Charlotte’s San Francisco Real Estate Blog

A posting I shall go. I have been wassailing, I have been ice-skating, I have been a-shopping and a-eating; I will be a-drinkin’ for New Year’s Eve, and I have been a-searchin’ for real estate dealios for my readers and my clients. Yes, low though it has been the holiday season, I have seen some amazing deals out there. How about a 5 bedroom condo in great condition that is NOT a short sale for $284,000? It is yours for the bidding. In San Francisco, no less. How about a two bedroom, 1200 square foot condo with new carpet and paint in Potrero for $387,000? Also not a short sale? It is yours for the bidding.

Or a two-bedroom, two bath home in Noe Valley with a legal in-law 1 bed 1 bath for $797,000? Yup. All there.

Pictures to be posted imminently. When everyone is heading for the exits, whether it be from financial panic or because they want to gorge themselves on holiday cookies and forget about housing for a while, this is the time to get a BARGAIN. My grandmother, Dorothy, who is 97 and with it as hell, loves to spell out words as she talks to you for emphasis. She would have said, “Get out there and find yourself a B-A-R-G-A-I-N while everyone else is pigging out for the holidays.” That is indeed how she would express it. Sellers know there are precious few buyers at the holidays (who wants to move now?) and are much more likely to make a deal with you.

And as the New Year begins, can we also please review the kinds of SHORT SALES I Like? I want you to only look at Short Sales if they are BANK-APPROVED. Call me if you need further clarification on Short Sales or on why a Bank-Approved Short Sale is indeed worth your time.  What else do we like? REO’s. That right, R-E-O’s. And that does not stand the Band REO Speedwagon, although I nor anyone I know can tell you what the heck REO stands for. It means Bank-Owned, and these properties, though sometimes needing repair, are usually discounted to the comparable homes in their area. Why? Because there’s only one thing banks hate more than having loans go bad is becoming landlords. They do not want to own real estate. Trust me, they’ve got plenty.

For help with your real estate questions, please call or email me: charlotteerwin@zephyrsf.com; 415-279-0289.

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Financial Contingencies must be a part of any offer to purchase real estate. As we all know, Banks are not our friends. Toasters and “What are you doing for fun this weekend” from the endlessly perky Wells Fargo tellers aside, any lender’s job is to protect the bank from risk. This may include changing the rules of the road, or the loan requirements pertaining to your loan even after you’ve gotten your approval letter.  But let me back up, in case you would like a review of what the Loan Contingency means.

A loan contingency is fairly straightforward, initially. It states that you are not obligated to purchase a property unless you are able to obtain a loan in the amount that you’ve said you need to borrow. So far so good. Your agent will usually put a loan contingency removal date of somewhere between 20 and 30 days as a part of your offer. During that time, the bank is ordering the property appraisal and demanding lots of information from you to verify income, assets, and the like. What has become the new normal and what troubles me deeply, is that your loan is actually never guaranteed to fund by your bank until it does. Really. A Bank of America loan officer who must remain nameless cheerfully agreed with me that my buyer is hugely at risk without the contingency in place and that Bank of America absolutely does not provide written assurance that any loan will fund.

 At any point in the process, up to the day you’re supposed to sign the documents, they can and do bring up new issues that may or may not be resolved to their liking. And if they aren’t, then no loan. Meanwhile, you signed off on the loan contingency waiver after you got the verbal go-ahead from your loan officer or mortgage broker and you are now on the hook to buy that property. Well, that’s ridiculous, says you, because obviously I can’t buy the property without the loan. Right. So the Seller is now entitled to keep your Good Faith Deposit. Now, an arbitrator may ultimately decide in your favor, but your cash can be tied up for months while the whole thing gets arbitrated. Ouch!!!

I asked Ilse Cordoni, President of the San Francisco Realtor’s Association what to do about this seemingly unfair degree of risk being born by you, the Buyer. She says that while most of the time things work out and the loans fund, it has happened that they do not and there’s not much we can do about it. The best suggestion is an offer that had a loan contingency that remains in place until the loan funds, but unfortunately that’s not an offer many sellers would accept.

What’s a Buyer to do? Stall! Stall stall stall. I avoid releasing the financing contingency until there’s some degree of mutual understanding between the loan officer and I that unless Hell Freezes Over and The Crick Runs Dry, the loan’s gonna fund.  Until I am at risk of being “kicked out of contract,” I want to make sure that you are as approved as you can be. Please don’t tell anyone!

For more information on writing offers, protecting your deposit, or purchasing real property in San Francisco, please email me at charlotteerwin@zephyrsf.com.

http://online.wsj.com/article/SB126022588878780861.html?mod=WSJ_hpp_RIGHTTopCarousel

The upshot of this in-depth piece on buying homes at Auction is that it is not easy nor necessarily profitable. I received a call from a teacher here in San Francisco who was convinced that the only thing that makes sense is buying foreclosed property at auction. Never having bought a foreclosed property at auction, all I could do was tell her what I’ve been told. So I was happy to see it in print in the WALL STREET JOURNAL, which still carries a fair amount of weight for me. Here’s a sampling of the obstacles in your path should you want to try this:

1.) You will be competing with full-time professionals.

2.) Those professionals most often are buying for groups of investors, and they have lots of cash.

3.) You need to pay cash, as in, for all of it. No loans.

4.) You can not inspect the property prior to the auction, so you have no idea what shape its in. And here’s a clue: People who have lost their homes are often unhappy about that fact. Otherwise good people sometimes do bad things when confronted with complete financial meltdown and the loss of their home.

5.) Legally, the previous owners have anywhere from six to eighteen months to leave, during which time they can, in some cases, bring their mortgage back to good standing. If the home is occupied, good luck getting those folks out.

6.) And here’s the piece that makes the least sense to me: Do you really think you can buy a house at auction and flip it next week after painting it and earn $45,000? If that were true, why wouldn’t the current owners sell it themselves and avoid being foreclosed on? Even the Journal article makes it sound like people everywhere across our great land are buying foreclosed property and flipping houses at great profit. After having bought, fixed, and sold 7 properties in four different major cities, I beg you not to think you’re smarter than the market is. You may get lucky once or twice, but it is tough to make money doing this.

In summary, I believe this is a form of gambling no different from betting the tables at Vegas. There is a high people get from buying at auctions. If you want to gamble, I recommend taking whatever amount you can afford to lose, going to Vegas or the Casino town of your choosing, and gambling until your money is gone. At least you will have a blast doing it and not wind up with toilets full of cement.

For questions on real estate, or for help buying or selling your home, please contact me at charlotteerwin@zephyrsf.com