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.