Charlotte’s San Francisco Real Estate Blog

Real Estate Broker, CA Dept. of Real Estate License #01370741

According to the Wall St. Journal, whether we are recovering from the housing bust is relative to where you live, which should not surprise.

http://online.wsj.com/article/SB10001424052970204900904574304113429149316.htmls:

To summarize:  it depends on the employment outlook in your area.

Re: San Francisco, according to the Journal, there is

* (-23.2%) less inventory now than this time last year

* Months supply is 9.8*

* (- 29.1) Price change from peak

*Jobless Rate = 9.9%

*Loan payments overdue = 7.1%

“According to Mark Zandi, chief economist for Moody’s Economy.com, ‘If people don’t have jobs or fear losing their jobs, then buying homes is out of the question.”

Makes sense to me.

 Want stats for your neighborhood? email me at charlotteerwin@zephyrsf.com. I’ll customize a year-over-year analysis for you based on your neighborhood, by Single Family Home, Condo, Multi-Family or Coop. Happily.

If you’re a buyer, you’re probably asking your agent to help you find a short sale. Short sale properties are complicated and frustrating for everyone involved. Here are some of the obstacles you will face and a few strategies for increasing your odds of success.

 Short Sale statistic: only 20% of Short Sale properties close.

The Short Sale process: an owner takes it upon themselves to sell their home short after receiving their notice of default. (NOD) They may or may not have spoken to their bank to get an approved/bank accepted short sale price. If they have not talked to their bank, there is no guarantee the bank will accept offers on the property. There is no guarantee the bank will accept offers on a bank approved short sale either, but the odds are better.  The owners have 120 days from the time they receive the NOD before the bank will foreclose. Your offer needs to be received and the bank needs to do a BPO, or Broker’s Professional Opinion, on the property before they can accept or reject your offer. You then must have the property appraised, your loan underwritten, inspections done ( highly advisable) and escrow closed before the time is up. You need to find out where the sellers are in the process- how many days left before that 120 period is up? Once its up, usually the bank will move the property into foreclosure. From there the bank will attempt to sell the property at a foreclosure auction. If they don’t get the minimum bids, the bank takes the property and adds it to their list of REO, or Bank-Owned properties.

The role of THE NEGOTIATORS:

If the homeowner and/or their realtor are communicating with the bank, each bank with an outstanding mortgage lien on the property has to appoint a negotiator. Your sale will not close if every lender has not negotiated and accepted an amount on their outstanding loan. Small details, like mistakes in recordation of notes, can derail the process. One case involved a seller who had a first, second, and a third loans on the property. The buyer’s offer was accepted. Four days prior to close, the title company’s research revealed that the third loan had been recorded prior to the second, putting it into second place ahead of the actual second. The deal did not close. If the listing agent is not in communication with every lien negotiator, run, don’t walk away from the property. The negotiators are the only people in the chain who can tell the buyer’s agent and the seller’s agent what is going on.  Negotiators have the power to extend the 120 day deadline if they think there’s attractive offers coming in.  

“Bank has the right to refuse or counter any offer.” This seemingly innocuous statement means that if you are lucky enough to have your offer accepted, it is entirely possible that the bank will accept a higher, better offer than yours, even after you are in contract. They can do that. Seems unfair, but that’s the way it is.

For sellers, another prickly problem: just selling the property does not protect you from the lenders coming after you after the sale unless your realtor has included “Anti-deficiency” language in your contract. Anti-deficiency language states that the former owner/borrower can not be pursued for the “short” amount.

Then there’s the BUZZARD effect: we’ve recently noticed postings on Craigslist from short sellers offering things like bathtubs, light fixtures, carpeting, lumber, copper wiring, etc. for sale. A short seller is not going to be a happy camper, and short sale properties often have been picked clean. You may also have former owners turned-tenants who may not legally have to vacate depending on their status. (Real Estate Attorney should be consulted here)

Legal and Tax hazards: First and foremost, you must consult your tax professional and a real estate attorney to be advised as to how a short sale or short sale purchase will affect you. Your tax situation is unique. Spending a few hundred dollars on professional consultation on a $500,000 or more sized purchase is money well spent.  Your Realtor is not qualified to provide you with tax and legal advice. The hardest thing in the world is to say “I can’t advise you on that” to someone, but that is the best answer a realtor can give you. Your realtor’s job is to help you make the best offer possible to get the property and to successfully close the sale. Rely on attorneys and CPA’s for tax and legal advice.

“Someone is getting the short sale properties. Why aren’t you getting my offers accepted?” Many short sale properties in the Bay Area are being sold to all-cash buyers. An all-cash buyer trumps a well qualified buyer with a loan, even at a higher price, to a point. If you can close in 10 or 15 days and there is zero risk you will bail due to the loss of a job, you are my buyer. Plus its always about cash flow, baby. $500,000 now versus $500,000 three weeks or five weeks from now will always win. Another common mistake is buyers who offer less than the short sale pricing. Not very likely to come away with the property with that strategy, again, unless you are an all-cash buyer.

But I want to buy a short sale property!

If you want to be successful,

1. Find out quickly whether the listing agent is in touch with the negotiators. (or has a short sale specialist from a title company working directly with them)

2. Look for properties with the least number of liens, or mortgages. 

3. Look for properties with bank approved short sale pricing.

4. Avoid properties that are past the 120 day period for foreclosure.

5. Summon your inner Saints of Patience and Long-Sufferance; consider sacrificial meals, flowers, and other offerings these two Saints might condone.

Using these strategies will increase your chance of success.

New York Times Article on Short Sales:

http://www.nytimes.com/2009/06/07/realestate/07lizo.html

The delinquent bloggist returns; to whom, I can not say. With apologies, I’ve been busy with Open Houses, working with buyers, ongoing construction at my own wee project site, and, importantly, a few days in Napa.

My sister’s Border Collie Robin cooling off from the 100 degree plus heat of Napa this week. As always, one must prioritize: summer relaxation is important.

Real estate, as you know, has not been as relaxing as Robin’s wallow in the kiddie pool of late. I understand and feel for the buyers I’ve met the last few months, who, listening to and reading the available media, correctly understand there to be an ongoing real estate disaster in California. Just this morning I heard the Realty Trac numbers on foreclosures in California for the first two quarters of 2009, and they are higher than 2008’s numbers. My heart goes out especially to newcomers to San Francisco who think they can still get massive price reductions on high end properties.  The truth is that you still can not buy a Bentley for $15,000, even on Craig’s List.

More than a few people who saw the three bed, 2.5 bath + office condo I held open recently listed for $950,000 tried to make offers in the low $700’s. What I try to educate people about is this: New construction costs anywhere from about $700 per square foot to $850 per square foot. When you look at new construction priced at $704/sq foot in one of San Francisco’s most desirable, mostly single-family residences only neighborhoods, next to Lincoln Park golf course and a block from Seacliff, you’ve got to believe that you are not going to get an auction-priced bargain. Particularly the week that the seller/developer has taken a $50,000 price reduction. 

In trying to understand what has happened to the American Consumer’s psyche, post real estate apocolypse, I think that we have only to look to the internet and the fate of Publishing to understand today’s consumer. Malcolm Gladwell, in his article “Priced to Sell” in The New Yorker magazine, July 5th, reiterates and then rebutts Chris Anderson’s (Chris is the Editor of Wired Magazine and author of “Free”) position that because so much information is free, consumers are no longer willing to pay for it. Ask a journalist or ad sales executive how subscriptions and/or advertising sales are going if you doubt me. I agree with the notion that people are getting accustomed to getting massive amounts of useful stuff (music, movies, coupons, email, online tv ) for free. With the economic meltdown, shopping is more an exercise in wondering how retailers can afford to sell their goods at the prices they’re asking.  Everything is on sale, marked down 70%, and absolutely free with purchase. Add to that the drumbeat of foreclosures, continued gloom on the employment outlook, and it is reasonable that people with cash expect to get what they want for half the list price.

The moral to my rambling is: think carefully about the first offer you make lest it be dismissed out of hand unless you are happy to move on to the next opportunity.