Monday, June 30, 2008

Buy a House Only If You Are Ready

Here is a recent article I read in the Los Angeles times by Liz Pulliam Weston. Liz hits in on the mark with her answer to a question asked by a reader.

Buy a house only if you are ready

Dear Liz: As a first-time buyer, I'm wondering: Is this the right time to buy a new home? Based on current economic indicators, house prices may go down further. When do you think is the best time to buy?

Answer: The best time to buy a home is when:
  • You have a strong desire to be a homeowner.
  • You are financially prepared and can afford the costs of a home.
  • You are ready to stay put for several years.

Liz also states, "The best time to buy a home is when you are ready, regardless of the market. That said, if you buy now, you must be psychologically prepared for your home to lose value. You could wait until prices start to rebound - but you may lose out on low interest rates or some great deals."

I've been recently reading that interests rates will start to rise as the bottom of the market nears. I'm also noticing that single family homes in Reseda, Van Nuys, Lake Balboa, and North Hollywood priced between $300,000 and $500,000 have hit the bottom and are now selling with multiple offers.

It's important to note that not all areas decline the same. For example, single family homes in Sherman Oaks have declined and average of 25-30% while in Reseda, home prices have fallen between 45-65% since the height of the real estate market.

It appears the areas which are holding ground are Studio City, Toluca Lake, Sherman Oaks, and Encino. I believe most of the wealth in the valley in concentrated in these areas which in turn is why we don't see big price declines.

Homes prices above $500,000 are still declining but with the lower priced homes starting to sell, it will probably be a matter of months until they find their footing and bottom-out. This should probably take place by the end of the third quarter or worst case scenario, at the end of the year 2008.

Now is the time to buy and hold. This is exactly what the investors are doing. Interest rates are still low but will probably rise later in the year and into 2009.

Written by: Richard Johnston, RE/MAX
818-730-4128

San Fernando Valley Market Update for June

Here is the latest update for the real estate market in the San Fernando Valley by our Association or Realtors.

http://sanfernandovalleymarketupdate.blogspot.com/

Saturday, June 28, 2008

Buying & Bailing in the San Fernando Valley

The term 'Buying & Bailing' means when a home-owner purchases a similar home while their credit is good, then walking away from their current home leaving the lender holding the bag (losses).

Though I do not advocate this kind of behavior, I can imagine more and more homeowners will want to make the switch. Just imagine owing $600,000 on your current home, then finding out a similar home down the street is listed at $350,000. The difference in mortgage payment can be substantial.

Though I do not personally know anybody who has done this, I'm sure this will become more prevalent as home-prices continue their decline in the San Fernando Valley. Lenders should work with home-owners who have fallen behind or who are unable to make the current mortgage payment(s) by possibly reducing their mortgage balance.

Written by: Richard Johnston, RE/MAX OTB Estates
I am a Short sale & Foreclosure specialist for the San Fernando Valley including the areas of Burbank, Studio City, Tarzana, Sherman Oaks, and Van Nuys. You can visit my San Fernando Valley real estate site for more information.

Wednesday, June 25, 2008

Lenders Prefer to Foreclose on Short Sales

The title of this post might sound crazy to you, but the more I get involved with short sales and bank owned homes, the more I realize that lenders go out of their way to make sure the short sale gets foreclosed upon.

Lets take a step back and look at all the reasons why a Realtor and a buyer would rather not deal with a short sale:
1. Really low price - it's obvious the sellers is desperate and once the bank does an appraisal of the home, their going to reject the deal.
2. Risks involved:
A. You pay for home inspection and appraisal not knowing if the home is yours.
B. Your initial deposit can be at risk if the seller disappears or won't release your money.
C. The lender forecloses on the home while you are still in negotiation.
D. The seller files for bankruptcy.
3. It can take an average of 2-5 months to find out if your offer has been accepted by all lenders.
4. You might miss out on new bank owned homes because your initial deposit it tied up on a short sale.

Because lenders know bank owned homes are in high demand and are selling for top dollar, Realtors and buyers prefer to work with a bank who can make decisions within a few days. Another words, buy a short sale not knowing whats going to happen with risk, or buying a bank owned home knowing the outcome within a few days.

It's obvious why lenders prefer to foreclose on a home than sell it short. Agents prefer it and so do buyers. The only reason anybody should think about buying a short sale is if they have time to waste and some money to risk. Also, be sure you are working with a short sale specialist.

Written by:
Richard Johnston, RE/MAX
818-730-4128

Sunday, June 22, 2008

La Crescenta or Tujunga? I'd Rather...

Lately I've been finding myself showing homes in La Crescenta and Tujunga. A two bedroom one bath home starts around $350,000 to $450,000 and a three bedroom two bath home starts in the mid $400's.

If I was to choose between La Crescenta and Tujunga, I would rather live in La Crascenta. I find the neighborhoods more developed and the homes well kept. You can find great neighborhoods on either site of Foothill Blvd in La Crescenta.


If you find the high cost of living in Glendale too much to handle, La Crescenta is an excellent alternative. It's only minutes away from Glendale. To get to Glendale from La Crescenta, take the 210 to the 2 freeway. Also, on the way down the 2, you'll enjoy the Downtown Los Angeles skyline.
To view available homes for sale in La Crescenta visit: http://www.homes.la/

Written by: Richard Johnston, RE/MAX
818-730-4128

Thursday, June 19, 2008

Selling Your Home? A Realtor's Perspective

What most home-sellers never see is the exchange of information from real estate agent to real estate agent. Below I'm going to outline what some agents do to the detriment of their seller's which cost the seller time and money.

Making your property available is important especially in today's market. I'm going to highlight what usually will cause the buyer's agent NOT to show your home.

1. Tenant! Need 24 Hours Notice
Problem: 24 hour advance notice required. Tenants rarely take care of the place. Smelly.
Answer: Get the tenant out asap or offer a credit to allow agents access to the property with a courtesy call. Maybe offer to tenant free maid service to keep the place clean and smelling good.

2. Call for Combo Lock Box Numbers
Problem: Listing agent doesn't put the combo code in the MLS and doesn't answer the phone when a buyer's agent calls. The agent will then skip over this home.
Answer: Listing agent puts the combo code in the agent private remarks section. It may sound simple but you'd be surprised.

3. We Update the MLS Daily/Hourly Don't Call for Availability
Problem: The buyer's agent will hesitate to call for fear of being rejected and will usually skip this listing.
Answer: Listing agent welcomes all calls for an update. If the listing agent can't handle the call volume, hire an agent to answer the phone.

4. No Pictures in the MLS
Problem: Buyers will skip over this home and so will agents.
Answer: Get a camera and take some pictures. Rule of thumb: If your home doesn't have pictures online within a few days, I suggest you find another agent asap!

5. Listing Agent Never Picks Up the Phone
Problem: The listing agent never picks up the phone when you call, it goes direct to voicemail.
Answer: The listing agent hires a receptionist to answer the phone so buyer's agent can get info quickly.

6. Make Appointment with the Owner
Problem: The buyer's agent has to call the owner and make an appointment. With so many properties on the market, guess what's going to happen?
Answer: Make your property available and place a lock box on the door.

The bottom line is, if agents can't communicate with the listing agent quickly or show the home quickly, then your home is going to continue to sit on the market while other homes sell quickly. Also, be sure you are working with a Realtor who knows what their doing.
Written by: Richard Johnston, RE/MAX
818-730-4128

Monday, June 16, 2008

Waiting for the Bottom?

Are you still waiting for the bottom? What do you consider the bottom? Is the bottom when others say so? Who do you trust? Do you listen to your real estate agent's advice?

If I can predict the bottom, I would be the richest man in the world. The fact is NOBODY can predict when the bottom will occur. Months will pass and only then will the bottom be truly called. Plus, the bottom for lower priced homes won't be the same for more expensive homes. The bottom for Valencia won't be the same for Sherman Oaks. The bottom for Reseda won't be the same for Van Nuys.

Do you run with the crowd? It's time you stand-out from the crowd and make things happen. This is a VERY strong buyers market. Take advantage of the situation and buy yourself a home in the San Fernando Valley and think long term. It's easy to buy a home, it's keeping it that's a challenge. Are you up for the challenge?

Sincerely,

Richard M. Johnston
RE/MAX 818-730-4128

Short Sale Trouble: How to Avoid It!

A recent post by Alan Butler on the BloodhoundBlog highlights potential issues when working with a listing agent who really doesn't understand the pitfalls of handling offers in a short sale.

Alan's response to agents who take all offers presented on a short sale and submits them to the bank to choose the best one as, "...A coward’s way to handle contracts."

In my opinion, the best way to handle a multiple offer situation on a short sale is to have the owner accept an offer and have another in back-up. Both offers should be submitted to the lender(s). Also, when an offer is accepted, the listing should be displayed as a 'Pending' listing so agents don't show a home which is already under contract. This also prevent numerous other offers to pour in which can complicate the situation with the bank.

When an offer has been accepted on a short sale and another agent wants to write an offer, Alan suggest saying, "I have an offer on the property at this time. You are more than welcome to submit your offer for consideration in a back-up position."

Alan also states that, "If you send multiple offers to the lender, you’ll simply confuse them. They’re confused enough already. Don’t help them.

Second, by sending multiple offers, you might unwittingly be creating the impression that you have got a hot little property on your hands that might be worth more money. This is going to make the lender cocky. Their demands for money are going to go up, and worse yet, they may get the impression that it’s a better idea to take the property away from your client and sell it themselves for more money!"

I agree with Alan completely.

On a recent showing with my clients, we came across an open house in a desirable neighborhood. The first 'Red Flag' I noticed was that the property was a short sale and the owner had already abandoned the property.

The listing agent turned maid was doing some clean-up work because it seemed the owner had just left leaving a trail of dust and trash behind for the agent to clean. Another big 'Red Flag'.

I use the term 'Red Flag' to indicate a serious problem with the property or a problem which can put a buyer at risk.

Nonetheless, I approached the agent and started to ask some questions. Listed below are the questions I asked:

Q. Why has the owner left?
A. Why are you asking? He left because he wanted to put his problems behind him.

Q. Do you have any offers on the house?
A. Yes, I'm going to collect them all and send them to the bank for approval.

Q. Has a notice of default filed on title?
A. Don't know but it's not important.

Q. Do you know how many months the owner is behind on payment?
A. Does that really matter?

Just by asking a few basic question, I already knew that this agent didn't know what she was doing and she was also putting her client at risk of foreclosure. Nonetheless, I advised my clients to skip over this home because the risk far outweighed the benefit.

The correct way to handle a short sale is the same way you would handle a seller who has equity. Welcome all offers, counter, then accept one and place the next best offers a back-up offer. Then sending the accepted including the back-up offer and have the lender choose which one they will accept if any.

Imagine what would happen if the listing agent sends 10 different offers to the lender(s) for approval. Now lets also imagine if the lender accepts an offer and the seller refuses to sign. If that doesn't draw up some lawsuits, I would be surprised.

If your thinking of buying a short sale home, their are some limited financial risks involved and expect to be patient as it can take several months for a response. MAKE SURE YOU ARE WORKING WITH A PROFESSIONAL. The best alternative to a short sale is a bank owned home or buying direct from a seller who has equity.

Written By:
Richard Johnston, RE/MAX
Short Sale Homes in the San Fernando Valley
818-730-4128

Wednesday, June 04, 2008

Documents Requested by Lenders in a Short Sale

If your home is considered a short sale or short pay, when an offer is made on your home, the lender will most likely ask for the following documents.

1. Income Statement showing how much money you make and your total expenses. The lender wants to know how much money is left over after your expenses. It's usually negative for a homeowner who can't afford their home.

2. Bank Statements for the last two months. Keep in mind that if there is a lot of money in your bank account, the lender will wonder why you are not using it to pay your monthly payment.

3. Two most recent pay stubs. Lenders want to know how much you're making at the time. This is so they can determine if they'll let you off the hook.

4. W2 Statement. The lenders want to know how much money you made the prior year.

5. Letter of Authorization. The lenders want you to authorize your real estate agent or another third party to have authorization to discuss your account.

6. Hardship letter. This is a letter by you to your lender on why you can't afford the payment anymore. Loss of job, death, health, etc... There are several resources online which will supply you with a sample hardship letter.

7. Listing agreement. This is the agreement you signed with your Realtor when the agreement was made to sell your house.

8. Signed Purchase Contract. This is the offer the buyer wrote also signed by you.

9. Estimated Hud 1. The escrow company will put this together.

10. Pre-approval letter. This will usually be included with the offer from the buyer. The lender wants to know that the buyer can get a home-loan.

Every lenders requirement might be different but the items requested above will usually be what they ask for. Keep in mind that the only time lenders really want to talk to the listing agent is when you have accepted an offer. So the first step is to give your agent authorization to have an open communication with your lenders.

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Short Sale homes in the San Fernando Valley including Sherman Oaks, Encino, Studio City, Toluca Lake, Van Nuys, and Santa Clarita Valley.

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