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Jim Klinge
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Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Carlsbad
(760) 434-5000

Carmel Valley
(858) 560-7700
jim@jimklinge.com


Category Archive: ‘Thinking of Buying?’

Peak Frenzy?

What makes me think the frenzy is slowing down?

1.  List prices have gone from ‘exuberant’ to “hit-the-lotto” range, generally speaking.  Have you seen it too?  It’s not enough to just get more than the last guy, some sellers list so high that they must be thinking of funding the retirements of them and the kids!

2.  The days-on-market statistic is dropping, but we are into dizzying warp-speed now – it can’t get much faster. 

Here are the DOM for NSDCC detached-home pendings/solds for each month (DOM stops when marked pending, so the DOM is the same whether the listing is marked pending or sold):

Avg Days-On-Market NSDCC Under-$1,000,000

Jan: 48

Feb: 34

Mar: 34

Apr: 30

May: 21

This has to be the peak DOM, doesn’t it? 

3.  The last big pricing upsurge was in 2003, and even though they were giving mortgages to anyone who could fog a mirror, the intense frenzy only lasted about a year – the pricing leveled off to minor increases starting in 2004.  There should be a natural limit on increasing prices – how much can buyers endure?

4.  The gap between fraud and flip is getting larger, which should throw logical buyers back to the sidelines.  You see it every day – and well, here are two new listings today of similar houses in the same neighborhood with nearly 20% price difference:

Five-second listing -  2,876sf asking $562,600:

http://www.sdlookup.com/MLS-130024262-3453_Ravine_Dr_Carlsbad_CA_92010

Flip – 2,476sf asking $669,900: 

http://www.sdlookup.com/MLS-130024357-3429_Moon_Field_Dr_Carlsbad_CA_92010

At some point, don’t buyers start to hesitate when they see these shenanigans?  They should, because it isn’t right – and unfortunately for the legit flipper, it is he who could be harmed.

Just like when the boom started out of nowhere last year (right before the election too!), it is likely that the frenzy will slow….or stop…without notice.

(I’ll add more later)

Posted by on May 13, 2013 in Frenzy, Short Sales, Thinking of Buying?, Thinking of Selling? | 2 comments

REOs & Short Sales “Ripe With Fraud”

fraudMost mortgage fraud takes place in the short sales and REO space, according to Rob Hagberg, associate director of fraud investigations at Freddie Mac. “This area is ripe with fraud,” he said during a webinar hosted by CoreLogic.

While servicers and others in the industry have adapted to some fraud schemes and put measures in place to detect and prevent fraud, schemes continue to evolve as fraudsters find new ways to manipulate sales.

For example, many fraudulent REO and short sale transactions involved the use of a straw buyer who temporarily purchased a home at an undervalued price and then sold it to a third party at a higher price.

These transactions would be immediately suspicious to anyone reviewing property records, which would show a home was sold for one price one day and then almost immediately resold at a higher price.  Savvy perpetrators are now eliminating the second buyer. Property records will not reveal a middle buyer, but they will reflect a higher price than the servicer agreed to.

Another growing trend in short sale fraud is what Hagberg calls the “short sale and stay.” This occurs when an underwater homeowner wishes to keep his or her home but wants to lower his or her loan amount.

The homeowner will recruit someone—often a friend or family member—to purchase the home through a short sale, and the original owner will remain in the home.

Sometimes, a wife will use her maiden name to purchase the home from her husband, and the couple will stay in their home.

Both short sale and REO fraud often require fraudsters to convince servicers a home is worth less than it actually is.

To accomplish this, fraudsters have attempted to bribe REO brokers, manipulate MLS data to lower the prices of comparable properties, and have engaged in reverse staging to make a property appear in worse condition than it is.

In cases of reverse staging, Hagberg has seen cabinet doors removed from kitchen cabinets, garbage left lying around the home, and sometimes old fish hidden behind refrigerators to create pungent scents.

Sometimes BPOs include false property stigmas such as high crime rates, and in a few instances Hagberg has seen properties undervalued by as much as $40,000 under inaccurate statements that the home had been a meth lab and would need to be entirely gutted.

http://www.dsnews.com/articles/reo-short-sale-fraud-continue-to-evolve-2013-05-10

Posted by on May 13, 2013 in Fraud, Scams, Short Sales, Short Selling, Thinking of Buying? | 9 comments

Hiring A Realtor

The real estate industry is known for its gimmickry, and is ripe for internet hucksters who put their own twist on it.

SD_Coastal sent in this latest attempt – an internet-referral company who has realtors who will discount their commission by 50%.  Towards the end they slip in that you have to sell AND buy a house to get the package deal:

1.  This is one of the most important decisions of your life – choosing a realtor solely based on their commission structure during a frenzied-up market is asking for trouble.

2.  The real estate industry doesn’t want to help you figure it out – rarely do you see any guidance on how to select a realtor from those in the business.

3.  If you only ask one question of your realtor-candidates, ask how many homes they have sold this year.  It is by far the best gauge to determine if they have adequate experience with navigating these choppy waters, and can help you too.

Don’t ask a yes or no question – ask specificially “HOW MANY SALES?”, and if they have closed at least one sale per month then they something to offer – and it would be smart to ask more questions to find out what.

4.  Most every agent will offer you a package deal if you sell-then-buy, but you’ll probably have to ask for it.

Get Good Help!

Posted by on May 9, 2013 in Thinking of Buying?, Thinking of Selling?, Tips, Advice & Links | 16 comments

When to Buy / Sell

The recent frenzy has been frustrating for buyers – should you wait-and-see?

The history of the median sales price shows that there is usually some softening around Dec/Jan – that is, up until this year:

US Median Sale Price

The demand feels extremely deep because there are so many lookers and offers – but not everyone is willing to pay these prices.  It is probable that the demand is truly deep at 90% of today’s prices – back where prices used to be.

Will buyers keep stepping up?

Most likely, as long as the list prices stay within reason, and there are few choices.  San Diego inventory is down 1/3 year-over-year, which is given sellers free reign to push list prices higher.

You can see below that sellers might be reaching their ‘jump the shark’ moment, with both the inventory bottoming, and the list prices on the higher-end rocketing skyward (+16% since December):

http://www.deptofnumbers.com/asking-prices/california/san-diego

This is a great time to sell – even better if you have neighbors who have closed for high prices in the last 30 days!

Posted by on May 6, 2013 in Graphs of Market Indicators, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 0 comments

Subprime is Back

Some excerpts from the latimes.com - thanks daytrip!

Subprime loans are trickling back.

Michele and Russell Poland’s credit was shot, but they managed to buy their suburban dream home anyway.

After a business bankruptcy and a home foreclosure, they turned to a rare option in this era of tightfisted banking — a subprime loan.

The Polands paid nearly $10,000 in upfront fees for the privilege of securing a mortgage at 10.9% interest. And they had to raid their retirement account for a 35% down payment.

Most borrowers would balk at such stiff terms. But with prices rising, the Polands wanted to snag a four-bedroom home in Temecula near top-rated schools for their 5-year-old son. By later this year, they figure, they’ll be able to refinance into a standard loan.

“The mortgage is a bridge loan,” said Russ Poland, now working as an insurance investigator. “It was expensive, but we think it’s worth it.”

In the aftermath of the housing crash, there’s no shortage of Americans who, like the Polands, are eager to rebuild their shattered finances. In response, lenders are emerging to offer the classic subprime trade-off: high-priced loans for high-risk customers.

Today’s high-risk lenders differ from those during the housing boom in key ways. These lenders say the new subprime mortgages are actually old school — the kind of loans made in the 1980s and 1990s. In other words, a borrower’s collateral matters, down payments matter, income and ability to pay matter.

Among those hoping to reverse the trend is the Polands’ lender, Citadel Servicing Corp. of Orange County. Chief Executive Daniel L. Perl said he has tested the water by making a few dozen subprime loans since late 2011, mostly with his own money rather than investment capital.

The Polands, among the first to receive Citadel loans, are part of a success story, Perl said. None of the loans has gone bad; about a third have already been paid off. With that track record, Perl recently raised $200 million from private investors. He’s hiring 55 employees to help him make loans through mortgage brokers across most of the West, and he’s moving from Citadel’s Aliso Viejo location to larger offices in Irvine.

“We’re looking to build it up over the next 24 months to $30 million to $50 million a month,” Perl said. “It’s a decent business plan in a credit-barren world.”

Perl requires 25% to 40% down, depending on credit scores that can drop as low as 500 on an 850-point scale. His potential customers, who pay a minimum of 7.95% interest, include higher-income as well as lower-income borrowers.

“Quite a few” affluent borrowers are good credit risks, Perl said, even though they had recent short sales — they sold homes for less than they owed on their mortgages. Perl also writes mortgages that exceed the Fannie Mae and Freddie Mac threshold for conventional loans, which varies but tops out at $625,500 in the most expensive areas.

“They come from all walks of life — doctors and lawyers as well as blue-collar workers,” Perl said. “As long as they have the ability to pay and equity in their homes, they are a candidate for one of our loans.”

John C. Williams, president of the Federal Reserve Bank of San Francisco, sees no reason that subprime mortgage bonds can’t reemerge in “plain vanilla” form, as opposed to the complex concoctions that ended up as “toxic assets” in the meltdown.

“I can’t understand why it hasn’t come back sooner,” he said, pointing out that there’s a strong market for bonds backed by subprime auto and credit-card loans.

“California has been famous for devising exotic mortgages,” Williams said. “But the reality is that they held up rather well until we started doing things like giving them to people with no jobs.”

http://www.latimes.com/business/realestate/la-fi-subprime-mortgage-20130427,0,6498564.story

Posted by on Apr 28, 2013 in Mortgage News, Mortgage Qualifying, Thinking of Buying? | 12 comments

Re-Calibration

Ken compared some of today’s tactics to those used at the peak:

They’re back after barely a decade: escalation clauses in real estate contracts, “naked” contingency-free offers and low-ball-priced listings designed to pull in dozens of bidders and turn routine sales transactions into auctions.

http://articles.latimes.com/2013/apr/12/business/la-fi-harney-20130414

buyinghouseI hope listing agents put their foot down about the escalation clause.  Every buyer would pay an extra $1,000 if that is all it took to win, so it isn’t a fair way to determine the winner.  Listing agents should demand that each buyer commit to a specific price, because those deals are more likely to stick.

No-contingency offers are great for the buyers with loads of money and guts, but wouldn’t you offer less than your maximum to compensate?  To encourage more buyers to go this route, it would be smart for sellers to provide a home inspection report at time of listing.  The goal is to sell the house, not to collect deposits from failed escrows.

You don’t have to list your home below market today to attract a crowd, just pricing it at the comps will put you ahead of other seller nearby.  Either way, make sure your listing agent has specific and adequate strategies on how to conduct a bidding war.

Here are other ideas – for sellers:

1. Provide unlimited access to the property immediately.

On the Manzanita listing, I told the sellers to leave town on Friday, and come back on Monday prepared to make a decision.  We communicated over the weekend in case there was a reason to change course, but the strategy worked great.  We reviewed offers by email as they came in, and asked all eight to make their highest and best offer.  By the time the sellers got back on Monday, we had the H&Bs and picked a winner.

2. Make sure your agent is ready, willing, and able to field inquiries.

The buyer-agents start calling, emailing, and texting within an hour of hot new listings hitting the MLS, if your agent is out to lunch they will burn the most precious first few hours and days of peak urgency.

3.  Put an attractive price on it.

Buyers have no problem over-bidding, so resist the urge to tack on a few extra bucks.  Chances are good that you added some icing to your cake already, so avoid the pricing overdose!  You want/need max bidders so your bidding-war strategy can work effectively – there is nothing worse than having only two low offers, and when you try to get them to bid up, instead they bail.  An attractive price will bring 5-10 bidders, and put more heat on them, not you.

Here are other ideas – for buyers:

1.  You need a teflon memory.

If you keep remembering comps from last year, you won’t be buying a house anytime soon.  I regularly see houses selling for 20% to 40% more than last year’s comps – it is a new day, and you can accept it, or wait.

2.  Flash your cash.

The listing agents are telling the sellers to take the strongest offers, determined by who has the most cash.  Prepare to provide a bank statement to substantiate your strength, and get fully pre-approved in advance if you want to utilize paragraph 3k.

3.  If you want to sell your old house concurrently, you have a problem.

If your agent can do some fancy dancing, you might be able to pull it off.  But it is so competitive, it would be a shame to miss the perfect house because you didn’t have this part handled in advance.

Admittedly, it is a quandry – if you sell first and rent, you have to move twice, and you could get priced out if you can’t find a replacement quickly and the market keeps moving.

The other options:

A. If you list your home for sale with an open-ended seller contingency to find suitable housing, you might lose some buyers and sell for less – and if you didn’t find a house to buy, you would have burned up your precious first-time-on-market urgency.

B. Have your house ready to sell, and when you find a suitable replacement, list your house for sale in the same hour and hope your agent is lucky!

C. Make an offer-to-purchase, contingent on selling your existing house – but don’t be surprised if most sellers send you to the back of the line.

Your agent should be able to address the options and offer some advice on the best choices.

Get good help!

Posted by on Apr 16, 2013 in Bidding Wars, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 4 comments

Bubbleinfo.com’s Future

Reader Ross expanded on his previous comment:

Responsible web site authors do not copy entire articles word for word without permission.  Copying is not authorship.  A URL at the bottom of an article is not “prominently displayed.”  No publication name, no original author name.  I do not hide behind pseudonyms, and I do not engage in childish name calling of  people who disagree with me.

Jim, I think you are a stand up guy and do provide valuable information, but your particular practice of copying entire articles into your blog to use as your content is, in my opinion, unethical, unless you obtain permission from the original publication to do so.  If you do this, then I sincerely apologize, but also recommend you include some notice of this, “used by permission” or some such.  To reproduce a work in entirety without permission, in my opinion, tarnishes your otherwise high level of professionalism.

My response:

I appreciate your willingness to comment.  Here’s my side of it.

I am a realtor.

My goal here is to help disseminate information that I think is important to my clients, and potential-clients.  I think it is my job to provide a resource that educates people about buying and selling.

I don’t claim to have authored these posts, I just think they are pertinent to the readers and building the education.

Could I include a sentence or two and then link out?

Yes, and usually I only include snippets of the story here – it is rare that I copy a whole article.  My goal is to expose the main point in 1-3 paragraphs, add a graph or photo, and link out for the readers who want the full story.

I am also using twitter, which is the easiest format to legally post articles.

But I don’t know how many bubbleinfo readers are frequenting the twitter account.  It’s only got 153 followers while the readership here at the blog miraculously stays right around 12,000 unique visitors per month.

Here is the real problem.

I need to provide content to keep an audience, and I don’t have time to author enough posts myself to keep the blog full and engaging.

KKHowever, help is on the way.

KK, our oldest, started her final quarter of college this week.  Once complete, she will be joining the family enterprise this summer.

She is a very engaging personality, and a born salesperson.  When she joins the team, there will be no more shortage of content – instead, we will be fit for reality TV.

If you can grant me some leeway until summer, I’d appreciate it.  The market intensity is brutal right now, and I have to stay focused on the business.

If you and others would like to comment on how to improve the bubbleinfo experience, I’d love to hear it.  I am going to have at least one guest author contribute occasionally, and I might just go with less content and hope people stick around another three months.

Posted by on Apr 3, 2013 in Thinking of Buying? | 30 comments

Getting Glutty Yet?

The active listings of detached homes from La Jolla to Carlsbad:

Date NSDCC Listings Avg. LP $$/sf
Jan 14
649
$722/sf
Feb 4
667
$716/sf
Feb 10
679
$713/sf
Feb 25
678
$719/sf
March 6
727
$703/sf

In February, there were 369 new listings, and 297 listings that went pending (not counting contingents) – slightly slower than our last reading of early February when it was a 1:1 ratio of new listings to pendings.

The average list price of February’s pendings was $439/sf, so it is the higher-end product that is sluggish.

It wouldn’t take much to slow this train down.

If we have 15-20 Carmel Valley resale homes under $1,000,000 get listed in March, it would soak up some of the demand, and leave everyone else wondering what to expect. But that is a big IF – only two have listed so far, one at $979,000 and the other at $999,999.

Posted by on Mar 6, 2013 in Inventory, North County Coastal, Thinking of Buying?, Thinking of Selling? | 1 comment