Every week I have a number of clients that anxiously await the arrival of new listings on the market. That’s especially true so far in 2012 with the inventory being so amazingly low. Folks flock to open houses on new listings and multiple offer feeding frenzies occur quite frequently now a days. Sometimes places are in fantastic shape and sometimes they aren’t yet most of these new offerings sell quickly, and lately over the asking price. Yet, there’s still those homes that just sit there…and some sit there some more! What about those places? Why don’t they sell and are there opportunities for buyers there?

The market is so very focused on the first 2 weeks of a listing. If a seller is going to get multiple offers is almost a certainty that it’s going to happen in the first 10 to 14 days of a listing. Buyers rush out to see the new listings and if they aren’t struck by the place immediately they move on to something else. When I look at the MLS I see some homes that are just sitting there, and it seems like they’re never going to sell and I can’t help but winder why? Often the answer to that comes quickly…the price is too high (often WAY too high), the project it’s in is a disaster, it’s a short sale and buyers have backed out because the bank can’t get it’s act together and approve (or even look at the file) the loan. Sometimes the place has a difficult structural problem or a significant location challenge and sometimes the home just shows incredibly poorly.

In Foster City right now, there are 10 homes out of the 21 total listings in both single family and condo/townhouses that have been on the market for more that 21 days. 3 of them have been on for over 175 days. Most of them, to me, have understandable explanations. Still, it’s an interesting thing that folks will offer significant dollars over the asking price but not offer under asking on some of these places. Of course, it would certainly be a concern to me that my investment couldn’t sell in a market like this. The big question would be…why isn’t it selling and could I resolve the issue that keeps it from selling and improve my prospects for appreciation going forward. In many of these cases the answer is no or tentatively maybe. That doesn’t really encourage folks does it?

As much a pain as short sales have been there’s one thing that’s pretty much been a certainty when you go about trying to buy one. That is that you don’t really have to commit until the bank approves the short sale. You don’t need to make your deposit with a Title company, you don’t need to spend money on inspections since it could take months to get the bank to even look at the file on this type of property. I mean really, why would a buyer spend their money on inspections when the bank could easily reject their offer or not respond in 5 months? Why would you put a 3% deposit into escrow where an underwater seller has to sign a release if you decide you’re sick of waiting for th bank to work this out…if it even is possible? The California Association of Realtors has a nice little disclosure called the “Short Sale Information and Advisory” that says the following:

“Buyers may expend money on inspections, loan applications, escrow fees and other costs that they will not be able to recover from anyone if the lender does not approve the transaction. Buyers may also have difficulty obtaining the return of their deposit in escrow if the seller becomes uncommunicative during the short sale process”.

Well, we’ve now entered the crazy world of 2012 real estate around here. Short sales are getting multiple offers now. I saw one this week where the listing agent has a sheet of rules for the transaction that states the following:

 ”Must have initial deposit up front deposited to escrow upon acceptance of offer by seller”

What? Seems the new rules in 2012 want to eliminate risk for sellers of short sales. A buyer in this case should tie up their deposit for months. It seems crazy, doesn’t it? The real question is, will enough buyers comply so that this becomes the norm?

]]> http://fostercityblog.com/2012/04/new-rules/feed/ 0 http://fostercityblog.com/2012/04/the-short-sale-from-hell/ http://fostercityblog.com/2012/04/the-short-sale-from-hell/#comments Tue, 17 Apr 2012 18:17:08 +0000 Jim Minkey http://fostercityblog.com/?p=6134

Short sales are not fun. Some folks (me included) sort of think of them as hellish. I have one right now that was (supposedly) approved when we ratified our offer in early January that’s still out there waiting for completion. You get excited, you buy a place…and then you wait, and wait….and wait for somebody at the bank or their service company affiliate to finalize your deal. When most folks hear about a short sale they get queasy. When you hear there’s a short sale, which happens alot, where there’s 2 loans queasy turns into weak at the knees. The reason being is that you’ll have to negotiate with both lenders to make this fly. You see, often the seller of a short sale owes on his original mortgage plus a second loan as well. Quite often that’s an equity line. Every once in awhile you’ll see a short sale where there’s 3 loans. Often that happens when it’s a condo and the seller hasn’t been paying both his loans as well as the HOA dues. # lien holders makes you go from queasy to weak in the knees all the way to nauseous.

Well, a couple of days ago I saw a short sale in Menlo Park that topped them all. It’s a really cute 3 bedroom, 1 bath house at 1082 Lucky (ironic street name, huh?) that’s listed for $899,000. Turns out the sellers owe almost $1,400,000. They owe that to not 1, not 2, not 3 liens…but 20 of them. That’s right…20 lien holders! They owe money to lots of different people who, over time, have recorded these debts against the title of this house. What that means is that in the case of a short sale, the first lien holder is going to have to get all of these other folks to agree to a significantly reduced payoff. 19 groups need to be negotiated with! So much for nauseous and all the rest…we’ve moved directly to comotose! I can’t imagine this actually ever happening without foreclosure. What a mess…but it’ll probably get multiple offers anyway in this insane market!

There’s a very strong element of thinking among buyers in this market that really is a hold over from the last five years…but in my opinion is no longer relevant. That element is the strong desire to negotiate the best possible deal. For some folks it really is the most important thing. In answer to the question, what’s important? these folks deep down think it’s the deal.

What I mean by that is that, for some buyers, the deal is the most important thing. Not the house/townhouse/condo…it’s the deal. It’s sort of funny to me that in the face of 10 offers or more on a property somebody will inevitably want to negotiate downward. I hear frequently questions like:

“Can we ask the seller to pay for our closing costs?”

“Do you think we can get the seller to fix all those things on the pest report?”

“How can we get the seller to fix the foundation?”

As I see it in markets like this one, heck in ANY market, the property is the most important thing. That’s the bottom line. If the place is in a good location, has the features you want and is in reasonably good shape,then negotiating over relatively small amounts of money is silly. Yet many folks feel bad if they don’t get a concession out of a seller. So many of the offers I’m seeing right now have no contingencies, have large down payments and are way over the asking price. The actual definition of “deal” in these cases is whether or not we got the place and is it in a location that is likely to appreciate well.

The irony is that making the deal top priority is ultimately a desire to save money. After wasting months of attempting to negotiate these relatively small amounts of money and losing homes in competition…the prices of these homes goes up. By the time it becomes apparent that the home is the most important thing, you’ve lost more money than you had been trying to negotiate originally in market appreciation. I can’t even tell you how many times I’ve seen that…and I’ve seen people who have actually been completely priced out of this area.

It happens all the time. There’s multiple offers on a given property and one knucklehead thinks they can successfully win it with their offer written under the asking price. In San Carlos last month, a house on Woodland got 28 offers and one of them came in $25,000 under asking. Huh? My question is, what’s wrong with that agent? Who writes an offer like that?

OK, maybe I’m assuming too much. Here’s an absolute. A guarantee. If there’s 28 offers on any given property it’s going to sell over the asking price. No doubt about it. I promise. Also…I think the odds are WAY in favor of a house going over the asking price if there’s as few as 3 offers. If you’re competing in this 2012 market you’re going to need to make an offer over asking. If you don’t feel like that don’t waste your time writing an offer. Also…consider moving to the East Bay too, because good homes between Millbrae and Sunnyvale (at least) are getting multiple offers.

Still, with every multiple offer scenario out there comes a story about somebody coming in under asking. Hilarious! Of course that’s the biggest piece, but there’s other silly things buyers do in this environment too. Asking the seller to pay your closing costs is almost as bad an idea as coming in under asking.

It’s really fairly easy to know if there’s going to be multiple offers on a place too. Simply ask, or have your agent ask, the listing agent 24 hours before the deadline how the activity has been. how many disclosures are out. If the answer is 45 you better get ready to write your strongest offer. Call again about an hour before the deadline and see if the agent can give you a solid number. One feeding frenzy I went through 2 weeks ago had 21 offers but when I called the agent about an hour before the deadline he told me he had 4 in hand and was expecting 2 or 3 more at best. Turned out he was wrong. Still, 6 offers invites you to swing for the fence in my mind as well.

If you’re writing an offer under asking in this environment your simply driving the overall price up, in my opinion. Most folks base their number on how many other offers are in play. Writing a silly offer like that just helps the seller get more money.

Way back when, almost before life existed on Earth, I spent a fair amount of time hosting and attending parties. This was, of course, back before I got married and settled down dontcha know. My friends and I discovered a tried and true formula for having terrific parties and consequently when we had one they were always fun and successful. Here’s what we discovered…if we invited any guys the party stunk because the guys tended to outnumber the women 7 or 8 to 1. So, we stopped inviting guys all together. We created flyers and a week or so before the party we would hand them out…only to women! Women in bars, women at the health club, women in grocery stores, you name it. Never any guys though! Guess what…we always ended up with a party that consisted of 50% men vs women. Our events were really popular as a result.

You see the truth was that you could wad up one of those party flyers and throw it out the window of your car…and some guy would find it, tell all of his friends and they would ALL come to the party. If you invited 10 women, 2 or 3 of them might come. So if you invited 300 women and zero guys you would get 100 women and 100 men. It never failed!

Now…flash forward a couple of millenia and we have the 2012 Peninsula real estate market. That house in the picture is in South San Francisco. It’s a bank owned foreclosure. The bank ignorantly gave this listing to an agent from WAY out of the Bay Area. In Red Bluff or someplace around there. Said agent made small boo boo and listed the house in the San Francisco MLS…not the San Mateo County MLS. In case you’re unaware, there are two different databases and just so you know, South San Francisco is in San Mateo county. Since I,or any other local agent can’t see it in our local MLS it might as well be listed in Sacramento’s MLS. Are there any SF agents searching SM County in their MLS? No way. Right? Wrong!

This is the era of ZillowTruliaRedfinMovotoRoostSawbuckRealtor.com! They just buy the info from the MLS, regardless of which MLS! Everybody but us knows about this listing!! This clueless Red Bluff agent is going to review at least 10 offers on this property! 10 years ago this guy would have been wondering why nobody was calling or looking at his listing! It’s a weird feeling getting a call from your client who says they want to see this listing in SSF and I can’t find it to show it to him.

Honestly, you can’t hide good deals around here! It’s just like the wadded up party flyer that the guys found! Even if there’s a rumor of a deal…buyers will find it now.

It never fails. Seems like any time I get a new listing, in the first hour of the first open house somebody inevitably asks me this question. ” Is the seller flexible on price?” Honestly, that’s really an astonishingly stupid question…isn’t it? Is there anybody that you know on Earth who puts their home on the market for sale and expects to take a big price reduction…on the first day! I mean, do these folks imagine me sitting with the sellers and having a conversation like this?

Me: “Well, we’re off and running. I just put the house in the MLS and our first open house is tomorrow.”

Seller: ” Great! Remember Jim, I’m real flexible on price. Make sure those potential buyers and those agents know that, OK?”

Me: “Sure, no problem. How much under the asking price do you think you may want to go?”

Seller: “Oh, I don’t know. Maybe $100,000 or so. I just want to make sure those buyers feel like they’re getting a good deal. That’s my goal.”

Folks, if you believe any of this please call me because I have some really great ocean front property to sell you in Vacaville.

Seriously, I’ve never met a seller in my career who had any flexibility on the first day of the listing. If you like the house and want to make an offer on a listing that’s been on the market one day…get ready to pay at minimum somewhere close to the sellers price. Heck, the truth is most sellers entertain the fantasy on day one that they’ll get multiple offers and their house is going over asking. Even if it’s a complete dump! Now if you’re asking that question on day 72…that’s a different story.

I wrote this a couple of years ago…and it’s still relavant. Here it comes again:

This post has been coming for a long time, and on this topic I want to be really clear. 1) foundation problems are common in Foster City and 2) those foundation problems are not a reason to avoid purchasing a home in Foster City. For several years, many many homes have had issues with their foundations in this area. I met an engineer once who told me that he had fixed 60 foundations in Foster City over the years. I’m not an engineer, but as I understand it the majority of issues come from exposed rebar that’s rusted over time, has expanded and then cracks or breaks up the concrete around it. I’ve also heard that the high sodium content in the Foster City landfill impacts this rusting problem a bunch. The photo above is a typical example. The pieces on the right have fallen away from the rest of the foundation and the rusted rebar is obvious. The weakened condition of a foundation with this type of problem theoretically has an adverse effect on it’s seismic stability.

Several contractors or engineers have made a good business out of resolving these issues. The fix on the foundation pictured above is slightly under $24,000. If you’re looking at a hillside property in San Mateo, Belmont or San Carlos you could easily find drainage issues that can have similar expense and that certainly doesn’t prevent people from buying homes in those locations. Foundation problems in Foster City are correctable and shouldn’t frighten anyone out of buying here.

It is wise, however, for a buyer to be diligent in inspecting the home they are purchasing…and that means hiring an engineer or qualified foundation contractor (one who has experience with this type of issue in Foster City is best) to inspect this area. Most property inspections will note rusted rebar if found but not go any further in explaining a solution for it. Be proactive, if there’s even a hint of a problem on a report get further inspection.

After 20 years I think I’ve probably seen it all when it comes to folks coming into open houses of mine. In the first few open houses there’s plenty of neighbors, there’s also agents with clients, folks that I think of as “professional” buyers ( those buyers who basically know what they’re doing) and there’s also those folks that just think it’s sort of fun to explore a house they see when they happen to be driving by. They have no intention of buying anything, they just like looking at open houses. I’m that type myself…I drive Lesley crazy when we go on vacation someplace because I can’t resist the urge to check out a few open houses if I see directional signs. Sometimes I just want to see how the agents in them act around me.

Well there’s this other class of open house visitor. I think of them as the wet blanket. These folks appear to go in with the specific purpose of being critical. They’re usually kind of a pain to tell you the truth. Typically they have no concept of the relationship between the listed price and it’s real value. Maybe they’re all from out of state and they think all of our prices are insane. 

On the first of April I pulled a little April fools prank here by telling that story about a Pompano house that was listed for $112,000. If that situation really did exist and I was holding the place open I’ll bet you there would be one person (out of the 500 who would come to that open house!) who would walk around the house and announce to me something like “There’s marks on the paint here!” or “How old is the furnace?” A few years ago I had this great listing that was kind of aggressively priced (we got 14 offers) yet there was this one older lady who complained to me about a cracked kitchen floor tile and told me in very broken English “Price too high! You come down!” I couldn’t resist..and I replied to her “Price too low! You come up!”

One of the funny parts of these complaints is the fact that the issues being raised are almost always easy and relatively inexpensive fixes. Missing closet doors, stains on carpet, marks on the hardwood floors…etc. If you’re buying a house at a discount versus the comps in the area, and sometimes even if you’re not, who cares about this little stuff!

Well, there’s been a pretty nice about face when it comes to Conforming loan limits. They were $729,750 as a result of the mortgage meltdown a few years ago but the Federal Government decided that the should be lowered down to $625,000. Surprisingly to me, the Feds decided last week to raise it again to the $729,750 number through 2013. That’s pretty darn good news for folks in this area as it certainly allows more bang for your buck when it comes to purchases and refis.

Here’s the story as reported by Reuters:

Congress Votes To Raise FHA Loan Limits