How Buyers Can Increase Their Odds of Winning a Bidding War
Bidding wars have long been a common trend in California’s housing market over recent years, though the rates seem to be declining somewhat. That said, California – especially certain markets like San Francisco and many southern markets – still remains one of the hottest bidding war centers across the nation.
While that might be great news for sellers, it can be a source of frustration for buyers. It can be daunting to approach an offer situation knowing that you’re competing with a number of other buyers vying for the same property.
Having said that, there are certain things that buyers can do to strengthen their position when faced with a potential multiple offer situation. If you’re a buyer entering the real estate market in a hot California market, consider the following tips to help you boost your odds of winning a bidding war.
Get Pre-Approved
One of the most important things that buyers can do before putting in an offer is to get pre-approved for a mortgage and crunch the numbers. This is especially important if a bidding war is imminent.
Getting pre-approved for a mortgage is important for a number of reasons. For starters, it will help you determine exactly how much you can afford in a home purchase and how high you can go with your offer. In bidding wars, it’s customary for buyers involved to incrementally increase their offer prices in an effort to outbid the others.
While you might be emotionally ready to go well over the asking price, this could turn out to be a huge problem if you wind up paying more than you can comfortably afford. Not only do you have to factor in mortgage payments, but also all other bills that will have to be paid, including utilities, property taxes, and homeowners insurance. By being pre-approved, you’ll know what your limit is and how far you can go.
A pre-approval letter is also helpful because it can make you a much more competitive candidate in the eyes of sellers. Typically, sellers prefer to work with buyers who they know are eligible for mortgage approval. In a bidding war situation, sellers want to waste as little time as possible. And choosing a buyer who is pre-approved for a mortgage over another is one way to ensure that.
Put in a Solid Offer Mid-Week
Weekends are traditionally the busiest times for property visits given the fact that people are usually off work and have more time to dedicate to house hunting. If time permits, consider visiting homes early in the week and give yourself enough time to really scope out a home in great detail. If your finances are already lined up and you’re ready to put in an offer, do so before the weekend rush.
By beating out the weekend competition, there may be less of a chance of getting involved in a bidding war. If the offer you present is solid and attractive to the seller ahead of the rush, there’s a chance that they may seriously consider your offer instead of waiting if there’s anything better out there.
Keep Your Offer Clean
The less red tape that a seller has to go through, the better. That means an offer that is filled with all sorts of different contingencies probably won’t fly in a bidding war situation.
Even if your offer price is high, sellers might not want to take a gamble on an offer that might not go through if any one of the contingencies cannot be fulfilled. In a bidding war situation, the fewer the contingencies the better.
Be Flexible With the Closing Date
Every part of an offer will be analyzed by the seller, and that includes the closing date. If you’re competing with another buyer who has offered the same price, something as seemingly insignificant as the closing date can be the deciding factor in which offer the seller chooses.
Given this, it’s extremely helpful to be very flexible when it comes to the closing date. If it works for you, consider giving the seller whatever closing date they want. If moving the closing date up, for instance, works better for the seller, be open to this option. Flexibility can work wonders in a bidding war situation.
Be Prepared With a Hefty Earnest Money Deposit
A big deposit shows sellers that you’re serious and are financially prepared to buy the house. Offer a bigger deposit than the sellers expect, and make sure to submit a certified check along with the offer to show the sellers that you mean business. Since typical deposit amounts can vary from one jurisdiction to another, have your agent verify what that particular number is in your area – and offer more.
The earnest money deposit goes towards your down payment anyway if you end up the winner. And if your offer isn’t chosen, you’ll get it back. A clean offer with a hefty earnest money deposit could mean the difference between winning or losing the deal.
Write a Letter to the Seller
If there’s something about the home you’re putting an offer on that has you emotionally attached to it, let the sellers know. Tell them how much you love the house and how you will make it a home for you and your family. Explaining to the seller why you want the property so much could tip the scale in your favor.
Buying and selling a home is an emotional process for all involved. And if the seller has lived in the home for a number of years and raised a family there themselves, they may appreciate knowing that the home is going to be left in the hands of someone who will care for it as much as they did.
The Bottom Line
Going up against other buyers in a bidding war can be an overwhelming experience. It can also be a frustrating one, especially if you’ve lost out on other bidding wars in the past. If you think you’ll be faced with yet another multiple offer situation, make sure to go in with your best foot forward, and always arm yourself with a seasoned real estate agent who’s experienced with handling bidding war situations.
7 Things That Are Left Behind When You Sell
When it’s time for you to move out of your old home and into your new one, there’s a lot of packing and hauling to do. But while you’ll obviously want to take all your clothes and furniture with you, there are certain items that you should leave behind.
Certain things are just assumed to remain with the property when sellers move. And if buyers find that these things have been taken on move-in day, there could be trouble.
As a general rule of thumb, the following items should be left behind when you move out.
1. Light Fixtures
When buyers scope out a new house to buy, they usually assume that the light fixtures they see in the home will stay when they move in. Unless you specifically state in the contract that you want to take the light fixtures with you, they should stay with the home.
If you do take them, it’s customary to replace them with something else so the buyers aren’t left with dangling wires and gaping holes in the ceilings and walls.
2. Anything Secured to the Ground
If it’s stuck to the ground, odds are it should stay with the property when you move. This can include any of the following:
- Mailboxes
- Fences
- Lights
- Fountains
- Water features
- Fire Pits
- Gazebos
Hot tubs should also stay even though they might not necessarily be affixed to the ground. There are still plumbing pipes and electrical wiring that are typically installed in hot tubs and run in-ground, so technically these structures should probably stay with the home too.
Items like these that are secured to the ground are technically classified as real estate as opposed to personal property, so they should remain on the premises when you vacate. If you have your heart set on taking a certain item with you, clearly detail its exclusion in the contract and make sure both you and the buyer initial it (if the buyer agrees).
3. Outdoor Plants
Along the same lines as the items listed above are outdoor plants, shrubs, flowers, and trees. Basically, any greenery that you have planted outside is considered to be part of the property and should remain there when the buyers move in. Buyers would be unpleasantly surprised to show up on moving day only to find large holes where plants once were.
Any greenery that has established deep roots would likely die after being ripped out of the ground and planted elsewhere anyway, so you would be better off leaving them where they are.
4. Anything Affixed to the House
Any items that are affixed to your home are also considered part of the property. This includes things such as:
- Hot water heaters
- Radiators
- Bathtubs
- Plugs
- Built-in shelves
- Cupboards
While it might sound silly to even try to rip any one of these items out and take them with you, it can and does happen. In these cases, buyers are left annoyed at the situation and sellers often wind up in legal trouble. As a general rule of thumb for sellers to follow, anything that is affixed to the home usually stays.
5. Fittings
Certain items might not necessarily be affixed to the property, but they should probably stay with the home anyway. This includes things such as the following:
- Carpets
- Curtains
- Curtain rods
- Free-standing appliances, such as refrigerators, ovens, and washing machines
- Satellite dishes
6. Manuals
Certain items in the home usually come with manuals when you first buy them. These manuals contain details needed for proper set-up when you first buy or install them as well as troubleshooting tips in case there’s ever a problem.
Having these manuals handy is important not just for you, but for buyers who may be taking over your home. Things such as refrigerators, ovens, hot water heaters, dishwashers, or any other item that is remaining on the premises will likely have manuals. Make sure to leave these behind for the buyer, and keep them in plain sight so they don’t have to go searching for them when they need them.
7. Extra Paint
When buyers first move into a new home, they may want to do some touch-ups on the walls here and there if there are any scuff marks that need to be covered. They may even need to do that from time to time long after having moved in. When that happens, having the exact paint handy can really help.
It can be nearly impossible to match the exact paint color on your walls with paint purchased in-store without knowing the precise one that was used. While you could always leave the exact brand name and paint color model number behind for the buyers, it would be much easier for them if you just left any leftover paint cans that you might still have.
The Bottom Line
If there are any items that you really want to take with you that would otherwise be left behind, make sure you take care of these details during the actual negotiation process so there are no surprises. Make sure everything is in writing. But in general, anything that is bolted, mounted, nailed, or planted into the home or ground should probably stay.
8 Things Buyers Should Know About Buying a Fixer-Upper
While many buyers tend to look for turn-key homes that they can just drop their belongings in and not have to worry about any extra work, others like the idea of having the opportunity to fix up the home as they see fit while adding extra value to it.
Of course, there are also buyers who are specifically looking for fixer-uppers that they can improve and then sell for a quick profit.
Whatever side of the coin you may be on for wanting a buy a fixer-upper, there are a few things that you should know first that will help you maximize your investment and profits.
1. Location is Number One
Whether you’re buying a home that you plan to raise a family in or are making a purchase for investment purposes, location is always most important. You can make all the changes you want to the actual property, but you can’t change its location. And if you plan to sell your fixer-upper in the future for a profit, the location will determine how easy or difficult it will be to sell.
Always consider the area you’re looking in to determine whether or not it’s desirable. Consider property values in the area and how much they’ve appreciated relative to neighboring areas, and find out what type of future development may be in the works that could influence the value of your property.
Your best bet is to buy a fixer-upper in a location with healthy market growth.
2. Buy the Worst House on the Best Street
If you buy the best house on the block, there’s little room to go up in value. This is especially important if your main goal is to fix and flip for a profit.
Ideally, you’ll want a big gap between the price you pay for the home and the amount you can realistically sell it for once it’s been fixed up. That way you can add value to the property yourself and take advantage of the appreciation come sale time.
3. Home Improvement Loans Are Available
Renovations can be expensive, and if you’re already maxing out your financial resources with the home purchase on its own, then there may be little left over to fix the place up.
Luckily, there are home renovation loans that you may be able to qualify for. These specialized mortgages offer loans to pay for the home itself while allowing for extra funds to cover the cost of improvements, such as the FHA 203(k) or Fannie Mae HomeStyle loans.
It should be noted that both you and the home will have to qualify for these types of loans. You’ll need an approved contractor and a submission of your loans for the work you propose to do. As long as you meet this criterion, you can take advantage of the funds needed to complete the updates you plan to do.
4. Look For Cosmetic Requirements Only
It’s so much easier (and cheaper) to make cosmetic updates on a fixer-upper as opposed to structural changes. Things like kitchen and bathroom updates, a fresh paint job, new countertops, new flooring, siding repair, or knocking down a wall or two are quick and simple cosmetic updates that can make a huge difference in the look of a home. Unlike structural changes, they’re quicker, cheaper, and easier to do.
Big-time work like fixing foundation issues, damage from pests, water damage, or soil issues could be extremely costly and time-consuming problems to deal with, which can really eat into your finances.
5. Bring a Contractor in
You’re going to want to have a home inspection done on the home you plan to buy, but you should also bring a contractor in as well. The contractor will be able to provide you with estimates on the work that you plan to do on the home so you can have a better idea of how close you’ll be able to stick to your budget.
After your contractor has had a chance to look around, ask for a bid for the job before making an offer on the home.
6. Crunch The Numbers Before Putting in an Offer
You’re only going to know if the fixer-upper you have your eye on is a good deal or not by crunching the numbers. You might see a home with a low price that only requires cosmetic upgrades to be made, but you need to make sure you can sell at a price high enough that will allow you to realize a decent profit.
To do this, you’ll need to work backward from the future sale price. And the only way to do that is to know how much you can realistically sell for. This is where a real estate agent can come in handy.
Find out what properties in the area have recently sold for and compare them to what your home will look like once all the work is done. Deduct every single cost associated with buying, fixing, and then selling the home, and see what’s left over. Considering all the work involved, you’ll want to make sure that the number you come up with will be worth your while.
7. Consider What You Can DIY
While most of the work should probably be left to the professionals, there’s no reason why you can’t get your hands dirty and do some of the minor work yourself to save some money. Identify what you think you can do on your own and factor that into the calculations of how much the work is going to cost you in total.
8. Leave Room in Your Budget For Surprises
It’s impossible to predict exactly what will happen once you start messing around with a fixer-upper. As such, it’s important that you add a financial cushion to your budget to account for any surprises that might pop up along the way.
Ideally, you should add an extra 10% to your budget to make sure you’ve got enough to cover all the work that’s already been accounted for, and a little extra for surprises.
The Bottom Line
There’s a lot of work that goes into buying and improving a fixer-upper. But the end result is usually well worth all the time and effort. Whether you’re fixing up the home to suit your own needs or are looking to make some money fixing and selling properties, keep the above-mentioned things in mind to ensure a successful project.
Buying and Selling at the Same Time? Follow These Tips
If moving is on the horizon for you sometime soon, then you’ve got plenty of decisions to make. And one of these important decisions is whether to sell or buy first.
Should you list your home first and look for a willing buyer before committing to another home? Or should you find something first to make sure you’ve got a place to go if you happen to sell faster than you initially thought?
Many homeowners are usually torn when it comes to making this decision, so the typical solution is to simply buy and list at the same time. The thing is, coordinating closing dates on both the sale of your current property and the move-in date of your new home can be a real challenge.
So, how can you make sure that buying and selling at the same time works out for the best? Consider following these tips.
Determine the Market You’re in
The temperature of the housing market in your area will determine how to proceed with your move. In fact, this is perhaps the most important factor to consider when timing your purchase and sale perfectly. The amount of time it takes to sell versus how much time it will take you to find the right home to buy will need to be considered when timing it correctly.
Is it a buyer’s market? If so, that means there are plenty of sellers out there and lots of inventory for buyers to choose from with fewer buyers to compete with. In this market, finding a home at a good price shouldn’t take long at all, though selling might take a little longer.
Is it a seller’s market? Then that means there are tons of buyers to compete with and not much inventory, which could take you longer to find the right property. But as a seller, you have a better chance of finding a buyer quickly and sealing a deal on your current home in a short time frame.
If you decide to list your current home and look for a new property at the same time, make sure you take the current market into consideration. Your listing strategy and house-hunting tactics should be tweaked accordingly to try and get the timing right.
Get Pre-Approved For a Mortgage
It’s always a good idea for buyers to get pre-approved for a home loan before they start house hunting. This will help them get an idea of how much they can afford in a home purchase. A pre-approval letter will also help get the ball rolling with mortgage approval so the mortgage can close faster after a deal is reached. This is important if you’ve sealed a deal on your current home and need to close faster.
A pre-approval is particularly important if you’re a buyer in a seller’s market, as you’ll be competing with many other buyers for fewer homes. In this case, you’ll want to do whatever you can to bring a purchase deal into fruition without any hiccups, and being pre-approved for a mortgage can help.
Have an Appraisal and Inspection Done on Your Current Home
Getting your home appraised before you list will help you determine the best listing price for your home. Inflated listing prices can end up causing listings to linger on the market for longer than necessary, causing them to go stale. An appraisal will provide you with some great insight into what your home is actually worth according to market conditions and will help you price accordingly.
Having your own home inspection done before buyers first make their way into your home to scope it out will help you identify any issues that may need some attention. Knowing about any potential defects with your home will give you the opportunity to fix them before your property is listed. You can be sure that such defects will be identified in a buyer’s home inspection, so uncovering them before an offer is agreed on can make the sale go much smoother.
Both an appraisal and a pre-listing home inspection can help you get your home ready for the market and price it accordingly, which can both prove to be extremely helpful in ensuring a seamless transaction.
Consider Including a Contingency to Sell Your Home First
If you find yourself in a buyer’s market, buying a new house shouldn’t be an issue. But selling might take a bit longer. In this case, you could find yourself with two mortgages to pay if you can’t sell your home after committing to buying a new one. In this case, you may want to consider including a contingency in your offer on a new home that states that you’ll only buy the home if you’re able to sell your existing property.
Just keep in mind that many sellers might not be too keen on such a contingency and may reject it.
Hire an Experienced Real Estate Agent
Your best bet when trying to time the purchase of a new home and the sale of your current property correctly is to hire a seasoned real estate agent who’s experienced with these situations. Trying to time these two transactions can be a complicated endeavor, so working with an experienced agent can prove to be extremely helpful.
An agent who is well-versed in these situations can help you come up with a sound strategy, negotiate appropriately, and price right to ensure that the timing of both transactions is as seamless as possible.
The Bottom Line
Lining up the closing dates on the sale of your current home and the purchase of a new one can be a real challenge. When you’re ready to make a move, make sure you go into this situation with a sound plan of action and a seasoned real estate agent in your corner.
What Exactly Do Your Condo Fees Cover?
Condo living is pretty popular among buyers who are looking for something more affordable than traditional freehold homes. Plus, there are a bunch of other perks to living in a condo beside their more affordable purchase prices, including their amenities, low maintenance, and 24-hour security.
But your mortgage isn’t the only monthly payment you’ll have to make when you own a condo. Unlike a traditional freehold house, condos also come with monthly condo fees that every owner in a complex must pay.
The amount that each owner is responsible for paying is based on a specific rate multiplied by the square footage of their respective unit. You could pay as little as $200 to as much as $1,000+ in condo fees every month, depending on where your condo is located, the type of building it is (ie. luxury condos usually charge higher fees), and the type and number of amenities offered.
The question is, what exactly do monthly condo fees cover?
Security
Most condo buildings staff a 24-hour concierge who will serve as security, as well as a point of contact for things like visitors, mail, minor issues, and so forth. The concierge or security guard’s paycheck is typically covered by funds collected from monthly condo fees.
Maintenance of Common Areas
Every owner is responsible for maintaining their own individual units. But the maintenance, cleanliness, and repair of all other common areas of the building are paid for via condo fees. This includes the maintenance of things such as:
- Landscaping
- Parking garage and lot
- Elevators
- Hallways
- Fences
- Walls
- Gates
- Windows
- Rain gutters
- Heating and cooling systems
- Gas pipes
- Electrical systems
Maintenance of Amenities
In addition to the common areas and systems just mentioned, condo fees also cover the maintenance of the building’ amenities, which differ from one condo complex to another. That said, common amenities in condominiums may include:
- Game rooms
- Fitness rooms
- Saunas
- Swimming pools
- Party rooms
- Rooftop gardens
- Guest suites
Insurance
Not every condo complex includes insurance as part of what their condo fees cover but must do. The insurance policies that condos take out cover building exteriors and shared common areas. Sometimes they might extend to cover things like damage done by floods, fires, and earthquakes. Given this, unit owners are only responsible for taking out an insurance policy to cover the interior of their own units and their personal belongings.
Reserve Fund
A reserve fund is an emergency fund, so to speak, that is saved up to cover the cost of occasional and unexpected repairs. For instance, a new roof or a newly paved parking lot are not things that must be done every year. Instead, they occur on occasion, and the money in a reserve fund can then be applied to cover these costs.
Ideally, there will be enough money in the reserve fund to adequately cover these costs. If not, each unit owner will be forced to fork over a lot of money in order to make up the difference between what’s in the reserve fund and how much needs to be spent.
A condo board that is well-run will charge each owner a small amount every month to be put towards keeping the reserve fund well-padded. That way, when the money is needed, there will be no need for owners to have to pay much more than they’re already responsible for paying every month.
Utilities
The majority of condo fees cover the cost of certain utilities of the building, including (cold) water, garbage collection, and sewers. Some may go so far as to cover heat, electricity, and hot water, and some may cover everything. Every building is different, so you’d need to check with your specific condo to find out exactly what your fees cover.
The Bottom Line
There are plenty of things that you have at your disposal when you live in a condo. But such things aren’t free; instead, you’re paying for them through monthly condo fees. If you’re in the market to buy a condo, make sure to find out exactly how much the condo fees are and what they cover before you sign on the dotted line.
6 Tips to Choosing the Best Mortgage Lender
The purchase price of the home you agree to buy will obviously have a direct impact on your mortgage payment. But the actual mortgage product itself will heavily influence these payments as well.
Different terms, interest rates, fees, and insurance premiums can make your mortgage more or less expensive. That’s why it’s important that you work with a lender who can offer you the most affordable and convenient mortgage product.
When you’re on the prowl for a mortgage lender, keep the following tips in mind to help you choose the right one.
1. Understand What Type of Professional You Want to Work With
When it comes to mortgages, there are different professionals involved in this sphere. It’s in your best interests to understand the various types of experts involved in mortgages and determine which one you’d prefer to work with.
Banks and credit unions: This is the more common source for mortgages. After all, everyone has their bank that they hold their checking or savings account with, so banks and credit unions are typically the obvious first option. But banks and credit unions are only able to offer their own products, so you could be limiting yourself to what they have available to offer you.
Mortgage brokers: These specialists don’t work for a bank or credit union, so they don’t have any of their own products to sell. Instead, mortgage brokers work on behalf of the buyer to find the best mortgage product available to meet the buyer’s needs.
These professionals do all the leg work on behalf of buyers and negotiate with various lenders. As such, you don’t need to do any of the comparison shopping yourself. This can save you a ton of time and money at the end of the day.
Alternative lenders: More and more online lenders and “bad credit” lenders are popping up, giving buyers a much larger pool of options in terms of where to get their mortgages.
Online lenders make the process convenient by allowing borrowers to apply for mortgages completely online without having to visit a bank in person. And private lenders provide borrowers with bad credit options when banks turn them down for a mortgage. It should be noted that it’s always important to be vigilant about potential predatory lenders who may not have borrowers’ best interests at heart.
2. Find the Lowest Rate
Lenders who offer the lowest interest rate are obviously going to get the most attention among borrowers, and rightfully so. Ideally, you want to lock in at the lowest possible rate. Doing so can help you save tens of thousands of dollars over the life of your loan.
Lenders often compete with each other for your business, and that often means offering the best rate they can possibly offer. However, it’s important to make sure that all other aspects of the mortgage are looked at in great detail to make sure you’re not inadvertently paying more at the end of the day because of exorbitant fees, which we’ll get into later.
3. Find the Best Terms
The interest rate of a mortgage is certainly an important aspect to look at. But the terms of the mortgage are just as important, as they will dictate how well you’ll be able to manage your mortgage. Consider the following mortgage terms:
- Early repayment penalties
- Late payment fees
- Payment frequency
- Ability to convert from an adjustable- to a fixed-rate mortgage
- Flexibility to make occasional lump sum payments towards the principal
- Ability to apply the mortgage to another property if you sell
4. Identify All the Fees That Are Charged
As if the mortgage itself wasn’t already a hefty payment to make every month, there are fees that lenders charge that you will be responsible to pay as well. Different lenders have their own sets of fees that borrowers have to pay, so you’ll definitely want to get a run-down of what these fees are and how much it will cost you.
The types of fees you may find on a lender’s contract include the following:
- Origination fees – This fee covers a mortgage broker’s time spent helping you find and process your mortgage.
- Application fees – The administration required to pull your credit report and collect all necessary paperwork is paid for through an application fee.
- Rate lock fees – If you find a great interest rate and want to make sure it doesn’t increase by the time your mortgage approval is finalized, you can lock it in. But there will typically be a fee associated with this service.
- Underwriting fees – This fee covers the cost of closing and funding the mortgage.
- Appraisal fees – Lenders send professional appraisers out to verify the value of a property before they agree to extend a loan. Buyers are usually responsible for paying for appraisals.
5. Comparison Shop
Different mortgage lenders will have their own mortgage products to offer home buyers, each of which will come with its own terms, fees, and interest rates.
It’s always important to compare different lenders and their respective products to find the one that best suits your situation. Much like you would comparison shop when buying any other product to find the best deal, the same theory applies to shopping for a mortgage.
You can save some time by checking online, as most lenders will have pertinent information about their product posted via the web. Just keep in mind that the information may be changed based on your credit health, assets, debt, and all other factors that influence your financial situation.
You can also work with a mortgage broker who can comparison shop for you rather than you having to do it yourself, as mentioned earlier.
6. Ask Your Agent
Your real estate agent is probably the best person to ask if you’re looking for a mortgage lender to work with. These professionals usually deal with a large network of other industry-related experts, including mortgage specialists. Odds are your agent probably knows someone who would be a good fit for you, so make sure to ask before you start looking.
The Bottom Line
You don’t have to settle for your regular banker when it comes time to get a mortgage. Instead, there are plenty of different mortgage products and lenders out there for you to peruse. Make sure to do your due diligence and compare different lenders and their products to find the best, most affordable mortgage that you can qualify for.
What Does it Mean to ‘Sublet’ Your Rental Unit?
Many homeowners rent out a part of their home in an effort to make a little side cash for space that they’re not using. Whether it’s a room in the home or a completely separate floor, homeowners can choose to open up part of their home to a tenant who then pays them a monthly rental fee in exchange for a roof over their heads.
But can renters do the same? If you currently rent and are out of town every so often, why should your unit be left vacant while you’re paying for it? Can’t you bring someone in
to rent out your place temporarily while you’re not there?
Or what if you want to bring in a roommate after you’ve already signed a lease, whether to help with the rent or simply to have some company?
That would be called ‘subletting’, and it’s an arrangement that you’ll need to work out with your landlord before you allow anyone into your home and charge them rent. If you don’t, you could find yourself in some trouble.
So, what exactly is subletting, and how do you go about it the legal way?
What is Subletting?
Basically, subletting involves a current renter leasing out their property to someone else. Not only can this arrangement be beneficial for people who are just looking for short-term rental units, but it can also help renters cover the cost of their long-term lease, especially when they’re not using the place 52 weeks out of the year.
Are You Allowed to Sublet?
When you rent out a unit, you typically have to sign a lease contract with your landlord. This lease will not only stipulate the term of your lease and how much your monthly rent will be, but it will also outline a number of details and terms about how you can and can’t use the property, as well as what your responsibilities and obligations are.
One of the terms that may be found in your lease if you ever intend to rent part or all of your unit out to another party at any time is a ‘sublet’ clause.
In California, you’re allowed to sublet, but only if you have written consent from your landlord before doing so. If your landlord doesn’t agree to it, then there’s no point in looking for someone to sublet from you. If you do, and you get caught, you could find yourself in breach of your lease.
This is especially true if there is no clause that specifically states that subletting is allowed or if there is a clause that actually says “no subletting.”
Landlords usually include this clause in leases in an effort to have control over who resides in their properties. Since there is no actual legal relationship between a landlord and a person who sublets, there’s little control for the landlord, compared to someone who actually has a signed lease.
It should be noted that the rules across the state of California may differ when it comes to subletting. For instance, the rules on subletting tend to be a little laxer in San Francisco where subletting is more common and supported.
Be sure to check your lease to see if there is anything that discusses subletting. Whatever is stipulated in your lease speaks volumes. While in some states it is illegal for landlords to specifically include a clause that prohibits subletting, California is a little different with this issue.
In the Golden State, landlords have the freedom to add such a clause if they do not want anyone other than the original tenant on the lease to live in the unit and pay a separate rent fee.
How to Handle a Sublet Arrangement
If you have explicit consent from your landlord to sublet your rental unit, you’ll need to go about it the right way. Ideally, you should draft up a contract or written statement that both of you sign which will outline the terms of the arrangement. The documentation should clearly detail the following:
- Term of the sublet
- Name, permanent address, and signature of the subtenant
This letter should be mailed to the landlord through certified mail, requesting a return receipt. This will provide you with proof that the letter was delivered in case the situation is ever taken to court. The copy should then be saved for your own records.
You and the subtenant should both be familiar and up-to-date on the laws surrounding subleases and understand what your responsibilities are to uphold the terms of the lease agreement.
The Bottom Line
Subletting can be a great way to supplement your rent, especially if you’re not there a few times out of the year. But at the end of the day, you’re ultimately responsible for the full rent amount as per your original lease. Even if your subtenant doesn’t pay up, you’re still required to pay. Just make sure that you choose your subtenant wisely and get written consent from your landlord before you take this route.
