San Diego Real Estate

Fear the Boom and Bust - Keynes V Hayak Rap Throwdown

The best thing to come out of the economic disaster.

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Are Online Home Valuations Accurate?

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Is it possible to speed up the approval of a short sale?

A brief (and probably not very favorable) response to the aforementioned question…

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Seth Green’s Cribs Edition - Unbroke

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Ferris Bueller House For Sale

Ben Rose House

Cleve pointed out to me that “Camerson’s house” was recently listed for sale. This is the house where Cameron and Ferris crash Cameron’s father’s prized Ferrari 250 GTO through a window and down an embankment (while attempting to run the odometer backwards to cover up their joyride).

Designed in steel and glass and built in 1953 in Chicago’s tony Highland Park area, the contemporary Ben Rose House (and Auto Museum) manages to look right at home among the trees with sun-dappled ravine below. The house itself comprises 5300 square feet and was designed by A. James Speyer, an architect with Mies Van Der Rohe’s firm. The Pavilion was designed later, in 1975, by another Mies protege, David Haid.

Rose lived in the home until his death in 2004. His wife, Francis, continued living there until her death earlier this year. Listed at $2.3 million, the house is being sold “as is” and probably needs some renovating. (For example, one funny anecdote about the house relays that its original design included stucco interior walls. Ben Rose paneled over the stucco due to its constant cracking. All was well, until during dinner one night: the stucco cracked and fell behind the panelling and the dining room filled with dust!)

–Kara Peterson

More photos of the Ben Rose house

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Short Sale Home Buying Strategy

Pictured: Kensington Short Sale

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Short Sale Strategy…

Undoubtedly, if you have been shopping for a home in the last year, you understand that short sales have a significant presence in today’s market. A short sale is a property sale where the seller requests that their lender accept a payoff amount (offered by a prospective buyer) of less than what the seller owes on the property. Short sales can be an opportunity for buyers to get a great deal on a property. But they can also be a nauseating pain - unless you go in with the right mindset.

Keep in mind…

The Bank, not the Seller, is calling the shots.

First, it is important to understand you are not dealing with the seller even though their name appears on the contract. The lender, who is considering hedging its bets and approving a lesser payoff, is actually calling the shots. Lenders are currently swamped with short sale requests from beleagured sellers, so don’t expect personal service or timely responses to inquiries from the opposite side of the transaction. For short sale buyers, this means a transaction can potentially take months to close. However, a few months’ inconvenience can pay off for a big reward–a large savings for you, the buyer!

The price is right? Wrong!

Listing agent’s pricing of short sales in San Diego can be so arbitrary that they are hardly worth considering, other than knowing that the list prices you see are under market value. In fact, some agents routinely price their short sale listings 10% - 20% below market value (by market value, we are talking about what home buyers will pay for a home in today’s “buyer’s market”). This pricing strategy results in multiple competing offers bidding each other towards market value (market value based on recent comparable sales). My advice to clients is to shop below their target price–anticipating that properties anywhere from 10% - 20% below the target price will end up actually priced in your original price range. It’s not an exact science, but I’ve found that this rule of thumb holds up in approximately 75% of cases.

A question I hear frequently is “why do listing agents do this?”. Simply put, the listing agent, who works for the seller, doesn’t know when the lender’s approval of the short sale is going to come. Thus, they want to drum up as much interest and as many offers as possible in order to get the best price come approval time. In practice, then, think of a short sale property as very much an auction-style listing, where the “highest and best” offer takes all.

Cash is King

When a bank does approve and enter into a short sale contract, the last thing they want to do is commit to an individual buyer, only to see the escrow cancel and have to go back on the market. The most common reason escrows cancel is the buyer not being able to obtain the financing  that they were planning on using to purchase the property. Remember, a short sale operates similarly to an auction, with the best bid receiving the lender’s approval and thus, the sale contract. For lenders, the most attractive bids are those that seem most certain to close escrow–i.e., cash offers. Because cash is so attractive to lenders, cash buyers can offer a lower price than non-cash buyers, with an average savings of 5% - 10% of the purchase price! Of course, not all offers can be made in cash, so a large down payment is the next most attractive option to a lender.

How to offset cash competition

The deposit is the best way for a non-cash, low money down buyer to compete with other bids. A buyer that shows commitment with a larger than normal earnest money deposit is, in the same manner as a cash buyer, going to appear stronger and more committed to closing the transaction than a buyer with low money down and less than 1% deposit. Where 1% - 3% is normal for a deposit, 5% will certainly get some favorable attention. It’s important to do homework on the property and financing before escrow and immediately after opening escrow because the deposit can become non-refundable after the contingency period is up.  The standard contingency length in CA contracts is 17 days from acceptance.

Pictured: Pacific Beach Foreclosure

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Factor in repair costs up front

Banks seldom approve minor repairs. These repairs should be factored into your bottom line when making your “highest and best” offer on a property. Remember, you are getting a good deal - but with that sometimes comes a little extra work to do (or to hire someone to do). Of course, you are never precluded from requesting repairs - just don’t plan on getting much, if anything, approved. And the bank will only issue credits unless financing cannot be procured without an actual repair being made.

If your like Mick, it will help

Trying to squeeze a short sale purchase into a traditional buying timeline doesn’t fly. Short sales can take more than six months to get approved (from the date of submitting a full short sale package to the lender). More often, they will take 4 - 5 months (and those lenders more affected by short sales requests, such as Countrywide, they might take up to 8 months)! Thus if you can sing the Stones early classic “Time Is On My Side” and mean it, you’re a good candidate for a short sale purchase! It’s good to start looking early, write offers early, and most importantly, to keep looking, and keep writing offers through the process…which leads us to my next point…

There’s other fish in the sea

Don’t fall in love - keep an objective mindset. Inventory is still higher than normal. Use it to your advantage. View a thousand San Diego properties online. Drive by a hundred. Go inside twenty. Write offers on ten. When you are writing offers on short sales, you are not submitting any real funds at the time of the offer. You will not enter into a contractual agreement until the bank has approved the short sale and you open escrow. So until a bank is going to commit to your offer, you don’t have anything on the line. Just like the 60’s, huh? Free love, real estate style!

Final Thoughts

Short sales actually have less competition in the market than bank owned homes. Additionally, if the short sale was an owner occupied property, you will receive full disclosures providing insight into the property that you simply do not get with bank owned or other absentee owned properties. Ultimately, if you are prepared to deal with the short sale process, it can be rewarding! In addition to receiving a “good deal”, for many buyers, considering short sales opens a significant number of options as opposed to just shopping for bank owned homes or conventional sale homes. If you have any further questions regarding short sales, buying or selling a home in today’s market, please don’t hesitate to contact us - 619.684.6229.

Cheers

Cleve

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WalkScore now on Nuvilla Home Search

As much as we would like to take credit for this, we have to give all kudos to the guys at Front Seat for allowing us to bring this to you. One of my favorite new toys, Walk Score rates how walkable a home’s location is. As described by the developer:

“Walk Score helps people find walkable places to live. Walk Score calculates the walkability of an address by locating nearby stores, restaurants, schools, parks, etc. Walk Score measures how easy it is to live a car-lite lifestyle, not how pretty the area is for walking. ” The score ranges from 0 (completely car-dependent) to 100 (walker’s paradise).

This is a fantastic tool that we are happy to offer as we have more and more buyer’s trending toward communities featuring amenities within walking distance.

Check out these example listings with Walk Scores of at least 97!

* Most walkable Downtown condos
* Most walkable Carlsbad homes
* Most walkable Point Loma homes

To get maximum benefit from Walk Score, here is a step by step look at Walk Score’s features list:

1. Search by Walk Score- Now this is cool. By entering a minimum Walk Score in your search, you are assured of not having to constantly look up the Walk Score for each property you’re interested in.

WalkScore value slider

2. Sort by Walk Score- If you can search by Walk Score, you should also be able to sort by Walk Score. Just click in the “sort by” box at the top of the results and choose “Walk Score, Highest First” to order the search results from highest Walk Score to lowest.
3. View the Walk Score in both the search results and property details- Even if you don’t search by Walk Score, you can still see the Walk Score for each listing in both the search results and property details.

WalkScore value on listing

4. View the Walk Score tile- When you click on the “Walk Score” link at the top-right of the property details area, you’ll see the Walk Score tile that shows all of the amenities that are factored into the score.

WalkScore tile

Obviously we know that Downtown San Diego condos lend themselves nicely to walking lifestyle. Where WalkScore can get very helpful is in the suburban areas.  For those unfamiliar with San Diego moving for job or military relocation, searching by WalkScore offers a quick filter for communities that may not offer what the buyer/renter is looking for.

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February & March Buyers: Have 08 Returns for Lender

If you are anticipating buying a home in the next two months, you might have an addtitional reason to get a jump on preparing your 2008 tax returns. With lenders getting increasingly strict with income and asset documentation, it’s a good idea to anticipate a a lender requiring your most recent tax return - even if 98% of the country is still 2 months from getting theirs done. It would be a terrible situation to have tax returns come up as a loan condition and have to scramble to get them done - or worse, to have to cancel the contract late in the game and risk losing any of your deposit.

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Obama’s Homeowner Affordability and Stability Plan released

The Obama Administration has released the Homeowner Affordability and Stability Plan, which the Administration hopes will help as many as 9 million homeowners in danger of foreclosure. There are three main components to the plan. The first is aimed at assisting homeowners that still have equity in their homes but currently cannot refinance, the second is to assist homeowners who are underwater on their mortgages and the third is aimed at supporting low mortgage rates through Fannie and Freddie. The plan only applies to primary residences and the loans cannot exceed Fannie/Freddie conforming loan limits.

The first component will help homeowners who have equity in their homes but fall short of the 20% equity needed to refinance. Homeowners who have conforming loans owned or guaranteed by Fannie or Freddie will be able to refinance so that they can lock in an affordable payment. The government estimates that approximately 5 million homeowners will be helped by this component of the plan.

The second component is aimed at homeowners who are underwater on their mortgages. The $75 billion initiative works to bring lenders, loan servicers and government stakeholders together to share in the cost of loan modification. The plan is to bing primary mortgages down to payments that do not exceed a 38% debt-to-income ratio. The cost of the loan modification would be bore by the lender while the government and the lender would split the costs of further reducing the monthly payment. Homeowners would not have to be delinquent on their mortgage to participate in this component of the plan. Furthermore, the component aims to create clear and consistent guidelines for loan modifications. Federal agencies, banking and credit union regulators as well as the private sector would come together to develop guidelines for use across the mortgage market. Adoption of the guidelines would be voluntary for the private sector, but all financial institutions receiving Financial Stability Plan assistance going forward will be required to implement the loan mod guidelines. And we know how the government feels about banks taking relief money….The plan also offers incentives for servicers and mortgage holders that participate in the loan modification program. Details are set to be released on March 4th. The government estimates that 3 to 4 million homeowners will be helped by this component of the plan.

The third component is aimed at supporting low mortgage rates by strengthening Fannie Mae and Freddie Mac. The Treasury Department would increase their Preferred Stock Purchase Agreements with both Fannie and Freddie from the current $100 billion to $200 billion in each. The Treasury Department will continue to purchase Fannie and Freddie back securities in order to promote a stable and liquid marketplace. Additionally, the Treasury Dept. will increase Fannie Mae and Freddie Mac’s portfolios by $50 billion, for a total of $900 billion. The Administration will work with state housing finance agencies, through Fannie and Freddie, in an effort to support agencies in serving home buyers with programs like CalFHA.

Though some details are still being worked out, the plan should need little legislative support as the Obama Administration plans on using programs and funding allocated for the Homeowner Affordability and Stability Plan.

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Offers Coming in Fast in Working Class Neighborhoods

It reminds me of 2003/ 2004. You scan the San Diego MLS for new listings coming on the market within your parameters. Once one hits, you start prepping the offer even before seeing the property. The list price is simply an indicator of where to start the bidding. 5% over? 10%? 12% over list? You write as clean an offer as possible, knowing that this is less negotiation than contract beauty contest. You wait to hear the results…You get back to the drawing board immediately because you know that there were likely 5, 6 or 7 other offers on the place. The phone rings - could it be??? “Hi there, I am sorry to inform you that we have went with another offer. Of the 48 offers we received, we went with one that was all cash, 17% over list price. Thank you for your efforts and I’ll call you if anything changes”.
48 offers. Not sure if that is a record, but it seems it must be getting close. Though this is an extreme case, this is indicative of what is happening with bank owned properties in working class neighborhoods. Buyers are jumping all over them. The interesting thing is that it is not just a product of low interest rates that is driving the demand. Investors are seeing value in prices that range from 30%-50% off peak market prices. The number of CASH offers that are coming through, and coming in high, are astounding. I wouldn’t expect this to be a sign of a shift in housing prices - the County still has over 20,000 homes listed for sale - and much more bank owned inventory that has yet to hit the market. What I do take from this, however, is that if we are not yet at the bottom, we are very close - at least in the working class neighborhoods.

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