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An Insider's Guide to North San Diego County's Coastal Real Estate
Jim Klinge, broker-associate
858-997-3801
klingerealty@gmail.com
Compass
617 Saxony Place, Suite 101
Encinitas, CA 92024
Klinge Realty
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Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Jim Klinge
Cell/Text: (858) 997-3801
klingerealty@gmail.com
701 Palomar Airport Road, Suite 300
Carlsbad, CA 92011


Category Archive: ‘Why You Should Hire Jim as your Buyer’s Agent’

Let’s Make An Offer!

Kayla returned from Manhattan for the long Thanksgiving weekend, and we were talking about the sluggishness in New York City market, which has been going on for 2+ years.  By now agents have learned that there’s no use fighting it – you have to learn to adapt.

It was in the year of her birth, 1991, when I experienced my first market slowdown.  All I knew was that there wasn’t a buyer for miles, and with a newborn child, I need to hurry up and figure this out!

This is my third time around the block, so I offered her a few ideas.

First let’s acknowledge how it works in a seller’s market.  Buyers find a house that is a good fit, and they buy it. Agents might offer up a strategy to get a discount, but for the most part, buyers pay the sellers’ price.  It’s binary – it is yes or no, is this the right house?  If it is, then pay the price.

Now it’s different, and if you can get a buyer to look at homes, their answer will be the same everywhere – ‘no’.  Because they are looking for any reason not to buy – and every house has one – once they find it then it’s game over.  But rather than just saying no to every house and never buying anything, let’s take it a step further.

At what price would you be a buyer?

Price will fix anything, and the price itself is usually the problem – it’s too high.

If the buyer would be interested at a lower price, then all you have to do is present a powerful case to the seller and listing agent to see if there is enough motivation to at least listen, and hopefully make a deal.

If you just make a lower offer without justification, I can already tell you what the answer will be: “No, and get off my lawn”.

To get something, you have to give a little. Here are ideas:

  1. Make an clean offer with quick close date. These work best on vacant properties where sellers might be eating an extra payment.
  2. Make an offer using older comps, and point out that the Case-Shiller pricing (or other) has retreated back where it was X months ago.
  3. Make an offer based on the cost of the needed improvements, and include contractor quotes when possible.

In all cases, include a photo of the family and pets, and an introduction that explains the offer.  Usually the listing agent will just forward the explanation right to the sellers, so it’s a way to have influence over the outcome.  Without an introduction and explanation, the listing agent has to justify the low price himself, and he won’t try too hard and risk looking bad.

We need price discovery!

The only way to find out what the seller might take is to put an offer on the table.  It may seem risky to be among the first to take the plunge, but by April/May we should see more people finding a way to make a deal.  Those will probably be with the sellers who have been trying to sell for 90+ days, and are tired of the process.  Let’s give it a shot!

Posted by on Nov 28, 2018 in Jim's Take on the Market, Kayla Training, Slowdown, Thinking of Buying?, Tips, Advice & Links, Why You Should Hire Jim as your Buyer's Agent | 1 comment

San Diego is #1 for Price Reductions?

The local birdcage liner has an article on price reductions, and mentions that San Diego leads the nation this year.  This is how they introduced it:

This isn’t a sign that the bottom is falling out of the market. Instead, after years of rapid price increases, experts say the market is becoming more stable and for the first time in quite a long time, it is shifting in favor of buyers.

That shift is most evident when you look at the number of times sellers have reduced prices. The share of home listings with a price cut grew to its highest level in at least eight years, says a recent analysis from Trulia. San Diego had the most reductions — 20.5 percent — of the 100 biggest metro areas in the United States so far this year. (It tied with Tampa, which also saw 20.5 percent of homes with a price cut.)

The full article (linked here) included examples:

  • 7171 Terra Cotta Road — $545,000. The four-bedroom house (1,804 square feet) in the Bay Terraces area has had four price reductions, starting at $569,000 at the beginning of November.
  • 4225 Florida St., Unit 4 — $395,000. The two-bedroom condo (794 square feet) in University Heights has had three price reductions, starting at $425,000 in mid-October.
  • 3655 Ash St., Unit 2 — $322,100. The two-bedroom condo (824 square feet) in Fairmount Park has had six price reductions, starting at $330,000 in mid-September.

Listing agent April Khamphasouk said the tough thing about selling the house at 2873 Upas St. is that it is basically two homes in one (the property is 1,698-square-feet and has a guest suite above the garage).

She first listed the home for $1.1 million in early October. By mid-October, the price was lowered by $19,000. There were three more price reductions and by Nov.12, the asking price for the home had decreased by $55,900. It is still on the market.

Khamphasouk said the recent price reduction seemed to be greatly increasing interest. Still, she said a lot of the issues in the past month have been related to rising mortgage interest rates.

No mention was made about the Upas property selling for $775,000 in May.  The Terra Cotta house just had a model-match sell for $415,000 nearby, and the Florida St. condo is on the corner of El Cajon Blvd. and next to a paint store.  If these homes represent the types of properties that need to lower their price, then the shock is that only 20% needed a price reduction.

The real news was that nearly 80% of the listings didn’t lower their price!

Posted by on Nov 26, 2018 in Jim's Take on the Market, Market Conditions, Slowdown, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 4 comments

Real Estate in 2019

Home sellers and agents will conveniently write off today’s market sluggishness as typical year-end slowdown, and in 2019 they will simply do what they’ve always done – put a bloated list price on their real estate.

You can’t blame them – it’s their chance to win lottery-type money.  If you got to name any price, you’d want more, not less, right?  It is a common mistake to over-price a home though, and homebuyers need to beware.

But over-pricing has been around since the beginning, and is just a reflection of how motivated the sellers are – which in 2019 will be ‘not much’.

What are the additional challenges that will be with us in 2019?

A. The realtor industry favors the home-sellers.  Realtors have a contract with the sellers, so no surprise that listings are the name of the game. But now that realtor teams dominate the landscape, the new and inexperienced agents are dispatched to represent the buyers – who won’t be too impressed with the lack of quality assistance offered on today’s market conditions.  Buyers without proper guidance will be happy to stay on the fence, unless they find the perfect home, and then they will….

B. More Buyers Will Go Direct to Listing Agent.  With fewer experienced agents being willing and able to represent the buyers, we’ll see single agency (disguised as dual agency) become more popular than ever.  Consumers don’t really seem to care, as long as the deal gets done, and listing agents encourage the idea.  Expect more blatant attempts to exploit the practice, like…..

Glenn first played the race card and tried to disguise his coming-soon plan as a ploy to reach all consumers, rich and poor (but was going to refer low-income people to outside agents). Now he is trying to force N.A.R. to insist on prominently displaying the listing agent on all websites, with a link back to their website.  If passed, will be the final dagger in the buyers getting their own representation.

Here he attempts to sell the concept as fair and clear (start at bottom):

C. Coming Soon.  The traditional brokerages are promoting their listings on their company websites before putting them on the MLS/open market, and you can’t blame them. Zillow and Redfin started it (see above), and now it’s a war.

But what are buyers going to do, monitor every real estate website?  Yes, at least the ones that allow you to set up auto-notifications.  If you see one you like, and you inquire with the listing office/agent – who do you get?  The faceless internet agent who reps the seller but will process your order as long as it’s reasonable.  It gets worse – there is one listing agent in north county who insists that you do a 30-minute, in-person consultation and then agree to see at least two of their listings before they will show you their coming-soon listing advertised on Zillow (and not in the MLS).

D. Sea Change in the Home-Selling Business.  The market plateau will cause more desperation among realtors, and the disruption that everyone has been predicting will finally arrive – it will just look differently than people expected.  Eliminating the traditional buyer agents will be uncomfortable, especially for older consumers who were used to having their own agent represent them in previous transactions.  We should see fewer sales as a result.

E.  Fewer Sales Means Fewer Comps.  We had 10% fewer sales in 2018, which means fewer comps to help buyers easily reach a conclusion on values.  Add in the built-in reluctance to trust the listing agent and we could have a downward spiral of fewer sales….which leads to even fewer comps.  Stagnant City!

F. Creampuffs only.  At these lofty prices and with fewer comps to justify exact values, nobody will want a fixer unless they can get a real deal.  There should be a price gap of roughly 10% between the ‘puffs and the fixers in older neighborhoods, but will sellers agree?  Will buyers be willing to pay +10% for a creampuff when they see a fixer down the street not selling, even when priced for less?  They did in a frenzy, but now?

G.  Prices Might Not Change Much.  Buyers going directly to the listing agent won’t find much of an audience for lowball offers.  Going direct only means you have an inside shot at buying the house at the sellers’ price, not that you’re going to get a deal – unless it’s been on the market for months.

H. No Help Anywhere in Sight.  You won’t hear about any of these market changers in the mainstream media – instead, we will be pelted with reminders that homes are unaffordable and other doomy assumptions to explain fewer sales.  Nobody will look beyond the usual excuses – instead, we’ll see more reflections back to previous cycles that have no relation.

Example: This guy compares the 1990s bust caused by the S&L crisis – but ignores that we bail out the banks now, so no bank bust is coming:

Forbes article on 1990s bust

Conclusion: In 2019, potential home buyers will be hearing more doom talk and getting less help.  They will see more listings at higher prices, and more escrows falling out.  It will be natural for them to proceed cautiously, and be resigned to the fact that if they don’t buy this year, prices aren’t going up much so let’s be picky and wait it out – maybe another year or two!

Sellers might get miffed, but they will shrug it off and blame the market or their agent for no sale.  Prices won’t be going down much (mostly because only the superior homes will be selling…and getting their price). Sellers will be picky and wait it out – maybe for another year or two!

In the meantime, the industry will be transitioning into single agency.

Posted by on Nov 25, 2018 in Jim's Take on the Market, Market Conditions, Slowdown, Thinking of Buying?, Why You Should Hire Jim as your Buyer's Agent | 7 comments

Rolling Into Stagnant City

A year ago, I guessed our NSDCC sales would be down at least 5% in 2018, and it looks like it will be closer to -10%.  While I’m confident that sellers will refuse to lower their price expectations much in 2019, I doubt that home buyers will just go along as they have in the recent past.

The disconnect will probably mean that the 2019 sales of detached-homes between La Jolla and Carlsbad will drop another 20%, which will change the landscape considerably from the robust sellers’ market we’ve enjoyed over the last nine years.

Homeowners waiting for the top of the market will move closer to the exits, and we will probably have 5% to 10% more listings early next year – with no let up in pricing.  Potential homebuyers who are starved for quality guidance will be conservative and adopt the wait-and-see approach.

It guarantees a slow start to 2019, and a real standoff.

The worst part about the real estate industrial complex is that they provide no help whatsoever on how to deal with market conditions.  They push Yunnie up to the microphone every month to report the latest sales counts, but that’s it.

Consumers and realtors are left to their own devices to figure out what to do.

Buyers will want somebody else go first.

Who will go first?  With the rise in mortgage rates, we have already lost almost the entire move-up market.  My rule-of-thumb is that if you want to stay in your same area, you have to spend 50% more than what your house is worth to make the move.  In other words, if your house is worth a million, the houses you see listed for $1.1 or $1.2 million nearby aren’t enough of an upgrade – you only get, what, one more bedroom?

But if you bought that home for $800,000 with a mortgage rate of 3.5%, the thought of having to spend $1,500,000 with a 5% mortgage rate will send your head spinning:

Purchase Price
Loan Amount
Mortgage Rate
Mo. Payment w/taxes
$800,000
$640,000
3.5%
$3,674
$1,500,000
$1,200,000
5.0%
$7,942

Your home’s appreciation generated the bigger down payment, but you have to pay more than twice as much monthly, and it isn’t fully tax deductible either. How many people NEED to move that bad?

So if the move-up market is comatose, then who’s left?

Those who don’t own a house here yet – the first-timers and newcomers.

They are at a disadvantage from being new the area, and are probably somewhat unfamiliar to the game – so it’s likely that they will be conservative. But the 2019 market will be entirely dependent upon them paying what the sellers want, or close.

I doubt we’re going to see fewer listings next year, so if there are 5% to 10% more listings – all with optimistic prices – and buyers are waiting to see what happens, there will be many more for-sale signs around.  That alone will cause buyers to pause.

Only the vastly-superior homes will be selling, and everyone will struggle to get the price gap right between the creampuffs and dogs.  The fixers will need heavy discounts, but thankfully, there is a floor.  I’ve probably taken 100 inquiries on my Brava listing – the flipper/investor action is still strong, though they are slightly more conservative about next year too.

Realtors could provide the solutions, but will they?

Here are the typical responses to taking a higher-priced listing:

SELLERS:  “Let’s add a little mustard to my list price.”

TOP AGENT: “The market is soft, and virtually all active listings are priced above what the market will bear. An attractive price will help to set us apart, and our expertise will help to clinch the sale in a timely fashion.”

REGULAR AGENT: “Let’s try the value range pricing!”

NEW AGENT: “What the heck, we can always lower the price later!”

Will the home sellers be sufficiently motivated to price their home sharply?  For those who have been waiting for the top of the market, the answer is no.  They are only selling if they can get their price – especially if they plan to move up in the same area.

We’re headed for a showdown – who will blink first?

There will be a healthy market for for the well-location remodeled homes, but the rest will sit a while before they figure it out – and many will not.

Annual sales dropping 20%?

We’ve been here before, and survived it.  We will survive this round too – we don’t have the shock of a market driven by no-qual loans all of a sudden shifting to qualifying-only, like we did in 2008:

Year
NSDCC Detached-Home Sales
Year-over-Year Change
2005
3,014
2006
2,626
-13%
2007
2,479
-6%
2008
2,037
-18%
2009
2,223
+9%
2010
2,461
+11%

Where will prices go? It will be a very soft landing, because without foreclosures and short sales, there won’t be desperate sellers dumping on price – they will wait it out instead.

Heck, they’ve waited this long, what’s a couple more years?

It will be case-by-case though. There will be a few great deals, some retail sales, and a lot of standing around.  Welcome to Stagnant City!

Get Good Help!

Posted by on Nov 21, 2018 in Forecasts, Jim's Take on the Market, Market Conditions, North County Coastal, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 7 comments

Robotic Real Estate

Below is the evidence put forth by a Bay Area realtor to show two things:

  1. Redfin home-value estimates are tied to the list price, and their estimates are increased as they gauge the traffic.
  2. Buyers are assuming the Redfin estimates to be accurate, and rely on them when making an offer.

In the beginning, zestimates were thought to be wildly inaccurate, and dismissed. But now that portals have been around this long, are consumers putting too much trust into the data received? It appears so.

Are buyers satisfied with internet values now?  Are they subconsciously thinking that the estimates are close enough AND that everyone else does too?

Will future home values be determined by internet traffic?

Click below for his case:

Read More

Posted by on Oct 2, 2018 in Jim's Take on the Market, Realtor, Realtors Talking Shop, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 5 comments

The Long Road Ahead

Things that blow out deals are usually avoidable, and are easy to identify in hindsight. In this case, the agent let the buyers pick a roofer out of the book, which is a terrible way to do business. He gets paid the same whether he blows the deal or not, so of course he tells the buyers the house will fall down some day. No wonder he has great reviews – think of all the homebuyers he saved from buying a regular house, and are still renting!

But the most important lesson is how the agent handled the situation once a concern has been identified.  Buyers are counting on their agent for expert guidance, which should include pointing out that there are no perfect homes out there, and let’s find a way to deal with the imperfections – because in this case, the house had far more positives than negatives.

But instead, the agent – who had been telling me that everything was fine – just sends over the cancellation form in the dead of night.  She didn’t give me any more opportunity to address the concern (even though I has already provided ample evidence), or try to fix it herself.  Instead, once her buyers objected, she just cancelled.

This is where we will see the last nine years of a bull market come back to haunt us.  There are plenty of agents who got into the business since 2009 that not only consider themselves one-percenters, but have built teams and are riding a high horse.  But they have never had to handle buyer objections.

Expect a long, stagnant, bumpy market ahead.

Get Good Help!

What did I do? I went back to the second-place finisher and sold it to them.

Posted by on Sep 5, 2018 in Auctions, Bubbleinfo TV, Jim's Take on the Market, Listing Agent Practices, Realtor, Realtor Training, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 2 comments

Should Buyers Wait?

Should buyers wait a while to see what happens to the housing market?

Are we just seeing the usual end-of-selling-season malaise when where all of the motivated sellers have succeeded, and just the OPTs are stacking up?

Or has the market shifted…..for good? Is this the peak?

I think it depends on your needs:

  1. Only buying a premium property – then stay in the hunt. In the last downturn, the prices of the premium properties held up well – most had less than a 10% decline in value, and that’s before people started hoarding real estate (not selling for any reason).
  2. Only buying a single story – then stay in the hunt.  The one-story market is red-hot, with demand far out-stripping supply, especially in the newer-home or view categories.
  3. Willing to buy a fixer – be patient.  Buy when you see the appropriate gap of 5% to 10% between the creampuffs and the ones that bark at traffic.  If the home is in original condition, the gap should be larger.
  4. Only want to steal a property – very unlikely in the near-term.  Sellers aren’t that motivated, and only a small minority might consider selling for less than 5% of list.

We should be in a stagnant state for months, as everyone waits to see what happens next spring.  But I think buyers will be similarly picky then too.

We’ll see the same or similar psychology take over the whole country at the same time – which is the way it always happens.  What needs to adjust is the sellers’ trend to expect more than what the last guy got.

Here is a discussion guided by our friend and realtor Tom Stone about the market in Sonoma County (follow the link) – and check the comment section too, where Tom mentions the solution. Hat tip Eddie89!

Link to Full Article on Wolf Street

 

Posted by on Aug 16, 2018 in Jim's Take on the Market, Market Buzz, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 3 comments

Millennials Have Regrets

We might be seeing some whipsaw effect with today’s buyers being overly cautious. Either that, or we’ve ran out of the buyers who jump in too fast or too high, and just the deliberate ones are left:

Millennials aren’t exactly jumping for joy after purchasing their homes.

About four in 10 millennials are already homeowners, according to a new survey of over 600 millennials (age 21-34) by Bank of the West.

Yet it turns out that 68 percent of them are feeling buyer’s remorse — almost double the amount of Baby Boomers who say they have regrets.

“Millennials are so eager to become homeowners that some may be inadvertently cutting off their nose to spite their face,” says Ryan Bailey, head of Bank of the West’s retail banking.

Here are the biggest areas of remorse.

Overspending on the down payment

Roughly four in 10 millennials felt they made poor financial choices when it came to purchasing their home. Part of the problem seems to revolve around the down payment. The survey found one in three millennials dipped into their retirement accounts to pay for their homes — a trend Bailey calls “alarming.”

“Borrowing from your retirement may make sense in special circumstances, but it’s definitely not a recommendation,” Bailey tells CNBC Make It.

To keep from getting squeezed, think about what you can afford as a monthly payment, and don’t forget to include taxes and insurance in your calculations, Danielle Hale, chief economist for Realtor.com, tells CNBC Make It.

Use filters on home search sites and price alerts to make sure you’re not shopping for a home above your budget. “Don’t fall in love with something that’s already out of your price range,” Hale says.

Underestimating ongoing costs

When you buy a home, the expenses don’t stop once you move in.

Millennials understand basic costs, such heating and electric bills, but Bailey recommends also considering how much time and money it could take to mow the lawn, clean the house or deal with leaky faucet.

“When you’re a homeowner, you can’t call your landlord to fix things, so you want to make sure you have a little extra cash in the bank,” Hale says.

It’s a big transition going from renter to homeowner, so make sure to take some time to learn about the maintenance costs associated with potential homes.

Settling for something that’s not quite right

Finding the right fit is as important as having the right budget when it comes to home ownership. The survey found that about half of millennials had regrets about the home itself.

One in five said they were frustrated by damages they found after moving in, while others said they discovered the house didn’t end up working well for their family.

To avoid unexpected expenses, experts recommend getting a home inspection before finalizing the sale. “Especially if you’re a first-time buyer or new to home ownership, you may not even know what to look for, so you definitely want to have the expert on your side,” Hale says.

It can also help to nail down what you really need in a home. Make a list of your must-haves before you start looking and know what you’re willing to compromise on, Hale says. It’s currently a very competitive market, so chances are, you’re going to have to make compromises.

In fact, about two-thirds of home buyers reported compromising on some sort of home characteristic, according to a survey from the National Association of Realtors.

“The more targeted your search is,” Hale says, “the more chance you won’t waste your time or get distracted by homes that ultimately aren’t a good fit for you.” Follow this advice, and you can avoid purchasing a home that you regret.

https://www.cnbc.com/2018/07/18/most-millennials-regret-buying-home.html

Posted by on Jul 26, 2018 in Jim's Take on the Market, Market Buzz, Thinking of Buying?, Tips, Advice & Links, Why You Should Hire Jim as your Buyer's Agent | 1 comment