bubbleinfo.com

We’ve heard about my strategy of sellers lowering their price early and often, and lowering enough to make a difference.

How’s it working?

To work right, it takes sellers who recognize that the buyers are looking for the deals.  Sellers who ignore that and list high – insisting that ”don’t have to move” or “aren’t giving it away”, etc., are just waiting for the lucky sale.  No problem, wait away.

We listed this house at 5146 Delaney in Carlsbad for $979,000, which was competitive with the other active listings, but we thought that we had a far-superior product.  If there was a buyer who had seen the other two for sale, but was waiting for more bang – we might attract them.

There were NO calls the first 8 days.

I had sold these sellers their first two houses in California before they bought this one when new.  Because of our long-standing relationship, they trusted me when I told them to lower the price immediately to $899,000 – a big hit for sellers who have only been on the market for a week.

We lowered the price, I had a big open house on a sunny Sunday, and within 48 hours had four offers.  A bidding war ensued, and it closed yesterday for $940,000.

A couple of points for sellers:

1.  Your house has to look like a deal to get offers. 

There have been sellers who read what I post here that have told me they’re not going to hire me because all I do is give them away – and they don’t want to give them away.  Sellers – you need to get over that feeling.  IT’S GOING TO FEEL LIKE YOU ARE GIVING YOUR HOUSE AWAY, relatively, if you’re going to actually sell your house in this market.

My sellers had thought at one point there house was worth well over a million dollars – but is $940,000 still a good price for it?  Yes.

2.  You need to adjust early, and often – AND ENOUGH TO STIR EXCITEMENT.

Don’t linger thinking it’s going to get better, later – it’s not.  The house on Delaney looked hot because it had only been on the market for eight days, and at $899,000 was a whopping $80,000 under the other two actives – which now are still both unsold, at 136 and 160 days on market, respectively.

3.  You never know when the next REO is going to list nearby.

A week after opening escrow, an REO on the same street listed for $829,900 – and it’s still unsold.  Think we could have gotten a bidding war going now?  No way.

Sellers – you can fight the trend, but your chances of beating it are heavily against you. 

I could also point to my seller from last summer who sold the townhouse on the lagoon.  He fought it for a year, but finally took my advice and we closed for $669,000 in August, 2008, just $19,000 above what he paid for it in 2004.  NOTHING HAS SOLD SINCE, and there are four active listings in the complex, two listed since June, and now a short sale has lowered down to $495,000.

Think that seller is happy today?

ForeclosureRadar (www.foreclosureradar.com), the only website that tracks every California foreclosure, and provides daily auction updates, issued its monthly California Foreclosure Report for February 2009.

The average difference between current market value and outstanding loan amount exceeded $200,000 for properties sold at foreclosure auction in February.  This represents a 189 percent increase in negative equity when compared to properties foreclosed on a year earlier. Notices of Default have increased 21.3 percent from January and have nearly returned to the peak levels reached in April 2008, despite the President’s Day holiday and February being a short month. Properties sold at foreclosure auction (trustee sales), rose 11.9 percent from January to 17,131.

• Notices of Default, the first step in the foreclosure process, increased 21.3 percent over notices recorded in January. A total of 43,836 default filings represents a 17.3 percent increase from February 2008. Given the short month, the average daily number of Notices of Default recorded in February was up 27.6 percent from January.
• Notices of Trustee Sale filed in February decreased 14.7 percent from January filings, with a moderate year over year increase of 2.2 percent from February 2008. With the current average delay of 125 days from the filing of a Notice of Default to filing the Notice of Trustee Sale, this drop follows the decline in Notices of Default seen late last year in response to Senate Bill 1137.
• Auction sales for February increased 11.9 percent from January to February, to 17,131 sales, representing $7.2 Billion in loan value. While sales were up 1.2 percent year over year, they remain 41 percent below the peak reached in July 2008. Of the properties sold at auction, 92.8 percent went back to the lender, representing $6.65 Billion in loan value for the 15,904 properties.
• Properties sold to third parties at auction continue to increase, rising 222.9 percent from the same time last year to a record 1,227 properties, a 38.8 percent increase from January. 

“Despite their unpopularity, foreclosures and short sales are currently the only mechanisms working to eliminate the negative equity now plaguing 30 percent of Californians,” says Sean O’Toole, founder and CEO of ForeclosureRadar. “While prices have corrected to affordable levels in many parts of California, housing markets and the economy continue to suffer due to the unsustainable debt taken on during the housing bubble.”

The average property sold at auction in February of 2009 had $201,052 in negative equity, based upon an average value of $250,030, $422,349 in loans, and an additional $28,733 in negative amortization, interest and fees. A year earlier the average foreclosure had $69,529 in negative equity, based on a value of $378,578, loans totaling $423,111 and negative amortization interest and fees of $24,997. These averages likely underestimate negative equity as they exclude past due amounts and negative amortization on 2nd mortgages for which no Notice of Default has been filed.

Nearly 99 percent of the loans foreclosed on in February were originally made between 2004 and 2007, with 46 percent having been made in 2006 alone. On average, these properties were 3 bedrooms, 2 baths and 1,589 square feet, with more built in 2005 than any other year at 5.7 percent of February’s foreclosures.

Opening bids at auction were discounted an average of 36.3 percent from the outstanding loan balance, a decline of nearly 5 percent from the prior month. Still, the number of properties that were discounted by 50 percent or more increased to 6,307 of the 17,131 taken to auction. The largest discounts were found in Monterey, San Benito and San Joaquin counties, at over 46 percent, while San Francisco County continued to see the smallest discounts of any major county at 20 percent. “These deep auction discounts reflect the significant negative equity lenders and homeowners are facing, while also offering opportunities for knowledgeable investors,” offers O’Toole.

(bold added)

This 1,633 sf house in Encinitas, listed for $569,000, probably went pending before the video hit the street – she was right, won’t last!

Days on market = 4

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This 4,287sf Chula Vista REO with the barbie house out front was priced to sell, listed for $585,900, so it’s no surprise that they’re in escrow. 

The 5,520sf house next door, listed for $799,900, had gone pending too, but it fell out last week.

Days on market = 12

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This 4,469sf REO on two acres in Valley Center finally found a buyer – we’re in escrow at $475,000. 

Still waiting for the call from Curb Appeal Magazine.

Days on market = 56

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Once I finally uploaded this side photo of my Vista REO listing, it went pending for $160,000, all-cash, just over the list price of $159,900.

Days on market = 85

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This 3,703sf newer house in San Marcos was first listed on the range $749,000 to $759,000, but once they changed the price to $689,000 to $719,000, it went pending nine days later. 

The sellers paid $502,000 at the auction in December, 2008.

Days on market = 42

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The upside-down 4,040sf REO on Buena Vista Circle in the village of Carlsbad, listed for $889,900, went pending yesterday.

Days on market = 11

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The 3,815sf REO with the view on Huntington in BR, listed for $809,900 went pending, but the other across the street is still active, now down to $780,947.

Days on market = 13

For those wanting a recap of our contest, click here:

http://www.bubbleinfo.com/2009/02/br-contest/

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Nothing matters until they close, and we’ll keep an eye on ‘em! 

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Here’s one that did close, the 3,538sf REO on Obelisco in La Costa that had listed for $799,900.  It went pending after 8 days on market, and closed for $880,000!

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From sddt.com

The city of San Diego is starting a new initiative to help communities dealing with home foreclosures, San Diego Mayor Jerry Sanders announced this week.

Sanders accepted recommendations from the city’s Committee on Foreclosures and Neighborhood Stabilization. These included expanding the city’s vacant properties program to include foreclosed and vacant properties, and making it easier to keep track of who is responsible for the abandoned homes.

The recommendations also called for expanding neighborhood watch programs and creating a new city Web site to provide information and counseling to people losing their homes.

“Far too many San Diego families have watched the dream of home ownership become a nightmare of financial turmoil,” Sanders said at a press conference Tuesday. “My goal in creating the committee was to find ways to prevent and slow the rate of home foreclosures and defaults in our city.”

San Diego County has seen a 133 percent increase in foreclosed homes over the past year, according to the mayor’s office.

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Plus this from the Sacramento Bee:

California 2008

237,131 foreclosures

136,785 loan modifications

http://www.sacbee.com/realestatenews/story/1685519.html

“While lenders made interest rate cuts their primary tool, they also temporarily suspended monthly payments and turned toward “short sales” in the second half of 2008. Those are sales in which lenders take less than owed to avoid the higher costs of foreclosing.”

“The data show continued reluctance to offer deeds in lieu of foreclosure, in which a bank simply agrees to take the home back from the borrower. Lenders also avoided lowering the amount borrowers owe. By December, so-called principal reduction was less than 1 percent of workout solutions.”

For those who are wondering about the effect of banks holding back REO properties, let’s review some of the other reasons why the downturn will continue, regardless.

1.  Still no mention anywhere about neg-am recasts getting waived.

The powers-that-be may not figure this out in time, or not care enough about the California market(probably more of the former).  If you thought the subprime loan payment adjusted a lot higher, wait until you see what a neg-am payment looks like after a re-cast.

2.  The robot realtors aren’t helping.  These listing agents now have their own websites so the buyers’ agents have to go there to download ‘special’ forms, which are usually just their version of the CYA.  This week one of the websites was down, so we couldn’t submit an offer.  But you can’t call them, you can only email. 

Magically a few hours later the website was back up, and we got the forms – one saying you must pre-qual with their lender in order to submit an offer.

An email to the lender gets returned, undeliverable, and his voice mail is full – can’t leave a message.  Here we have a viable offer to submit, yet the system is in the way.  By the way, they said all offers must be submitted within 24 hours after listing too. 

3.  Some of the agents doing short sales are killing me.  Check out short-sale listing #090013568.  I called this lady because she listed this house for $299,000, which is $100,000 under three good closed comps which I was using to price a model-match Countrywide REO down the street.

She tells me that she already has an offer of $350,000, which only tanks my value by about 10% to 15%.  But over the next 3-6 months, hers will be sitting there as an active listing, and buyers will think the values are $299,000, not $350,000.

The Countrywide’s appraisers will hang me out to dry around $399,000, and I’ll have my hands full trying to sell it.  The price will have to drop steadily until I can convince a buyer that the other listing will close much higher, and it’ll probably still mean that my price will have to go substantially lower to compensate.

Check her listing – no photos, no remarks, even the occupant’s phone number is wrong, and I checked – she doesn’t have another listing.  What is she doing??

The environment is bad enough, and how some are handling their business are making it worse.

(Sorry, rant over)

More lowlights – this will be it for awhile, promise:

From sddt.com

The 3,705 notices of default (NODs) filed in February were a record high for San Diego County, according to statistics released by the county assessor’s office.  The number is a 15.4 percent increase in filings compared to January.  The last time the number of NODs reached a comparable level was in April 2008 when NOD filings climbed to 3,601. 

From September to November 2008, there were fewer than 1,500 NODs recorded each month after a change in the California Civil Code that required lenders to contact troubled borrowers 30 days before filing an NOD.

Since December, the number of filings per month has been above 3,000, which was more similar to figures seen throughout most of 2008.  The median number of NOD filings 2008 was 3,212. 

Year over year, there were 493 more NODs filed last month compared to 2008, a 15 percent increase.

Trustee deeds, were more stable than NOD filings.  While there were 40 more trustee’s deeds filed in February compared to January, the 1,365 filings were down more than 40 percent from the peak number of filings in July 2008.  The number of trustee’s deeds filed during 2008 hit its low in November with 1,144 filings.

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February 2009

NODs = 3,705

Trustee Deeds = 1,365

MLS sales = 2,169 (attached, detached, and 2-4 units)

Think that the trustee deeds will overtake the MLS sales by when, September? Or sooner? 

The recent bailout legislation included raising the super-conforming loan limits back to where they were last year – $697,500 in San Diego County.

The Fannie/Freddie websites noted the change a couple of weeks ago.

But have you seen any lenders funding super-conforming loans to $697,500?

Me neither, and no word as to when they might be available.  Think lenders are just too busy to get around to it?  One of them could break out and capture a niche in the marketplace, and if Fannie/Freddie are buying, how risky could it be?

I mentioned towards the end of the 100+ comment post last week about getting together for a beer at Pizza Port in Carlsbad tonight, but I can’t make it.

But I’d like to regroup anyway.  I’m afraid that if we were to load up on sharkbite red ale and get crazy, it could digress into going door to door with shadash and throwing freeloaders out of their house!

Instead, I want to find a way to protest about what the government is doing.

I’m open to your ideas, but I’m thinking we should write a song of protest.  We’d meet up at Pizza Port in the next week or two, drink a few beers to make us sound better, and then sing it on camera.  Then put it on youtube, send it to government officials, and boom – change the world.

What do you think?

Have any verses you like to contribute?

Has the REO business been picking up?  The foreclosure agents we’ve been following were impacted by the foreclosure moratorium, where are they now?

Here is the first half of 2008, with today’s tally at the bottom:

Jan 15 – 474 Actives/149 Pendings = 3.18

Feb 7 – 482 Actives/187 Pendings = 2.57

Mar 13 – 477 Actives/205 Pendings = 2.33

Apr 18 – 467 Actives/247 Pendings = 1.89

May 13 – 418 Actives/298 Pendings = 1.40

June 10 – 344 Actives/288 Pendings = 1.19

June 27 – 261 Actives/261 Pendings = 1.00

March 9 – 223 Actives/223 Pendings = 1.00

In spite of the foreclosure ban, REO business has picked up – the totals were about half as much four or five months ago.

These same agents have listed 229 properties this year, and had 330 go pending since January 1st.   They’ve closed 260 so far this year, and improvement of 17% over last year’s 223 closings in the same period.