South Bay Real Estate

Foreclosures not likely to end anytime soon

A few interesting articles appeared today relative to the ongoing foreclosure/housing crisis. Here's a recap of the latest doom and gloom.

As reported in the LA Times and elsewhere, the Mortgage Banker's Association says delinquencies and repossessions have hit a new high and are likely to continue through all of next year. In fact, since this stat has been tracked in 1972, this is the highest quarterly level recorded.

Clearly, unlike the initial wave of foreclosures which were related to sub prime, neg am, stated income loans made on questionable collateral in an escalating price market, we are now seeing prime borrowers defaulting due to the perfect storm of job loss, negative equity, and continued price erosion.

As of the most recent reporting, 1 in 7 home loans are in foreclosure or past due. At the beginning of he year the number was 1 in 10. Couple that with the stat thrown around that 1 out of 5 homes are under water. Well not literally, figuratively. That is, more is owed than the home is currently worth. My impression is that if you add in the transaction costs associated with selling, that number is even higher. Maybe we are lookng at 25%.

Other interesting stats are that for the past six weeks, applications for purchase money mortgages have declined even though interest rates are still at or below 5% on 30 year fixed rate mortgages.

Even so, well priced homes in all price ranges continue to get multiple offers. My last four listings all had muliple offers and on some of the properties my buyers have gone after, our offer has been one of 20!

Advice for buyers: don't get carried away with these reports. If there is a home you want and the price is suorted by the comps, go for it and forget the low ball negotiating.

Advice for sellers: while there has been a recent stabliztion, prices aren't going substantially up anytime soon. A foreclosure on your block or of a comparable property can be very costly for you. Even if you do find a buyer at the price you want, foreclosure activity will affect the appraisal and we all know that appraisals are major deal killers these days. Don't chase the market down - work with good offers - counter and negotiate.

If you are interested in buying a foreclosure in the LA area, use the search engine at www.socalistings.com

Current Trends

As soon as people find out that I sell Real Estate in the Los Angeles area, they want to find out about the "market". Should they buy or sell Real Estate right now? Is this a good time? Are prices going up or down? Are interest rates going up or down? Hence this addition to my blogging efforts.

Market Update 11-19. Here's the inside scoop on Los Angeles area Real Estate.

• There are still more buyers than sellers. More accurately, there are far more qualified buyers for well priced homes than there is available inventory. Usually, this moves prices up and that is what we have been seeing on a limited bases in the Los Angeles area.
• REOs are slowing down. Whether this is because asset managers are sitting on properties so as not to flood the market or there are less properties due to the multiple moratoriums is unclear. What is clear is that many REOs are getting multiple offers often over the list price. I had lunch with an REO manager from Wells today. He tells me that his listing agents are getting 30 offers on good properties.
• Avoid Short Sales. You are looking at a 3-6 month process and by the time you get the approval letter, the price may not seem as attractive as it did initially. Beware of the numerous scams surrounding short sales such as the flip and other questionable practices I will write about separately.
• HVCC continues to be a major problem. Even if the appraisal comes in at the sale price, there are often problems with the underwriters interpretation of the appraisal. I heard a horror story today about a buyer who protested an appraisal that came in $15K under. When it was redone, it came n $20K under.
• The hottest market segment is $350-450K SFR anywhere in the Los Angeles area. This seems to be the sweet spot for the first time buyer. The over $1M market and higher end luxury market is very slow right now.

Homebuyer Tax Credit Extended and Expanded

President Obama has signed an extension and expansion to the home buyer's tax credit.

This is very, very, welcome news for both buyers and sellers of resdential real estate.

(Additionally, it was previously announced that the higher loan limits of up to $729,750 will remain in effect for 2010.)

I've read a lot of different numbers as to how many buyers the first time buyer tax credit brought into the market. What I can share with you on a very subjective basis, is that at least in my business 3 out of 4 buyers made their decision to buy in 2009 because of the tax credit. Other contributing factors were the low interest rates (a client got 4.78 yesterday on a 30 year fixed) and the decline in prices. What no one anticipated was how competitive it would be to secure a property, what with the multiple bids above asking price, and how tight the lenders are and the underwriter scrutiny that is being applied prior to final loan approval.

Here are some of the main facts you should know regarding the Tax Credit Extension. Please check with your accountant or tax preparer as to how any of this might affect you specifically.

• First Time Buyers may be eligible for a credit of up to $8,000.
• Current Homeowners who sell and buy a new home may be eligible for a credit of up to $6,500.
• To qualify, buyers have to sign purchase contracts by April 30th and Escrow must close by June 30th.
• The credit is available for purchases of up to $800,000 on their principal residence. Vacation homes do not count. 
• There are increased income limits. Singles earning up to $125,000 and couples earning up to $250,000 qualify.
• You can apply the credit to your 2009 tax return or amend your 2008 return to get the money sooner.

If you've been thinking of buying or selling, don't miss out on this great opportunity.

Time to Sell Your Home. What Repairs/Updates should you do?

Sellers often ask me what repairs or upgardes to make before I list their home. The answer depends on what they expect to get back for any money invested.

My clients who listed and sold 3802 W 242nd in Torrance installed all new exotic Tiger Mahogany floors throughout the entire home and repainted the interior. Did it help sell? Yes. Did they recoup their entire investment? Not sure, but on that house it was worth the investment because the presentation helped to outweight whatever reservations buyers may have had.

I have two in escrow now, 12039 Wagner in Culver City and 402 S Walker in San Pedro that I am representing the buyers on. The sellers took radically different approaches to marketing these properties.

Wagner was extensively remodeled to the point that most of the interior of the nearly 100 year old house was almost new. The owners also did seismic work that went well beyond the required minimum. The owners also had exquisite taste in selecting paint colors and the house presented well.

Walker, is the other extreme entirely. Most of the work done, none of which was very recent, met any standard. Additionally, there are numerous visible dangers and hazards. To the extent that newer windows were installed, they probably have to be removed and entirely re-installed as well as the decaying poorly installed siding as well.

Fortunately, the buyer of Walker is prepared to do $100K of work to turn the house (which is fundamentally sound) into a more desirable living space. For the buyers of Wagner, their work is almost done. At the end of the day, each will represent good value at the full sunk price in their respective neghborhoods.

So, here's my advice for sellers.

1) Don't embark on projects that you don't have the budget to finish.

2) Get permits for any work. Often, you may be able to also update permits for work done previously at the same time.

3) The biggest ROI is on kithcens, bathrooms and anything that enhances curb appeal.

4) What can you do for little or no money to make the property more marketable? How about removing clutter, cleaning, letting in more sunlight, etc. Fesh coat of paint in a neutral color in the main rooms.

It is always important to ask yourself who your target customer is. Are you selling a fixer and have you priced as such? Is your home comparable to the condition of others in the same area? While you may not know who or where that buyer may come from, try to think through the situation and if you trust your agent enough to list your home with him/her, please listen to their advice on how to sell it as well.

Buyer Beware - Short Sale Horror Stories and more

You know all those Real Estate disclosures we give you whenever you are buying or selling? They are well worth reading because the old adage "buyer beware' has never been more appropriate than now when it comes to buying or selling real estate. Let me share 3 stories with you to illustrate the point.

Anyone who has spoken to me knows that I really don't like short sales. That was hammered home to two of my clients recently with fortunately avoided disasters.

The first one involves a triplex that may clients have been trying to buy as a short sale since May. This was advertised as a "bank approved" short. Well, we finanally get the letter approving the short sale from the first lien holder and stipulating a closing date of 9-25-2009 (or else).

In reviewing the mandatory disclosures, it comes to our attention that what was advertised as a triplex and even appeared in the tax records as a triplex was in fact a duplex. Whoops. The amazing thing is that the appraiser even came back with an appraisal as a triplex. But, it just isn't.

Once I informed the listing agents, who actually stepped up and handled this very professionally, as to what was happening, they resubmitted our addendum looking for a lower price to reflect the actual property condition and even got an appraiser there virtually the next day. Now, we are waiting to hear back from te negotiator.

The next short sale horror tale wasn't quite as nice. 

After waiting for about 4-5 months, one of our clients was informed that her short sale offer for a property in San Pedro was accepted. Great. We then receive an "addendum" from the listing agent indicating that there was a third party involved in the transaction other than the bank. As it turns out, the listing agent somehow got another agent on her "team" on title with an option to buy the property. Their deal structure was in actuality a short sale flip. I don't know if this is legal, but I certainly would assume that the bank approving the short payoff would be less than amused to learn that the listing agent had another buyer lined up who would pay more. Didn't they used to call that "making a secret profit?"

And. here's the kicker. Fidelity won't even offer title insurance as they are sure this scenario, which apparently is becoming a widespread scam, will wind up in a class action lawsuit down the line.

But, enough about short sales. Let's talk termites.

The next day after taking possession of their new home, my clients send me the loevly picture below and ask as to whether these ae termites or not. We did get a termite clearance from a a reputable local company. As soon as I forwarded the picture, the owner of the company showed up at the property and stood behind his work. So, it is nice to know that there are people out there to whom integrity and honesty still means something.

Shorewood Realtors - Agents of the Month August 2009

Well we all like recognition and I was thrilled to see that when Shorewood published the agents of the month for August, I was one of the top agents in the company and honored as an "agent of the month"

So, as a top agent here's what I can tell you.

If you are selling, price your house right and make sure it shows well. There are still more qualified buyers in the market than there are desirable properties in any price range. Make sure you have a solid buyer and that the deal sticks. Expect that after the home inspection you might get various requests for repairs. If your buyer is solid and the requests are reasonable, do them. Most important, make sure the buyer is represented by an agent who knows what they are doing and the lender is both direct and reliable.

If you are buying, forget the low ball offers. Good properties are selling quickly, often above list price and with multiple offers. Get an approval from a direct lender, be prepared to show your proof of funds to close, make sure you understand what you are signing and why and that your agent knows and has explained the timelines in the transaction to you.

If you are buying or selling, the time is right!

Short Pay not Short Sale

There is probably no more misleading phrase in the real estate lexicon right now than "short sale". These are really "short pays" and should be referred to as such.

Many of my buyer clients mistakenly are under the impression that I don't want to write offers on short sales. Nothing could be farther from the truth. What I don't want to do is to waste my time and theirs on transactions that will never be consummated.

In my opinion, the reason that most listed short sales ultimately go to auction is because the listing agent simply didn;t know what they were doing. This includes a variety of mistakes being made which range from not properly completing the short sale package to widely inappropriate pricing assumptions, everything in between and both at the same time.

Sellers actually have to have hardship and no financial means in order to complete the short sale with most investors. it is rare, if at all, that an investor will let a homeowner short sell at a loss of $100,000 to the investors while the seller has assets in the tens or hundreds of thousands of dollars and makes no contribution to the sale.

it is also unlikely that the investor will accept a price way below market or what they would get if they foreclose and relist as an REO.

A few guidelines for buyers interested in a short sale.

• It will be months in most instances until you have an answer. Are you willing to take the risk of rising interest rates and pass by other properties for this one today, which may not even be a bargain by the time the short pay is approved?

• If the answer is that you don't want to miss out if this one is accepted, then by all means go for it. But don't be misled by the listing price which is often a ploy to get offers.

• Do your homework and understand how much is owed on the first and second mortgage. As the second lien holder will be wiped out in foreclosure, they are more likely to approve a sale where they get something rather than getting nothing. If you are asking the first lien holder to lose more than they would by letting the process run its course - forget it. Do your homework and study the comps. Actually, your Realtor should be providing you with information about both of the above.

• Remember that what you are really engaged in is a "short pay" where the seller is asking the lender/investor to accept less than what is owed. Put on your business hat and ask yourself if you were the lender, what would you do?

If you want to search the foreclosure database right now, go to www.socalistings.com

Re-Engineering Short Sales

There was some recent rumblings from BofA regarding changes they are thinking of initiating to their short sale process. Currently BofA is servicing about one out of every five loans in the US. So, any positive changes they can implement will be well received.

Apparently, their new idea is to start to work with homeownersas soon as they decide to list a home as a short sale. The current standard in the industry is to wait until the owner actually has an offer in hand to begin the evaluation process as to whether the owner and sale price will be approved. My belief is as a result of this, many listing agents have been putting properties into the MLS at very low prices in order to get offers and start the process. The result is further distortion in the market and a loss of equity for those selling their homes under standard terms.

Additionally, the Obama administration is attempting to address the problem by a large infusion of cash to break the bottleneck. What is really needed is a standardization of business practices and systems so that every investor, servicer, and institution is working from the same playbook.

Another new wrinkle is that now some lien holders in the second position are trying to have sellers sign promissory notes to repay part or all of the debt. In that case, most would rather walk. I have long thought that in CA, the other shoe waiting to drop is that now some investors will start to go after short sellers who have assets if they can do so (recourse financing).

So here's my very simple recommendation as to how the bottleneck can start to be unjammed.

1. Issue standardized guidelines regarding what amount, as a percentage of the outstanding loan can be written down. For example, if the guideline for first mortgages is up to 20% short with supporting documentation, then everyone knows where they stand, Same idea for seconds. Issue a one size fits all dollar amount or percentage for release. Example: 2.5% of the balance not to exceed $5,000.

2. Standardize hardship approvals. Example: job loss, less than 120 days cash on hand.

3. Reward sellers who start to negotiate for a short sale while they are still current on their loan. The benefit is less loss for the lenders.

4. Cash for keys.

If simple measure such as these are implemented, one of the major benefits will be that banks can start to value these assets on their balance sheet in a straightforward and transparent manner.

Here's how.

• Determine the amount of non performing loans.

• Ascribe a certain percentage to short sell and another to be foreclosure.

• Implement pre-determined loss formulas based on the above recommendations

.

Listingbook Launch - Yet Another Ellis Posner Real Estate Search Site

As many of you know, I have always endeavored to provide the most up to date, comprehensive and easy to use real estate search tools on my various websites such as www.socalistings.com, www.ellisposner.com and www.90266realestate.com

I have gotten excellent feedback and received many compliments - particularly on the clean look and feel as well as the map function and pre-set searches on 90266realestate.

I have recently added yet another site: www.ellisposner.listingbook.com. Listingbook is a product that is being made available to all Realtors and being touted to the consumer as "search like an agent" or some such other marketing slogan. Not quite sure what they mean by that.

So, I set up my listingbook site, ellisposner.listingbook.com and haveactually "invited" a number of you already. In that regard it is like Facebook and other social media sites.

There are a few things I don't like about listingbook. One is the clutter. They apparently are trying to monetize it and there is a lot of clutter, most non real estate related, for my taste. But in that regard, I also don't like the direction that realtor.com, zillow and others have gone in terms of the banner ads and other clutter. (Okay, we all know I have banner ads on those sites too!)

I am also not a big fan as to the manner in which the listings are presented. I assume they went for a different look and feel than the other sites. Fair enough.

I do have to admit that listingbook does provide info that many other sites, such as mine, does not (which is why I added lintingbook to my armada). Two features that I like are that apparently you can access recent sales as well as pendings. I think that is very important information for consumers to have

For those looking for a powerful foreclosure search engine, you are still best served by going to my traditional sites: www.ellisposner.com and www.socalistings.com. The foreclosure market just doesn't lend itself to the regimentation available for MLS listings and remains the Wild West.

California Foreclosure Prevention Act

The California Foreclosure Prevention Act goes into effect June 15, 2009.

Civil Code Section 2923.52 requires an additional 90 day period beyond the period already provided before a Notice of Sale can be given. The purpose of this is to allow all parties to pursue a loan modification to prevent foreclosure of loans meeting certain criteria.

Sounds good, right?

Well maybe, maybe not.

A mortgage loan servicer who has implemented a comprehensive loan modificationprogram may file an application for exemption from the provisions of this law. So maybe it is not quite accurate to say that this is a foreclosure moratorium law. As I've written about elsewhere, much of what passes for action to solve the housing crisis is little more than photo ops and ill conceived plans by those who are not involved in the process on a day to day basis.

One of the criticisms of this law is that the vast majority of large servicers should have no trouble complying as they have already implemented similar requirements at the federal level in order to comply with the Obama administrations Making Home Affordable Program that began in March.

Here's what will happen starting Monday:

• Lenders will submit applications to the state outlining their loan mod programs and thus getting them an immediate 30 day exemption.

• If the lender's program is approved, the lender is permanently exempt.

• If the program is reject by the state, the lender has 30 days to resubmit.

So, I'm not exactly sure what this program will accomplish except the appearance of doing something.

For those interested in actually implementing ideas that may make a difference, try some of these on for size:

• Streamline the short sale process. Make lenders comply with mandatory 45 day turnaround time for complete package.

• Certify a limited number of licensees to transact short sale business so that packages are complete.

• True Foreclosure Moratorium - no new foreclosures for 120 days, no exceptions.

• All lenders must write down the outstanding loan balances by 15%

• True government subsidized 4% 30 year fixed mortgages.

Too extreme, too costly, too radical? The consequences of allowing the current situation to play out are far more extreme. 

Home Buyer Tax credit can be applied to Purchase Costs

U.S. Dept. of Housing and Urban Development (HUD) Secretary Shaun Donovan recently announced that the Federal Housing Administration (FHA) will allow home buyers to apply the administration's new $8,000 first-time home buyer tax credit toward the purchase costs of a FHA-insured home. The American Recovery and Reinvestment Act of 2009 offers home buyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate.

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent down payment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of the announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate.

Pending Home Sales Rise 6.7% in April

Pending home sales in April posted the biggest monthly jump in 8 years. I believe that low interest rates, the influx of investors, the first time buyer credit and pent up demand all contributed to the increase.

A few factors may dampen the activity going forward.

First, interest rates have been creeping up over the last few weeks and Buyers locking now may see a 75 basis point uptick from rates they were quoted 60 days ago. Second, there is not a bottomless well of first time buyers and investors. In the current lending environment, it is difficult for the traditional "move-up" buyer to sell and buy for a number of reasons I have discussed elsewhere. Lastly, as we exhaust the pool of Sellers who have the equity and want to sell, there will be less and less desirable properties on the market.

Conclusions: Buyers should not assume that current favorable conditions will continue while additional changes will break in their favor. Those who were waiting for prices to go down further may not qualify now for the homes they want because rates have gone up and surprise, prices have not declined further.

Don't be misled by what you read

I have received a flurry of emails about the article that appeared today in the LA Times business section: Southern California median home price falls to $247,000 in April http://tinyurl.com/qqj2uh

 

I am trying to counsel clients to not put too much value into these broadly general articles and just take them for what they: newspaper filler written by people interpreting data that has been fed to them.

 

A few things about April data.

 

To start with, the sales that closed escrow in April were, for the most part properties that went into escrow 30-45 days earlier, meaning February-March. At that point the market was much softer. The first mistake I hear Buyers making is that they want to apply the conclusions of April closings to May-June actives. Doesn't work. Today, well priced desirable homes in ALL price ranges and areas are selling in less than 30 days and with multiple offers. My last 6 closed transactions were all multiple offers and the last 8 offers I submitted all received counters with the "multiple" box checked. My conclusion: if you like the house and the price is fair, you might want to consider paying it and look for other concessions such as getting your closing costs paid for.

 

I find some statements entirely incorrect, such as:

 

Interest rates remain relatively high and credit standards tough for "jumbo" mortgages of $417,000 and above. DataQuick reported such loans comprised about 11% of mortgages for homes sold last month, down from about 40% of sales in late 2007.

 

I don't think 4.875% is relatively high for a 30 year fixed or that asking people to document their income , provide tax returns, have reasonable DTI and FICOs is a tough credit standard.

 

What should be discussed and what I've blogged about here is that certain categories of homes such as two and three on a lot attached and detached townhomes which are found in abundance in the Beach Cities are very hard to finance. What should also be discussed is that currently loan amounts above $729,750 on Single Family Residences are difficult to secure and therefore that segment of the market is being impacted. Actual numbers, location and property types are more relevant than terms such as "wealthy" or lower priced home.

 

I think it would be a great policy if the people that write about Real Estate in mass media publications or the talking heads on cable news were held to the same standards that licensed Realtors are: disclose, disclose, disclose.

Conforming Loan Limits Raised in High Price Areas

This is good news for sellers. Lenders are starting to price the new higher maximum loan limit of $729,750. Previously, the maximum was $625,500. This should firm up the market up to about $900,000 (with 20% down). It will also ease the downward pressure in that price segment.

I anticipate that lenders may charge a premium on the higher loan amounts and subject borrowers and properties to a higher level of scrutiny.

This move will also hopefully allow more people to refinance and stay in their homes at lower interest rates and payments.

The only question that remains to be answered is how many full doc, 20% down Buyers are still ready to purchase.

Searching for Foreclosures?

Here's some info you might find useful when you use the foreclosure search engine on either www.socalistings.com or www.ellisposner.com.

There are three categories of properties that you will see displayed. (Please note - the search engine is not updated in real time like the active MLS listings are.)

You can search on either bank owned (REO), auction, or pre-foreclosure (NOD). The first most important point is that these properties are not necessarily on the market, or if they are, they are not listed at the loan amounts or estimated value you may see.

Because these properties may not be on the market, you can not gain access to see them or there are not always pictures available.

The bank owned properties may be listed as REOs or the banks may be in the process of evicting the previous owners or getting a BPO to decide what price to list the home at.

You can expect that maybe 25-30% of the REOs that you will see on my sites may actualy be on the market at any time. Your reasonable question at this point may well be "why are these listings displayed?" Glad you asked.

If you see that a property has been taken back by the bank but is not on the market, we can track it so that as soon as it is listed, (and sometimes before) I can get you in to see it and we can make an offer before everyone else.

At the other extreme are the "preforeclosure" properties. These are homes that have had a Notice of Default (NOD) filed. Some of these may be actively listed and some may not. Once an owner falls behind on their mortgage payments, banks file NODs to start the foreclosure process. The owner can then elect to either list the property and hope to complete a short sale or just ignore the filing and wait until the Sheriff comes to evict.

So, if your question is why display these properties. Because if you are interested in buying one that is not listed, I can contact the owner directly in your behalf and negotiate with the bank.

The other category you can search on is auction. These are properties being sold on the court house steps: All cash, no title insurance, and no inspection. In other words, not for the faint of heart - investors only.

Please feel free to call or email with any quesions and remember to follow me on twitter!

WSJ Foreclosure Bidding War Article 4-23-2009

The Wall Street Journal published a very accurate article recently on what is going on relative to foreclosure bidding wars. It will be available to non subscribers for a few days more online. Check out this link if you want to read it http://tinyurl.com/c9owac. If you can't access it send an email to socalistings@yahoo.com and I will send you a pdf file.

A few points from the article worth mentioning are:

• Many companies have ended their moratoriums which artificially reduced the REO supply. This will increase the inventory of bank owned properties on the market.

• Buyers who think they can lowball are missing out. Many asset managers have already priced the propeties so low that they are selling considerably above the asking price but still in some instances at 50% of what they sold for previously.

• Sellers definitely favor all cash buyers (investors) over anyone else and will often select the offer most likely to close escrow even if it is not the highest bid.

My observations of what has ben going on the last few weeks are that:

The MLS list prices should really be considered "opening bids" in many instances and not sales prices that can be negotiated down. Typically, thse opeing bids are 15-30% lower than what a private seller would price their home at. A good indication of whether the seller as an auction mentality and is looking to create a bidding war is when the listing agent indictes in the agent notes that the offers will be reviewed on a specific date (usually a few days after it hits the MLS).

While banks definitely favor all cash offers, the investor buyers are NOT getting as great a premium for cash as they would like. Maybe 3-5% in most instances. Over the last 2 weeks, I have submitted 6 all cash offers on REOs for investors and 1 all cash short sale offer. Admittedly a few of the all cash offers were lowball (even for me). At this writing, we have receieved one bank addendum that is not in escrow yet, one other is looking good and two were rejected.

The one FHA offer I submitted on a REO didn't even get the chance to submit a best and final.

What I am hearing is that there will be a flood of REOs hitting the market during the next few months so expect these conditions to continue. If you are thinking of buying a foreclosure call me for tips on how to be the winning bidder.

Remember to follow me on twitter!

Form 1004MC

There is a new wrinkle on appraisals; Fannie Mae Form 1004MC (Freddie Mac Form 71).

The effective change is that now appraisers must include info about active listings and REOs and not just closed sales comps. Specifically, the form asks whether the trend in various categories is increasing, stable, or declining. There is also a section questioning whether foreclosures are a factor in the market and while the doc specifically references REO sales, it is quite subjective as to whether listed short sales will effectively pull the prices down as active comps are being utilied.

Here' an example of what I'm talking about.

Let's say an agent lists a "short sale" for $499,000 on a property that should be priced at $699,000 just to start the short sale process and get an offer. Will the appraiser use that as a comp? I don't know and it remains to be seen. But, if so, there may have to be more scrutiny to insure that agents just don't place underpriced properties on the market in order to get offers and ruin everyone else's prop values. 

Real Estate 2009

So here we are in January of 2009.

So there is no doubt that 2008 was a disappointing year for homeowners, brokers, lenders and anyone else associated with housing. The question is what does 2009 bring?

Some more of the same, but not not exactly.

The price drops during Q1 2008 were more prcipitous and drastic than anyone predicted. Once the easy mortgage money dried up, the only way to sell a home was by being priced way below the competition. Once the banks figured this out, REOs were priced very aggressively and the party was on.

For 2009 I predict that the the most desirable areas in Southern California will start to stabilize by the spring and some properties may even sell for slightly more than they are now.

For less desirable areas, or marginal houses in good areas, 2009 is probably looking a lot like 2008.

Another prediction is that the banks will slow down or place a voluntary moratorium on foreclosures. It is not good business for them. I believe that when possible, the investors will try to keep the homeowners in the properties when they can afford them at renegotiated rates and payments.

Mortage rates will have to come down. Whether the government or the lenders artificially deflate rates, there are buyers when prices are where they are now (about 2003 levels) and rates are below 5%.

One piece of good news from 2008 is the "new" FHA and revised FNMA price guidelines. With "conforming" loans in higher priced areas like Los Angeles County now raised to $625K, homes are within reach of FHA financing (the new sub-prime).

I have long observed that in real estate, public perception trails the market by about 6 months. Future blogs will explore common mistakes buyers and sellers are making as well as trends so that my readers can respnd more quickly to moves in the market.

The Housing Market is Getting Worse

By nature I am a positive person, so it is hard to conclude that unfortunately the housing market is just getting worse. There are two parallel streams adding to the dismay: first, there is a pricing chasm between buyers and sellers large enough to drive a freight train through, and second, it is just harder and harder for buyers to qualify for a mortgage.

As for pricing, the truth is that sellers just can't get the price they thought they could and buyers just can't seem to get offers accepted at 20% below the listed price.

What I am seeing is that homes that are priced properly and show well are selling in about 60 days. Buyers who are pre-qualified and can make string offers are able to negotiate many concessions and get great prices. It is a different market today. Enjoy.

Have you recently received a Notice of Default?

Over a thousand NODs are being sent out every week in LA County. Due to unforeseen hardships such as job loss, injury, illness, or death in the family, many homeowners have found themselves behind in their mortgage payments. Others have mortgages that have recently adjusted by hundreds or even thousands of dollars per month and find that they can not meet these newer higher payments. While the best solution is to bring the payments current, that is often not possible due to circumstances beyond the homeowner’s control.

Once the pre-foreclosure process starts, time is of the essence and every day counts. Many homeowners waste time trying to refinance. Other would like to sell their homes but do not believe that they have enough equity to successfully do so considering the transaction costs, late charges, commissions, and other fees.  Many families reluctantly conclude that their only option is to allow their home to be foreclosed on. While they may be aware of the devastating effects a foreclosure has on their credit file, often they do not know that even after the loss of the home, in some cases the defaulting party may also be liable for any deficiency created as a result of the sale of the property. This can have further devastating effects.

If you are in this situation, you may not know that there are alternatives to foreclosure. For example you may be able to do a short sale. A short sale occurs when the lender agrees to take less than the amount owed on the loan. You may ask why they would do that.  The answer is simple: Banks do not want to own Real Estate. For more information on short sales (in California) please feel free to contact me.