should-i-use-redfinThere are pluses and minuses to my clients using Redfin as a source. The plus is that sometimes they find properties that they like personally, but that I wouldn’t think to send them. (Take, for example, my client who sent me the South Central fourplex we closed.) The problem that often arises, however, is that the data is usually inaccurate and always incomplete. The listing agent will post info on the MLS, but it will take a couple days to propagate the Redfin channels, and by that time, it may be too late. Additionally, on Redfin, you’ll never get the listing agent’s private remarks, which is the good stuff.

Search real listings here.

Search real listings here.

Enter the MLS’s Home Central Search. The name is clunky, but it’s actually a great portal that allows my clients to search specific criteria directly on the MLS – the website that agents use. For some clients, I’ve even programmed the portal to email them new listings based on their personal criteria on Sundays, twice a day, or every four hours, depending on how ambitious they are. Since I’m looking for the best deals all of the time anyway, there isn’t always a need for this. But you never know. Sometimes I might overlook something, or simply not know my client’s taste well enough. A client-agent relationship is really a learning, growing one, and the more interesting properties we show each other, the better I get to know you and your needs.

So if you’re using Redfin to shop for properties, stop. There’s a better way, direct from the source. Just ask.

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Canceling a Transaction

A few times in the past couple months I’ve struck a deal with the seller, but we’ve had to cancel escrow. In this market, when acting fast is part of the game, it’s often impossible to do all your due diligence before making an offer. If the listing agent won’t allow interior inspections before escrow, we try to arrange a preliminary interior inspection the day escrow opens so that if there’s something obviously wrong with the property, we can cancel before the earnest money deposit (EMD – usually 3% of contract price) is due. On one of these deals, we had to inspect after we sent the EMD, but since a physical inspection contingency was part of the contract, we got the EMD back no problem.

Canceling escrow is one of the most emotionally draining parts of my job. In this seller’s market, striking a deal is already tricky enough. That’s why I encourage my buyers to do all of the due diligence they can before we offer, especially:

  • drive by the property
  • understand the neighborhood
  • check ownership history
  • check comparables

This way, we limit the surprises once we enter escrow. If you plan to develop a good reputation in this business, it’s important to have good reasons to cancel escrow. But it’s good to know the option is always there.


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Transaction Coordinator

One valuable asset we have on our team at Adaptive Realty is our transaction coordinator. Aleen comes in during escrow to make sure all the paperwork is in order and all signatures are obtained. While I’m helping my buyers schedule physical inspections and go over possible repairs, Aleen is on her computer making sure i’s are dotted and t’s are crossed. Because my favorite part of the job is finding good deals and negotiating the contract, I’m thrilled to have a transaction coordinator to help gather all the paperwork during escrow.

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Subject to Inspection

In the apartment building world, many properties are listed as “subject to inspection.” This means that your offer is considered subject to inspection of the property. Simply put, the seller understands that you haven’t seen the property, and you can cancel if you don’t like it.

Why do they do this? Usually it’s because they don’t want to disturb the tenants. Or they’re lazy.

Actually, all offers that you make are subject to inspection. During escrow, your inspection team (a general inspector / foundation specialist, a sewage specialist, or, depending on the work you expect to do, your contractor) will do due diligence to make sure there aren’t any current or future problems that might arise with the property. These team members, if they’re licensed, are liable for the information they give you.

Depending on what your team finds, you can ask for a credit from the seller to fix the problem, or back out of the deal and get your deposit returned with good reason. If the listing is “subject to inspection” you don’t even need a good reason.

So don’t be scared to make an offer on a solid deal without inspecting the property. That’s what escrow is for. And that’s where Adaptive Realty will continue to guide you.

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One thing to consider when deciding on your best and final offer for a property is the zoning. If you’re buying a duplex on a 8,000 sq ft lot, the zoning makes a huge difference in terms of the property value. If it’s R2, the duplex is all you’ll get, so there’s not much hidden value beyond the obvious: rents, appreciation, future market rents.  If the zoning is R3, a developer can build one unit for every 800 sq ft of lot space.  So in this case, that’s 10 units.

There are other restrictions involved. Here are some basics:

– Max height = 45ft.

– Setbacks = 15ft. front and back. 10% of width on the sides.

– 1 parking space per 1-bedroom apartment; 1.5 parking spaces per 2-bedroom apartment

For more details, see the L.A. City Zoning Appendix.

Our sample lot here is 160 feet by 50 feet.

One parking space is 10 feet by 20 feet.

Unless our developer is building 3 stories or an underground parking garage, we can only truly fit 8 1-bedroom apartments here because of the parking requirement and driveway.

So a reasonable estimate for the value of this new property will be:

8 units X $1,600 monthly rent ($19,200 yearly) = $153,600

11 X GRM = $1.69 million

If a developer buys the duplex for $400,000, builds for $840,000, that’s a $460,000 profit.

So if you’re bidding $360,000 (12x GRM) on a duplex with a rent roll of $30,000 / year, remember what the developer paying all cash stands to make.  The good news is, that developer might be there again when you sell.

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The Drive By

You can tell a lot driving by the outside of a property. You stop, look around, get a sense of the street, the building quality, the curb appeal. Most renters decide before they walk into their prospective apartment whether they feel comfortable or not, so why shouldn’t you have the same reaction?

There are several things I do before my clients drive by a property:

– make sure the property is still available

– see if the agent will meet us there instead (usually not the case without an accepted offer)

– Google map it and check out the satellite images

– check Zimas to make sure the assessor agrees with the listing agent about the number of units, square feet, bedrooms, etc.

If all these things check out, a drive by can tell you a lot. You just have to get off your lazy/busy butt and drive…

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