San Diego's Real Estate Library

Investors Back in the Market, Cash is King

dkaiser@realestatelibrary.com (Dennis Kaiser) — Tue, 16 Feb 2010 23:57:00 +0000

Investors are back in the market, and they’re paying all-cash, mostly for property under $500,000. The effect is to freeze out first-time home-buyers who need a loan. Banks are still chary about providing loans. About the only loans left for first-time buyers are FHA and VA loans.

So, while the first-time buyer is working through the loan process, the investors are swooping in and buying the best property, which, after making minor repairs, they are putting back on the market. Sometimes, they rent out the property hoping for more appreciation down the road.

Appraisals are also affecting buyers who need a loan. Appraisals lag the market because they use past data, typically six months worth, to calculate current market value. When a market has bottomed out and begins rising, appraisals often come in under the value agreed upon by the buyer and seller. Banks are requiring buyers to come up with extra cash to make up the difference. First time buyers are having a hard time doing this, so we’re seeing many more sales fall out of escrow than normal.

Another thing hanging over the market is the so-called “shadow inventory” of bank-owned property that has not been put on sale. How many properties the banks are holding is a mystery, but, they may not be accumulating as many as the pundits believe. Large investing companies are buying multiple properties at the foreclosure auctions. The banks have finally realized it’s better to take their losses there rather than go through the time and expense of re-habbing and putting the properties on the market..

Home and pending sales were down in January, which is not unusual at this time of year.

The decline in sales is not a result of reduced demand, we are seeing multiple offers on the best properties in the best neighborhoods, rather it was produced by a lack of inventory, or should I say, a lack of desirable inventory.

We expect sales to regain their momentum through the Spring because of the extended tax credit and because this is historically the prime time for home sales. After that, all bets are off.

Remember, the real estate market is a matter of neighborhoods and houses. No two are the same. For complete information on a particular neighborhood or property, call me.

P.S. The FHA requires all condo projects to be re-certified before they will make a loan. To find out if the condo project you’re interested in is eligible, go here: https://entp.hud.gov/idapp/html/condlook.cfm

San Diego County foreclosures drop in December

dkaiser@realestatelibrary.com (Dennis Kaiser) — Thu, 14 Jan 2010 00:33:00 +0000

San Diego County saw the number of foreclosures drop across the board in December. There were 1938 Notices of Default filed versus 2565 in November, 2008 Notices of Trustee Sale versus 2119 in Novemeber, and 814 properties went back to the bank versus 953 in November.

We know that several banks announced that they would not be foreclosing nor evicting people during the holidays. "The dramatic drop in foreclosure activity may have been a Christmas gift to homeowners," says Sean O'Toole, founder and CEO of ForeclosureRadar.com, "however, giving rising mortgage delinquencies it is becoming increasingly clear that foreclosure activity no longer fully represents market realities".

In other words, the market really isn't what the numbers the numbers say. The shadow inventory is alive and well!

What you weren't told about November's foreclosure numbers

dkaiser@realestatelibrary.com (Dennis Kaiser) — Wed, 16 Dec 2009 19:06:00 +0000

"Figures don’t lie, but liars sure can figure."

This quote by Mark Twain has never been more relevant than in our day. With contradictory statistics bombarding us daily, a thinking person has to wonder what’s real and what is a lie.

Let’s do a real life example. In November there were 29,597 Notices of Default filed in the state of California. In October there were 36,531. Now suppose you see a news report that reads “Foreclosure filings drop 19% in November, another sign that the recovery is well under way.” Is that true?

Well the first thing is that the article writer has an obvious agenda, that of convincing you that a recovery is well under way. News reporting should be objective, meaning that reporters should not draw far-reaching conclusions from one data point. The second thing is that the statistic itself is a lie.

Do the math and you will see that there were 6934 less Notices of Defaults filed in November than October, and then divide that by 36,531 to see that the number is indeed 19% less. So how is it a lie?

Well here’s what you weren’t told - there were only 18 recording days in November versus 22 in October! The lower total in November was due to the difference in the number of days documents could be recorded and NOT fewer filings each day. 36531/22=1660 per day for October and 29597/18=1644 per day in November, a difference of only 1%.

So please be very skeptical about what you see in the news. To get the facts today you have to avoid the slanted reporting and do your own research. One source that I use is Foreclosure Radar (www.foreclosureradar.com). According to their December newsletter, “The simple reality is that homeowners are continuing to enter foreclosure faster than they are coming out. This will likely continue until we see meaningful progress on loan modifications, or the often predicted “foreclosure wave” finally occurs.”

dkaiser@realestatelibrary.com (Dennis Kaiser) — Wed, 02 Dec 2009 03:32:00 +0000

The banks' solution to the mortgage crisis these days is to "amend, extend and pretend." This video talks about "shadow inventory", "strategic default", and from the street predictions about 2010.

How To Buy A Bank Owned Property - Part 2

dkaiser@realestatelibrary.com (Dennis Kaiser) — Thu, 19 Nov 2009 03:27:00 +0000

Here's how to buy a bank owned property (REO) in San Diego County.

How To Buy A Bank Owned Property - Part 1

dkaiser@realestatelibrary.com (Dennis Kaiser) — Tue, 17 Nov 2009 15:59:00 +0000

Frustrated trying to buy a bank owned property in San Diego? This video teaches you how to succeed.

This Changes Everything You Knew About Short Sales

dkaiser@realestatelibrary.com (Dennis Kaiser) — Tue, 17 Nov 2009 03:29:00 +0000

I just came back from a meeting with the Regional Sales Manger, REO Division, for a major bank. He told me that they have a new streamlined short sale process that should make the process very similar to a conventional sale. Go from offer to closing in 30 days!

It's been very successful in Northern California and they are now going to offer the proram in Southern California. I won't go into the details here, but part of the motivation is that they have incentives from the government to do short sales instead of foreclosures.

Their goals are:
1. Modification first using Home Affordability Modification Program guidelines (HAMP);
2. Do a short sale if possible
3. Foreclosure is the last resort.

And this one really floored me, you don't have to be behind in your payments! Even cash for keys is possible! These are exciting developments that could really help you if you find yourself struggling to make those mortgage payments. Call me right away to see if this applies to you, what have you got to lose? 800-469-6391.

Gov't Housing Coming To Your Neighborhood

dkaiser@realestatelibrary.com (Dennis Kaiser) — Wed, 11 Nov 2009 23:22:00 +0000

Sometimes I feel like I've entered the Twilight Zone, that I've been transported into a parallel world where different rules apply. Consider this recent news release:

"Fannie Mae announces “Deed for Lease™” program
Fannie Mae last week announced a new Deed for Lease™ program. Deed for Lease allows borrowers to transfer their property back to the lender and then lease back the house at market rate. The lease period is for up to 12 months, with possible month-to-month contract extensions after that period. The program is designed for borrowers who do not qualify for or have not been able to obtain other loan-workout solutions, such as a loan modification.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of borrowers in this circumstance also may be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31 percent of their gross income."

Does anyone have the slightest clue about the consequences of this? Imagine Fannie Mae (owned by the government) operating rental houses on your block. I shudder to think what this means to the real estate market, but I'm sure I'm worrying for no reason. Since the government is running this program, I'm sure we can expect nothing but efficiency and success.

How to Make Your Home Affordable

dkaiser@realestatelibrary.com (Dennis Kaiser) — Wed, 11 Nov 2009 18:32:00 +0000

The Home Affordable Modification Program (HAMP) is the government modification program that President Obama put into place. This program is only available for owner occupied residences. It requires that a homeowner make 3 payments on a trial basis before Servicer can process the modification to see if it can become permanent.

HAMP is designed to help as many as 3 to 4 million financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over the long term. The program provides clear and consistent loan modification guidelines that the entire mortgage industry can use.

Borrower eligibility is based on meeting specific criteria including:
1) borrower is delinquent on their mortgage or faces imminent risk of default
2) property is occupied as borrower's primary residence
3) mortgage was originated on or before Jan. 1, 2009 and unpaid principal balance must be no greater than $729,750 for one-unit properties.

After determining a borrower's eligibility, a servicer will take a series of steps to adjust the monthly mortgage payment to 31% of a borrower's total pretax monthly income:
First, reduce the interest rate to as low as 2%,
Next, if necessary, extend the loan term to 40 years,
Finally, if necessary, forbear (defer) a portion of the principal until the loan is paid off and waive interest on the deferred amount.

To see if this will work for you, contact the HAMP Support Center at 888-995-HOPE.

Have you explored all of your loan options? If you need help, call us for free, no-obligation information for distressed homeowners.

How To Buy A Short Sale - Part 2

dkaiser@realestatelibrary.com (Dennis Kaiser) — Wed, 04 Nov 2009 05:39:00 +0000

How To Buy A Short Sale - Part 1

dkaiser@realestatelibrary.com (Dennis Kaiser) — Tue, 03 Nov 2009 05:04:00 +0000

Dave Liniger's Predictions

dkaiser@realestatelibrary.com (Dennis Kaiser) — Tue, 20 Oct 2009 02:25:00 +0000

We’re back from Salt Lake City where we heard Dave Liniger’s predictions about the real estate market. Dave is the CEO of RE/MAX International. The session was titled “Demand Success” and we learned what we needed to know to ensure success for our clients, whether they need to sell or want to buy or invest.

Some highlights:
Expect 8 times as many short sales in the year ahead.
REOs and short sales will continue to dominate the market for the next 2-3 years.
Matures and Boomers are downsizing, looking for a nice lifestyle for less money.
It’s more important than ever for agents to be experts in distressed property.
Social networking is here to stay.

I couldn’t agree with Dave more! That’s why I hold the SRES (Seniors Real Estate Specialist) and CDPE (Certified Distressed Property Expert) designations! For expert advice about downsizing, getting out of an upside down property, or buying a foreclosure, you can contact me any time. Or you can follow my postings about these topics on this blog, Facebook, or Twitter!

Mill Creek Canyon looking down towards Salt Lake City.

C.A.R.’s 2010 Housing Market Forecast released

dkaiser@realestatelibrary.com (Dennis Kaiser) — Thu, 08 Oct 2009 02:07:00 +0000

The median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 this year, according to C.A.R.’s "2010 California Housing Market Forecast," presented today at CALIFORNIA REALTOR® EXPO 2009 in San Jose. Sales for 2010 are projected to decrease 2.3 percent to 527,500 units, compared with 540,000 units (projected) in 2009.

“California’s housing market continued its strong sales rebound this year, resulting from the continued pace of distressed properties coming to market,” said C.A.R. President James Liptak. “This follows two years of double-digit sales declines in 2006 and 2007. Looking ahead, we expect sales to moderate to a more sustainable pace.” “After experiencing its sharpest decline in history, we expect the median price to rise modestly next year,” Liptak added. “2010 will mark the beginning of the ‘new normal’ for California’s housing market. This ‘new normal’ likely will feature a steady stream of sales driven by distressed properties in the low end of the market, coupled with moderate home-price appreciation.”

“With distressed properties accounting for nearly one-third of the sales in 2010, inventory will be relatively lean, under six months during the off-season months, and a roughly four-month supply during the peak season,” said C.A.R. and Vice President Leslie Appleton-Young. “We expect the median price to decrease slightly through the remainder of 2009 and into next year, then rise before leveling off next summer. For the year as a whole, home prices are forecast to reach $280,000. The wild cards for 2010 include foreclosures, loan resets, the labor market, and the California budget crisis, as well as the actions of the federal government.” - Source: California Association of Realtors

Those are serious wild cards indeed! In my opinion, this is a bit like saying if I jump off this cliff I expect to fly, but the wild cards are the weather, wind velocity, and gravity. What do you say?

Fed Decision Will Shake Things Up

dkaiser@realestatelibrary.com (Dennis Kaiser) — Tue, 29 Sep 2009 21:05:00 +0000

"BE WILLING TO MAKE DECISIONS." General George Patton. And that's exactly what the Fed did last week at their regularly scheduled Federal Open Market Committee meeting. But just what did they decide...and what do their decisions mean for home loan rates?

The Fed said they are going to ration out the remaining commitment of Mortgage Backed Security purchases through the first quarter of 2010. There will be no additional buying, but instead, a longer weaning off of the program. There was some speculation about the Fed increasing the amount of buying above the $1.25T committed to, and last week's statement is the Fed's nice way of saying "no." They will not be buying more in quantity, but what they will do is attempt to provide a smoother transition to normal market conditions.

It is a given that once the Fed ceases its purchases, that interest rates will climb significantly higher...most likely back above the 6% area. So instead of a hard transition with a large bump in rates, the Fed is attempting to allow rates to gradually rise. This means that waiting to purchase or refinance will very likely mean a higher interest rate.

Their decision also means that the Fed's remaining purchases will all be lower in quantity, as the remaining allotment for purchases will be spread over a longer period of time - and additionally, will not necessarily be spread out as evenly as their past purchases - which could lead to more volatility for rates in the near term.

In other news, the inventory of unsold existing homes fell to its lowest inventory level since April 2007, while the inventory of unsold new homes dropped to its lowest level since January 2007. While some of the decline in new home inventory may be due to builders constructing fewer homes - these reports indicate that the housing market is indeed showing signs of life.

Remember, with home loan rates still low - but slated to increase with the Fed's recent decision - it might make sense to get off the fence if you've been considering a purchase or refinance. Or do you have a family member, neighbor, friend or coworker who might benefit from getting some good real estate advice? I'll always take good care of your referrals!

Crazy Advice That Works

dkaiser@realestatelibrary.com (Dennis Kaiser) — Mon, 21 Sep 2009 23:53:00 +0000

If you’re tired of bashing your head against the wall trying to buy a bank owned property or a short sale, consider a different approach. My clients have had success in buying homes from the bank by making offers on multiple properties without seeing them first.

Notice I didn’t say buy the house without seeing it, I said make an offer without seeing it. There are two good reasons for this. First, you can get your offers in faster without trying to coordinate your schedule with your spouse and the Realtor. Sometimes by the time you see the house it’s already tied up. Second, you save the emotional wear and tear of seeing homes you like and not being able to buy them.

The fact is you won’t be able to buy many of the homes you see on the computer. Why not? Because they are short sales that won’t work out, or they are bank-owned properties that will sell for all cash, or they are condos that are not FHA approved, or dozens of other reasons I could fill this blog posting with. So why run yourself ragged and fall in love with homes you can’t buy? Why not figure out which ones you can buy and then do your homework on only those?

How do you find out which ones you can buy? By making offers on them. If the bank likes your offer, you will be sent an addendum to sign. All banks do this, since they don’t want to use the Realtor forms that are different in each state. They make their own forms that their own attorneys have approved and you will need to sign that before the bank proceeds. Getting the addendum means this is a house you can actually buy! Now that’s the time to go see the property and decide if you actually want to buy it! If you don’t like it, you don’t sign the addendum and we walk away. Meanwhile we keep making offers on new bank properties and short sales as they come on the market.

Will the market always be this crazy? No it won’t. But it is now, you can’t change it, all you can do is figure out how to succeed in spite of it. By thinking outside of the box you can achieve your goal while others are giving up in frustration. If you’d like to learn more about this crazy idea that works, call me at 800-469-6391.

Fannie and Freddie Say Borrow More!

dkaiser@realestatelibrary.com (Dennis Kaiser) — Fri, 11 Sep 2009 21:26:00 +0000

Get this - Rather then bringing in a down payment of at least 20 percent, you might find that a smaller down payment gets you a better interest rate!

According to the New York Times:
"Rules put in place in late 2008 by Fannie Mae and similar rules adopted by Freddie Mac are less favorable to borrowers who put down 20 percent to 25 percent--partially because they consider these borrowers to be more of a credit risk since they are not required to purchase private mortgage insurance. (!)

According to Fannie Mae, borrowers benefit from this industry practice because they are able to leave themselves a financial cushion by not issuing larger down payments, and can instead save the extra money for emergencies.

It is important to note though that smaller down payments mean higher monthly payments because the loan itself will be larger." (italics mine)

So let me get this straight - taking on more debt, making a higher payment to the bank, and paying money to an insurance company is for my benefit! I guess that's true since I always believe what the government, banks, and insurance companies tell me - don't you?

Appraisal Review Blues

dkaiser@realestatelibrary.com (Dennis Kaiser) — Fri, 11 Sep 2009 00:29:00 +0000

As credit lines dry up, we’re seeing more and more appraisal reviews. What’s that you say? This little goodie is the thing that can blow up your transaction at the last minute and there isn’t a darn thing you can to stop it.

Say you’re a buyer and your offer is accepted. Yay, you bought a house! And you’re pre-approved, so it’s smooth sailing! You pay $450 for your appraisal, and it comes in at the price you paid, so life is good! So you start making moving plans, you give your notice, have a garage sale. Your lender needed a few last minute pieces of paper, but you sent those in and now you have loan approval with all conditions met. Ready to fund the loan and close, and in just a few days you’ll be moving in! Maybe.

The lender now sends your appraisal, which came in fine, to a third party company for an “appraisal review”. Basically this is a second appraisal to double-check the first one. Only this one is done by some pencil-pusher in L.A. who has never seen the house and has never even been to San Diego County! And his appraisal comes in for $50K less and just like that your transaction is dead. You need that loan; you don’t have $50K more to bring into escrow, so it’s over. Kiss your $450 for the appraisal and the $350 for the inspection you did goodbye. How many times can you do this before your down payment is wiped out?

Say you’re the seller. You did all the repairs that the buyer wanted so you could keep the deal together. You’ve taken down all the pictures, made plans to move, stopped all your magazine subscriptions, ordered the utilities to be turned off, maybe bought another place. Then the appraisal review bomb hits. The buyer can’t buy, so all those repairs you did just for him are for nothing. Now you get to put the house back on the market and start all over. Of course there’s no guarantee that this won’t happen with the next buyer either. You just get to eat it.

Why is this happening? Why does the lender wait until the very last minute to do the review appraisal? What can I do to make sure this doesn't happen to me? Good questions, and if you give me a call I’ll be happy to answer them for you. The take home message is that this is not the real estate market of two years ago and if you’re planning to buy or sell real estate in 2009, you’d better hire an agent who knows what he’s doing. Now is definitely not the time to think that all agents are equal and that your transaction will turn out fine no matter which agent you hire. Get someone knowledgeable and experienced who can protect you!

Home Is Not A House

dkaiser@realestatelibrary.com (Dennis Kaiser) — Thu, 10 Sep 2009 03:47:00 +0000

This weekend I visited my folks in Orange County, quite a drive from where I now live. After a day of socializing, mom offered for Crystal and me to spend the night there rather than make the long drive home. Wanting to get back to our own bed and our own space, we made the drive.

What struck me is that this was the first time that I considered my “interim” place to be “home”. Some of you know that we sold our house of 8 years recently and are currently living in a temporary location, in a place I thought I would never consider as “home”. But after only two months, I’m forgetting the old place and the place I live now is the place I long to get back to, my home.

You see, what makes a place “home” is not the house. It’s your family, your decorations, your favorite chair, your TV where you know how to work the remote, your fridge with your favorite foods in it, your comfy bed with the pillow that’s just right. When you sell your house and move to a different one, the new one soon becomes “home” instead of the old one.

I bring this up because there are some of you who should move for financial, employment or strategic reasons, but you don’t want to give up your “home”. My point is this: you won’t. Moving is just taking your “home” and setting it up in another place. Perhaps a place that doesn’t cost you so much each month, or is closer to the grandkids, or a place you rent so that you can be mobile if your job changes.

Your new home might serve you better than your present one, and it’s only inertia that’s keeping you there. I’ve learned from personal experience that moving is stressful, but achieving your goals is well worth it. When we moved we thought we were giving up our “home”, but we found out that we still have our home, and we gained a lot more besides.

Here's what you get when the government owns the banks

dkaiser@realestatelibrary.com (Dennis Kaiser) — Fri, 04 Sep 2009 00:05:00 +0000

IRS to mine payment data on mortgages

The Internal Revenue Service (IRS) will study whether it should make greater use of data on mortgage-interest payments provided to it by banks. The program, which searches for inconsistencies between mortgage payments and income, is currently used to send notices to non-filers who it believes should have filed a return. It could be used to target for audits individuals who report less income than they paid in mortgage interest.

The move will expand a regional research project on mortgage interest to a nationwide level by December 2011. Initiatives such as these typically involve examination of a small number of tax returns to evaluate new enforcement strategies.

According to the Treasury inspector general, tens of thousands of homeowners who paid more than $20,000 in mortgage interest in 2005, the latest tax data available when the Treasury inspector general’s office began its audit last year, either didn’t file a tax return or reported income that appears insufficient to cover their mortgage interest and basic living expenses.

Source - Martin Vaughan at martin.vaughan@dowjones.com

If Only...

dkaiser@realestatelibrary.com (Dennis Kaiser) — Mon, 03 Aug 2009 22:56:00 +0000

We like to keep in touch with our clients and hear what’s been going on in their lives and with their real estate and other investment plans. These days, there’s not a lot of good news and we don’t usually hear that plans are working out better than expected. In fact, we usually hear that plans are on hold, that there have been reversals, or job changes for the worse, or even bankruptcies, short sales or foreclosures.

We get it. We used to own 17 houses ourselves, and let me tell you what THAT’s like! Unwinding that portfolio takes years when markets are declining significantly in a matter of weeks. While our gains were breathtaking on the upside, our losses have been equally breathtaking on the downside.

Most people have learned to live with it and try to count their blessings of family and good health and not dwell on the negative. But there is still a sense of failure and loss. And it dawned on me that what hurts the most is not the loss of money, but the loss of time that we can never get back. We did what we thought was the right thing, we worked hard, we tried to better ourselves, we took risks, we invested in our economy, and now we have little, nothing or debts to show for it. That’s what hurts the most; we wasted all that time and energy.

My neighbor bought a house down the street a few years ago and fixed it up and hoped to make a profit. Instead, he took a huge loss and now is stuck with an equity line on his home that he has to pay back somehow. He comments philosophically, “I would have been better off if I sat on the beach and smoked weed.” I’m not advocating illegal drug use, but that pretty well captures the sentiment.

What does this all mean? How does our country move forward when those who are hard-working and like to better themselves and things around them and make things happen decide it isn’t worth it? I don’t have the magic answer, but this is a question we will have to grapple with in the years ahead.

So as I said, we get it. We know how you feel. Let’s talk about what’s been going on and see if we can give you some strategic advice that will help. The worst thing you can do is hang on by your fingernails and hope that tomorrow will be better. Don’t get me wrong, things will be better eventually, but not tomorrow. We have to make the tough choices now while we still have options. As you get pushed further into the corner, your choices will become more difficult. Call me any time for free, no B.S. advice. Don’t say 6 months from now, if only…..

A Negative Inheritance

dkaiser@realestatelibrary.com (Dennis Kaiser) — Mon, 03 Aug 2009 22:55:00 +0000

I want to make you aware of a situation I’ve run into a couple of times lately. In both cases, an heir inherited a piece of real estate and then discovered that there were loans on the property for more than it was worth. They then had to bring money into escrow in order to sell the property. In one case, the bank foreclosed on the property and now this heir has a foreclosure on his record!

Now I’m not an estate attorney, and I don’t know why these heirs took the upside down properties into their name and didn’t just leave it for the estate to handle. Perhaps they thought the house was worth one price, and then when they went to sell it 6 months later they discovered that the market had dropped below the loan amount. They weren’t my clients so I don’t know all the details.

But my point is this. We always assumed an inheritance would be a positive thing, and that if we inherited a house from a relative it would be a windfall. But these days it could be a burden instead of a gift. A number of seniors these days have put “reverse mortgages” in place that could erode any equity they had in the house, or perhaps they own rental property that has recently gone upside-down.

Now some of you might be offended that I even brought this up, but if you have good communication with your family, you might want to have an “economic summit” and see where everyone is financially. I know it used to be that talking finances with family members was taboo, but these days we all need to stick together. If a family can talk about things, then they can do better estate planning. Perhaps an over-encumbered house can be sold now rather than have it tie up the estate for 6 months to a year while the heirs deal with banks.

So please think about this. I’ve seen people get stung lately by inheriting a problem and I don’t want it to happen to you.

Take the red pill

dkaiser@realestatelibrary.com (Dennis Kaiser) — Tue, 30 Jun 2009 02:56:00 +0000

The changes are coming at us so fast and furious that it’s easy to get frozen into inaction. How many times have we said lately, "That can’t really be happening in America, can it? They can’t really do that, can they?" We’re all a bit uneasy because we know something’s wrong, but we don't want to face what it is.

I’m reminded of the movie, “The Matrix” when Morpheus confronts Neo with a choice – take the red pill and deal with what’s really going on, or take the blue pill and forget about the real world, just go back to what you used to believe.

I don’t know about you, but it sure would be a lot easier to take the blue pill. I’d love to go back to pretending that the government is watching out for its middle class; if you work hard and invest wisely you will succeed; and the good guys will be rewarded while the bad guys get punished. It sure would be easier if I could go back to believing that.

But now, I’m trying to operate in the real world. It’s no picnic but I’m still convinced that those who take considered action will be better off than those who are frozen in disbelief.

While we’re talking movies, remember “Titanic”? I just watched the scene again where Jack and Rose overhear the captain and the engineer conversing about what hitting the iceberg really means to their voyage. Jack gave his assessment of the situation: “This is bad.” Everyone around them was concerned with petty things that wouldn’t matter an hour later, while Jack took decisive action which ended up saving Rose’s life.

In my real estate practice I counsel people who are in various forms of hardship, and so I see firsthand the effects of inaction. You have to act while you still have options. Like the Titanic, the more the situation deteriorates, the fewer options you have. Your ways of escape are cut off one by one by the rising water and you may be forced into tragic dead-end situation where you have no more choices.

I know that some decisions are tough to make. Feeding your family or destroying your credit. Doing the distasteful thing or wishing and hoping something better will happen. Facing what feels like failure or making the best of a bad situation. Ripping off the bandaid quickly or pulling the hairs out one at a time.

I understand. Crystal and I have had to come to grips with our own situation lately and have made some really tough decisions. These true life experiences plus my extensive training as a Certified Distressed Property Expert (CDPE) makes me uniquely qualified to counsel and advise you or anyone you know who is facing some hard choices. We’re all going through this together, so please don’t be embarrassed, just pick up the phone and call.

Why You're Frustrated Trying to Buy a Short Sale

dkaiser@realestatelibrary.com (Dennis Kaiser) — Fri, 15 May 2009 03:50:00 +0000

I’ll explain the steps involved in buying a short sale property, but first let me define a few terms.

A “short sale” means that if the owner sells the property, there won’t be enough money to pay the bank what is owed. The owner is “short”.

The “borrower”, the “owner”, and the “seller” are all the same person.

The “bank”, also known as the “lender”, does not own the property. Even so, for the owner to be able to sell the property he needs the bank’s agreement to discount what is owed.

The “package” is the documentation that must be sent to the bank so they can decide whether or not to accept a short sale and at what price.

The “agent” is the real estate professional that the owner hires to market the property and represent him during the short sale process.

Now here’s how it works. The seller and his agent decide to attempt a short sale. There is no guarantee that a short sale will work, since the bank may or may not go along with it. While experience tells us which circumstances have the best chances of success, the rules are constantly changing so no one can predict the outcome with certainty.

The agent’s first job is to create the package. This involves, among other things, hardship documentation, a Broker’s Price Opinion, photos, and most importantly an OFFER. The bank will misplace (this is code for shred) any incomplete package, so there is no point in submitting a package without an offer.

How does the agent generate an offer quickly? By listing the property at an unreasonably low price. The owner will net zero from the sale, so the price doesn’t matter to him. The agent’s first priority at this point is only to generate an offer, any offer. In fact, the agent might know some investors who will throw a lowball offer at anything, and in this case you see the listing hit the MLS with an accepted offer on day one. “Accepted offer” means the seller has signed it, but remember the seller is powerless to sell the property unless the bank goes along.

So now the waiting begins. It takes the bank 3 to 4 months to decide if they will allow a short sale, and at what price they will do it. During this time the property is still listed on the MLS as “Active”, since the bank has not approved the short sale yet. This is why you see listings at very low prices that have been on the market for 100 days. You’re wondering “what’s wrong with this property?” Nothing is wrong, it’s a crazy low price on a short sale and the seller is waiting on an answer from the bank.

During this waiting time the seller is either allowing showings or not. If the seller allows showings, you can make an offer which will be considered a “backup offer”. As you might imagine, in several month’s time it’s common for many backup offers to come in.

Once the seller has enough backup offers, he may decide that it’s nutty to keep having people come through the house, since they have plenty of offers and they aren’t even sure that a short sale will work. So why bother? If the seller comes to this conclusion, the listing will still be active in the MLS and yet you can’t see it or make an offer on it.

Bear in mind that none of this information is stated in the listing description that you see on the Internet. You might not know that it’s a short sale, or where it is in the process, all you see is a house at what looks to be a great price.

When the bank completes their own appraisals and due diligence, they will answer the seller. There might be all kinds of negotiating at this point between bank and seller, as to what the bank will accept as a loan payoff and what responsibilities the seller has. The seller might have to come up with some money or give the bank a promissory note. If the bank and the seller can’t come to terms, there will not be a short sale.

But let’s assume the bank and the sellers agree on what has to happen for a short sale to take place. The bank at this point will state at what price they will do a short sale. We then call this an “approved short sale” meaning that the bank has approved it. The price is probably NOT what the agent has in the listing, it’s usually more and it might even be significantly more.

At this point the person who made the original offer usually walks away. The price is not what he was hoping for. The bank might then ask the agent to see the backup offers and decide to accept or send a counter offer to one of them. They might ask everyone to submit their “highest and best” offer within 24 or 48 hours. At this point the agent might put the new price into the MLS and say the short sale has been approved and generate some new offers. There are no rules to this game; it goes however the bank wants to play it. They call the shots, because without their approval, no sale will take place.

So if you’re still interested 3 to 4 months after you made your offer, and if you’re willing to up your offer so that it’s the highest and best, then congratulations! You succeeded in purchasing a short sale property!

Downsizing

dkaiser@realestatelibrary.com (Dennis Kaiser) — Thu, 07 May 2009 03:19:00 +0000

The current economic climate has caused many people to re-think their priorities in life. Or stated more correctly, many people re-thinking their priorities has caused the current economic climate. This dramatic shift in motivation lies at the root of all that we see happening, and the reason stimulus won’t work is because people don’t want to be stimulated.

In real estate this dramatic sea change in thinking from expansion to contraction is showing up as the desire to have your housing work for you rather than you work for your housing. Some of my clients are re-examining the drive to constantly strive for more and better homes, especially as it gets harder to work longer hours as we age, and we are no longer certain that we’ll make more money next year than we did this year. And even if we did manage to make more, we won’t get to keep any more as taxes are certain to increase in the future.

So how do we get housing to work for us rather than vice-versa? It starts with an honest assessment of what we need and want in our lives. What if by downsizing to a less expensive but equally comfortable home gets you out of debt so you don’t have to work so hard just to maintain? What if you could free up equity and buy some investments that produce “mailbox money”, meaning checks that show up in the mail without you having to work for them?

It looks like this – you have a large house that you don’t really need anymore because the kids have moved out. You have empty bedrooms that you never use. You’re in one of the upper tier price points that have declined in value a bit, but not as much as the entry level market that has been hard hit by foreclosures. You’re getting closer to retirement, but you’ve watched your retirement funds in the stock market drop. You could stay where you are and continue to make the big mortgage payments, but you’d rather not. Why not trade that house for a more affordable one and free up capital for investing in cash flowing assets?

What if you downsized and reduced your monthly expenses? If we’re in the eye of the economic storm and there’s more to come, you will be better able to stand. And if happy days are returning soon, then you will be making good money while your expenses are lower, and so you’ll be able to replenish that retirement account. You win either way.

It seems I’m running into more people who are thinking along these lines, which makes sense in light of the social mood shift. It is exactly this shift which tells me the economy is not ready to return to the go-go days of expansion. We have much more de-leveraging ahead.

So how about you? Are you getting closer to the edge where if things don’t turn around soon you’ll be in trouble? Or maybe you’re doing alright but you’re just tired of working so hard? Why not be proactive and make some wise choices while you still have options? That’s called living life by design and not by default. You call the shots.

Depending on your situation, you could reduce your debt, eliminate your debt, purchase cash-flowing rental property or some combination. For example, if your home is worth $950K and you owe $300K on it, you could sell it, buy a house for $500K cash, and buy two rental homes in Hemet for $75K each that rent for $850 per month each. So you’ve eliminated a $2500 a month mortgage payment, reduced your real estate taxes by $500 a month, and increased your income by around $1200 a month. That’s $50K a year you don’t have to make. That could be the difference between working and retiring, or living well on only one income.

So what’s really important to you and what are your priorities? Spending more time with the kids or grandkids? Is there a ministry or worthy cause you’d love to devote more time or money to if only you could? Perhaps you have the means already. Maybe you could free up time and money by restructuring what assets you already have. We can all learn to be better stewards of what God has blessed us with.

Your whole life can change with some strategic moves. If you’re stuck in a rut of working to pay the bank and not getting anywhere, I can help you get unstuck. Feel free to call me any time.

San Diego County Sales Strong in February

dkaiser@realestatelibrary.com (Dennis Kaiser) — Wed, 25 Mar 2009 18:34:00 +0000

Sales of single-family, re-sale homes were up 38.4% year-over-year. This is the tenth month in a row home sales have been higher than the year before. Year-to-date, home sales are higher than any year since 2005.

Sales continue to be concentrated in the lower-priced cities where the bulk of the bank-owned property is: Chula Vista up 73.2%, Escondido up 89.1%, Oceanside up 42.5%, and Encanto up 189.5%, just to name the cities with the largest number of sales.

Inventory was down 9.9% in February, while the number of properties pending rose 19.1% from January and was up 186% year-over-year.

The median price was flat at $325,000, but was off 24.4% compared to last February. The average price fell 8.3% month-over-month, and was off 33% year-over-year.

Condo sales were down 3% month-over-month, but gained 37.8% compared to last February.

The median price for condos fell 1.6% from January, and was off 36.8% year-over-year.The sales price to list price ratio increased 2.4 points to 98%. The sales price to list price ratio for condos rose 0.9 of a point to 96.9%.

The real estate market is very hard to generalize. It is a market made up of many micro markets. For complete information on a particular neighborhood or for an evaluation of your home's worth, call me.