Every now and then, I have a well meaning prospective buyer say to me, “I’m already working with an agent, but if you find a good deal, let me know and I’ll use you.”  Sometimes it’s someone I meet at a social event or someone that inquires from my blog.

I think the buyer’s mentality is understandable.  Their intention is twofold: (1) get the feelers out about what they are looking for in the housing market (2) to let me know that I will be compensated if I find them that coveted ‘good deal’.

My response is the same every time:  (1)”Do you feel you are getting good support from your current agent?”  (2) “If so, I would continue to work with them.”  I won’t be calling with the inside scoop on a new listing.

Why, you ask?  Several reasons:

• Is it reasonable and fair to preempt another agent’s hard work?  As a buyer, if you have an agent that is working diligently and consistently on your behalf, it seems reasonable to reward that agent with your business.
• As agents, we often have access to the same data.  Is it simply a matter of who makes the call, or sends the email, fastest and brings you the ‘great deal’?
• If I’m listing a ‘great deal’, I would still want you to be represented by your agent.  It’s always my preference to have a buyer represented by their own agent.
• Let’s say I did come across a screaming deal before it hit the market – Who would I call first with that ‘good deal’?  The clients that are already committed to working with me in their home search, or the person that may work with me if I find the ‘good deal’?
• As a buyer, you may have signed a Buyer Broker Agreement committing you to utilizing your existing agent.
• And lastly, the agents working in the area, comprise an almost small town-like atmosphere.  Those actively working in the business know one another and complete real estate transactions together – often more than once.  Reputation is crucial and undermining agent/client relationships is a career killer.

And one more quick side-note – if there is a ‘good deal’ to be had today, it WILL have multiple offers.  No one calls me asking for a ‘nice overpriced home’ these days.  Everyone is looking for a deal.  The good news, compared to pricing as far back as 2003, it’s all a good deal.

The best strategy, find a home you love, that fits the needs of you and your family, and your budget.  If an agent calls you with the deal of the century, if it’s not in your budget, and not going to support what you really need in a home, it doesn’t matter what kind of deal it is.

If you are frustrated, you are not alone. Buyers and agents alike are very discouraged. This video animation done by SanDiegoCastles, is a tremendous illustration of the consumer frustration that abounds.  If you ever need help in San Diego, Kris Berg is your gal.  Love her!

The real estate market is a strange world right now.  It’s plagued by distress sales, foreclosures, a challenging lending environment, and economic uncertainties, and yet there are certain price points where inventory is so low that sellers are receiving multiple offers within days of listing.  If the home is priced right and it’s under $500,000 – it will sell – fast.

Many investors and fence sitters feel like with the steep declines in values, it’s time to jump back into the Orange County real estate market.  And guess what?  They have cash.  This video done by Tyler Wood - my go-to-guy for all Big Bear real estate needs – illustrates a similar dynamic in their market and raises some important questions for cash buyers to consider.

So what is the value of an all cash offer?

Are YOU one of those cash buyers?

There is no question that coming into a multiple offer situation with cash will give you an advantage if the other offers have to secure financing.  But as Wood points out, you may be finding that you aren’t the only cash buyer.

But even if you are the only cash buyer in a multiple offer situation – what advantage does that give you in your negotiation?  Let’s look at the potential benefits that the seller has when they have an interested, all cash buyer:

1. The question of the buyer’s ability to secure financing goes away.
2. A possible quick escrow period.
3. Less contingencies to contend with.  No loan contingency.  No need  to appraise.

So what is the value of those things to a seller?  What monetary value do you place on that?  Clearly, the answer will vary depending on a seller’s circumstances and how important a sure and quick close is for them.

I know in theory that ‘Cash is King’.  But, I think you’ll find that a seller, if given a choice via multiple offers, will go with a buyer that requires a loan at full price rather than a buyer that is offering 10% off asking just because they have cash.

It’s important to note that at the end of a transaction – whether it’s a cash buyer, or a bank that funds a buyer’s loan, – IT’S ALL CASH.  Either way, the money is the same in the final analysis.

I launched this blog in May of 2008 in an effort to bring information to present and future clients that was the truest representation of what I could provide about the Orange County real estate market.   The constant drone of the Realtor community – “It’s a great time to buy” was making me feel a disconnect with my colleagues.  In early 2007, it was a tough market to sell a home and buying made sense for a handful of clients.  This became a place for me to share information about locations and internal markets within South Orange County specifically.

In the Beginning

When one launches a blog such as this, you go into it knowing that what you write initially falls on deaf ears.  I didn’t mind really.  I love the writing, I love the authenticity of it, and I love the platform.  Information about the vast changes in real estate to share with readers was easy to come by….and over time readership grew.

So What Happened?

The last three months have posed challenges and sadly, I let the distractions get in the way of my beloved blog.  I admit that I abandoned my blog as of late.  With a friend’s passing, an increase in very active buyers, and summer with my kids, I let it get the better of me.

When someone first starts a blog, the hardest part is starting.  It’s the momentum that keeps you engaged once it begins.  I have found that starting up again is just as hard.  But today is the day!

So Welcome Back!

For my readers (if you’re still there) and for those just coming on board, I’m back in the saddle again.  Back to the stuff that connected us before, back to the OC real estate voice.  Thanks for continuing to come back.

What Happens When the Home You Are Renting Forecloses?

Tenant rights have been addressed in recently weeks under the ‘Helping Families Save Their Homes Act’.   On May 20th, 2009, Obama signed the new law that extends the rights of a tenant to stay in the foreclosed property from 60 days to 90 days.

Recently I had a client ask whether this would apply only to homes foreclosed from this date forward or those that have recently been foreclosed on.  From contacting various tenant’s rights groups, it looks as though the 90 days applies to homes foreclosed from May 20th, 2009 and forward, otherwise, it is still 60 days.

Also, it is worth noting that the  following language is included in the law:  “the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property.“  In other words, you still may be required to pay rent to the lender that now owns the property.

If you have questions about your rights, I’m happy to assist. You may also find assistance at various Tenant Advocacy sites.  For example, TenantsTogether.org, California’s Statewide Organization for Renters Rights.

Wagon Wheel is small community in Trabuco Canyon located off Oso Parkway not far from the south gate of Coto de Caza.  The homes were built in the mid 90’s by Kaufman & Broad who subsidized the original mello roos bonds making it known in part, for it’s very reasonable tax rate.

Homes range in size from the condos in the Dakotas (835 to 1,117 square feet) to the gated community of Stonecliff (up to just over 3,000 square feet).

Current market conditions in Wagon Wheel are not dissimilar to Orange County as a whole.  The upper price points remain very slow and the lower price points are plagued by distress inventory.

Market Conditions

Note that there is very little bank owned inventory on the market currently, but given the recent completion of the moratorium on foreclosures, we are seeing Notice of Defaults on the rise again and in the coming months, I expect to see bank owned homes back on the rise in Wagon Wheel and all over Orange County.

The highest sale year to date is in the California Laredo tract at $725,000 in February.  The next closest sale was $600,000.  The poor sale history for the upper price points is  not isolated to Wagon Wheel and is seen across the market due to the lack of available financing and buyer cautiousness.

The highest sale in the last 30 days was in the California Landmark tract, a traditional sale for $556,000.  Between $500,001 and $750,000, there are 5 available properties and 3 in escrow.

Under $500,000 is plagued by distress sales.  Currently 4 out of 5 active listings are short sales, yet the 4 equity sellers currently in escrow reflect the buyer demand – buyers are often reluctant to wait out the lengthy short sale process and opt for a traditional sale.

Questions?

If you are wondering how these statistics and trends impact your buying, or selling process, please don’t hesitate to let me know.  I’m always happy to help.  No pressure and no obligations.  I can be reached at (949) 939-2514 or emailed at linsey@ocrealestatevoice.com.

This information and stats are from SoCalMLS and are deemed reliable but not guaranteed.

This video is a bit dry – but good news – it’s relatively short. Hang in there with it and there is some good information from Lawrence Yun, NAR’s Chief Economist.

During the final months of 2008, many lending institutions participated in a voluntary moratorium on foreclosures.  Notice of Defaults (NOD’s), the first step in the foreclosure process in California, plummeted.   The final days on the moratoriums have just passed.  Fannie Mae and Freddie Mac’s were lifted as of March 31.

And if you’ve been paying attention to my ‘Microscope on the Market’ series, you’ve noticed the drop in bank owned homes on the market – hence the second half of that headline, ‘Foreclosure Sales Drop’.  Without the new NOD’s, there’s been a dramatic reduction in bank owned homes.

Notice the following chart that tracks Notice of Defaults and Foreclosure sales.  The green line represents California’s NOD filings.  Notice the arrows – the dramatic dip in September and the sharp rise as of March ‘09.

With the rise in filings, we can expect the foreclosures to rise.  Will Obama’s plan help?  My guess is no for Orange County.  Why?  The loan modifications the banks are offering, by and large, don’t change the significant negative equity that many of these homeowners are facing.  Without a substantial equity reduction, many sellers (who’ve already seen their credit damaged) will opt to walk away from the property.

What does this mean for buyers and sellers?  If we see a large rise in distress inventory, this market may see some downward pressure on pricing – although in some of the lower price points, overall inventory is still low (especially if you remove the difficult short sales).  I would expect that demand for this inventory will remain high – as we have seen in recent months.

One interesting note in the Foreclosure Radar report:

The California Foreclosure Prevention Act, which goes into effect this summer, adds an additional 90 days to the foreclosure process if lenders fail to take certain actions.  It is quite possible that the dramatic rise in foreclosure notices occuring now is an attempt by lenders to process as many foreclosures as possible before this law takes affect.

If you are interested in viewing foreclosure data and bank owned homes don’t hesitate to contact me.

This post is LONG, but if you are thinking of buying a short sale (or if you’re an agent looking for an outlet for your short sale frustrations),  PLEASE read.  Understanding this information is a must.

I completely understand the allure of the short sales when you are a buyer.  The prices are attractive and there are SO many of them.  They have become a  necessary evil of the Orange County real estate market.  I get it.

If you really want to pursue a short sale, be forewarned.  Know what you are getting into, understand the risks, the pitfalls, and what is  required to make them happen from a buyer perspective.  They may, or may not, be worth it.

What is a Short Sale?

The seller’s obligations in a sale (loans, encumbrances, and closing costs), exceed the value of the property.  The seller must prove a hardship (job loss, wage reduction, divorce, health crisis, lack of assets) to qualify for a short sale.

A Few Realities

• There is no Standard Operating Procedures for the banking industry to handle short sales.  Every bank has different guidelines and manages them differently; even negotiators within the same bank manage them differently.

• This is important:  Nearly across the board, a banking institution will not consider a seller’s hardship application until they submit an offer with a short sale.  What does this mean to a buyer?  Your offer is used to see if they qualify in the first place.  You may sit in escrow for weeks while the bank considers not your offer, but the seller’s circumstances.

• There is no Standard Operating Procedures for how agents handle their short sale listings.  Frankly, I think there is a lot of irresponsibility in this area.

• Many agents leave their listings ACTIVE in the MLS even though they have an offer submitted to the bank.  Once an agent has a good offer with a solid buyer, it should go in Backup position.  The bank will only look at ONE offer – highest and best – anyway.  Why waste an agent’s time, a buyer’s time and emotion, showing a property that is not really available?

• Even Banks will ask the listing to remain Active after an offer is submitted.  Note the conversation with this agent on Twitter.

• The SoCalMLS has a Special Condition field where agents are required to specify that the short sale has an offer submitted to the bank.  Unfortunately, most agents don’t use it.

• An ‘Approved Short Sale‘ does not necessarily mean that the process will go any faster.  See Countrywide’s response on my short sale last year.

• A short sale process will take as little as 60 days (very rare) or as much as 4 to 6 months (common).

• The list price is not a reflection of what the bank will, or will not, take. The listing price is positioned to generate offers.  Remember, the bank hasn’t even looked at these seller’s situation yet, let alone evaluate the the market value of the home.

• There may be past due HOA fees, property taxes, or other expenses, that the bank will ask for a buyer to cover.

• If the seller declares bankruptcy during the process, your deposit becomes a frozen asset that you likely wait a fair amount of time to recover – if you do.

• Many short sales ultimately foreclose.  Why?  If you find out please tell me.  There is often NO LOGIC in the way banks (and investors) approve, or disapprove these.

• More banks are trying to do loan modifications for sellers rather than approve short sales and in some instances, they are incentivized by the government to do so.

Real Life Examples

The following are scenarios that have been experienced by me, my agents, colleagues, and my buyers.

• My Listing last May:  I had 8 offers in 3 days.  The highest was $580,000 and it took 4 months to get an approval from Countrywide.  By the time it was approved, the market value had fallen precipitously and the buyer was no longer interested.  When I asked Countrywide if the process would go more quickly with a new buyer given the hardship had been approved, their response was that the each buyer was a new file and they couldn’t provide better than a 4 to 6 month time frame.  The home sold for $490,000 4 1/2 months later.

• An agent within my company, had a short sale in escrow with a solid buyer for 90 days.  The bank asked the insolvent seller to come to the table with $3,500 on the $165,000 sale.  When the seller was unable to, the bank refused the short sale.  The home is currently vacant and worth about $145,000 6 months later.  Currently, it’s not in foreclosure and the seller hasn’t made a payment in about a year.

• This week alone, I’ve shown 2 different short sales, marketed on the MLS as Active, that already had offers submitted to the bank without notation in the listing.  When I called expressing my buyer’s interest in one of the properties, the agent subsequently told me, ‘the deal is done’.  When asked, “Then why is it active?”, his response was, “Don’t tell me how to run my business, sweetheart.”  BTW – Don’t call me sweetheart unless you’re loving me or you’re my husband. 

• One of my recent short sale listings was in escrow 60 days with a qualified, ready-to-go buyer.  In that time, the bank reviewed the seller’s hardship, denied it, and offered a very poor loan modification.  Buyers lost 60 days and their offer was never considered.

• I currently have an investor buyer in escrow on an ‘approved short sale’. We’ve been in escrow 90 days on a property that had an Notice of Default filed in March 2007!  Not only has there been no news, the listing agent has told me essentially – don’t call us, we’ll call you if there is an update.  Not very reassuring to my buyer.

This is the tip of a massive iceberg.  So if you want to buy a short sale, you certainly have my blessings.  Just be armed with patience, don’t become emotionally attached to the property, and be prepared to potentially go through the process more than once.

If you have questions, if you think I’ve gotten any of this wrong, or if I’ve just scared the hell out of you – leave a comment or give me a call.  Happy to chat with you.  If you want to create a strategy to buy in Orange County – whether it’s a short sale, bank owned, or an equity seller, just let me know and I’m happy to help.

Happy House Hunting!

Today’s Microscope on the Market focuses on the Laguna Niguel real estate market.

Homes Under $500,000

In the under $500,000 market, Laguna Niguel does not vary from any of the cities I focused  on in South Orange County with a whopping 63.9% of the active properties in a short sale situation.  Couple of things to note – it would appear that there is significant movement with 71 properties in escrow.  Sadly, 38 of them are short sales and those can sit in escrow for 60 to 180 days and that can skew the perception of significant movement.  Notice only 18 have actually closed escrow in the last 30 days.

I want to also point out the very low number of bank owned inventory.  Pay close attention to this number in the coming months.  It will increase again based on the end of the moratorium on Notice of Defaults.  Filings are back up to levels prior to the moratorium so watch for this number to increase.

Also of note, despite the large supply of short sales, buyers still look to bank owned homes and equity sellers for their purchases by a significant degree in relation to the supply.

Homes $500,001 to $750,000

Again, despite the large number of short sales, buyers love bank owned inventory and it doesn’t last on the market and their is still a significant demand for reasonable equity sellers.

Homes Over $750,001

As I noted in Coto last week, there is just very little in the upper price points that is moving.  At this rate of consumption (12 homes a month), we have a 12.25 month supply of homes.  If nothing else were to list in this price range, it would take us over a year to consume the existing inventory with current buyer demand.

The good news in Laguna Niguel – there is very little bank owned inventory and very few short sale listings.  That can be good news for values in the coming year.  I’m not suggesting any appreciation guys – but even with slow sales, these folks may have the financial strength to hang on.