Despite fierce opposition, including over 5,000 constituents personally expressing opposition to the bill, California Governor Newsom signed Assembly Bill 3182 into law on September 29, 2020.
It creates a new Civil Code Section 4741 which voids rental limits below 25% of the members. Per Civil Code 4741, a condominium or stock cooperative association may not unreasonably restrict the rental or leasing of the owner’s unit.
A planned unit development (PUD) association may not unreasonably restrict the rental or leasing of any of the owner’s individual lot, including the residence, Accessory Dwelling Unit (detached ADU), or Junior Accessory Dwelling Unit (attached ADU).
The intent of this bill is help combat the housing and homelessness crises in California, noting that many owners are currently prohibited from renting houses under HOA rules.
Supporters believe that house rentals would help bridge the middle-class housing shortage, freeing up housing for lower-income Californians in need of housing.
There are millions of homes across the state that have the potential to be rented to Californians in need of housing but that are prohibited from being leased under outdated homeowners association rules.
AB 3182 prohibits rental bans in HOAs to allow homeowners who want to rent out their homes.
Under the new law, any provision in a governing document “that prohibits, has the effect of prohibiting, or unreasonably restricts” the rental of any of the separate interests, accessory dwelling units (“ADU”), or junior accessory dwelling units (“JADU”) in a community association is rendered unenforceable.
While there is uncertainty and disagreement over the impact of this language on minimum rental terms, the law specifically allows associations to prohibit short term and transient rentals, defined as rentals of 30 days or less, and also allows associations to place a rental cap of twenty-five percent (25%) of the separate interests (or greater) in the association.
However, AB 3182 also states that if the owner lives in either the main residence or an ADU or JADU on the property, then the property does not count as a rental unit.
As for the required duration of a lease, an association may only limit short-term rentals by imposing a minimum lease term of 30 days or less. This applies to all associations, but does not apply to the rental of ADUs and JADUs.
This means that owner-occupied rental properties are essentially exempt from these rental restrictions under the new law.
There are many different rental requirements HOA memberships often approve by a majority vote.
For example, a one-year minimum lease term, or a waiting period of one year before a new owner can rent a home, or the requirement that the tenant promise to abide by the HOA rules.
Are any of these requirements unreasonable? The issue of unreasonably restricting rentals is a vague standard, which could lead to litigation between homeowners and their HOA, since the definition of “reasonable” in this context is not obvious to all.
AB 3182 also requires any associations with provisions in their governing documents that conflict with the new requirements to amend their governing documents no later than December 31, 2021.
Associations must comply with the prohibition on rental restrictions specified in the new law starting on January 1, 2021, regardless of whether the association has revised their governing documents to comply with the new requirements.
Any association that willfully violates the new law is subject to a civil penalty to the applicant or other party in an amount not to exceed one thousand dollars ($1,000).
AB 3182 also amends the government code to require quick approval of applications to cities and counties for construction of ADUs and JADUs, deeming all such applications approved if not acted upon within 60 days (this applies to governmental agencies, not associations).
The new bill also requires that properties which meet the minimum requirements be allowed to construct one ADU and one JADU on the same property. ADUs and JADUs are not allowed in condominium developments, so this distinction will only apply to planned developments with properties on individual lots.
Some reasons for having HOA rental restrictions include home loan lending requirements that have minimum Owner Occupancy ratios. As an example, many lending institutions will not provide home loan financing if the HOA complex has less than 50 or 60 percent of the total units occupied by the owner.
The new Civil Code has the maximum of 25% of the total units as tenant occupied and 75% owner occupied.
Other reasons relate to the upkeep and maintenance of each condo or home in the HOA. Many believe that renters do not take care as well as a homeowner. However, maintenance and upkeep standards can be enforced by the HOA rules and regulations with the burden and cost of compliance placed on the owner instead of a tenant.
Associations with rental restrictions or rental caps in their governing documents should discuss the impact of AB 3182 and how to address the new limitations on rental restrictions with legal counsel to avoid compliance issues and any civil penalties.
If you are buying a property within a Homeowners Association, having a contingency in your purchase contract to review and approve of the HOA Rules and Regulations is important because if you plan to rent the property you must understand what is allowed before completing the sale transaction.
Hiring an experienced Realtor to represent you will help you navigate through this complicated area.
Call or text Pete Sabine with your questions. 925.297.5335 or send an email to Pete@PeteSabine.com. Visit our web site OurFiveStarTeam.com
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You may have recently entered into an agreement to purchase a residential property or you may have completed a loan application to refinance your home.
Lenders are required to obtain an appraisal, prepared by an impartial and unbiased appraiser, and use it as the primary tool for assessing the sufficiency of your collateral.
You may want to retain an appraiser to provide an appraisal to help you make decisions such as buying, selling or refinancing your home.
The basics of an appraisal
An appraisal is an opinion of value.
For estate planning, financial planning, or sale price decisions, individuals or a trusted advisor usually orders an appraisal.
When an appraisal is used to obtain an opinion of value of a property for loan purposes, federal regulation requires the lender or its agent to place an appraisal order.
The lender contacts a state licensed or certified appraiser and identifies the property to be appraised and the intended use of the appraisal. The appraiser then determines the appropriate scope of work for the assignment.
The appraiser’s scope of work typically includes the type of property inspection (interior, exterior only or none), what approaches to value are required, and any lender-specific requirements.
In some cases, the lender may order the appraisal through an agent, such as an Appraisal Management Company (AMC).
For residential mortgage lending, Fannie Mae (FNMA) and Freddie Mac (FHLMC), which are Government Sponsored Enterprises (GSEs) that purchase mortgages on the secondary market, have developed residential appraisal report forms that are commonly used to communicate the appraisal of properties used as collateral.
Regardless of the type of appraisal report used, all appraisal reports must contain sufficient information to enable the intended users to understand the report properly.
Why is an appraisal necessary?
The lender orders the appraisal to obtain an accurate description of the property and an independent opinion of value. The lender uses the appraisal to document that the real estate is appropriate collateral and determine whether the value of the property is sufficient to support the lending decision.
Why isn’t the consumer considered to be the client when he or she pays the appraisal fee?
Federal banking regulations require the financial institution to be the client, regardless of who pays the fee.
How does the appraiser develop the value opinion?
The appraiser researches market data, public records and talks with buyers, sellers and real estate brokers active in the market area.
Data researched includes sales, leases, and current listings of similar properties. Other data include land sales and residential construction costs.
After all factors affecting the value are considered, the appraiser develops an opinion of value and prepares an appraisal report.
What is the appraisal process?
If an appraisal requires an interior inspection, an appraiser will contact the homeowner (or, in the case of a sale, an agent or the seller) to inspect the interior and exterior of a property.
As previously mentioned, an appraisal may not require an interior inspection.
An appraiser will research county and municipal records, Multiple Listing Service (MLS) records, and other data services for information and documentation concerning the subject property and market area.
An appraiser will review recent sales and listings of comparable properties.
Comparables are recently sold or listed properties that have similar utility, quality, age and amenities as the subject property and are located in the subject property’s market area.
In markets where few sales have recently occurred, comparables may be from similar or competing neighborhoods located some distance from the subject property.
An appraiser may use the sales comparison approach to develop an opinion of value.
What is the Sales Comparison approach?
Often the primary approach to develop an opinion of value for a residential property, the sales comparison approach utilizes recent sales of comparable properties.
An appraiser will analyze and compare characteristics that include the living area of the home, land area, style, age, quality of construction, number of bedrooms and bathrooms, presence or absence of a garage, etc.
What is a comparable sale or comparable listing?
A comparable sale is a recent sale that is similar to the subject property in terms of physical and functional attributes and location.
A comparable listing is a current listing that is similar to the subject property in terms of physical and functional attributes and location.
Comparable sales and listings are used in the sales comparison approach.
In most cases, the sales comparison approach is the most reliable indicator of value for a residential property because it most directly reflects the actions of buyers and sellers in the market.
The cost approach is another method an appraiser may use to develop an opinion of value.
What is the cost approach?
The cost approach is the appraiser’s opinion of the current replacement cost of constructing a reproduction of the existing structure, less any estimated depreciation, plus the value of the land.
The cost approach is a valuable approach to use when appraising newer homes that might have little or no depreciation.
In what circumstance would an appraiser use the cost approach and/or sales comparison approach?
The cost approach is based on the premise that an informed purchaser would pay no more for the subject property than the cost of constructing a substitute property with the same utility.
Differences between the sales comparison approach and the cost approach are particularly evident when the property being appraised involves older improvements where depreciation due to age and functional obsolescence are difficult to estimate, or when the improvements are relatively unique or specialized and there are few comparable properties.
If completed correctly, under ideal circumstances the indicated value by the cost approach should be similar to the estimated value by the sales comparison approach.
Why does an appraiser make “adjustments”?
In developing an opinion of the value of a property, an appraiser considers recent sales of similar properties. The sales that are the most similar to the property being appraised are the best indicators of value.
However, since rarely are two properties exactly the same, the appraiser must account for differences between the property that sold and the property being appraised.
These differences are called “adjustments.”
Adjustments are added or subtracted from the sale prices of the comparables to indicated an adjusted sale price for the property being appraised.
An appraiser may utilize the income approach.
What is the income approach?
The income approach is most often used in appraisals of properties that have two, three or four living units, where income is a factor in the decision-making process of buyers and sellers.
The income approach is based on the relationship of anticipated benefits (dollar income) to value.
The income approach in residential appraising generally consists of little more than a gross rent multiplier analysis (the sale price of a property divided by its income potential).
The gross rent multiplier (GRM) analysis is very reliable in markets where homes are rented and sold frequently.
However, the income approach is not applicable when the property appraised is located in a neighborhood where most homes are owner-occupied.
How does an appraiser develop an opinion of value?
After data collection and analysis, the appraiser will develop an opinion of value by considering the indicated value(s) of the sales comparison approach, as well as the cost approach and/or income approach, if applicable. The values indicated by the approaches utilized will be reconciled to a final opinion of value. The appraiser will present his or her findings and conclusions in a report to the lender.
What are the essential elements of a credible appraisal report?
• A clear, accurate description of the subject property
• Sales that are the most recent and most comparable
• Comments that explain important issues in the appraisal
• An opinion of value supported by the analysis of the comparable sales
Credible appraisals clearly identify the property appraised, the scope of work performed by the appraiser, the client and other intended users, and the intended use of the report.
The appraisal report must include the definition of value (e.g., market value), the effective date of value, the subject property’s relevant characteristics, and any other special instructions from the lender, Fannie Mae, Freddie Mac, VA, FHA, etc.
A credible appraisal must effectively communicate the data and analysis required to support the opinion of value.
A credible appraisal must comply with the Uniform Standards of Professional Appraisal Practice
and all regulatory requirements including the Federal Fair Housing Act, as well as client-specific requirements.
What is the importance of appraiser independence?
Appraisers are trained to deflect any attempt to influence the appraisal or value opinion, remaining independent, impartial and objective. The appraiser has the sole responsibility for the analyses, opinions, and conclusions contained in the appraisal.
Appraiser independence is a critical element to protect the client and intended users and to enhance the public trust that appraisals contain credible opinions of value. Both Federal and State law requires appraiser independence.
Without public trust, mortgage investors could withdraw funds from the secondary market resulting in a shortage of funds for residential lending.
What can be done if it is discovered that a correction is necessary or other relevant data should be considered?
After reviewing your appraisal, if you believe the appraiser did not consider important information about the subject property or available comparables, discuss the matter with your lender.
Submit your concerns in writing to the lender with a request that the appraiser be asked to address them.
For example, if the appraisal has an incorrect living area size for the subject property, provide factual evidence which supports your position.
If you believe the appraiser selected comparables that were not the most comparable, submit a list of the comparables you would like him or her to consider.
The lender will provide this information to the appraiser and request the appraiser to consider what’s been submitted.
The appraiser should review the appraisal and, if additional credible information is pertinent to the appraisal assignment, provide a revised appraisal with commentary addressing your concerns.
After asking for a reconsideration of value, the appraisal remains flawed. What are your options?
You may request the lender order an appraisal review assignment or to order a second appraisal. Keep in mind the lender is not required to do either.
An appraisal review is completed by a different appraiser who will verify the facts and data in the appraisal, search for additional comparables and provide a conclusion as to whether the comparables used in the appraisal are the most comparable.
If the review appraiser does not agree with the opinion of value in the original appraisal, he or she will complete a sales comparison approach and provide his or her own opinion of value.
What can be done If you suspect fraudulent or incompetent appraisal practice?
Submit your concerns in writing to the lender.
Also, you may consider filing a complaint with the state appraiser regulatory agency in the state in which the property is located. The contact information for each state is available at www.asc.gov.
You may also contact the Financial Fraud Enforcement Task Force at www.stopfraud.gov.
Be advised that state appraiser regulatory agencies will generally not act as a resource to you in trying to resolve any issues with the appraisal that may affect your transaction.
Instead, the agency will consider your complaint in light of the appraiser’s responsibilities under the law, and may take disciplinary action against the appraiser, if necessary.
I have heard about problems with appraisers traveling long distances to appraise homes?
How far is too far? The issue isn’t so much “distance” or “how far is too far,” rather the question that should be asked, “Is an appraiser from outside of my area competent to appraise my property?”
Some appraisers work in many geographic areas and are knowledgeable and competent in all of them.
Other appraisers have a limited range in which they normally appraise and they may not have the data or the experience to be competent outside their local market.
What information should you provide to the appraiser?
The more information the appraiser has about your property, the better he or she will be able to develop a credible result.
The appraiser will be interested in knowing if there are any private agreements or restrictions, easements or rights of way, encroachments, “agreed to” arrangements with abutters (e.g., fences, walls) on the property, etc.
The appraiser may ask about the property’s title, sales and rental history, and occupancy.
He or she might ask if the property is under a pending purchase and sales agreement or option and, if so, the details about the agreement or option.
If the property sold in the past three years, the appraiser may ask about the details of the transfers.
Finally, the appraiser may inquire about physical characteristics of the property, including any additions, permits, etc.
If you are hiring the appraiser directly, the appraiser will want to know what the intended use of the appraisal will be.
If you are engaging the appraiser to prepare an appraisal for a federally-related transaction, you should know that the lender or the lender’s agent is required to engage the appraiser
What should the appraiser do when he or she inspects my home?
Based on the client’s intended use of the appraisal, the appraiser determines whether an interior and/or exterior inspection or no inspection is required.
Under many circumstances, the lender will require a full viewing of the property including an exterior and interior inspection.
Assuming that a complete inspection is required, the appraiser inspects the site, site improvements, and building improvements.
The appraiser considers the site’s size, shape, topography, drainage, and any other attributes that may affect value.
He or she views the site improvements (e.g., paving, fences and walls, landscaping) to determine their contribution of value to the property.
Finally, the appraiser inspects any structures. Some of the items considered are building style, number of stories, size, number of rooms (including bedrooms and baths, etc).
He or she observes the structure’s condition as an aid to estimating depreciation.
In addition, the appraiser considers the property as a whole, including the dwelling and any other improvements as well as any visible encumbrances (e.g. power lines, encroachments).
Finally, the appraiser considers the property in relation to the neighborhood.
An appraiser’s inspection and a home inspection are different.
An appraiser gathers information to develop a value opinion and a home inspector gathers information to identify construction features, structural integrity and any needed repairs.
The appraisal report has codes describing elements such as condition, construction quality and location. How do I find out what they mean?
At the request of the lender/client, the appraisal report may be prepared in compliance with the Uniform Appraisal Dataset (UAD) developed by Fannie Mae and Freddie Mac.
The UAD requires the appraiser to use standardized responses that include specific formats, definitions, abbreviations, and acronyms. Look through the appraisal for the UAD Definitions Addendum.
In most cases, the addendum will be in the appraisal. If not, either request it from the lender or access it online
Having an appraisal contingency in your purchase contract is important because if the appraised value is less than the agreed upon purchase price or repairs are required, you can renegotiate the sales price, require the seller to make the repairs, or back out of the offer altogether with the return of your deposit money.
Hiring an experienced Realtor to represent you will help you navigate through this complicated area.
Call or text Pete Sabine with your questions. 925.297.5335 or send an email to Pete@PeteSabine.com.
Discover more real estate pro tips. Find our podcasts at FiveStarRealEstateTeam.podbean.com.
Compass. License #00880760
The Advantages of Professional Property Management
Being a landlord requires effort and dedication. If you live far away from your rental property or have other personal commitments, hiring a property management company is a good option. Some of the benefits of hiring professional property management services include:
Finding High Quality Tenants
The biggest challenge for most landlords is to find responsible tenants for their rental homes. This ensures timely payment of rent, proper maintenance of the home and fewer problems during the tenancy period. Professional property managers have defined criteria for screening applicants and selecting the most suitable occupant for your property. Experience in scrutinizing thousands of rental applications will extract the facts and identify warning signs. In-depth research about the tenant’s background, employment, rental records, income, criminal history, previous rental experiences ensures that you are renting your property to the best qualified tenant.
Effective Property Advertising
A property manager uses the most effective resources to market your property to a large pool of prospective tenants. Posting high quality photos and virtual tours of the home will help to set your property apart from the competition. Property managers will offer effective staging tips and evaluate the condition of your home to recommend improvements that will increase its appeal and rental value.
Strict Rent Collection Process
Collecting timely rent every month is important to ensure a consistent cash flow. When you work with a property management company, you can be assured they will collect the rent on time and deposit it into your bank account. They demand that tenants follow the lease terms and pay the rent by the due date. In case of delays, they know the proper and legal ways to deal with the situation.
Property Maintenance and Repairs
Performing maintenance and repair tasks on time not only ensures a comfortable stay for the tenants, but also retains the value of your investment property. By hiring professional property management services, they will outsource the task to licensed and qualified contractors. The property manager will conduct regular inspections of the rental home to identify and repair any potential issues before they pose larger and more costly problems.
Better Tenant Retention
Property managers act as a point of contact between the landlord and tenants. When all the maintenance issues are addressed timely, tenants are less likely to look for another place to live in.
This, in turn, will lead to shorter vacancy cycles for your rental home. You will also be saved from all the efforts of finding and screening new tenants, marketing, arranging visits, re-painting the home etc.
A property manager has in-depth knowledge of the tenant-landlord laws and the property manager will ensure that the process is carried out in a legal manner, saving you from exposure to costly litigation.
Contact us to discuss your options for property management of your rental property. We are affiliated with a local professional property management company and we can relieve you of the burden and hassle of managing your income investment properties.
Listen to our podcast with a professional property manager.
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We are the Five Star Real Estate Team, and we know how to set the stage for your success.
Pete Sabine & Leslie Whitney
Call or Text 925.297.5335
By Pete Sabine
There are so many choices for a real estate professional, does it really matter who you choose to represent you when you buy or sell a home?
If all real estate companies are the same, why are the results so different for each company?
Even more true when focused on the personal performance of a Realtor.
Why are two Realtor’s results so different in the same profession and local market?
Athletics can be a measure of comparison. For one reason, athletics are designed to be clean and pure in results. The scoreboard generally defines the finest of top performers. Each performer knows the start, the finish and event rules.
How each athlete prepares for the event physically and mentally makes a world of difference. The tenacity of training, the focus of mind and nutrition of the body are all contributors of success.
The same is true in the real estate profession.
Athletes generally get to train and prepare for several days or weeks to compete at an event. Realtors train, compete and recover daily.
Success in the real estate profession can be measured in different ways. One measure is the sales volume recorded in the MLS. A more meaningful and relevant measure of success is defined by the tears of happiness in a client’s eyes and referrals to their friends, family, and co-workers.
As the legendary NBA coach Phil Jackson said, “You're only a success the moment you do a successful act, so these acts have to be repeated all the time." So true and drives the good to become the great.
It is the work ethic, the focus, and the competitive drive! The perseverance, the training, the mental toughness, and it is the way you show up every day…without a ranking, without results to rest on, and power through your day to get results. It is your internal drive to make a difference in someone’s life.
You do so as a role model, a parent, a significant other, a sibling or a friend. You do what you do every day to make a difference on your own scoreboard in life, not anyone else’s scoreboard.
Now, more than ever, experience and knowledge matters in real estate. In challenging times, you are best served by a seasoned real estate professional who can help you navigate through a transaction that can often be complex and with frequent changes in the market that can affect the outcome.
What is your scoreboard to measure a Realtor? Discover how we can help you reach your goals.
Pete Sabine & Leslie Whitney. Call 925.297.5335. Experience. Innovation. Results. Compass. License #00889760.
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