One of my favorite things about Foster City, as a realtor at least, is the fact that it’s relatively easy to study comparables. There’s a finite amount of homes and floor plans in this town so I can simply search by square footage and find what these houses have sold for historically. It’s, of course, not exactly foolproof since no two houses are the same. Some are very upgraded and others not so much. Never the less, it’s alot easier studying comps and how the market is doing in Foster City since you have lots of like kind homes. It also makes it very interesting to look at how the 2012 market is evolving. Here’s some examples:

685 Pilgrim was listed for $888,000 a month or so ago. The most ever spent for this 3 bedroom, 2 bath floor plan was $900,000 and I thought Pilgrim was priced high since it needed a roof. What do I know…it got 10 offers and closed at $908,000.

844 Vega was listed for $998,000 also about a month ago and also got multiple offers. The most money ever spent for this floor plan was $1,066,000 in 2005. 844 Vega sold for $1,050,000.

354 Bluefish was listed for $910,000..same time last month. Guess what…it got multiples. The most money ever spent for this floor plan was $1,000,000 in 2005. 354 Bluefish closed at $967,000.

There are others in escrow now that are going to extend this list. It’s an amazing thing that in just a few months the values of these homes are bouncing right back to where they were before the meltdown. I hate to say it, but heard a whole lot of commentary about how we were never going to really recover from the binge that was the subprime era. Dare I say it, I think we’re recovering nicely…thank you. Coming close to and exceeding all time highs in Foster City is really a testimony to how strong this local economy is.

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.

Yet another aspect of the insanity of the current marketplace and one that’s becoming more and more prevalent is the practice of dispensing with any and all contingencies in order to get a home in competition. In the last few weeks especially it seems to quickly becoming the norm. Honestly…I hate the idea. Talk about going way out on a limb! First of all, in most of these circumstances there are already inspections done so accepting the property in “As Is” condition and waiving a contingency to do inspections is not really that dramatic. You can, of course, inspect all you want…you just don’t have a contingency to negotiate further over what you might discover. You also can’t back out over these discoveries either.

The long limb really applies to the appraisal and loan contingencies. Since this is a new phenomenon, the values that are coming in on appraisals are typically above the comparable sales for any time prior to mid February 2012. I wrote an offer on a cute townhouse in Palo Alto that was listed for $825,000 and ended up selling someplace north of $900,000. The last unit that sold over there was this same place…and it went for $765,000 in 2010. The winning offer was not only over 900k but had no contingencies of any kind. In essence the buyers are saying “Don’t worry about the appraisal, if it doesn’t come in we’ll go ahead and make up the difference in cash to make this deal close.” This can be pretty risky stuff. You’re really guaranteeing the sale for the seller to get them to take your offer.

It’s not just happening in Palo Alto either. The house at 354 Bluefish in Foster City got a non contingent offer as well. There’s been several others so far this year in FC that have experienced that too…and it looks like that’s what is coming in the future as the norm when writing offers. I really hope it doesn’t. If you don’t have 30% down you’re at risk. I actually had an agent tell me today that she received an offer on a Million dollar plus house where an agent presenting an offer with 40% down apologized for not writing an all cash offer. “I’m really sorry, but my clients need a loan” she heard the agent say. Amazing!

I got an e-mail from a client today who said:

“Reading your posts as of late, it sounds like we’re in a bit of a bubble.”

That’s not the first time I’ve heard this lately. The question is, how long will this bubble last? I personally think it’s going to last awhile. Here’s why:

1. Lots of folks have obviously been sitting on the fence for the last few years. Those folks have been saving money.

2. Population in this area isn’t declining

3. There’s still a finite amount of housing and buildable land around here.

4. The inventory is hilariously, preposterously low

5. The buyers in this market are all well qualified, out of 15 buyers I’ve worked with so far this year only one has less than 20% down.

6. As I see it, we’ll need inventory to at least triple to make a dent in this demand…I’m not sure that’s coming.

7. The major media hasn’t discovered this story yet, when that happens I predict more buyers enter the marketplace (more sellers too!)

Case in point, and this is kind of scary too. The 3 bedroom house at 685 Pilgrim looked at offers today. The most money ever spent on this floorplan was $900,000. This house is listed for $888,000. 685 Pilgrim needs a roof. The same floorplan in far worse condition sold for $775,000 last November. This afternoon they got 10 offers…undoubtedly it went over the all time high. What happens when the next 3 or 4 bedroom rancher comes on the market that doesn’t need a roof? I’m thinking it’s likely it’ll be priced higher than 685 Pilgrim.

I really don’t expect this “bubble” to burst this year. Whatever the case…it sure is a wild ride we’re on!

So far, a fairly large number of homes for sale around here, both condo/townhouses and single family houses have experienced multiple offers this year. Not only your run of the mill 2 or 3 offers but lots and lots of offers! Here’s a list of some of the one’s I’ve been involved with or know of personally lately. There’s the address listed and the number of offers received next to it:

880 Carina FC…6 offers

2619 Cipriani Belmont…11 offers

760 Celestial FC…11 offers

650 Harvester FC…5 offers

42 Commons FC…6 offers

880 Meridian Bay #116 FC…14 offers

335 W. 27th SM….21 offers

844 Vega FC…4 offers

812 Andromeda FC…7 offers

1030 Crestview SC…11 offers

1357 Woodland SC…6 offers

2605 Read Bel…9 offers

3908 Fernwood SM…30 offers

162 Positano RS…12 offers

Like I said, that’s just to name a few. I have no doubt there’s a WHOLE bunch more with similar stories right now. The thing is, writing an offer with this kind of competition is significantly different than writing an offer with just one other competitor or, incredibly, no competition! Consider this a little primer if you’re considering an offer in one of these frenzies. First of all, if you’re thinking about writing an offer at, below or even slightly above the asking price…don’t waste your time. Seriously. If you’re not prepared to go over asking by a fair amount you won’t be in the game at all.  A lender friend of mine told me she wrote an approval for a buyer who offered $40,000 under asking on a listing in San Carlos that got 38 offers. Other than providing comic relief for lots of folks, not much was accomplished by that offer. It’s impossible to say exactly what it’ll take to get a place in this environment, just take your best shot and hope for the best.

Second, seriously consider reducing your terms to the bare bones. If inspections have been done, the winning offer most likely won’t include an inspection contingency. It’s also going to be sold in As Is condition. In many of the most competitive battles the buyer will write an offer with no contingencies at all and be willing to make up the difference themselves if the property doesn’t appraise. This scenario is commonly occurring all over the Peninsula right now…shades of 2004, huh? It really is very thin air up here now isn’t it? Buying a home in 2012 is an experience not for the faint of heart.

So our brethren north of us in Canada have come up with an interesting slant on real estate transparency. Seems there’s a government agency called the Canadian Competition Commission that’s taking action to force consumers private information that exists now on private MLS pages to be made public. Info such as the sellers phone number and property access information would thereby be made public and would appear on public sites like Trulia, Zillow and Redfin if they’re in those markets. Currently that type of information is kept off of the public versions of those sites for obvious privacy reasons.

There’s plenty of info that the Canadians are going to also make public that already is down here…like closed sales prices and mortgage information. It’s the inclusion of sellers contact info that’s interesting and sort of strange to me here. The seller’s phone number is included in listings so that agents can call and make appointments to show their homes. Often, these numbers are unpublished cell numbers and the inclusion of them to the general public that may often not even be local is sort of a troubling thing to me. I’m thinking I wouldn’t want my number published to anyone who was looking for a house to buy…or whatever else they might want. This is proprietary information that ought to stay that way if you ask me.

It’ll be interesting to see how this plays out and whether or not we see something like this around here in the future…in the interest of transparency. Here’s some more on this topic:

http://agbeat.com/real-estate-news-events/canadian-showdown-over-making-homeowners-information-public-in-mls/

So, you think the real estate market hasn’t turned a corner yet, huh? On Sunday I shot a video of a house in Palo Alto for a client who lives in New York….thus the commentary on it. OK, it’s Palo Alto but the story of folks out there looking is becoming more and more common on the entire Peninsula. Check it out.

You know what? Honestly, I really hate short sales. Since they sort of arrived on the scene around here they’ve been a massive pain in the posterior if you ask me. I’m not alone in that estimation either. A short sale (a oximoron if ever there was one) occurs when a homeowner who owes more on his/her loans (and often loans) and puts their home on the market attempting to persuade their lender(s) into forgiving some of their debt to allow the place to be sold. In the past 5 years or so it’s sort of appeared to me that lenders seem to want to torture buyers and agents who are attempting to actually buy one of these places.

Buying a short sale is not for the faint of heart…and certainly not for somebody in a hurry either! They take forever and often it takes months just to get a lender to look at the file. One agent I know spent months just trying to get a return phone call from the relevant person inside a bank holding a loan. I’m not talking about actually negotiating the short sale, months just getting somebody to make an initial contact with a decision maker. Another agent I know was told any offers on a short sale with one particular lender had to be faxed (and faxed only!) to one particular fax machine…that was always busy. Busy at 2:00AM, Busy for 3 weeks straight. If you’re looking for personal growth in the area of patience, try negotiating a short sale. It’s a land where most rules of common sense get redefined.

Historically, short sales are those listings you see that have been on the market forever. the ones with the 3 digit days on market numbers. Not in 2012 though! In yet another sign of the turning of the real estate market so far this year, short sales are not only ratifying early in their listing life…they’re getting multiple offers! You really have no idea how amazing that is to me! In the past 2 weeks alone I’ve seen 5 short sale listings get multiple offers. In Foster City the townhouse at 965Vasco da Gama in Winston Square is getting at least 5 offers this afternoon. Multiple offers on a short sale? Unheard of! The irony is that, now, people are waiting in line…to wait in line again! We’ll now compete for the opportunity to wait for the lenders to take 4 months to look at the file.

I don’t know…I hear that they’re actually getting better at this. I hope that’s true! Keep an eye on the escrows of these short sales. It’s going to be interesting to see how long they take to matriculate in 2012.