I mean really, I haven't.

Ask my buyer clients.  Did I "sell" them anything?  I don't think so.   I just helped them to buy what they wanted to buy.

Does that make me a bad Realtor/Broker/Agent/guy?

I don't think so.

I gave them the tools to make an informed decision and they did.  I don't think I have one client in 23 years who was ever unhappy with their purchase.  Some did not come back to me when they sold, but they made money.  I have one who bought a condo for $170,000 and sold two and a half years later for $340,000.   We didn't have the right chemistry to work together after the purchase, and so we didn't, but I bet when they got their proceeds check chemistry was the last thing on their minds....

I give all of my buyer clients knowledge of what's on the market that meets their specifications, opportunity to view/inspection/assess and insight regarding value and desireablility.

And you know what is the most any important feature of any given home? 

Location?

Nope.

LOCATION?

Nope.

LOCATION!!!???!!!

Nope.  It is not.

It is whatever is most important to the buyer.  Period.

If the home that client buys has that feature, did I sell them on it?  I don't think so.  I gave them the facts, the disclosures , the numbers, the reports.  I helped them decipher, interpret, understand.  But, did I sell?

I don't think so....

What do you think?

Well, I think Columbus' visit to our neck of the woods worthy of remembrance. 

In 1492
Columbus Sailed the Ocean Blue....

And he discovered the land in which and of which we make our living by helping others buy and sell pieces of it.

Do you think Chris had any idea of what was to come?  Think about it....after a LONG and I supposed scary and anxious voyage, one that many felt would result in his demise by falling off of the "edge" of the earth, he made it HERE.

And what was here?  Native Americans and lots of uninhabited land.   Some wooded, some barren, most untouched.

Chris and crew did not up pull up to port; there was no "port."  Just the edge of the land, the shore.  There was no Internet or GPS to map a course or see pictures of what this world was like.  No Google Earth, no mapquest, nothing but the stars and the earth's magnetic field. 

Man, if our technology all failed and we had to find our way around like that today, think of the pandemonium that would ensue!

Well, things are what they are.  Chris found it, and from it we have sprang.

I'm happy to be here, and I hope you are too!

Check out what Wikipedia has to say about Columbus Day here:  http://en.wikipedia.org/wiki/Columbus_Day

Why would anyone offer this nice reward to first time home buyers and then put the finish line right after Thanksgiving?

I think Thanksgiving is being disrespected here...!

Thanksgiving is my favorite of our fall/winter holidays.  It's a time of goodwill, family, and fruits of your labors....one of which is food.  Not to mention football!

But, to close an escrow when a million ca-zillion others are trying to do the same to meet the arbitrary deadline of November 30 is just insane.  Effectively, the deadline has passed.  Here in Southern California, if you are considering the purchase of a short sale or a foreclosure, know this, there is a snowball's chance in hell that it will be closed in time to meet the deadline.  Even if you are looking at a good-old fashioned standare equity sale, you need to be chomping at the bit to wrap it by month's end in November. 

See, the banks are closed on Thanksgiving, November 26.  Historically, most escrow companies, which facilitate these escrow closings are closed on Fridays.  While this year we may well see that change, this arbitrary deadline of November 30 is just insane!  Besides, lots of folks travel Thanksgiving week, or used to!

Well, rumor has it that the powers that be are slowly seeing the light.  But we don't know what the result of seeing the light will be so, for now, if you are looking to buy, do it now, not later.  Home under $400,000 in Orange County particular (the surrounding counties will soon follow) are already past bottom and inching upwards. Rates took an upward turn last week and inventory is down.  Sure, there's always talk of another wave of foreclosures, but they will be absorbed by the buyers that are out there.

If you want to buy, get off that fence and consult a Realtor today!

“The ‘Catch’ to a Short Sale”

A novella by

Richard Gayle

Forward:  This story is for the prospective buyer of a property being sold as a short sale.  This is not for the prospective seller, although there is nothing I wish to keep secret from a prospective short sale seller.  It’s just that this is more for the buyer--what they can expect when considering and perhaps pursuing the purchase of a short sale.

In the Beginning:

Mr. Smith didn’t know what lay ahead of him when he bought his home.  Or that his heart’s desire would take him away from it….

The term “Short Sale” refers to the sale of a parcel real estate which is in an “upside-down” equity position. “Upside down” means more is owed on the property than what it is worth.  Example:  Mr. Smith buys a home two years ago for $150,000 and puts down $25,000, financing the other $125,000 with an interest-only loan.  Two years later, the property is worth $100,000, but he still owes $125,000.  So, he is upside down by $25,000.

Now, for whatever reason, Mr. Smith decides to sell (moving up, moving down, sickness, death, job change/transfer, financial hardship, other miscellaneous reason).  To make the story more interesting, let’s say that Mr. Smith is single and has met someone on the Internet who lives on the other side of the country…after a period of long-distance dating which includes telephone calls, emails, texting, IMing, video chat and actual visits by each party to the other’s hometown, Mr. Smith decides to move to his significant other’s neck of the woods.  

Now, to sell from that upside down position, he either has to A)  Bring $25,000 to the closing table, plus the costs to sell or B) get his bank/mortgage company/or whoever the lienholder is, to agree to a short sale.   Put another way, a short sale is when a property is sold for less than what is owed on it and/or the costs to sell.  As such, it is “short” of the equity needed to cover the existing liens plus the costs of the sale.

So, Mr. Smith goes to his lienholder(s) and says, “I want to sell.  I don’t have enough equity.  I would like to sell anyway (because, you know, he has his cross-country romantic love-interest) and so, what do I need to do to satisfy your requirements for a short sale?”  What he is doing is asking his lienholder(s) to take the loss when his property is sold.   This, if it sells for $100,000, will amount to $25,000 + the costs to sell. 

Now, lienholder(s) don’t like to take losses…and thus are resistant to short sales.  But market conditions have forced them into a position where they agree to them, grudgingly, as they are less painful than a foreclosure in the areas of time, trouble and money.  In so doing, they reserve the right to approve every term, condition and cost of the sale.  The seller is virtually powerless in the transaction (I may be using the expression “virtually powerless” a bit loosely, but I am usually of the opinion that the power position of the seller in a short sale is very, very weak).

Now every lienholder will have different ways of going about it.  In one situation I handled for a seller recently, she had two liens on her home, from two different lenders.  The first lender wanted nothing but for us to put the home on the market and send in the first/highest/best offer we got, AND, to negotiate with the 2nd lender to get their payoff amount down to $1,000 (in this particular instance, the balance on the 2nd was about $90,000 and yes the 1st told me to negotiate the payoff down to $1,000).   That was it.  The 2nd lender wanted a full “short sale package” from the seller.  This included a “hardship letter” which explains the reason the seller needs to do a shortsale.  Included also is the seller’s tax returns for the 2 most recent tax years, recent paystubs, bank statements and any other financial documentation the lender may require.  It is like gathering the documentation required for a home loan application.    The 2nd also wants from me a Competitive Market Analysis (CMA) which is a broker’s research and opinion of fair market value, as well as some 18 or so pages of questions that they have given me to answer and submit with the CMA.

So, I, as the seller’s agent, gathered all these things up and faxed them to the 2nd lender.  It takes several working days to “scan them into the system” and I am told to call back in several days to confirm they are received and “entered into the system.”

So, let’s say that on the day I put the home on the market, I get an offer from a buyer.  I can tell that buyer that they can reasonably expect to wait approximately 2 months before a response to their offer is rendered by the 1st lender (the 2nd lender does not have to respond as the 2nd agrees to take a flat sum out of the proceeds of the sale).  This time frame can vary GREATLY; however, this is the average in my experience.

So let’s say you are the buyer.  You want to see Mr. Smith’s property.  Not so hard since Mr. Smith is really motivated to get to where he’s going.  But let’s say that you want to see a different short sale.  It could be harder.  Why?  Motivation.  While Mr. Smith is so very motivated, let’s take the case of the family that is forced to sell thanks to their loan being one of those awful adjustable rate loans that has adjusted to infinity and beyond the point of their ability to pay.  They have to sell, they are going through the short sale process, but they really aren’t motivated.  Why?  Because they have  to move.   And where are they going to move?  Depending on the lienholder and their situation, their credit may be jacked up because of late payments and the short sale itself may show as a delinquency on their credit report.  Who will rent to them?

Knowing all this, short sale sellers sometimes don’t make it easy for your agent to get you into the home to look at it.  They sometimes don’t allow their agent to put on a lockbox (a device which attaches to the property, usually the front door, that your agent can open and retrieve a key to the home…makes getting in easy), and sometimes will allow it to be shown by “appointment only.”  These appointment-only times could be something odd like 10-11:30 on Thursday mornings.  Or, they could give you a personal appointment and then not show up.  Or when you do show up, there is a family member home that does not speak English and knows nothing of your appointment and won’t even answer the door.   If tenants live in the home, it can be worse because it could be that they are in the midst of lease and were certainly not expecting to move any time soon….

Now, your agent has done their job…they called the seller’s agent, cleared it with the seller, shown up at the home, (on time of course) with you in tow, and viola!  No one gets in! I mean, is this some exclusive Hollywood nightclub all of a sudden??  It makes your agent look incompetent.  I have been in this boat.  “The Boat of Perceived Incompetence” (I think I saw this boat in San Diego once).  This boat is not a fun boat.  When in this boat, I want to row row row my boat fiercely down the stream and merrily merrily merrily get away from this bad dream to the next home and strike this home from the buyer’s want –to-see list.  Sometimes, briefly, wishful thoughts of pyrotechnic accidents come to mind…

I digress….

Let’s say you did get into the home to view it and you put in your offer.  You are advised by your agent that short sales are typically AS-IS.  The lenders for the seller generally will NOT provide the customary niceties that you get with a standard equity sale in Southern California – a termite clearance (includes treatment and repairs as needed), a home warranty, specific repairs that are noted as being need on a home inspection, and in the case of a property governed by an HOA (home owner’s association), the HOA transfer and document fees (approximately $400 worth of stuff).   Nevertheless, you submit your offer and you know the wait is on…

What happens during the wait?  Well, besides Mrs. Smith getting antsy waiting for his departure to be close to sweetie, this short sale file/package/request is in the queue in the lender(s)’s short sale department.  The queue is “the line.”  The line is long, sometimes very long.  The line is so long that you may have time while in the long long line to sing a song…perhaps a long long song to pass the time that you have to pass while in the long, long line.

So, what happens during the wait is just that….the wait.  Oh, the agent for the seller (me in the earlier example) will be in contact as needed to re-fax lost documents, explain my research, answer questions about our local market, etc.  But you, the buyer…you just wait.   It’s like the military…hurry up and wait.  And most sellers’ agents do not give your agent statuses on what’s happening while you wait…you just wait.  When I represent the seller, I would email your agent every week to say what I knew, even if it was nothing, just to make sure that you, the buyer, are still there and somewhat paying attention, if nothing else…! 

Oh, as the seller’s agent I know what’s going on….the paperwork is collected, the file is assigned to a “negotiator” (because, you know, it is sort of a hostage situation) who “negotiates” the short sale with the seller’s agent, and once the negotiator has the file’s ducks in a row, it has to be signed off by their “team leader” or upper management, and scoured for radiation and any bio-terrorism threat (I am kidding about the radiation and bio-terrorism).  I tell the buyer’s agent what is happening but again, often there is nothing happening, just waiting….

Here’s the thing, generally, you have no guaranteed place “in line.”  If this short sale’s turn in the queue comes up on the 60th day after submission, and someone else submits an offer slightly better than yours on day 59, you are bumped!  On a rare occasion, a seller’s agent will work with offers one at a time until an acceptance is granted and you won’t get bumped…but again, it is a rare occasion…. And this, my friends, is “the catch.”  Patience is not rewarded, it is trounced upon!  It is because the lienholder(s) are losing money and thus both want and need the most they can get, as well as it being the seller’s agent’s responsibility to get the highest and best price for the seller and lienholder(s).

If, however, you are willing to wait, knowing that on any given short sale this could happen, you could submit multiple offers on multiple short sales.  The problem with this approach is emotional.   You may like one home better than another and hope and pray that you get THE ONE that you so love and adore…and when you don’t, it is disappointing…sometimes very disappointing… The question then is, how well do you handle disappointment?  Can you weather the storm of the lost short sale?

In this market, properties that are decently kept, in decent areas and decently priced will receive multiple offers.  And it is not uncommon for the offers to go over the list price because, the pricing strategy of many agents is to price the property artificially low so that a bidding war ensues, pushing the offer prices up, up, up.   This strategy does not always work as offers can and do come in at the list price, whatever it may be.  And if that is the only offer a seller gets, then obviously it is all they have to work with.   The fact is, the market (buyers and sellers) decide at what price a property sells, not the agents.  As an agent, I do not control the market; I simply work within it….

So, a short sale is the sale of a parcel of real estate that is short of the equity needed to sell it and pay off all liens.  It is not short “time-wise”!! Oh no, not short time-wise at all.

But, in due time, Mr. Smith is able to sell his home (with the lienholder’s cooperation) to you (or another buyer!) and move cross-country to be close to his dear one.  And thus may he, and you (or another buyer!) be able to begin a new life in a new home where all is well….

I hope you have both enjoyed and learned from this novella. 

©Richard Gayle 2009
Real Estate Broker
Orange County, CA

I have been thinking about this for some time...I don't suppose for a second that I've got it all figured out, but I feel I need to get it out there NOW...

Instead of foreclosing on so many homes, why can't lenders "think outside the box?"

Here's my suggestion...when there is a family in trouble, instead of using conventional methods of pursuing the homeowner and nagging them daily with phone calls, how about you lenders instead ask if you can HELP them stay in their home?  And I don't mean lip service, I mean REAL help.

Let's face it, lenders are up to their eyeballs in the alligators of foreclosures.  The way of doing things is broke...it needs fixing.  Why not TRY something different? 

How to help?  Change the terms of the loan, temporarily, to allow the family to stay IN the home.  Even if the the changes are drastic for a while, it could be a WIN-WIN.

Each borrower would be assessed/qualified just like they were when they got the loan in the first place.  And, a payment would be worked out that the client could make.  NO NEGATIVE AMORTIZATION, a REAL PAYMENT, even if it was with ZERO interest for a while.  Do it a year at a time, or TWO.  Re-valuate and if the homeowner can pay more, so  be it. 

But what IF the homeowner CAN'T pay more?  EVER?  Well, we can't expect lenders to work for free.  So here's my thought...once a property reaches the threshhold where it can be sold and either break even or make a little, the homeowner has to make a decision...go back to the original loan terms, refinance, or sell. 

So, WHY would a lender do this?

A)  It stops foreclosure and thus KEEPS the family IN their home.  There is none of the cost to foreclose, take possession of, repair (sometimes due to homeowner rage), and re-market and re-sell the home.

B)  They may not be making money on the loan for a while, but they STOP losing it.

C)  They become the HERO.  They KEPT the family IN the home while mitigating their losses which appeases their stockholders and as a result...

D) ...this makes HEADLINES.  This is GOOD news, a welcome change, a welcome relief!!! This makes people WANT to do business WITH THAT particular lender, the one that DID NOT FORECLOSE but rather HELPED families STAY in their homes.  And so, this lender's...

E) ...business GROWS....they move ahead of the competition with increased market share.  They make more loans, thus helping more families realize the American DREAM (NOT nightmare) of homeownership.  In so doing, they make more money, thus REALLY appeasing their stockholders.

Listen, I realize this may be idealistic, but, it's just a thought, a brainstorm.

Can we, as a real estate community, as a REAL community, come together on this and make this, or some thing other than this foreclosure epidemic, happen?

Let me hear from you all, thanks! :)

I represent a buyer who was pre-approved for a CALFHA $0 down loan!  6% .  And with a seller concession of 3%, she can get into a home with $0 out of pocket!

Is this one of those evil, sub-prime loans that going to exponentially jack up her payment in a year or two resulting in another foreclosure?  NO!  I am perennially opposed to  such an awful product!  This is a CalFHA loan.  And for those of you who can remember way back when, the CalFHA used to be a bear to deal with…not so anymore!

Instead of an indefinite period of time in which it takes to get their underwriting approval, and “untouchable” underwriters, now, it takes 3-4 days in underwriting and the lender can actually talk to  the underwriters!

Times have changed…and this change is for the better.   I don’t know all the particulars of the loan…my client is a first-time homebuyer…but my lender does.  She can quickly get a DU yea or nay for to see whether it’s feasible to move forward in this arena or another.

 And yes, it can be used on Foreclosures/REOs!

I am in Orange County so if you are looking to buy a first home or need a lender who can do this type of loan for you or one of your clients….let me know.  I am happy to help, happy to serve! J

I’m confused.   Is it 2008?  Or 1998?

Here’s why I am confused…you see, Orange County filed for bankruptcy in December, 1994 and emerged from the same in December 1996.  The OC real estate market bottomed out about the third quarter of 1996, and was s-l-o-w-l-y creeping up by year’s end.  During 1997, the creep upward continued…and if memory serves me, there ended up being about a .5% appreciation over the course of the year.

And then came 1998.   And lo, things did change!

Once winter started to wane and Spring was knocking at the door, our market started to heat up along with the ambient air temperature.   

And did it ever!

I mean, things really took off!

I would constantly monitor the MLS for new listings and as soon as a new property that was a match for one of my clients would hit the system, I would call them, say “meet me there” and arrive, offer in hand for them to sign on the spot!  And, we would still lose out to one of the many other offers than materialized virtually instantaneously!

It was madness!  Frustrating!  Unbelievable!

And it continued for some 6 ½+ years!  Madness I say!

But the Spring of 1998 was where the OC market got it’s running start as the pent-up buyer demand broke free of the shackles of fear and reservation and apathy and it took flight…supersonic flight.

After half a decade of decline, (due in great part to OC getting together with unscrupulous businessmen who lead us into bankruptcy, and the Berlin Wall coming down, resulting in massive cuts in defense contracts--resulting in massive job loss which resulted in an exodus out of homeownership and the entry into the foreclosure arena), buyers were tired of being scared and tentative.  So they rebelled and revolted and reversed their course, and thus, reversed the course of the market at the same time.

The vast amounts of foreclosures at that time were the kindling that fueled the fire that set the rest of the market, nay, the entire market ablaze. 

I remember all of the HUD Homes.  I used to go to the HUD office on Hutton Centre every Friday and pick up the new list of HUD Homes for sale.  I would take this list and paste my logo and contact info on it.  Then, I would fax it out to the hundreds of individuals who were on my fax list, hungry for the HUDs.  And why not?  HUD frequently ran specials where you could buy a condo for $100 down and closing costs were paid for you.  Houses were only FIVE HUNDRED DOLLARS down!  And costs paid. 

The Veteran’s administration had REPOs too.  Their list was printed in the LA Times every Friday.  I would get the paper, cut out the list, scan it into my computer and again, add my logo and contact info and fax out to everyone.  HUD and VA homes were not listed with Realtors.  But we loved HUDs because you got the full 6% commission if your bid was the winning bid.  All the HUD homes were on master keys and some agents, when they showed their clients a hot property, would break off  the key in the lock so that no one else could get in to see it.   By the time HUD could send someone out to fix it, it would be past the bidding period and the property was sold!  Where the population is dense, the rats will breed…

Also, Fannie Mae and Freddie Mac had foreclosures too.  They did list with Realtors, so we could find them in the MLS.   Fannie Mae offered 3% down financing and Freddie Macs were 5% down.  Freddie’s frequent-seller program was /is called Homesteps and if you sold a certain number in a year, you started earning bonuses. 

Some of these homes were gems, some were dogs.  My wife and I bought two of the gems, two condos in Tustin Ranch in 1996 and 1997.     We lived in both but have since sold them…but I wish we hadn’t of!!

And what do I see happening now, in 2008?  Well, the foreclosures, which I do not see as vast as back then, are seemingly acting as kindling…again.  On Sunday, January 6, I wrote an offer on a foreclosure in Irvine, a 2 bedroom, 2.5 bath townhouse under $400,000.  That home got nine offers …in this market! (whatever this market is!)  NINE offers!

Another property, a short sale listed for $418,000, has multiple offers up to $425,000 on it! 

Agents from San Diego to Riverside are telling me the same thing…things are picking up.   Activity is up.   That includes showings, offers and offer price to list price ratios, as well as multiple offer scenarios.

So, can you see the cause of my confusion over what year it is?   Right now is very reminiscent of early 1998.

So, here’s my dilemma…I have a number of buyers who want to wait for the “bottom.”  The problem is, we don’t know we’ve hit bottom until it has passed.  And since there are thousands of buyers waiting for the bottom, as soon as all these buyers see that the bottom has passed, all will jump into the market at the same time, resulting in increased activity-- more viewings, multiple offers, offers over list price…there will be competition for homes again…oh wait, that’s what I am experiencing now!

What does this mean?  It means that now is a good time to buy.  Rates are low…in fact, it was reported on OCRegsiter.com (see here ) that our mortgage rates have dropped to the lowest point in a year.  And with all the sellers out there knowing that it is a buyer’s market, they are willing to do whatever they can to get you buyers off the fence and into a home.  They are taking lower offers, paying closing costs, throwing in appliances that don’t typically get included, making improvements and just plain playing nice.  They are asking “what will it take to get you into my home today?”

Now people, I am not saying that what’s going on now is indicating that 1998 is about to happen again.   But, it sure is bugging me….

And since it is bugging me, I have to now go and ask all of my buyers….”what will it take to get you into a home today?”