In yesterday’s video you heard about the agent who said he had written 70 offers on behalf of a well-qualified buyer, many at $10,000 to $50,000 above list price, and he still hadn’t sold her a house.
To see how frustrated I should be, I checked my Y-T-D stats:
131 offers written on behalf of buyers.
17 solds and pendings to show for it.
A success rate of 13% sure looks frustrating, but let’s examine. Reviewing the 131 offers, here are my thoughts, based on those results:
1. Willing to write low offers.
Many get no response at all, but you can’t take it personal. I don’t mind writing low offers because it serves as my primary ‘listing-agent-desperation gauge’, plus they help satisfy the buyer’s curiosity on whether you can steal a good one. My best closed sale this year was 8% below list price, though have two short sales pending at 15% off. I’ve written offers at 20% below list, and 15% above.
2. Making offers help educate buyers.
The paperwork is overwhelming, there are at least 23 pages required on each offer – let’s get familiar with it. If you haven’t bought a house in a while, you’ll see something new on the forms every time you read them, so review as many as you can!
3. Expect to lose some bidding wars.
The likelihood of getting into a bidding war is excellent with 90% of the buyers chasing 7% of the inventory – today’s active REO listings/total active listings is 657/9,070 = 7%. Other buyers are going to out-bid people just to end their frustration, and someday that could be you – unless your agent is willing to temper the emotion and write lots of offers.
4. Listing agents are going to take the wrong offer.
The over-worked staffs of the big REO agents are going to screw up. They’ll lose offers, terminate the bidding prematurely, and/or flat out ignore you, hoping you’ll go away.
5. Buyers blow out during inspections.
It is a two-part negotiation. First buyer and seller settle on price, then the buyers execute their due diligence. The REO listing agents don’t want to fix anything, so if you find a deal-killer in a bank-owned, it’s usually a cancellation. Hopefully on a non-REO you can get some love from the seller, but almost always it depends on the listing agent’s zest for closing deals, instead of re-selling them over and over.
6. Making an offer is much easier.
Today, with electronic signatures, the writing of offers is much quicker, but not frivolous. Every offer I’ve written was made in good faith, and almost always a better reflection of actual value than the list price.
7. Timing – sellers are overly-optimistic during the spring and summer.
Buyers have a better chance of getting the sellers’ attention between September and November. By December the sellers throw in the towel, figuring that springtime isn’t far off.
All in all I don’t feel that frustrated, it’s all part of how the market has changed.
These three game-changers:
a. lower pricing
b. electronic signatures
c. the internet exposing virtually every property for sale to waiting buyers
have helped increase the competition for the good deals, and the rush to snag them has intensified that any house put on the market today that doesn’t get an offer in the first week or two must be listed at the wrong price!
Yet the frustration endures with so many of the REOs listed with robot realtors that you can’t get on the phone, and who let new listings run active for days and days. If we see a substantial increase of REO listings in the coming months it will help soothe some of these frustrations. Agents are pleading for them, and sales should increase because there will be more inventory to go around!
1,400sf of heaven, built in 1960 and last sold in October 2005 for $430,000, and yes of course financed 100%, plus a cash-out refinance in 2006, resulting in negative skin in game.
Sold for $148,000 in 11/99:
The market can’t be any hotter than it is right now, can it?
NEW YORK (AP) — A year after the financial system nearly collapsed, the nation’s biggest banks are bigger and regaining their appetite for risk. Goldman Sachs, JPMorgan Chase and others — which have received tens of billions of dollars in federal aid — are once more betting big on bonds, commodities and exotic financial products, trading that nearly stopped during the financial crisis.
There have been no significant changes to the federal rules governing their behavior. Proposals that have been made to better monitor the financial system and to police the products banks sell to consumers have been held up by lobbyists, lawmakers and turf-protecting regulators.
Five of the biggest banks — Goldman, JPMorgan, Wells Fargo, Citigroup and Bank of America — posted second-quarter profits totaling $13 billion. That’s more than double what they made in the second quarter of 2008 and nearly two-thirds as much as the $20.7 billion they earned in the second quarter of 2007 — when the economy was strong.
Meanwhile, Bank of America and Wells Fargo today originate 41 percent of all home loans that are backed by Fannie Mae and Freddie Mac, according to Inside Mortgage Finance. The banks made $284 billion in such loans in the first half of this year, up from $124 billion during the same period last year.
“The big banks now are more powerful than before,” said Johnson, now a professor at the Massachusetts Institute of Technology’s Sloan School of Management. “Their market share has grown and they have a lot of clout in Washington.”
One investment gaining popularity is a direct descendant of the mortgage-backed securities that devastated many banks last year. To get some lesser performing assets off their books, banks are taking slices of bonds made up of high-risk mortgage securities and pooling them with slices of bonds comprised of low-risk mortgage securities. With the blessing of debt ratings agencies, banks are then selling this class of bonds as a low-risk investment. The market for these products has hit $30 billion, according to Morgan Stanley.
“It may be unpleasant to hear that the traders are riding high,” said Walter Bailey, chief executive of boutique merchant banking firm EpiGroup. “But, hey, it’s a pay-for-performance thing, and they’re performing like mad.”
And that means the return of another Wall Street mainstay: Lavish compensation.
After 10 of the largest banks received a $250 billion lifeline from the government last fall, some lawmakers were outraged that employees were being paid seven-figure salaries even though their companies nearly collapsed. A handful of top executives, including Citigroup CEO Vikram Pandit, have agreed to accept pay of just $1 this year. But the compensation of most high-performing traders hasn’t changed.
Goldman spent $6.6 billion in the second quarter on pay and benefits, 34 percent more than two years ago. And Citigroup, now one-third owned by the government after taking $45 billion in federal money, owes a star energy trader $100 million.
While this article highlights individual stories of how some people are dealing with the downturn, the quotes in this excerpt below were most interesting – from latimes.com:
Not everyone is buying it. Eventually, when the economy regains steam and housing prices rebound, Southern Californians will again stretch to buy a house they cannot really afford, some believe.
“People have short memories and just look a couple of years ahead,” said San Fernando Valley real estate agent Gary Rapoport, who represents clients generally looking for properties in the $400,000 range. “They just want to buy whether they qualify or not.”
Real estate economist Christopher Thornberg seconds that view. Californians display a sort of amnesia about downturns that affect the housing market, he said, whether caused by financial-market debacles or the collapse of the technology boom. Price slumps in each of the last four decades, he noted, didn’t dispel the perception of residential real estate as a sure-bet investment.
“We’ve been here before,” Thornberg said. “People have a shocking ability to forget the past.”
When homeowners negotiate a short sale with lenders, they sometimes assume there will be relatively little impact on their scores. After all, the loan was successfully paid off, there was no foreclosure, and the lender voluntarily agreed to accept a lower balance than was owed.
But in fact, according to VantageScore researchers, short sales can trigger big drops in scores. Sarah Davies, senior vice president of analytics, said a homeowner who previously had an excellent score of 862 might plummet 120 to 130 points immediately as the result of a short sale.
While it’s true the lender may lose less money through a short sale compared with a foreclosure, Davies said in an interview, “it’s still a derogatory event.” The full debt was not repaid. The lender lost money. Scores tanked.
What happens when borrowers walk away from their mortgage debts altogether, the “strategic defaults” that have become commonplace in some large markets, especially in California?
They can count on 140- to 150-point immediate hits to their scores, plus negative marks on their credit bureau files for up to seven years.
People who file for bankruptcy protection covering all their debts — the mortgage, credit cards, auto loans, etc. — get hit with declines that are the scoring equivalent of a nuclear bomb: an average 355- to 365-point collapse in their scores. Bankruptcies remain on borrowers’ credit bureau files for 10 years.
The Gamble House in Pasadena is one of the most significant houses ever built in America, and a quintessential example of the Arts and Crafts movement. Here are two descriptions, under their links:
The David B. Gamble house, constructed in 1908, is the internationally recognized masterpiece of the turn-of-the-century Arts and Crafts Movement in America. Built for David and Mary Gamble of the Procter and Gamble Company, the house is the most complete and best preserved example of the work of architects Charles Sumner Greene and Henry Mather Greene who made a profound impact on the development of contemporary American architecture.
Greene and Greene broke sharply from the academic traditions of their time, using nature as a guide rather than the dictates of popular historical styles. The design of the Gamble House, while in part inspired by the wood-building vernacular traditions of such cultures as the Swiss and the Japanese, is a unique statement drawn from the life and character of Southern California. Wide terraces and open sleeping porches facilitate indoor-outdoor living, careful siting and cross-ventilation capture the cool breezes of the nearby Arroyo Seco, and broad, overhanging eaves shelter the house from the hot California sun. Wood is celebrated in the Greenes’ use of articulated joinery, exposed structural timbers and shingles which blend sensitively with the landscape.
In the Gamble House, furniture, built-in cabinetry, paneling, wood carvings, rugs, lighting, leaded stained glass, accessories and landscaping are all custom-designed by the architects, and were created in the true hand-crafted spirit of the Arts and Crafts movement. No detail was overlooked. Every peg, oak wedge, downspout, air vent, hardware fitting and switchplate is a contributing part of the design statement and harmonious living environment.
The Gamble House was designed in 1908 by architects Greene & Greene. It was commissioned by David and Mary Gamble, of Cincinnati, Ohio, as a retirement residence.
David Berry Gamble, a second generation member of the Procter and Gamble Company in Cincinnati, had retired from active work in 1895, and with his wife, Mary Huggins Gamble, began to spend winters in Pasadena, residing in the area’s resort hotels. By 1907, the couple had decided to build a permanent home in Pasadena. In June of that year, they bought a lot on the short, private street, Westmoreland Place, passing up the more fashionable address, South Orange Grove, known at that time as “Millionaires’ Row.”
At the same time the Gambles were selecting their lot on Westmoreland Place, a house designed by the firm of Greene & Greene was being built for John Cole on the adjacent property. Perhaps meeting the architects at the construction site, and certainly impressed with the other Greene & Greene houses in the neighborhood, the Gambles met with the brothers and agreed on a commission.
The architects worked closely with the Gambles in the design of the house, incorporating specific design elements to complement art pieces belonging to the family. Drawings for the house were completed in February 1908, and ground was broken in March. Ten months later, the house was completed, the first pieces of custom furniture were delivered, and The Gamble House became home to David Gamble, his wife Mary, and two of their three sons: Sidney and Clarence. (Their son Cecil was 24 at the time, and on his own.) In addition, Mary’s sister, Julia Huggins, came from Ohio to live with the family. By the summer of 1910, all the custom-designed furniture was in place.
Alan Gin had to comment on the latest SDAR report:
from sddt.com:
The median price of detached resale homes in San Diego County rose for the fifth straight month in August, while sales dipped slightly.
A report from the San Diego Association of Realtors (SDAR) showed the median price of a detached single-family home sold rose 0.8 percent from $372,000 to $375,000.
Attached homes, such as condominiums and townhomes, had their median price rise nearly 8 percent from $210,000 in July to $226,000 in June.
Mulitple bids on lower-priced properties is driving up the median price, said Alan Gin, University of San Diego economics professor.
The five-month trend may show that the market has hit bottom, or even shows proof that the housing market has turned the corner, he said.
But it does not mean the local economy as a whole is out of the woods.
Gin said the positive news in the housing market is a good sign, but questions about unemployment linger.
Should unemployment continue to rise and a new wave of foreclosures enters the market at an inopportune time, Gin said the housing market could take a turn for the worse.
However, he said it is not likely.
Last time the median prices of attached and detached homes were this high were September 2008.
The total number of attached and detached homes was down 11.3 percent from August to July with 2,622 sales.
However, the drop off is not something to “take much stock in,” Gin said.
“I wouldn’t consider (an 11.3 percent decline in sales) a big change given that June and July were pretty big months in terms of housing,” he said.
He said an activity drop in August is a normal, seasonal change.
Last month’s sales were a 6 percent increase over August 2008.
Year-to-date, 2009 is out-pacing 2008 by almost 4,500 units sold, a 28 percent increase.
One thing that has been driving sales this year is the first-time homebuyer tax credit offered by the federal government.
The tax credit is equal to 10 percent of the home’s purchase price or $8,000 whichever is less. It expires on Dec. 1.
Erik Weichelt, president of SDAR, said Realtor associations, particularly in California, are pushing Congress to extend and expand the tax credit.
Aside from extending the deadline to sometime in 2010, Realtors are hoping to increase the limit of the credit to $15,000.
However, not much headway has been made lately as Congress has been focusing on other issues like healthcare, Weichelt said.
Six-year Realtor Jane Loveday said she started noticing buyers heating up the market in March; she added activity has been increasing steadily since.
Even more buyers have contacted her within the past few months, specifically trying to obtain the tax credit.
“I do have a couple of buyers who are specifically wanting to close by November 30 but whether they can find a property and get an accepted offer I can’t guarantee. That (the tax credit) is a huge stimulus to them.”
One of the problems facing potential buyers is a lack of inventory at lower price points.
Weichelt said there is less than a month and a half supply of inventory priced below $250,000.
He said almost every property that comes onto the multiple listing service in that price range has multiple offers on it within days.
Gin said that an activity drop is a normal, seasonal change?
Here are the total sales history for July and August. It looks like August is usually a big month for closings, culminating a summer’s hunt for homes:
All Residential MLS Sales, San Diego County
Year
July
Aug
diff
1997
2,767
2,793
+1%
1998
3,595
3,095
-14%
1999
3,717
3,629
-2%
2000
3,018
3,445
+14%
2001
3,488
3,786
+9%
2002
3,555
3,651
+3%
2003
4,359
4,634
+6%
2004
4,165
3,880
-7%
2005
3,736
3,897
+4%
2006
2,639
2,844
+8%
2007
2,360
2,416
+2%
2008
3,007
2,788
-7%
2009
3,382
2,816
-17%
Normal drop-off? Sales haven’t slowed this much all decade between July and August. What does it mean?
Factors that could cause sales to drop more sharply than usual:
1. Fewer condos closing due to financing? Nope, condo sales last month were higher than August of the last 2 years.
2. Tougher financing? On the high-end yes, qualifying for jumbos is hard, but FHA loans have created a firestorm under $700K.
3. Higher rates? Nope, mortgage rates (5.68%) are lower this August than ever before.
I think sales are hampered by the lack of quality inventory, and many buyers are wondering if they should step up and pay more to win a bidding war. PROCEED WITH CAUTION. As REO listings are dripped out and anxious buyers jump on them, it’ll look like the market is getting hotter. But keep an eye on # of sales, and don’t listen to any of these cheerleaders who refuse to check facts before speaking!
My second REO assigment in the last two weeks, after a couple of dry months – could this be the beginning? I think it is, but the quality isn’t great yet, at least of the ones they send me. This 1,245sf house on Paseo Ajanta in Rancho Penasquitos will probably need to be in the low-$300,000s or lower to find a buyer:
In the quaint central Connecticut town of East Haddam, Bill and Rose-Marie Evans built a theme park for their three children. Their property included a pool, a hot tub, a swing set, a trampoline, a paved basketball court and more than enough yard to host neighborhood soccer and kickball games.
They had expanded the ranch house they bought in 2001, turning it into a 3,000-square-foot home with room indoors for games like pool, table tennis and Foosball, making it a prime sleepover destination. “The master bedroom was on the first floor,” Mr. Evans said. “There were three bedrooms and a second family room upstairs. The kids had 1,200 square feet to themselves.”
But then in mid-June, the moving van arrived, and the Evanses left behind their own personal vacation land and squeezed uncomfortably into a 1,200-square-foot rental, while they began building a marginally bigger home. The couple had decided that with the economy uncertain, they had to conserve money and live more modestly.
Leaving the home they once believed would be theirs into retirement was a painful decision, one many baby boomer families are facing. It’s an issue that especially resonates in suburbia, where highly taxed, stressed-out parents wrestle with the prospect of moving sooner than they had planned. But children can be uncomfortable with decisions that change their notions of security, and their unhappiness forces parents to consider what they do — or don’t — owe their offspring.
“We always believed that was going to be the place we would come back to with our own kids for Christmas and Thanksgiving,” said Andrew Inman, 19, who, along with his sister, Brittany, 17, is Mrs. Evans’s child from a previous marriage. “We kind of felt lied to.”
Baby boomers are already driving a new market for smaller, less expensive homes, according to Stephen Melman, the director of economic services for the National Association of Home Builders in Washington. In a recent member survey, 59 percent of builders nationwide said they were planning to or were already significantly downscaling from the McMansion era.
“Many boomers seem to be thinking they are going to do it eventually, they may as well do it now while they need the money for tuition or because there’s just less money available,” Mr. Melman said.
