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Hat tip to MB who sent this from the nytimes.com:

LOS ANGELES — From Kirk Morgan’s perch, in a mansion at the top of Los Angeles, he can see it all: The snow-covered mountains from the vast windows in one of the seven bathrooms. The Hollywood sign, eye level from the kitchen. And, from the master bedroom, a sweep of Los Angeles stretching from downtown to the Pacific Ocean.

But what he likes best, Mr. Morgan said, are the fevered tales he overhears from the Runyon Canyon Park hikers who pause at the house set amid its own 22 acres that he has guarded for nine months, as they try to unravel the mysteries suggested by this foreboding hillside mansion. For all its aspirations at grandeur, the 16-year-old house at 2450 Solar Drive remains unfinished and vacant, pocked by boarded-up windows and gang graffiti, a jumble of hanging wires and holes cut in the living room ceiling. A Winnebago is parked in the gated front yard.

Many of the tales — like the murder that supposedly took place on the pool table in the billiard room — are urban legend, said Mr. Morgan, 53, the house guard, who was wearing camouflage shorts, a cap and no shirt as he opened the padlocked gate to allow a visitor inside.

“It just blows you away what you hear from these people,” he said. “Like it is owned by the Devil. I am a man of the Lord. There ain’t no Devil here. I salted this house and also had my Indian friends come over and burn sage.”

But many of the tales are accurate.

Gangs, among them the notorious Armenian Power, really did turn the place into a clubhouse, the police said. Gang tags are still visible on the walls. Teenagers commandeered the carpeted first floor for weekend raves.

Yes, over the years, 2450 Solar Drive has served as a blue-chip crack house, according to the police: its floors were scattered with remnants of crack cocaine, crystal methamphetamine and marijuana.

“And this is where the satanic stuff happened,” Mr. Morgan said as he led a visitor into a windowless room, pointing to a faded sketch on the wall. “You can see the image of a devil. And they had chicken feathers hanging on a wire.”

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An agreement for a “nonrefundable” escrow deposit is invalid and unenforceable, according to the recent California case of Kuish v. Smith (2010 WL 373225).  This case serves as a good reminder for REALTORS® that inserting a “nonrefundable deposit” provision into a real property purchase contract may be legally ineffective.

The Kuish case involved a $620,000 escrow deposit for the purchase of a $14 million oceanfront home in Laguna Beach.  Instead of using a liquidated damages provision, the buyer and sellers merely agreed in the purchase contract that the deposit would be “nonrefundable.”  According to the trial court, both parties were “big boys,” meaning that they were “sophisticated business people [who] understood all the ramifications of their actions in freely negotiating to make the [deposit] non-refundable.”

The buyer eventually cancelled the agreement.  The sellers refused to return the deposit to the buyer, even though they sold the property to someone else for $1 million more.

The buyer sued to recover the $620,000 deposit, and won on appeal.  The court stated that “any provision by which money or property would be forfeited without regard to actual damage suffered would be an unenforceable penalty.  To construe the term ‘nonrefundable’ to establish [the sellers'] entitlement to the full deposit without regard to actual damages would essentially create a liquidated damages provision.”  Yet, the parties in this case did not separately sign or initial a liquidated damages provision.

Under C.A.R.’s Residential Purchase Agreement, the sellers would have been entitled to the escrow deposit (not to exceed three percent of the purchase price), if the parties initialed the liquidated damages provision, and the buyer had no contingencies or had removed all his contingencies.

Hat tip to Kingside for sending this along:

Licensed real estate broker Sieglinde Summer listed a residential property for sale on a multiple listing service, advertising a price of $749,000 to $799,000. Phil and Jenille Holmes saw the listing, expressed an interest in buying the property and, after some negotiation, agreed to the seller’s asking price of $749,000 to purchase the property free and clear of all prior liens and encumbrances, with a 30-day escrow. In anticipation of the closing, the Holmeses sold the home in which they were then living.

A fact not known to the Holmeses was that the property was encumbered by $1,141,000 in debt. The lenders refused to discount their loans. As a result, the sale could not be consummated. The Holmeses sued Summer, alleging that she was aware of the excess debt and had an obligation to disclose tha information to any potential buyers.

The trial court sustained Summer’s demurrer without leave to amend, finding she had no duty of disclosure with regard to the amount of debt on the property.  The Fourth Appellate District reversed an order of dismissal. The court held that a real estate broker who was aware that a property had significant debt which exceeded the property’s asking price had a duty to disclose that fact to potential buyers.

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I don’t think it is in the seller’s best interest to “pre-market” a home, but most REO agents insist on installing a for-sale sign in front of their new REO assignments at least several weeks before the price is determined. 

Callers who hear that there is no price get ticked off, and are quick to forget.  Oh, you got their number and you call them back with the price?  They are bored by then, and it’s harder to re-ignite any interest, plus the other agents don’t appreciate seeing you constantly trying to scoop their buyers on EVERY SINGLE LISTING YOU GET.

Wouldn’t it seem better to avoid ticking off buyers and other agents?

The future of real estate should include videos. 

If you just look at the comps on paper, there was the similar REO sale a few doors down (which we saw) that closed last month for full price, $792,000, but it was on the golf course, down off La Costa Ave.

The inferior location might not be obvious to an asset manager with 300 files on their desk, who is looking to make a quick decision.  If the initial appraisal or BPO only included a few “positive” photos, the true condition of the home might not be obvious either. But if there was a video presentation to pick up the good, the bad, and the ugly, the price might be sharper – here’s an example:

I had a listing last summer at the end of Steinbeck in Carlsbad, a 3,495 square footer with a great view of the ocean/smokestack (like you’ll see at the end of this video). 

The seller, who had already moved and wasn’t coming back, really struggled with the idea of selling for only $1,015,000.  But he relented after I presented a compelling case, and I promised that in a year or two that he’d be thanking his lucky stars, and that he’d probably want to buy me a beer.

We closed July 29, 2009.  Here’s the latest in the neighborhood:

Bruce Norris is a very knowledgeable and experienced player in the real estate arena. 

His focus is on the buying and selling of trustee-sale  properties around the Inland Empire, but he has other related business ventures, including the financing of trustee-sale purchases, and providing a vehicle for investors to participate in the hard-money returns. 

He has his own radio show, provides trainings, and even has a blog!  Here’s a link to his homepage:

http://www.thenorrisgroup.com/

He recently published a 61-page powerpoint presentation – link below.  It’s a remarkable research project regarding the current market conditions with plenty of charts and graphs covering the unintended consequences and false indicators that he is seeing:

http://www.tngacademy.com/pdf/sdcia-5-11-2010.pdf

There are mountains of data in his presentation, but I’d like to address page 59, where it notes that 60% of the buyers went through the listing agent to make their offer.

On page 61 it notes that only 7% of the sales were over $300,000. 

I regularly tell buyers who want to pursue homes in the lower price ranges to go direct to the listing agent – that market is too hot/competitive, and the failure rate of offers is extremely high. 

You’ve seen the stories here – when we have sold the cheapie REOs in Oceanside that garner dozens of offers, the buyer agents tell the same story, something like this:

“I have written so many offers with this buyer, please take this one, I’m begging you!”

There aren’t that many agents who are going to work for months and months to earn $2,000 to $3,000 after splits and expenses, so I wasn’t surprised to see that the listing agents are representing most of the buyers too. 

The big REO listing agents have plenty of buyers’ agents on duty, and most like to put their for-sale signs out prior to MLS-input, so they should be representing the buyers of lower-end listings.

How about in North SD County Coastal?

A check of the last 117 detached sales from Carlsbad to Carmel Valley revealed that 18, or 15% were marked as round-trippers, where the agent represented both seller and buyer.  Only a couple looked like they were a result of quick action in the first few days of the listing.  There were eight REOs, and none of those were sold by the listing office.

THOUGHTS ABOUT GOING DIRECT TO THE LISTING AGENT

1. It might make the difference when there are multiple offers – you could win the race, but you’ll probably still have to pay top dollar. I don’t think there are many legitimate, professional listing agents that would burn their sellers, and take their own offer when a better one is on the table.

2. Once the listing is stale, and the seller and listing agent are both fatigued but don’t want to lower the price, there might be an opportunity. But I think in both cases (1&2) you could still get the same deal and have your own representation if your buyer’s agent is really good.

3. If you go direct, don’t be surprised if the listing agent is more loyal to the seller, and acts like you owe them a favor. You’d think the listing agent would be grateful – but if they aren’t, it’s because they are uncomfortable with the situation, especially if they burned somebody else to make the deal. And don’t be surprised if they are resistant to sharing the commission either, they’ll think of it as their reward for getting you the deal.

4. If you were working with a buyer’s agent who was helpful, and for whatever reason you decide to go direct, do a little something for your previous agent. If they provided real assistance in your search, consider hiring them separately to consult on the deal, because you might need help along the way. If you feel uncomfortable telling them, then press yourself to at least buy them lunch or do something nice. If you don’t feel uncomfortable burning them, then they didn’t do much to help you anyway.

This is a touchy subject, agents don’t like to talk about it – and I don’t need commenters to load up please. But if there is more real estate revolution, it’ll probably be in this category – having just one agent facilitating the deal. Realtors will have to provide real value, beyond filling out pre-printed forms, and pointing out which room is the kitchen.