FDIC Insured?

Picture this: my dad is in line at IndyMac Bank and in front of him is an elderly woman crying her eyes out because she can only get back $100,000 of the $300,000 she deposited in the FDIC insured bank! True story!

It turns out there are some tricks involving living trusts that can really bite you if your bank fails. This one involved beneficiaries that were not related to the depositor, so don't assume that if there are 3 people on the account, that it is FDIC insured up to $300,000.

The FDIC states that "no one has ever lost a penny of insured deposits", and the question you have to ask is "what exactly are insured deposits?" They tell you in this publication:
http://www.fdic.gov/deposit/deposits/insuringdeposits/index.html

So if you have more than $100,000 in any bank, please don't assume anything but check to make sure your deposits are really FDIC insured.

Adventures in Ocean Hills Country Club

It's been a while since my last post, Crystal and I have been super busy! We purchased a fixer house in Ocean Hills Country Club, which is the best senior community in San Diego. Since we do a lot of business there, we know the market well. So this property came up that needed work, and the heir didn't want to deal with it, and so we bought it at a fixer price. We then proceeded to rehab the property and within 2 weeks, we are now on the market.

The work begins.....

This home is now for sale, you can see more pictures at http://www.4746athos.com/!

Our hope is to make some money on this to help pay for the cabin addition (I'll talk about that in the next posting). Is it nerve-wracking to try to flip in this market? Yes, it is. Time is our enemy, as the market is going down and carrying costs can destroy any profit we hope to make. Nevetheless, we have to try. What other choice do we have? Give up and do nothing? Wait for a better day? I admit, it is tougher to make money when you're swimming upstream. But in a better market this opportunity would not have presented itself, since a couple years ago even fixers were selling quickly and for top dollar. Today buyers can be more picky, and will pass over properties that are in bad shape, which leaves a potential opportunity for those willing to do the work of fixing them up.

So did we make a huge mistake? Will we end up with no money and only the experience? (Experience is what you get when you don't get what you want!) Stay tuned!

The cabin continues...

Many of you know that we are attempting to build a free and clear cabin in Idyllwild using only money made from real estate investments, and not from the salary we earned by working. Well, we've had a few setbacks with the market going south as it has. Plan A was to sell a piece of land we have in the high desert but the market evaporated. Plan B was to sell the present small cabin that we have and use that for construction money. Well, the cabin that was worth $300K is now worth 225K, so plan B doesn't work either. It will still take $350K to build the cabin, and so how to do it?

So we put our thinking caps on and came up with Plan C. By the way, this exercise is to teach all of you how to use real estate to buy real estate. I could build the new cabin with an equity line, and then pay it off in time, but what can you learn from that?

So here's the plan. We are building an addition on the small cabin we now have in order to increase it's value through sweat equity. I admit this is tough to do in the current environment, where it seems that it costs more to build that it is worth when you're done. But in Idyllwild there are plenty of 2 bedroom cabins for sale, but anything with 3 bedrooms is worth at least $300K. So we're adding that extra bedroom and bath and hoping that will get us close enough to start building the ultimate cabin! The photo above shows some of the firewood from the 4 Jeffrey Pines we had to cut down to make room for the new addition!

You may ask where the $30K is coming from to build the addition? From real estate of course. We are in the process of buying a home and expect to fix it and flip it for a profit. Whoa! Flipping in a declining market? Not for the faint hearted to be sure. Stay tuned - the adventure begins next week!

Darndest buyer's market I've ever seen

It's been a heck of a few weeks! Homes in good locations under $400K are getting multiple offers, and most are selling substantially above the asking price. Watch for exciting numbers to start hitting the news when these properties close escrow!

Buyers I meet at open houses are frustrated that they can't seem to buy a house! It's either a short sale (like watching grass grow) or an underpriced bank owned property (start the bidding war). There are darn few real sellers willing to sell into this market! Most are just staying put and waiting out the storm. So the reality is that buyers are having a heck of a time. They are making lots of offers that don't go through, and it's not because they are trying to lowball, it's because they are being outbid.

The investors are coming out, as well as boomers buying homes for their kids who haven't been able to afford anything until now. These savvy buyers are snapping up the best properties, offering all cash and closing in 14 days, music to the bank's ears. Imagine you're the bank - would you rather sell to a buyer like that or to the first time homebuyer using FHA 3% down financing that could take 60 days? What would you do if it were up to you? Right, and so would the bank. So you see why many buyers are frustrated.

And yet the news keeps printing the same old, same old. This morning I saw the big headline that home sales were down 1 percent in April. Keep reading to paragraph 5 to find out that sales were UP 6.4 percent in the West.

This house in Oceanside came on the market this week at $364,900. We offered $380K and were outbid. Sold in 5 days. Darndest buyer's market I've ever seen.

Home and Condo Sales Continued Rising in March

Sales of single-family, re-sale homes rose 15.4% from February, reaching the highest level since last August. Year-over-year, home sales were off 33.2%.

The median price for single-family, re-sale homes in San Diego County was flat in March at $440,000. Year-over-year, the median price of homes was down 24.1%. The average price for homes rose 5.2% from February, off 15.1% year-over-year.

Condo sales gained 17.5%, month-over-month, down 37.2% compared to last March.

The median price for condos was also flat at $295,000, off 21.3% year-over-year. The average price for condos fell 0.2% month-over-month, down 14.8% compared to last March.

Remember, these are statistical prices. When the market was going up, the large number of million dollar plus sales skewed prices upward. With the large number of bank-owned properties going through the system, prices are being skewed downward.

The sales price to list price for single-family homes fell 1.4 points to 93.1%. The ratio for condos dropped 0.4 of a point to 94.5%.

Days on market for homes fell three days to 81 days. Days on market for condos rose one to 87 days. Take these numbers with a grain of salt. If a property listing is canceled, withdrawn or expired and then re-listed, days on market is re-set to zero.

The real estate market is very hard to generalize. It is a market made up of many micro markets. As Leslie Appleton-Young, chief economist for the California Association of Realtors, recently said, "Knowing the median price is interesting, but it is as indicative of the value of your home as knowing the median temperature in America is to predicting the local weather." For complete information on a particular neighborhood or for an evaluation of your home's worth, call me.

San Diego Homebuyers' Expo

The first-ever Consumer Homebuyers' Expo coming to the San Diego Convention Center next month. The San Diego Association of REALTORS® and the Building Industry Association of San Diego County have partnered for this one-day event that will take place on May 10 from 10 a.m. to 6 p.m.

The expo will feature free seminars addressing a variety of topics in both English and Spanish including:

How to Qualify For a Home Loan;

the Dos and Don’ts of Home Buying;

Energy Saving and Green Opportunities;

How to Choose and Work with a REALTOR®;

Understanding Your Credit Score;

Finding a Loan that Best Suits Your Budget;

Understanding the Tax Benefits of Homeownership; and more.

Prospective homebuyers will learn how to navigate through Southern California's real estate market while getting the opportunity to meet with more than 200 industry vendors and experts.

Admission is free with this coupon!

655 to Zero in 5 Seconds

The current chaos in the lending industry is presenting us with new challenges all the time. A few weeks ago we were hit with banks reducing or freezing equity lines causing fits for those who were counting on their HELOCs as swing loans, or to purchase property when a good deal came around. So I advised my clients to take the money out now if they thought they were going to need it later this year.

Now we have another wrinkle - credit scores. Have you ever heard of someone having NO credit score? A FICO score of ZERO? This just happened to a buyer who was pre-approved for a loan, had a credit score of 655. Purchased a property. Then the lender went to double-check the credit score, and it dropped from 655 to zero overnight. The reason? The buyer didn't have enough "activity" going back two years to generate a score. It used to be that if you didn't borrow a lot of money and didn't havde a lot of debts to pay back, that was a good thing. Well in 2008 it's now a bad thing. FICO has decided that without enough recent evidence that you faithfully pay credit back on time, they will not issue a score.

The moral of the story is that if you want a credit score, you must have "activity" in the past two years. I don't know how much activity or what kind of activity, only FICO knows, and they hold your credit score in their hands. Scary.