Shari Posey's Diary of a Mad Realtor

Which investment is better--real estate or stocks?

Shari Posey (Prudential California Realty) — Wed, 21 May 2008 11:39:30 -0500

Which investment is better...real estate or stocks? If you ask a Realtor, you know which answer you will get and the same goes for a stock broker. Of course, common sense says you should have a little of both but if I had to choose only one, I would pick real estate.

In early April, it was time to fund my IRA account. I hate to admit this but I really only look at my brokerage account once a year compared to my daily contact with the real estate market. However, I subscribe to Money and Forbes, so I try to know what's going on in non-real estate markets as well.

This year I took the microscope to my brokerage accounts. I calculated my rate of return over the past 10 years for each mutual fund and for my stocks. Even after all the turmoil in the stock market, I gained an average of 3.7%. At least I didn't lose any money and stayed at least in line with the inflation rate. I feel even better because I read in this month's issue of Money magazine that since the end of 1998, the Standard & Poor's 500 index of blue-chip stocks only returned 3.5%. Without knowing hardly anything about the stock market, I beat the Standard & Poors...by a little at least.

However, when I look at my real estate investments over the same period of time, I'm way ahead! Overall, I'm up approximately 33% taking into account today's values. Obviously, the properties that I've held the longest are up the most.

One huge advantage of stocks and mutual funds over real estate is liquidity. And that is something real estate investors have learned the hard way in the past two years. If you have to sell a stock at a loss you can do it with the click of your mouse. If you have to sell real estate at a loss, it's a long, painful process.

Neither stocks or real estate are a sure thing. In both cases, experts advise looking at your investment in the long term. This year I contributed the maximum to my IRA to reduce my taxes but I will also look to buy a piece of property that makes sense as a long-term cash flow vehicle.

Ways Prices Drop

Shari Posey (Prudential California Realty) — Thu, 10 Apr 2008 15:23:10 -0500

It seems common sense that the reason real estate prices drop is because there is too much supply and limited demand. BUT WAIT!! There are other factors at work behind the scenes.

The housing market is not like your average retail store that puts products on the shelf and offers advertised specials.

One way prices drop is when property is sold privately off the market. Believe it or not, some sellers would rather have either a private party buy it under market. This private party could be a family member or a friend, or maybe they have a friend in real estate who has a buyer "in their pocket" who wants a great deal. When a home sells off the market it is a comparable sale for the entire neighborhood.

Desperate sellers also bring prices down. These days many desperate sellers are banks that want to cut their loses by selling properties below other listings. Not all banks are doing this type of fire sale of property, Ironically, as long as the property is listed on the market often times buyers bid up the price. I showed a few bank-owned new listings this past weekend that had multiple offers by Monday.

Short sales prices are even lower than foreclosures in many cases. Some banks don't want to gamble with prices or the condition of the property in the future if they take the home back through foreclosure. Some banks cut their loses before the owner has even moved out of the property. Short sales are not for every buyer. Generally there are months of waiting while the banks go through their approval process.

The housing market is very volatile right now. For sellers, the best chance of getting the highest price is to price your property below other competing listings but make sure it is marketed heavily so buyers and other agents have the opportunity to see it.

What is "Green" Building?

Shari Posey (Prudential California Realty) — Tue, 19 Feb 2008 11:21:55 -0600

Several months ago I read an article in our local newspaper, The Grunion Gazette, about two homeowners in Long Beach who were planning to tear down their 1920s bungalow and replace it with a very environmentally sound home. They were looking for volunteers to help them build it because the costs of building green is so much higher than traditional materials.

When I read the article I was trilled that someone in Long Beach was bucking the trend. A friend of mine also saw the article and he thought about volunteering to help build because he's a believer in green building, too. My ultimate dream is to build a strawbale house here in Long Beach. People tease me about it but straw is an incredible green building material plus it costs less than manufactured green products. ("Manufactured" green products seems like an oxymoron to me.)

Yesterday I was driving around the area where this green house was being built and I decided to check out the progress. To my horror this 1920s bungalow was added to a landfill in order to be replaced by a monstrous 2-story square box that takes up almost the entire lot! I'm not an expert on green products but I can't see how this new gigantic structure that will be filled with environmentally sound finishes like bamboo floors and dozens of fluorescent lights could have less of an impact than a little bungalow.

"Green" seems to be a trendy excuse for replacing something that is perfectly functional or for charging more for a product that has minimal benefit.

Will Roger Must Have Been a Landlord--He Sure Wasn't a Flipper!

Shari Posey (Prudential California Realty) — Tue, 15 Jan 2008 22:39:17 -0600

I love this quote from Will Rogers...

"You don't wait and buy real estate. You buy real estate and wait."

Every day I get calls from investors ready to get back into the market to flip and grow rich. Ironically most of the homes that are currently bank owned are flips that flopped. My philosophy in general is to buy real estate to hold unless the market has increased to make at least 10% profit after rehab, holding and real estate fees.

Our current market is a perfect market to get into a home that needs some cosmetic repair and live in the property while you do the work (sweat equity!). Down the line, you can turn that property into a rental and start with a new project.

Buyer Tests the Market with Multiple Offers to See Who Really Wants to Sell

Shari Posey (Prudential California Realty) — Tue, 15 Jan 2008 10:57:26 -0600

One of my buyer clients found several properties he liked equally and made offers on multiple properties at the same time. All the sellers knew they were in a multiple offer situation. Yes, the offers were low but not what I would consider offending.

Out of 5 offers, 3 sellers came back with full-price or nearly full-price counter offers. One of those full-price counter offers was also loaded with so many special terms they would strangle a buyer. Two sellers came back with fairly generous price reductions and the buyer chose to continue to negotiate with one of those offers.

A week later, two of the sellers who my buyer did not choose wanted to come back to the table and negotiate more but it was too late.

The moral of the story is not all sellers are motivated to sell just because their house is on the market. However, if you are a seller who is motivated, you need to realize there are many properties competing for a limited number of buyers. No seller wants to "give" their house away but the negotiating process will determine the value of your property in today's market so be prepared to cooperate if you want to sell. And for buyers, the more flexible you are in your needs, the better deal you can strike. Some sellers are very motivated; it just takes working with an agent who is willing to provide the expertise and invest the time to help you get the best deal.

Know the Difference--"Short Sale," "REO" & "Default"

Shari Posey (Prudential California Realty) — Tue, 11 Dec 2007 14:35:58 -0600

Most buyers and many real estate agents are unaware of the enormous difference between a listing that is a "short sale" and one that is an "REO." Also, many people are not aware what it means when a home is in default/foreclosure.

Short Sale Listings

The homeowners of these properties owe more in loans than what the property is worth. For example, a home may be listed at $399,000 but the owner owes a first loan of $399,000 and a second loan or a line of credit for $100,000. On the surface it looks like a great deal for the buyer to get the house for $100,000 less. But in fact, the second lender has to agree to accept the deal, which in the case is $0. In addition, there are real estate fees to sell a property so the first lender would also have to accept less than $399,000. Most lenders require the borrower to have a true financial hardship to prove they can not pay the difference between the sales price and their loan amounts. A hardship is a serious financial setback like a death of a spouse, loss of a job, huge medical bills, etc. Even with a hardship, many banks are not approving short sales. These homes may or may not be in default, meaning the owner may or may not be behind in payments.

Default Homes in Foreclosure

These borrowers have missed enough payments to force the bank to take action to start the foreclosure process and file a Notice of Default, and then go to auction if the borrower can't bring their loan current. Buyers are excited about finding killer deals before homes goes to auction or get listed with agents. Many buyers think that you can offer the owner $10,000 and convince them to walk away from their homes. The reality in today's market is that not very many of these default borrowers have any equity, and they may also have unpaid property taxes and other liens against the property. The few borrowers who have equity are bombarded with people knocking on their door offering them deals to walk away. If you have a lot of diligence you can land one of these deals but I would advise you to do a lot of homework. Additionally, when the property goes to the foreclosure auction you must have all cash/cashiers checks to purchase.

REO Listings

These are properties that have already been through the foreclosure process and are currently owned by the bank or a servicing company. These properties are listed with local agents but any agent can sell them. The properties are sold as is and the bank knows nothing about the condition of the property and offers no warranties. Some banks have special requirements for the buyer, for example the buyer must qualify with a specific bank. These vacant properties are a depreciating asset for the banks and most banks are eager to make deals. Many of these properties have investors that must approve the price of the sale but I have seen some killer deals go to the buyers who have the guts to submit an offer.

Buyers! Should You Wait for the Market to Hit Bottom?

Shari Posey (Prudential California Realty) — Tue, 11 Dec 2007 10:24:09 -0600

On Sunday I held one of my listings open, as I usually do on the weekends. And as usual, I had 5-6 buyers who love the house but are waiting to buy when the market hits bottom. A few buyers are making their move now but most are waiting. However, it occurred to me recently that each and every house offers a completely unique negotiating experience. Here's what I mean...

This is a true example of a buyer couple I worked with recently: They found 5 houses they liked equally and all of them were priced nearly the same...around $500,000. The buyers were highly qualified with a large down-payment and great credit. We submitted 5 offers simultaneously. One seller didn't even want to respond to the offer. Two sellers came back with a counter offer a few hundred dollars off of full price. Howver, two sellers came back with wonderful counter offers. We continued to negotiate with the two most-motivated sellers and the buyers struck a deal.

This experience shows that for some homes, the market will most likely go lower as their homes remains on the market. But for other homes, you can get an awesome deal now if the seller is ready to strike a great deal. We ended up negotiating a home far below the list price. The buyers felt like they were able to buy now and enjoy a home at a price that gives them equity as the market goes down. These buyers decided that they would rather be among a handful of buyers making offers with motivated sellers now; than waiting for the absolute bottom when everyone jumps into the market.

Some Sellers Won't Negotiate a Penny!

Shari Posey (Prudential California Realty) — Fri, 30 Nov 2007 13:35:17 -0600

It is interesting to see how the sellers of newer listings, meaning those on the market less than 30 days, haven't quite caught on to the fact that it's not a seller's market anymore. I have presented several offers to "newbie" sellers and the counters came back at full price. These are not multiple counter situations. However, sellers who have been waiting for an offer or who passed up earlier offers and have now been on the market 60 days or longer are eagar to negotiate and are working for win-win outcomes.

ATTENTION SELLERS! This is not a seller's market anymore. Inventories are at an all time high and sales are at an all time low. These are real statistics; Realtors are not making this up to get you to price your homes to sell or steal money from your "equity."

The reality of Econ 101 is as true today as it was in a hot market...something is only worth what someone else is willing to pay for it. If you only have one offer, you only have one buyer willing to pay for it.

Take Media Forecasts with a Grain of Salt

Shari Posey (Prudential California Realty) — Thu, 22 Nov 2007 11:38:11 -0600

My first job out of college many years ago was as a fact checker so I'm always on guard for discrepancies. But, as a Realtor I was actually delighted to discover in the most recent issue of Money Magazine there are two completely opposite statistics and forecasts regarding the housing market--I'm going to use these examples in my open houses to show buyers that deciding when to buy should be based on personal need not on media forecasts...

Page 34--Housing prices increased only 3.2% nationally in the year ended June 2007; and Grand Junction, Colorado experienced a 14.3% 1-year price increase and "still sizzles."

Page 89--Home prices nationwide are down 4.2% from a year ago; and there is "no rescue" for Grand Junction, Colorado, which is projected to decline -9/0% next year.

With wildly conflicting published reports like these, it is no wonder that buyers are confused when and where to buy! The best time to buy is when it is right for your financial situation and personal needs.

Zillow.com is a BIG FAT Zero.com

Shari Posey (Prudential California Realty) — Sun, 11 Nov 2007 14:10:16 -0600

Zero accuracy that is. Let me explain...

Three times this week I got calls from clients or prospective clients asking me why Zillow.com gave a particular home value and that it seems out of line. That's because it represents almost nothing!

Zillow.com does base their "Zestimates" on data but it's like going to the doctor and you get a full diagnosis of your health based on only your blood pressure. You can't base a home's value on limited data because very few homes are exactly alike and very few homes have been sold over and over without modifications.

For example, Zillow.com doesn't know that you put in granite counter tops, landscaped the entire backyard into a tropical paradise. They don't even know if you have completed a major home addition if it hasn't caught up with the property assessor's office which can lag behind the building department by months or years. Zillow.com doesn't know that the homeowner's across the street from you painted their house purple and park their cars on their front lawn...mainly Zillow.com isn't a buyer and a property is only worth what a buyer is willing to pay no matter what Zillow.com may say.

One thing I will give Zillow.com tremendous credit for is having a fabulous PR campaign. However, if you want an accurate estimate of what a home is worth ask a real estate agent who will provide a detailed analysis. But only a buyer will provide the actual value.

Does the Sales Price Seem too Low?? It's Probably a Short Sale and that Means "NO" Sale!

Shari Posey (Prudential California Realty) — Sun, 11 Nov 2007 12:58:31 -0600

A client emailed two MLS numbers of properties she would like to see. They were priced way under market and she thought it would be an opportunity to get a great buy.

Again I am reminded of the old saying, if something looks too good to be true it usually is.

In this case the listings were both short sales. That means that the homes are listed at a price that is less than what is owed on the property. In these cases, the properties were listed $100,000 less what was owed. In a short sale the bank must agree to accept less than what the borrower owes. Will they agree to a loss? Sometimes yes but usually no. I have seen a handful of short sale listings actually close escrow and usually it is at a value only slightly under what is owed on the property, so the bank isn't losing that much money. In all cases, the seller must have a true hardship as the reason they can't make the mortgage payment (loss of job, death of a spouse, hospitalization, etc. ). Additionally, buyer and seller will have to wait weeks to get an answer from the bank as to whether or not it will allow the short sale to go through and it might change its mind at the last minute prior to close of escrow.

You might think banks would prefer a short sale to foreclosure because the borrowers are probably going to end up in foreclosure anyway. However, many short sales are due to owners taking out equity lines of credit on their homes for remodeling, purchasing a car, paying off credit cards, going on vacation, etc. Other short sales are investors that hoped to flip the property but it flopped. And a few others are fraud where a home's value was inflated so the new owner could get cash back at closing with no intension of making the payments. It's not easy for banks to make decisions when every single pre-foreclosure story is different.

If I were a buyer, I wouldn't waste my time with a short sale unless I didn't care whether or not I got the property. As a seller, unless you have a true hardship you should look at other ways to make the mortgage payment like taking on a second job because getting a short sale approved is unlikely.

Rent to a Mortgage--At first it stings but then it's a beautiful thing

Shari Posey (Prudential California Realty) — Fri, 26 Oct 2007 18:27:50 -0500

My husband and I were out taking a walk today and passed by apartment we had wanted to rent many years ago. It was kind of decrepit then and now it is even worse. We laughed today but back then we were just starting out and it didn't seem bad--in fact, it was a little out of our price range. We ended up renting a place in a sketchy neighborhood for $560 per month. One day a FOR SALE sign went up across the street and I went over to take a look. (This was before I became a Realtor.) Somehow I got bit by the bug and by the time Bob came home from work I had already decided to start looking for a place to buy.

We had a great agent who took us to look at lots of places that actually all met our needs but we were being picky for our first purchase. We ended up buying something that was completely different than what we thought we wanted but fell in love with it the second we walked in the door. Yipes! Then we had to sign a contract that meant we would be paying DOUBLE our rent payment. We were scared as heck but we did it any way.

Today that crummy old apartment rents for the same amount as our house payment, which by the way we still have and a tenant pays the payment for us, plus we have cash flow every month.

I know some people don't believe in homeownership, but I over time rents alway go up and fixed mortgages never do.

(NOTE: I team with a trusted mortgage professional to help you get pre-qualified to obtain a minimum of a 10-yr. fixed loan.)

Savvy Investors Know...

Shari Posey (Prudential California Realty) — Fri, 26 Oct 2007 16:16:08 -0500

There are hundreds of blogs about the "housing bubble" or the "lender implosion." I've participated in some of these blogs but most of the time it seems like there is very little debate or insight beyond the news headlines. However, the other day I found a blog of savvy investors from around the country whose posts are extremely insightful about how to measure opportunities today. Most of the members of the blog feel that there are more ways to be successful now then when the market was booming by buying & holding. (Buying & holding has always been my mantra.)

Capitalize on the fear in others. Use fear to your advantage and don't let it use you!

http://forums.biggerpockets.com/index.php

How Much Can You Afford? Get a Plan!

Shari Posey (Prudential California Realty) — Sun, 14 Oct 2007 14:24:17 -0500

Yesterday a young couple came into my open house and we chatted. They said they are open house junkies but they know they will never be able to afford a home on two teacher salaries. I didn't ask them how much they make but I know entry-level first-year teachers in our area make about $50k per year. That's $100,000 for this couple.

Based on their income they should be able to afford a mortgage of $300,000-400,000. So, where do you find a starter home priced in that range? There are lots of them!! Yes, it might be a condo, a fixer-upper or a small house with potential. This couple was looking at a neighborhood of homes in the mid $600,000s, so naturally it was a little depressing to them.

I suggested they talk to a lender or go online and use a mortgage calculator to figure out how much they could afford with their income. They should start putting away the difference between that mortgage payment (including taxes & insurance) and their current rent every month in a separate savings account, and in six months to a year they will feel much better about their financial situation.

Deja Vu?? 5-Year Anniversary of the Bear Market for U.S. Stocks

Shari Posey (Prudential California Realty) — Tue, 09 Oct 2007 18:56:41 -0500

Tomorrow is the 5-year anniversary of the low point of the U.S. stock market when the S&P 500 bottomed out at 777 before it began a 5-year bull market run that reached 1558 last Friday and appears to still be climbing.

What's interesting abou this is the Buiness Section of the USA Today on 10/10/05 read, "Where's the Bottom, No End in Sight." Gloom and doom splashed across the top of the business section of the newspaper and probably the lead story of every TV news show and talk radio station. But everyone was WRONG! That day actually marked the turning point of the market and the media didn't see it coming.

So when we read about the housing market and the media reports the current slump has no end in sight, realize that they don't know what the future will bring. Nobody does. We will only know when we hit bottom when we are already on the way up!

Bank-Owned Properties Are Not Always Great Deals...But Sometimes they Are!

Shari Posey (Prudential California Realty) — Sun, 07 Oct 2007 20:10:52 -0500

Most people think that a foreclosure home is always a great deal. Logic would tell you that the banks want to get rid of their properties quickly. Unfortunately, logic rarely occurs in big corporations!

Most of the bank-owned properties (REOs) I see come on the market, including the ones that I represent, are often priced by agents who simply drive by the home, check out comparable listings on the MLS and the data is plugged into the lender's computer model to determine a list price. The listing agent suggests a price but it is not necessarily the price the bank chooses.

In addition, most REOs have been left in terrible condition so even though they are initially priced at market, other homes on the market have been better maintained. Occasionally the bank will repair and renovate a property before it goes on the market to cause a faster sale.

So when is an REO a great deal???

Like most sellers, after a property has been on the market a while the bank becomes more open to negotiation. Unlike normal human sellers, it often takes many counter offers to finally get to an accepted price when you are negotiating with a bank. Sometimes it even means leaving the negotiating table and coming back later. Making an offer on an REO takes more patience but it is worth the effort! You can get an awesome deal on a property that needs some repairs and then remodel it the way you want.

I work with several banks listing homes and work closely with a network of agents in California and out of state. REOs are a great way to buy a house under market and end up with a great piece of property.

Knowing When to Buy

Shari Posey (Prudential California Realty) — Sun, 30 Sep 2007 19:47:35 -0500

Yesterday I had an open house in Long Beach. One couple in particular told me they are "waiting for the market to hit bottom." Their price range is considerably lower than the home I was holding open but they seemed to feel that the market was moving fast in that direction. Today I took a young couple out house hunting in Redondo Beach. They feel now is a great time to buy because there are some deals out there. Two couples; two philosophies...so which one is right??

The couple that is ready to buy is tired of living in a rental and the landlord hasn't been keeping it up very well. They will be starting a family soon and have been sitting on the sidelines since last year. They know how much they can afford and feel comfortable with the payments in the price range they are considering. They plan on staying in the house until the kids they don't even have yet are at least through elementary school.

The other couple is in a price range that won't get them everything they want and they don't want to compromise. They saw Jim Crammer of Mad Money on the Today Show when he told buyers "Don't you dare buy a house now!" He said by this time next year, this housing market will recover.

So when should you buy?? You should buy when it is RIGHT for you. Do you want a home of your own that you can decorate and change as you feel? Would you like a tax deduction? (Ask your accountant!) Can you afford it for the longer term (5+ years)? If the answers to ALL of the above YES, then start looking with a Realtor and get a feel for the market so when you know when you find the right house.

The crazy thing about timing the market is how difficult it is, even for experts. For example, when Jim Crammer says BUY NOW to everyone on the sidelines, I wonder what will happen?

2003 Curtis Avenue #A, Redondo Beach, CA 90278--Detached 4BR Home

Shari Posey (Prudential California Realty) — Sun, 30 Sep 2007 18:37:03 -0500

SOLD!!!!!

2003 Curtis Avenue #A, Redondo Beach, CA 90278

Beautifully Remodeled 4-Bedroom DETACHED Home with a Private YARD & NO HOA

Detached Home with a Large Grassy Backyard & Patio List Price $820,000

This home has a great traditional layout with the open living room, dining room and kitchen downstairs opening up to the private backyard. Upstairs are 3 large bedrooms PLUS a HUGE MASTER SUITE (4 bedrooms total).

Click HERE for more details.

7154 E. Peabody, Long Beach, CA 90808 -- Gorgeous 4BR/2BA Pool Home $649,000

Shari Posey (Prudential California Realty) — Sun, 30 Sep 2007 18:25:19 -0500

7154 E. Peabody Street, Long Beach, California, 90808

Stunning, Fully Remodeled 4 Bedroom Pool Home on a Large Lot

4 Bedrooms, 2 Full Bathrooms, Swimming Pool, Big Corner Lot! List Price $649,000

The owners have upgraded this home from top to bottom...everything including cherry hardwood floors, copper repiping, 2-year old roof, 1-year old swimming pool, custom kitchen, upgraded second bath, NEW MASTER SUITE ADDITION, and much more!! This is a must see!

Click HERE for more details.

"Time is money and I don't want to waste time showing my buyer properties."

Shari Posey (Prudential California Realty) — Mon, 24 Sep 2007 10:25:34 -0500

A local agent called me yesterday afternoon about one of my listings he was thinking of showing his buyer client. He wanted to know if the seller would be interested in a lease option. I told him the seller would be very interested. He went on to ask me how much the seller would sell the house for. Hello?!? If I knew the seller's bottomline, I wouldn't tell him. I suggested he make an offer and we would see what happens. He also said he wasn't happy with the amount of commission offered (2.5%). I told him it is possible that could be negotiated but I wasn't promising anything. He asked me a lot of questions about the property itself and I happily answered them. He actually lives down the street from the property so I told him the house is vacant and he can show it at anytime. His response was, "Time is money and I don't want to waste time showing something that doesn't work out." I agree he should not waste his client's time showing a property that isn't inline with what the buyer wants, so I suggested he preview it first. He said, "I don't waste time previewing. I'll let you know if I want to show it."

Waste time?? Time is what it takes to become a good Realtor. Time learning the contracts. Time doing the paperwork. Time learning the inventory. Time looking at the comps. Time helping sellers prepare their homes to sell. Time marketing homes. TIME PREVIEWING PROPERTY for buyers. TIME SHOWING PROPERTY to buyers. It would be fantastic if agents were guaranteed a sale every time we met with a client! Clients take time and attention--whether they are buying or selling, real estate is usually the biggest investment of their life!

The Housing Market is Very Localized...Some Neighorhoods are DOWN and Some are UP!

Shari Posey (Prudential California Realty) — Mon, 17 Sep 2007 12:43:25 -0500

Listening to the media can be very confusing when you are trying to decide whether to buy or sell now. Not only are reports conflicting but they are usually based nationwide, statewide or regional statistics. In fact, the housing market is very localized, meaning that you can have a down market less than a mile from a stable market. In addition, neighorhoods that have fewer homes on the market, sell at a higher price. Basically, it's still a market economy driven by how much money a buyer is willing to pay. This is why it is important to work with an agent familiar with the actual neighborhood you are targeting and how it compares to the broader market as a whole.

Lender "Pre-Approvals" -- Maybe You are Pre-Approved or Maybe Not!

Shari Posey (Prudential California Realty) — Fri, 07 Sep 2007 20:43:35 -0500

One day the buyer is qualified; the next day he is not! I've had several buyers and offers from buyers that have pre-approvals written 2 weeks ago but now they are just pieces of scratch paper. Lenders are changing their guidelines on a daily basis, so if you are a buyer and you got approved a few weeks ago, you better check again before you go househunting this weekend. And if you just got pre-approved a few days ago BUY SOMETHING fast because you may not be approved next week.

That said, the most important aspect of homeownership is not the color of the walls or the size of the backyard...it's #!) affording the payment and 2) planning on staying in the home for a few years at least. There are great deals on nice properties out in the market right now. There are also a lot of overpriced properties so you have to know which is which and exactly what is a good deal.

If It Seems to Good to Be True...

Shari Posey (Prudential California Realty) — Wed, 22 Aug 2007 10:25:47 -0500

I think there are more scams out there now then when the market was hot. Every day I get a call from a buyer or seller who has come into contact with some amazing opportunity. Usually it is buyers and sellers who are not working with a Realtor and are searching the internet on their own. Of course, doing online research is important but at some point, people need a trusted advisor before making important decisions such as some of these "opportunities" I have recently heard about:

1. An online ad reads--$286,000, 3BR/2BA single family home, 1660 sq. ft. with a family room and formal dining room in Long Beach. Buyers only. (Can we all say..."bait & switch.")

2. An online mortgage broker tells a young couple they can't qualify with less than 10% down but he can refer them to a company that will buy the house for them and then they can rent to own. (I wonder how much money the mortgage broker will pocket after the company takes the couple's lease option money.)

3. An online mortgage broker tells a homeowner to refi into a jumbo ($1,000,000 loan) 5-year ARM at 4.78%. He swears that it's not a negative am loan, balloon payment, no prepays...just a clean loan that only they can offer because they are wholesale lenders. (Read those loan docs very carefully.)

4. A credit-repair company will help a family in default cut their house payments in half for a small fee upfront fee of $1500. (A reputable company does not charge a fee and there are many non-profit programs.)

5. An investor offers take over all the mortgage payments for a small fee upfront processing fee of $5000 and the homeowner just signs little piece of paper called a grant deed. (I know a woman who recently bought into this incredible offer and of course the "investor" never made a single payment and is still living in the house as it's going through foreclosure. Other than $5000 and free rent for a while, I'm not why a con artist would go to this extent.)

Does anyone know of any other current scams we can warn people about?

Friends Investing Together

Shari Posey (Prudential California Realty) — Tue, 21 Aug 2007 23:10:45 -0500

An old friend called me today and wondered if it would be possible for his son to get together with a few friends and buy a house. They have all started their careers and are renting crappy apartments for about $800 per month each. My friend said his son can't afford much more than his current rent. At first my thought was, no way. But I started running some numbers and it's very possible for 4 friends to purchase a nice 4-bedroom house and keep each owner's payment under $1000 per month, including the taxes and insurance. I told them they would have to commit for several years.

I've had 2 sisters that purchased a duplex together and a few couples romantically involved but not married. They all are still happy. I wonder how the lender would look at a loan with 4 owners? I found six great houses that could work for them. I'll keep you posted.

Do you have 3 close friends that you'd like to become investment partners with??

Why Do Life-Long Renters Hate Homeowners?

Shari Posey (Prudential California Realty) — Sat, 18 Aug 2007 11:48:50 -0500

In this morning's LA Times there was a Letter to the Editor from a life-long renter who is says he has "no sympathy" for the thousands of mortgage people losing their jobs and I'm sure it extends to the thousands of homeowners losing their homes. There's a blog--Patrick.net--that is dedicated to illustrating why renting is far better than owning. This renter named Patrick has many arguments why, in his expert opinion, it's far better to rent for your entire life than to own. For example, he makes statements including:

Patrick says...The only money baby boomers have is in their homes so now they are forced to sell.
I say...Are you kidding?? Baby boomers have tons of money in real estate and the stock market. Baby Boomers are selling homes to downsize or move to warmer climates. Try to find one homeowner who has owned their home for more than 10 years and is sorry about it.

Patrick says...Rental housing is a horrible investment--it's better to invest in U.S. Treasury Bonds.
I say...Hello? Who do you think is paying down the mortgage on the apartment Patrick lives in? Patrick is! Patrick is paying his landlord's mortgage and in a few years, Patrick will be paying for his landlord's cruise to the Bahamas after the apartment building is paid off. Sure, being a landlord can be a headache but so can investing in the stock market when stocks go down. Yes, U.S. Treasury Bonds are safe but they barely keep up with inflation.

Patrick says...No landlord buys with the intention of renting out in California because that's not profitable.
I say...I buy properties with the intention of renting them out and so do millions of other property owners. I have 3 rental properties that all have positive cash flow and I'm a tiny fish compared to landlords who have hundreds of units with cash flow. It's true that not many investment properties in California have immediate cash flow but after a few years as rents increase, the properties break even and as time goes by, they become cash cows.

Patrick says...A House is not a home; it's just a box of wood. Calling it a home is a manipulation for profit.
I say...Why is just about every Christmas carol about being home for the holidays? Of course not everyone has the desire to plant roots but the majority of people around the world buy homes. Dorothy said it best, "There's no place like home."

I never contradict renters who come into my open houses and proudly proclaim that they will never buy. If renting makes them happy, I'm happy for them. But I believe in my gut that homeownership is a path to financial security as long as you can afford what you are purchasing.