Archive for August, 2008
Mt. Madonna School 2008 Dream House for Sale
August 10, 2008
I figured I was a shoo-in to win the Mt. Madonna School 2008 Dream House Raffle. I just had that feeling in my gut: I’m going to buy one ticket, and they’re going to pull my number out of the hat when they choose the winner.
Boy, was I wrong. I lost, spectacularly. I got bupkis. Nothing. As in, zip, zero. Not even a phone call to say “Hey, Seb, we’re sorry – some guy up in Scotts Valley won. Better luck next time.”
And now, the effrontery – the dream house is being sold, just scant weeks after it was won. You can be sure I would have moved right on in and enjoyed the sea air, at least for a couple of years.
And to add insult to injury, somehow, I didn’t even end up with the listing for the 2008 Dream House. Sheesh. Guess I’ll have to go back to makin’ money the old-fashioned way: working. 
Posted by SantaCruzBroker at 8:11am
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Tales of a Santa Cruz Short Sale
August 09, 2008
A week or two ago, I had a short sale close. If you’re selling real estate these days, you’re selling short sales. About 1/3rd of all listings in the county are either short sales or REOS, and I’ll bet that among properties that are actually selling, much more than 33% are short sales or REOs.
There are many misconceptions about short sales. The first big misconception is that they’re actually short. Alas – they are not. They seem to drag on, and on, and on. Much more often than not, they are torturous. While you can get a good deal on a property by buying it as a short sale, I posit that you are not necessarily getting a “good deal” – you are probably getting a fair deal, given the state of the market.
I don’t want to go into a great deal here about what a short sale is, or isn’t. If you’re interested in learning about short sales in general, I invite you to view my video presentation about Opportunities in the Santa Cruz Foreclosure Market. Or, you can also download my Santa Cruz Foreclosure Report, a 10 page PDF document I whipped up about buying foreclosure real estate in Santa Cruz.
Specifically, I want to discuss this one short sale I closed a week or two ago. A few months back, I got an early morning phone call from a lady who had been using my web site to look at properties and research the foreclosure process. It turns out, there was a condo she wanted to buy in Capitola, but her present Realtor wasn’t too eager, for whatever reason, to write up an offer on a short sale. Did I feel comfortable doing so?
Sure, I said, no problem. In fact, I feel very comfortable writing up short sales. With a short sale, it’s the listing agent that has to do most of the heavy lifting, working with the bank, staying in touch, doing what they can to get the bank to accept the short sale offer. In fact, I don’t take short sale listings. It’s too much work for me, I’ve got my hands full already – so I refer my short sale sellers to a colleague of mine, and that’s his specialty – working with short sales, representing the seller.
We wrote the offer up, a fair bit lower than asking price. We wrote it up at a price that I thought was fair at the time. The listing agent had thought it would be about a month before the bank would accept the short sale price. I knew, of course, that this was just a guesstimate, and it would probably take much longer than that – and I informed my client as much. In fact, I told her it could easily take 2-3 months. Or more. My client said fine, she’d be patient – this is the only condo she wanted, and she’d seen plenty. This was it, and it was worth waiting for.
Which is good, because if you want to buy a short sale, you need to really want that property, and you’ve got to be patient. One problem with being patient in a falling market is is that you watch as all the prices start to decline. You begin to see that other homes are closing escrow for prices that may be lower than what you wrote up in your short sale offer. Zoinks.
And that’s what happened here. My client started to fret – was she getting a good deal? Was she overpaying? Would values continue to drop, and if so, how low would they go? So, we decided to send in an addendum asking for some closing cost credits, which we hadn’t asked for in the original offer.
The listing agent loved this. Ha, just kidding – she kind of pushed back against that idea. She didn’t want to have to try to negotiate a closing cost credit on top of everything else. So, a week or two of tension surrounded this, but eventually the listing agent got behind the idea of the credit, got her client (the seller) to sign the addendum, and submitted that to the bank.
After much hemming and hawing, the bank agreed to the purchase price, plus the closing costs credits – hooray! We were good to go. And here’s where the trouble really started. Once we had an accepted price and terms, we went over to the property so I could do my AVID – my Agent’s Visual Inspection Disclosure. I had never actually been out to the condo yet – but I have been in many other units in this complex many times over the years.
We went there along with a couple of contractors my client wanted to have do some work – painting, installing a washer and dryer in the unit, that kind of thing. One of the contractors helpfully pointed out that the unit had popcorn ceilings – that is, the ceilings were treated with that bumpy white substance so popular in 1970’s construction. “Those are asbestos ceilings,” he said.
Good stuff. Like many people, especially in Santa Cruz, my client has an aversion to all things toxic, especially the kind that are known to cause cancer. There’s a great deal of information on popcorn ceilings, and the health risks popcorn ceilings represent. Apparently not all popcorn ceilings contain asbestos, so you need to test.
So, test we did. It turns out, these ceilings had an asbestos content of 10%, which is very very high. Not good. What most people do is paint over the popcorn treatment, and that seals in the asbestos, and be done with it. My client, however, did not feel that was acceptable, she didn’t want this toxin in her home.
Next came the quotes to remediate the asbestos. We got some quotes for testing and remediation – not too bad, just about $3200. Unfortunately, my client did not have the money on top of everything else to pay for this, nor was she inclined to – she felt “the bank” should pay for this. So, it was back to the listing agent, for another addendum, specifying that the seller would pay for this – which, since the seller had no money, that meant his lender needed to pay.
Another couple-few weeks of drama surrounded this latest development. Eventually, and to my surprise, the short sale lender did agree to pay another $3200 for asbestos remediation. My client arranged with the remediation and testing companies to bill escrow, and off we went, another hurdle leaped.
This asbestos remediation company is a professional outfit, that’s what they do, is remove asbestos. So, it was kind of surprising to find out they had done a half-assed job. In fact they ended up contaminating the entire unit. Wow, what a nightmare. The thing with short sales is, the lender gives short sale approval, with a close of escrow to be on-or-before a certain date – and they typically don’t give you very much time to close escrow once they have given you approval, as was the case here.
To cut a long story short, we were ultimately able, by hook and by crook, to get the unit certified as “asbestos free” in time such that the lender could fund the loan and close escrow in time to stay within the time period permitted by the short sale approval letter. We had to kind of cheat here, actually – my client got the testing company to do a simple field test, because if we’d have had to wait for the actual electron-microscope lab test, we wouldn’t have made the cut-off date. The field test said the unit was clean, the lab test said no – there was another round of cleaning and testing before the unit was actually cleared, but this was several days after escrow had closed.
It looks like we got lucky on another account – a couple of days after escrow closed, the escrow company, Financial Title, shut its doors forever. Another sign of the times. Whew. Dodged a few bullets on this one, rat tat tat.
What a crazy gig, this Realtor bidness. I hope to tale of a Santa Cruz Short Sale has provided some useful anecdotes for you – please let me know if you have any follow up questions!
Posted by SantaCruzBroker at 1:52pm
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Home Buying Philosophy in Santa Cruz
August 07, 2008
Yesterday, I popped on down to Keller Williams Real Estate in Santa Cruz for another of their freebie, and generally excellent, training sessions. To my delight, I found that one of my former colleagues from Thunderbird, Kari Kelly, had joined Keller Williams (after a multi-year stint at Vanguard Realtors). Kari’s a great lady, and it was nice to chat with with and catch up. She’s only been at Keller Williams for three weeks, but seems to be enjoying it tremendously.
The topic of the day’s training was “Creating Urgency to Buy.” I personally don’t have a problem with creating urgency to buy – I think that by now, most people can see the writing on the wall – if you want to buy some real estate in Santa Cruz, now is a fine time. Yes, prices may continue to fall over the next year, but there are plenty of opportunities to buy “below full market value” that you can insulate yourself against the coming price declines. The thing is, you’ll never know when, exactly, we’re at the bottom, and by the time we do hit bottom and start coming up on the other side, it’ll be more of a seller’s market and the deals won’t be so easy to come across.
Over at Keller Williams, they teach you that really, you should only show a buyer three properties. That’s incredible. The idea is that you do such a good job interviewing the client and finding out what they really want, you can save everyone a lot of time by only showing them properties that they have a good chance of actually buying.
Interesting idea. My question is, with that philosophy: do you ever show a short sale? I mean, let’s face it – most short sales are a waste of time. More than half (probably about 75%) of short sales go nowhere. The reality is, you don’t have a good chance of actually buying a short sale – not the average one, anyway. Yes, I know, some short sale listing agents are very good and have a “high” success rate – but most do not.
Personally, I hate showing short sales, because most of the time, it’s a waste of precious time, time that I will never get back, no matter what. But I’ll show ‘em anyway. After all, many a nice house is listed at an attractive price as a short sale, and some of them do pan out. And I’ll also show my clients more than three properties. I do encourage folks to drive by on their own, because most of these “well priced” properties turn out to be not so well priced when you discover there’s high tension power lines, or the neighbor has his front yard littered with broken down cars, or the odor from the sewage treatment plant is just a tad too ripe.
Don’t get me wrong, I’d like to show each buyer no more than three properties, because the Keller Williams people do have a point – there’s little point in showing property that you are fairly certain the client will not buy. The thing is though – this is a customer service business. If the client wants to see the inside of the property, and you are their agent – what do you do, just refuse? “Remember, Mr. Client, I will only show you three houses. So choose wisely.” I have a hard time with that. It’s saying, “I know what’s better for you than you do.”
Part of this strategy employs the use of Buyer Broker agreements – where you get the client to sign a contract saying you are their exclusive agent for buying a property in such-and-such a region between such-and-such dates. It’s kind of like forced loyalty – you have to stick with the agent, even if they don’t want to show you a property, because the plan is to show you no more than three.
I have tried getting people to sign Buyer Broker agreements – with no success. I didn’t try too hard, more of a trial balloon a few times, more than anything else, I suppose. Again, the Keller Williams folks make a good point: would you agree to sell someone’s house without a contract? No, of course not. So why would you agree to help someone buy a house without a contract with them?
Food for thought.
Posted by SantaCruzBroker at 5:55am
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St. Joseph and Santa Cruz Real Estate
August 04, 2008
So I was down at the Santa Cruz Association of Realtors today, buying a couple of swish new Blue SupraKey safes – the place the Realtor keeps a key to your home so that other Realtors can show it when you’re not around. As I forked over my credit card, what should I see there, but St. Joseph, the Underground Real Estate Agent(tm).
Pretty cool, huh? Who knew there was a patron saint of home sellers – and no less than Joseph, as in Jesus, Mary, and Joseph. If you’re having trouble selling your house – just ask your listing agent to pick you up a $10 Statue of St. Joseph and bury it at your property. Your Realtor will end up saving money, too – if your house is $50,000 over-priced like 90% of most houses on the market, that’s $1500 in commissions right there your Realtor would save, versus eventually reducing the price to where it otherwise would need to be if it doesn’t sell thanks to a little divine intervention.
The booklet that comes with the statue is pretty cool. It has a couple suggested prayers, here’s an example:
“St. Joseph, guardian of household needs, we bury you now to help us in the sale of our property. Please bring us an acceptable offer. When escrow closes, we will dig you up and display you in a place of honor in our new home.”
All I can say is, Amen to that!
Now, to be fair, the booklet does mention that it is wise to also continue with typical methods to sell your real estate. #1 on the list? Drumroll, please: properly price your home. Looks like your Realtor’s gonna be out that $1500 anyway.
For more info on the St. Joseph’s Statue, visit StJosephStatue.com – or pick one up at the Santa Cruz Association of Realtors.
Posted by SantaCruzBroker at 11:20pm
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More about Santa Cruz and the 2008 Housing Bill
August 02, 2008
I got quite a few e-mails from my post the other day about the Housing and Economic Recovery Act of 2008. My mother wrote me (Hi Mama!) and said, what’s a GSE? What’s FHA? Good questions. Here’s a bit of a run-down on some of the acronyms used in my last post:
- A GSE is a Government Sponsored Enterprise – in this case, Fannie Mae and Freddie Mac, but there are and have been a few others. As I often do, I will refer you to the Wikipedia entry for Government Sponsored Enterprise.
- FHA is the Federal Housing Administration. You can read all about it on the Wikipedia page about the Federal Housing Administration. It’s no surprise that a major piece of the legislation that President Bush just signed addresses the FHA – together with Fannie Mae and Freddie Mac, these institutions are pretty much the only things holding the real estate market together at the moment.
- VA is the Veteran’s Administration. It used to be that we didn’t have too many VA loans in the area, but now prices have dropped in many parts of Santa Cruz and north Monterey County that VA loans are becoming increasingly more frequent.
- CDBG: that’s Community Development Block Grant.
I got an e-mail from another client asking if this would put an end to short sales and REOs. The answer to that one is a resounding no. Here’s a link to an interesting take on the housing bill:
The housing bill will likely help less than five percent of the families facing foreclosure over the next two years.
Of course, AlterNet is a commie-pinko agitator web site, so take that with a grain of salt. Don’t get me wrong – I love commie-pinko agitators as much as the next guy, but you can see from the article that the author very much favors competing legislation, H.R. 6116, the Saving Family Homes Act of 2008. Good or bad, I can predict this with a lot of confidence: HR 6116 will go nowhere.
I found another interesting article about this bill, claiming that the 2008 Housing Bill is just Crony Capitalism at its finest. This is actually a really great article, and if you are interested in the legislation just passed, I recommend you read it. Among the many questions it raises is, what is the “fair market value” of a home? I mean, the idea is that the debt gets written down to 85% or 90% of the home’s current value – how is that home’s value determined? By an appraiser, probably – but which appraiser? The bank’s? The borrower’s? I’m guessing the bank will be choosing the appraiser, and what do you want to bet the appraiser will be turning in rosy figures for the home’s value?
One of the biggest questions out there is, say you are a homeowner with a mortgage you can’t afford – how do you take advantage of this bill? Suppose you do somehow manage to qualify for the program, that you are one of the lucky 5%. Who do you call? My guess would be the lender’s loss mitigation department. And, good luck with that – they’re famously painful to deal with. It’s a messy situation still, and it appears that the Housing and Economic Recovery Act of 2008 will not be as helpful as we’d hoped to struggling homeowners in Santa Cruz county.
Posted by SantaCruzBroker at 9:07am
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