Here are some thoughts to keep in mind as you view homes:
There’s more to buying a house in Los Angeles than the stated price.
While the stated purchase price of a home for sale in Los Angeles is the starting point in an offer to buying a house, other details of the offer determine the true costs to the buyer and the true proceeds to the seller. These details, along with the price, become points of negotiation.
The most obvious, common, and costly detail is the request for the seller to pay the buyer’s closing costs. Depending upon the loan program, this could equal as much as 9% of the purchase price.
On a home valued at $300,000, paying buyer’s closing costs would mean a $27,000 reduction in proceeds for the seller – and a $27,000 savings for the person buying a house.
Then there are the inspections and the repair allowances. Buyers usually pay for the inspections, but they can ask the seller to pay these costs.
Every purchase offer should include a set figure that the seller agrees to spend on repairs, if required. This figure must be deducted when the seller is looking at net proceeds. And then, if more expensive repairs are needed buyers and sellers must either return to negotiations or let the transaction die.
But those aren’t the only factors that can affect the buyers’ or the sellers’ finances.
Timing can also play a role. If the buyer is leaving another home or the seller is buying a house, the closing/possession date can save or cost them dollars. Think of the cost of putting your household furnishings into storage and renting temporary shelter in the interim between closing on one home and moving into another.
Next, look at what’s included in the purchase price. Kitchen and/or laundry appliances may already be included per the listing. If not, the buyers can ask for them. Inclusion saves the buyers money, while it may cost the sellers to replace them in their new home. So even though these items are not given monetary value on the purchase offer, they do have value that both parties need to consider.
The same is true for items like a riding lawn mower. The seller may not need one in their next home, but leaving it behind does add value for the buyer.
Whether you’re buying a house in Los angeles home or selling a home in Los Angeles, before you focus on the stated purchase price, look at the true price. You’ll see it after you make the additions and subtractions.
If you have questions about these costs and how they affect your bottom line, call me at 310-279-5232 or drop me a note at email@example.com. I’ll be happy to speak with you.
And when you’re ready to buy or sell a Los Angeles home, it would be my pleasure to guide you through a smooth transaction.
Powerhouse Real Estate
310.279.5232 | firstname.lastname@example.org | www.PowerhouseRealEstate.net
Does it Cost Too Much to live in LA?
More Angelenos spend a large portion of their income on housing than people anywhere else in the country, according to a new study out Thursday from Harvard University’s Joint Center for Housing Studies.
Fully half of the households in metro Los Angeles spend at least 30% of their income on rent or mortgage payments, the highest rate of 381 metropolitan areas in the U.S. One in four households here spends at least half its income on housing. Does it cost too much to live in LA?
The report is the latest evidence of a growing affordability crunch in Southern California’s housing market. Costs to both buy and rent homes have grown far faster than incomes in recent years, pushing more families to spend a greater share of their income to live here.
Seven of the 10 metros with the highest share of “cost-burdened” households are in California, including the Inland Empire, San Diego and Ventura County.
Many economists peg 30% of income as a point at which housing costs start to become burdensome, crowding out other spending. At 50%, it becomes a “severe burden.” Of low-income households that spend at least that much on housing, 39% reported spending less on food and 65% cut spending on healthcare, the report said.
“Pretty much all other necessity spending is getting crowded out,” said Dan McCue, research manager at the Harvard Joint Center for Housing Studies. “Food, clothing, healthcare, you name it. There’s just less to go around.”
Renters are especially squeezed, with 6 in 10 renting households spending at least 30% on housing. Among homeowners in metro Los Angeles, 4 in 10 spend that much, the sixth-highest rate in the country.
The study’s findings echo a report issued in May by the Southern California Assn. of Nonprofit Housing, which found Los Angeles County has a shortfall of nearly 500,000 apartments that are affordable to low-income households. State and local funding for affordable housing has fallen in recent years, even as rents have climbed and demand for low-cost rentals has surged.
In Southern California, the challenge is one both of high housing costs and stagnant wages. Median household income, adjusted for inflation, has fallen 11% here since 2005, while rents have climbed.
And while the typical Southland household still earns more than the national average, incomes here lag behind those of other high-cost housing markets like San Francisco, New York and Washington, D.C. So, despite having less expensive housing than those cities, Los Angeles fares worse on measures of housing affordability.
“The basic cause of these high cost burdens is weak income growth,” McCue said.
More broadly, the Harvard study sees the housing market slowly healing nationwide, in step with the broader economy. But tight credit and high levels of student loan debt are keeping many young adults from buying homes, one of several factors holding back a stronger recovery.
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