Archive for December, 2013

FAREWELL A P I

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What is an API according to Heidi

What is an API according to Heidi (Photo credit: h3idi.harman)

Say farewell to the API as you know it. Welcome to new era of accountability, with at least a couple years of confusion in between.

The release Thursday of the results on the state’s Academic Performance Index marks the end of a decade of judging student performance based on test scores alone. Within three years, California will have moved to a very different system in which scores on the newly introduced Common Core assessments and other state standardized tests will be but one spectrum in the prism for evaluating schools and districts.

There will be new, multiple measures that could include high school and middle school graduation rates, rates of absenteeism, reclassification of English learners, passage on Advanced Placement exams or a mix of other indicators.

How these measures will fit together – and whether they can even be combined coherently in one index ­– will be the State Board of Education’s challenge.

The Legislature gave the board until October 2015 to solve it in the law establishing the Local Control Funding Formula, passed in June. By then, it must approve three sets of evaluation criteria that will replace the sole reliance on various standardized tests, including the California Standards Test and high school exit exam, that currently comprise the API (see accompanying story). These “rubrics” will be used by districts to evaluate their own academic progress and by county offices of education and the state superintendent of public instruction to determine if districts and schools could use support or more serious forms of intervention.

The measurements will be drawn from eight priority areas that legislators cited in passing the funding formula, Some of those – student achievement and student engagement, for instance – can be readily quantified through test scores and rates of attendance and absenteeism, while other areas, such as parent involvement and school climate, will be harder to measure. The law gave the State Board latitude to create other indicators.

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THANKS TO BARBARA BOXER

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Barbara Boxer, United States Senator from Cali...

Barbara Boxer, United States Senator from California (Photo credit: Wikipedia)

As of Dec 1st both the IRS and Franchise Tax Board have put in writing that they no longer consider “Debt Forgiveness” resulting from a Short Sale to be taxable income under either State or Federal tax laws.

This removes a huge potential problem from anyone going through a short sale. Until now It has been common to receive a tax bill in the tens of thousands of dollars many months after the property has been sold.

Thanks are due to Barbara Boxer for her part in fighting this battle for us.

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THE $$$$$$$$’s Per/Sq Foot PUZZLE

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A Recent Buyer client was continually comparing different listed houses on the the basis of ASKING PRICE per SQUARE FOOTAGE of living space. At 1st sight this seems perfectly reasonable. He could not understand why there seemed to be NO evidence of this when looking at SOLD prices. i.e. Bigger houses seemed to sell for FEWER dollars per square foot than smaller ones.

However, once we understand how houses are built it really does make sense.

Assume 2 house built at the same time are both 3 bed 2 bath models and 1,200 sq feet living area.

They were both sold new for $400.000. Therefore, when sold, they cost the Buyers $333 per sq ft.

At this time the $$$$$$$$ per sq footage is a valid indication of comparitive value.

Now consider which parts of a new house are the most expensive to build?

How about the Kitchen and Bathrooms with all the high cost plumbing and electrical systems which are not required in the other parts of the house.

1 year later one of the owners decides to add a 400 Sq Ft extension to his family room. As the new consruction does not include any new plumbing and little electrical work the cost per sq ft of the project will obviously be less than that of the complete house.

From this point on the $$$$$$ per sq foot calculation becomes meaningless

The larger house will have a lower $$$$$$$ per sq footage because a a larger part of it cost less to build.

 

 

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PROBLEMS FOR THE 1st TIME BUYER

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Cover of "Buying a Home (Essential Financ...

Cover of Buying a Home (Essential Finance)

Real estate transactions place a particularly complex set of psychological and emotional stressors on buyers and sellers.  Clients are supposed to make wise financial decisions, find (but manage!) their emotional passion for a property, do diligent research, and handle an uncanny list of logistics – all at once.

This has been the case since the dawn of the real estate business. But the last decade has added two line items to this list of stressors that have sent some buyers and sellers over the edge – and pushed many others right to the (deal-breaking) brink:

The biggest recession in American history is one — this has ratcheted up buyers’ and sellers’ financial fears and the pressure to make smart, sustainable decisions.

The advent of the internet is the other — now that every bit of market data and advice is literally at hand, real estate consumers can overwhelm themselves and fall prey to “analysis paralysis” in the effort to get informed.

Client mindsets, unmanaged, kill deals. And you can’t manage what you don’t first understand. Even worse than glitching up your close rate, some of these anxieties can actually cause panic, paralysis and poor decisions. Let’s take a little trip inside the minds of our post-recession, constantly-connected home buyers and sellers, to get a better understanding for their freak-out moments and sticking points.

Neurosis #1: Interest Rate Fixation.

The buyer and refi-er with interest-rate fixation checks interest rates online all day, every day. They hang on Bernanke’s every word – and text or call you immediately after his every press conference to see what you think about it. They notice rates rise and fall by .375% one week, and have done the amortization math to reveal that this difference would save them $2,750 over their 30 year loan.  As a result, interest rate fixated buyers and home owners often freeze up when it’s time to lock rates, hesitating out of the hope/fear that rates will decline, even by a smidgen, tomorrow.

As with most human neuroses, interest rate fixation starts from a good place: the desire to be a smart, informed, wise money manager and real estate decision-maker. But it can spiral to a place where it borders on delusional. Something about the ease of access and constant information about every moment’s variation in interest rates makes mortgage borrowers perceive that they have more control over the precise timing of their rate lock and their transaction than they actually do.

How you can help

If you have someone with interest rate fixation on your hands, it might help to keep them mindful of the overall goal of buying the right home at an affordable price and terms, or saving money and paying their home off early, via their refinance.  Explain that they should be aggressive about moving their house hunt and refinance forward. But also inform them that their contingency and underwriting timelines have more impact on the timing nuances that dictate their precise interest rate than obsessively watching CNBC ever will.

Neurosis #2: House-Stalking Syndrome.

Your house stalkers are those buyers who are constantly asking you about homes that are not on the market, having seen a late-night infomercial that urged them to write letters to owners asking them to sell – and finance – their homes.  These are also the buyers who see a ‘Coming Soon’ sign go up on the most luxurious home in town and start checking online, calling the listing agent and emailing you 5 times a day to know the moment it comes on the market. Then, when it is listed at a price far beyond their means, they go to the Open House, put in a lowball offer (with a picture of their Yorkie) and go into mourning when the place sells for hundreds of thousands more than they could every have paid.

Believe it or not, these are the most benign symptoms of house stalking syndrome. I’ve heard of house stalking buyers who track the sellers down on Facebook, knock on their doors, and even attempt to sabotage their open houses. But by and large, house-stalkers reserve their fixation for late-night internet research into a property’s permit history, floorplans, owners and neighbors, estimated value, days on market and listing agent history.

How you can help

Historically, house stalkers were seeking to be the first to hear of a price reduction.  But on today’s seller’s market, house stalkers are often legitimate buyers driven slightly nuts by the prospect of getting outbid (again).

To minimize this mania, it’s essential for you, the agent, to be the calming presence in a crazy market.  Create a sensible house hunting plan and strategy, encourage them to view homes priced low enough that they can compete and stay within budget, and brief them up front about how many offers buyers normally are having to make before snapping up their ultimate home.

Neurosis #3: Home Voyeurism, aka Looky-Loo Syndrome, aka Property Peeping Tom Tendencies.

Home voyeurs are related to the aforementioned home-stalkers, with one big difference: they have no interest in actually buying a home!  Hence, these Property Peeping Tom’s can be the bane of an agent’s existence, because their phone calls, emails and texts place a real drain on the time you could be spending with serious clients.

As long as there have been open houses, there have been looky loos. But the advent of the internet has exacerbated their symptoms and encouraged their bad behavior by rendering so much more information about properties and the people involved with them publicly available.

How you can help

The toughest type of Property Peeping Tom to deal with are those friends and relatives who beg you to use your real estate agent superpowers to constantly pull comps, get insider information or even provide access to listed homes for what you know will turn out to be no good reason. One word: “no”.  Wait – one more word: “boundaries”

Neurosis #4: Décor Expectations Disorder.

Reality TV, real estate shows and design magazines have created some pretty unrealistic expectations about what the interior of a home should look like on any given day. While the average human being isn’t put off by some unopened mail in the basket or a pair of sneakers in the hallway, those with Décor Expectations Disorder are shocked and outraged by even the slightest signs of real life inside the homes they view. They are aghast when every pillow isn’t fluffed and completely incensed by out-of-date appliances.  No window valances? Quelle horreur.

How you can help

Truth is, the ante has certainly been upped. Buyers at all price points do have the right to expect listings to be clean and prepared for sale – and listing agents must know that homes which don’t measure up will not command top dollar. If your buyer client has Décor Expectations Disorder, remind them that the perfectly staged homes tend to get more offers and sell for more, so that a poorly prepared property might present a good opportunity for them.  Encourage them to visualize the place in the pristine condition they’ll keep it, if and when they end up owning the place.

And take every opportunity to remind your home sellers that the competition is fierce. In fact, remind them that they are not just competing against nearby listings, but also against the standard of cleaniness and decor that buyers see in the media. Encourage them to be vigilant about keeping their home pristine and clutter-free while it’s listed and being shown. Stagers, housekeepers and storage units are property preparation investments that can have pay off big, at closing.

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API Myths

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St. Clare School. Oldest Elementary School in ...

St. Clare School. Oldest Elementary School in Silicon Valley (Photo credit: Wikipedia)

Heiwa elementary school %u5E73%u548C%u5C0F%u5B...

Heiwa elementary school %u5E73%u548C%u5C0F%u5B66%u6821 _18 (Photo credit: Wikipedia)

An increasing number of new home Buyers are using the API system as a major factor when choosing where to buy a home. 90 % of 1st time Buyers start by requiring that the Elementary School has a 900+ score. Given that this eliminates approx 95% of schools in Silicon Valley we have a problem.

The solution is to explain how to use the API System for what is is designed to do, not what they are being told by other uninformed parties.

First we clarify that API does not tell how good a school is. Specifically at the Elementary level it measures only 2 subjects: English and Math.

Whilst these are important i firmly believe there is much more involved in being a good school than teaching how to take tests in 2 subjects only.

An API FULL REPORT also gives the demographic make up in a given school, and how each group is scoring. For example, let’s just take a typical Silicon Valley Elementary school which has an API score 0f 860 and a total of 350 students, 50% White, 50% Asian, and 50% others. We will consistently see that the Asian student group has a 900# API, while the White group will be in the 800’s.

If I were an Asian Buyer I might see this as a good reason to save a huge amount on my home purchase by considering an 860 Total Score for such a school to be perfectly acceptable for my children. This decision could well allow me to buy a suitable house for $500,000 rather than the $600,000 it will cost in the next school district which is similar in all respects except the API score.

The 2nd and most important piece of advice is to find one or more suitable neibourhoods, then go and visit the local school(s) during the normal day. Every school I know is delighted to allow future parents to do this and thereby get a real life idea about the quality of the school.

 

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