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 If a property listing is canceled, withdrawn or expired and then re-listed, days on market is re-set to zero.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.

Fun With Foreclosures

The foreclosure glut continues here in San Diego County, and there are new twists every day just to keep life exciting! For example, we have a bank who refuses to sign the Smoke Detector and Water Heater disclosure even though it is required by California law. The bank's response? "WE DON'T CARE WHAT CALIFORNIA LAW SAYS." So Mr. Buyer, if you want this bank owned property you have to buy it without the protections afforded you by law, because the bank DOESN'T CARE WHAT THE LAW IS. Definitely buyer beware!

And the buyers are out there clamoring for these properties. Just this morning I checked out 96 homes for a few potential buyers I'm working with in North County. Most of them were in bad areas or short sales. The best one is a bank owned property in Rancho Del Oro, a nice family area of Oceanside. 1919 square feet built in 1996, listed for $343,900.


This property has been on the market for 10 days, and if definitely a good deal. Here's the catch - there are 30 (thirty) offers on it as of this morning! Countrywide bank, the seller, has countered everyone verbally with "highest and best", meaning take your best shot. So the house will definitely sell for significantly higher than the asking price. As I said in a previous blog posting, you have to look at these things as an auction, with the listed price merely the starting point for the bidding.

How high will it be bid up? This last week we were working with a buyer who made a $350K bid, all cash, close in two weeks, on a bank owned property that was listed at $308,900. We didn't get it! I won't know what it sold for until it closes escrow, but it had to be more than $350K, or at least 13% above asking price.

Now here's the point I want to drive home - there were 30 offers! In this supposedly dead market where no one is interested in real estate anymore, thirty buyers were looking for property, saw this one and made an offer on it. Thirty! What does that tell you? What it tells me is that there is an enormous pent-up demand for housing in this highly desirable area of the country. I promise you, for every buyer who is out there trying to find a good property today, there are ten more who are sitting on their hands waiting for the bad news to blow over. And when it does, there will be buyers flooding the market, there will be panic buying, and prices will rise very quickly. Mark my words!

Geocaching

Since I watch my granddaughter Grace part of the day on Wednesdays, it's a great time to go geocaching, or as she calls it, "treasure hunting". This involves taking a handheld GPS, going to coordinates of the cache, and then looking around trying to find it. Sort of like "I spy" but in the real world. If you've never tried it, geocaching is a great excuse to be outside on a beautiful day exploring places you would never have discovered on your own.




Today our destination was Oceanside Harbor, where we found this cache of toys and goodies near the "heron tree", the Eucalyptus tree that is home to nesting herons this time of year. Down the road was another treasure chest, where we had a fun climb up a grassy slope to retrieve it, and even more fun sliding back down!

So thanks to geocaching, we had a fun afternoon at the harbor. We saw sea lions, squirrels, pelicans, herons, and we had delicious ice cream cones! Without the cache as an excuse to go there, we probably would have gone to the same old park down the street.

And the best part is that my granddaughter is learning that there is treasure everywhere if you just look for it.

Short Sales 101

Here's the real truth about short sales. When a seller cannot sell his house for enough money to pay off the loans against the property, that is called a short sale. For a short sale to work, the bank has to (1) agree to let the property be sold and (2) agree to take less than what is owed.

The bank does not have to do this. They have every right to foreclose on the property and take possession of it. Then the house is known as a "bank owned foreclosure" or an "REO", which stands for Real Estate Owned. It can be argued that it is in the bank's best interest to do the short sale, because after all, they will incur legal fees if they foreclose, the house will sit vacant and can be vandalized, they will have carrying costs, they will still have to hire an agent to sell it, and during all this time the value could drop even further. So it makes sense that a bank would cut their losses and accept a short sale.

Having said that, you must realize that we are not dealing with a rational person, but with a robotic entity, the bank. They may have their own reasons for wanting to foreclose rather than accept a short sale, for example, the numbers show up on different columns in their financial statements, or they may just be kicking the can down the road hoping for some kind of government bailout. The bottom line is, no matter what their reasons are, or even if they have any reasons at all, they do not have to do a short sale. And they don't have to do it even if the real estate agent says the bank has already approved a short sale. The guy who approved it might have been fired, and now there's a new guy who says no.

But let's assume we can get the bank to go along. Now at what price? The bank will do its own appraisals, inspections of the property conditions, market conditions, etc, and will usually take several months to complete their homework. Then they will come up with a price. This price has NO RELATIONSHIP to the listed price. The listed price was just a "teaser" price that the agent came up with to generate activity on the property.

In other words, the seller doesn't care what the price is - he gets zero. So the agent picks a price low enough that he can generate some offers to take to the bank. Of which the bank may reject them all.

So let's say you make an offer because the price is really low, in fact it looks too good to be true. If the price really is that low, what do you think is happening during the 3 months the bank is considering your offer? That's right, other offers are coming in, most likely better than yours. A common tactic of the bank is to counter everyone with "highest and best", meaning take your best shot. Then the bank will accept the best offer and reject the others. So after 3 months of waiting, you have nothing.

So you can do a short sale, as long as you go in with your eyes open. Look at the price as the opening bid in an auction, because that's really what this is. Unfortunately, if you're looking at properties on Realtor.com or some other website, you can't tell what's a short sale and what isn't. All you see is what appears to be a bunch of low priced homes and you can easily get a wrong impression of the market.

Here's what works better - if you're serious about snagging a good deal, it's usually better to go after the bank owned properties. These properties are owned by the bank, the ultimate motivated seller. They put a real and not imaginary price on the house, which they really will accept, and it won't take 3 months to get an answer. You'll be comfortably living in the sweet deal of a home you purchased, while those chasing the short sales will still be at it.

San Diego Foreclosures - A Seller's Market?

We have several bank owned properties in escrow, and here's what we've learned.

The price in the MLS is probably not what the house will sell for. I know you're thinking sure, it will sell for less, but no, it will probably sell for more. Here's why - banks usually reduce the price of a home in big drops, with the aim of generating multiple offers. In other words, if a house generates no offers at $400K, they don't drop it to $380K, they will drop it to $350K. This will create multiple offers and the property will get bid up, so that it will sell someplace between $350K and $400K.

Think of the price as the starting price at an auction, because that's what it is. The bank may play one offer against the other, or it may counter everybody with "highest and best", meaning you have one more shot to make your highest offer and then the bank will decide which offer to take. Or they may simply accept an offer other than yours and you miss out.

It seems buyers have this idea to wait until the bank drops the price, and then offer less. I'm telling you that strategy will not be successful. We lost a bid on a bank owned property in Idyllwild by trying that. We have 3 offers out on bank properties right now for clients of ours, and they are all multiple offers. Yes, multiple offers, today!

I feel like I'm in the middle of a seller's market, even though it's a buyer's market! The seller dictates the terms, picks the services, and makes you sign an addendum where you may have no time for inspections, and you must buy the property "as is" or lose your deposit. We just saw a title insurance report where they specifically exclude any claims arising from the foreclosure process. Of course this was the policy mandated by the bank, and you can't choose another title insurance company. And how about $500 per day penalty if you don't close on time! Does this sound like a buyer's market to you?

There is no negotiation like you would do with a human seller, because you are dealing with an inhuman entity. And still buyers tell me that they think they will stroll up to the bank and make a low-ball offer and get that property for 50 cents on the dollar, because after all, they have cash. The robots at the bank could care less, and so could the listing agent who has 200 listings and has no time for frivolous offers.

Oh, and I forgot to tell you, the bank usually drops the price on Thursday to increase the odds of getting multiple offers. You make your offer on Thursday or Friday. Of course they won't answer you right away, and they are closed weekends. So by time Monday rolls around, there will be more offers on their fax machine besides yours. And they will review them when they get to it. No amount of prodding of the bank or the agent (if you can actually talk to one) will be effective. You must simply wait for a response.

I know this sounds glum, but I'm trying to educate you to today's reality so you can be successful and actually snag a good deal. We have several escrows going right now with bank owned properties, and a few more in the works. So we know what works and what doesn't. If you are serious about getting a good buy on a bank owned property, I can make that happen for you. But you will have to be teachable, and you may have to forget what you read in a book or heard in a seminar.