12% more. That’s a serious increase in prices in just one year which we discuss more in the audio portion.

PRICE REDUCTIONS

Another indication of the hot Belmont housing market is reflected in the number of price reductions—or lack thereof. There were no price reductions in April for any Belmont home which sold.

In April of 2012, out of the 24 sales 10 homes sold above the asking price, 4 sold at the asking price and 10 sold below. In 2013 all but one home sold over the asking price.

PERCENT RECEIVED

Sellers in Belmont received on average 111% of their asking price in April of 2013 as compared to 99.6% last April.

If you are a seller who has been waiting for the market to rebound, it just did.

Data from the Multiple Listing Service for San Mateo County – MLS Listings, Inc.

Disclaimer:

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario. Drew & Christine did not participate in all of these sales.

Are Home Prices Rising Too Fast?

Are Home Prices Rising Too Fast? [re-blog]

DAILY REAL ESTATE NEWS | MONDAY, APRIL 15, 2013Rising Home Prices

Some housing analysts are concerned that the sudden rise in home prices could make homes more unaffordable again if the price increases outpace income growth, The Wall Street Journal reports.

Average housing costs for home buyers who took out a mortgage were around 22.5 percent of average incomes, according to John Burns Real Estate Consulting. That is down from 38.5 percent in 2006, the peak of the housing bubble. The historical average is about 33 percent.

But with home prices rising in many markets and, in some, rising at a faster pace than income levels, will more people soon be priced out of the market?

Housing analysts say that, for now at least, lower mortgage rates are offsetting the higher prices of homes.

Borrowers have seen their purchasing power rise by around 33 percent over the past four years due to the low interest rates, The Wall Street Journal reports. For example, a borrower can make a $1,000 monthly mortgage payment and qualify for a $222,000 mortgage at today’s low interest rates, compared to 2008 when they’d likely qualify for $165,000 when mortgage rates were around 6.1 percent — nearly double what they are today.

Borrowers are able to withstand home-price increases because of the low rates, not because household incomes are growing, The Wall Street Journal reports. If mortgage rates tick back up to the 6 percent or 8 percent range, homes may look overpriced relative to incomes, according to housing analysts.

Source: “Why Rising Interest Rates Could Eventually Curb Price Gains,” The Wall Street Journal (April 10, 2013)

Read More

Existing Home Sales and Prices Continue to Rise
What’s Really Driving the Rise in Home Prices?

Forget Everything You Thought You Knew About Home Values

It seems there’s even more pent-up demand for housing than there was after the 1989 housing crash. The lower than usual interest rates is undoubtedly a contributing cause for the frenzied activity but what else is creating the stratospheric rise in housing activity?

It’s becoming a common event for a home to have 10-20 offers submitted by enthusiastic buyers. One first time buyer home in San Mateo recently sold with 86 offers! We’ve been in bidding wars ourselves where the winning bid paid over $300,000 more than asking price for a modest San Carlos home.
It’s probably not a leap for you to then believe that the median size home in San Mateo County climbed 29% since last March?
How’d we come up with that 29%? We adjusted it to account for the size of homes selling during the two periods. Had we not done so the raw figures showed a 34% increase.
In March of 2012 the median home in San Mateo country sold for just $689,000 and this March the median home price was $925,000. So did a lot of larger homes sell this year? For sure the upper market is starting to get traction again but the median size home selling in 2013 was only 5% larger. So we roughly estimate that if one can get a 5% large home in 2013 but have to pay 34% more, than prices probably went up by a factor of around 29%.
Looking at the housing picture for San Mateo County for March of 2013 as compare to March of 2012, we see that there were 20% fewer home sales this year as compared to last.
Why the fewer home sales if the market is so hot? Because, simply put, there are fewer homes for buyers to choose from. In 2013 there were 20 percent fewer sales but 29 % fewer new listings-which explains the low inventory.
For buyers wanting to get into a home, it may be now or never as home prices appear to have skyrocketed almost 30% in San Mateo County just in the last year. If interest rates rise, that double whammy may just put home ownership out of the reach for many.

 

 

The information contained in this article is educational and
intended for informational purposes only. It does not constitute
real estate, tax or legal advice, nor does it substitute for
advice specific to your situation. Always consult an appropriate
professional familiar with your scenario.

 

Saving More For A Down Payment–is it Wise?

Is it Wise to Save More For Your Down Payment?

Are you a first-time buyer wondering how you’ll ever have
enough of a down payment to buy your first home?

Do you wonder how much down payment you need for a home? Did
you know that if you’re buying a home and using FHA financing your down payment
could be as little as 3.5?. Ten percent down loans are also making a comeback
and are quite common once again.

But should you wait and save more for your down payment so
you can be 20% down? In our current market, that might not be such a great
idea.

Home values have been increasing rapidly in the last year.
An area in Belmont known as Sterling Downs offers many first time buyers
affordable living options. But the values there have been rising with the rest
of the tide.

This graph illustrates the price trend in the last year in
Sterling Downs, Belmont. We used homes which closed escrow since January of
last year that were three bedrooms and between 900 and 1,100 square feet so
that the sale prices weren’t affected by the size of homes selling.

Clearly it would be near impossible to keep up with the increase
in the selling prices simply by saving more money each month from your paycheck. We estimate
that in 2012 to date the average Sterling Downs home increased $75,000 or just over
$5,000 per month.

If you have been waiting to buy a home and need some advice
on some of the varying financing options which are available, feel free to contact us and
we’ll refer you to one of the great mortgage brokers who can answer all of your
questions.

 


Mortgage-rates27-300x300
The information
contained in this article is educational and intended for informational
purposes only. It does not constitute real estate, tax or legal advice, nor
does it substitute for advice specific to your situation. Always consult an
appropriate professional familiar with your scenario.

 

DRE License Numbers
01124318 & 01174047

Drew & Christine
Morgan, REALTORS | Notary Public

All data was retrieved
from MLS Listings, Inc. The Multiple Listing Service for San Mateo County.

 

Belmont’s Proposed Sewer Lateral Requirement Might Just Stink

Crocodile-in-the-sewer-urban-legends-231554_487_491

We initiated this post on the Belmont Patch and wanted to make sure the residents of Belmont know what their City Council is working on as the newest proposal in keeping Belmont’s residence safe.

I tend to stay away from expressing our opinions about the machinations of Belmont’s City Council but I thought their recent proposal which burdens every home seller with a sewer lateral inspection and repair requirement needs some public scrutiny.  

What is a sewer lateral?

It’s the underground pipe that runs from your home to the public sewer system.

What’s the issue?

In some cases, the sewer lateral can leak or even break causing sewage to seep into the ground—similar as to a leach field used in septic systems but not as sanitary. It also has the unwanted effect of possibly allowing ground water (from rain for example) to enter the sewer system which can overburden the system.

What’s the Fix?

First, you have to learn if you have a faulty sewer lateral. There is a relatively inexpensive smoke test which Belmont has been employing to detect faulty sewer laterals. The more expensive way to discover this is through a field test with a camera which is snaked through your sewer line to detect visible deficiencies.

How much does it cost if I need to repair my sewer lateral?

That depends. An short run and easy fix from your home to the street might cost under a thousand dollars but could also reach ten times that amount if there are difficulties in reaching the sewer lateral or, as in the case of many Belmont homes, the sewer lateral has a very extensive run across multiple properties before it reaches the main city sewer line.

What the City of Belmont is considering:

The Belmont City Council has been deliberating whether or not to force each homeowner to perform a test and if necessary repair the sewer lateral before they can sell their home. That proposal is called a “point of sale” or POS proposal.

What’s the problem with their proposal?

There are several issues with this approach which could cause a homeowner a problem should they need to sell their home and either not have the funds to repair the sewer lateral, or not have the time before the close of escrow. Amendments to this proposal include ways a homeowner could negotiate with a buyer to inherit the burden but so far the proposed workarounds appear to be at odds with lending and escrow institutional requirements.

What’s the answer?

The City of Belmont is currently testing sewer laterals utilizing a smoke test which offers the added benefit of detecting downspouts that may be discharging roof runoff into the sewer system rather than the storm drains. Should they find a leak they could then require the homeowner to repair their sewer lateral and have the opportunity to secure financing if needed.

The POS proposal seeks to limit the sewer lateral test to a relatively small subset of homes—only those which sell in a given year, which in 2012 was only 236—while the easily performed smoke test could potentially reach far more homes.

One wonders if the city is truly interested in fixing the sewer lateral problem or pushing it off onto those who will have little voice in the next election—those selling their home and moving away.

UPDATE–I attended the meeting with the Belmont staff and council on Thursday, the 14th to hear their newest idea of the Point of Sale requirement for sewer laterals. Be clear, the City Council has directed the staff to discuss how to best implement the POS, not whether or not the POS is the best way to deal with the issue.

Clearly there is a need to repair broken sewer lateral lines in our city. Having sewage seep into the surrounding ground is not ideal, but the larger problem appears to be the amount of water which enters broken sewer laterals during and after heavy rains. This water then ends up taxing an already overburdened treatment system and anyone who lives in Belmont knows the cost of maintaining our sewer system keeps getting passed along in the form of rate increases on our property tax bills.

But is it leaking water into our sewer laterals which is the major culprit or is it the city’s very own main lines? The smoke tests which the city has been performing clearly revealed one of the greatest issues are folks who have tied their downspouts into the sewer system rather than divert the water to run down the curb and into the storm drain. So again we question, are we moving forward armed with all of the information we need or just moving forward to give the impression we’re making progress?

The rainy season is almost over and we’d suggest the council, which appears ahead of their skis right now, take a step back and get more information and input before storming ahead. Gathering more information from lending institutions, title companies and plumbing contractors who specialize in sewer lateral replacement might prove to be a good start. Having the city deliver the results of their smoke testing to the public for scrutiny might also show some good faith that these decisions are based on solid data; then set a date for action prior to next years’ rainy season.

The question of course today is why a POS vs. requiring each property owner to test and fix their sewer laterals? If the City Council is truly concerned about fixing the issue, a POS requirement severs to only uncover a small percentage of the defective sever lateral lines—commensurate with home many homes sell each year. Since it’s an election year, this seems a politically palatable way to deliver bad news—only those moving would be affected by the cost (estimated to average $7,500 per household). But is it the best answer to the problem? Probably not.

If the council is truly concerned with the health and safety of its citizens it might continue down the path of requiring each and every homeowner to remedy this situation independent on whether or not they are moving. I’m struggling with this but the only reason I can see for not requiring every homeowner to repair their lateral is it would be politically unfavorable.

If the City Council has its way a POS would be eminent. The staff has been directed to develop a step-by-step plan for administrating this new burden. The proposal, if I can paraphrase it and as it stands now, is before a home could be transferred, it would need to have a certification the sewer lateral is intact. That encumbers the homeowner to order and pay for a sewer lateral camera inspection costing about $150-$200 dollars depending upon ease of access. The results of the test and camera footage shall be delivered to the public works department for analysis—promised not to take more than a day or two. If your sewer lateral passes, you get to pass “GO”. If not, you will be required to fix it and provide a certification to the city prior to the close of escrow. Of course the city will have its hand out for encroachment permits, building permits and so forth and they’ve offered no proposed relief on these fees in order for homeowners to comply. Or, the third option presented on Thursday, was that the buyer of the property could sign a pledge to repair the sewer later at their expense with 180 days of closing—and deliver a deposit as security of performance—an amount which has yet to be determined.

Of course this will raise all sorts of red flags for lenders, who if they get wind this requirement exists, will force the repair of the sewer lateral prior to the close of escrow as part of a lending requirement. So while we applaud the city staff for attempting a workaround, their third prong option still has some kinks in it. Namely that once the seller and buyer negotiate who will pay for this repair those negotiations will become part of the contract—the very contract the lender will scrutinize and thus require a sewer lateral certification before they will lend on the property.

As REALTORS, we’re used to handling city issues in the form of disclosure such as the new smoking ordinance, school boundary issue, or even dog and alarm licensing requirements so this newest burden which the city apparently feels we are fighting just for the sake of having to do less work, is really a non sequester for us. What this will burden is the home sale transaction—the seller and the buyer—to find a way to appease the city’s new requirement without unwittingly defrauding the lender at the same time.

The views expressed here are my own–Drew Morgan and not necesarily the views of the National Association of REALTORS, The California Association of REALTOS, The San Mateo Association of Realtors or even my wife.