5 year selling cycle for home owners

If you own a home, there is an odd phenomenon, totally unscientific in nature but completely true from my personal experience.

As an agent we find that neighborhoods go through selling cycles every 5 to 7 years, which works in terms of average appreciation rates in a normal healthy market. This selling cycle is a bit inconvenient in our current market.

Here has been my experience as a homeowner. You move in to your new home, start making it your own, slowly step out of your comfort zone and begin bonding with your neighbors. You go through a couple of years of neighborhood holiday parties, borrowing tools, cups of sugar and general friendship. A couple more years pass, kids get older, friendships change, marriages, divorces, jobs won, jobs lost, life in general going on as life does. Then you start to see that the neighborhood is "changing" when in reality we change. Life paths change, housing needs change and the fix is more than repainting a room. Sometimes it makes me think that moving to the top of a mountain with the nearest neighbor being an eagle or squirrel would be lovely. But I am much too social for my own good. I admit that while attempting to be a good neighbor and friend I have found myself in the position of knowing way too much about the people living in the houses around me. So today I sit here with a lovely home, still in need of a kitchen remodel and new flooring (we have lived here 6 years) and I am wondering, maybe it will take the energy of a new homeowner, eager to jump in and out of their comfort zone and get involved with my ever changing neighborhood and my most interesting neighbors. It's not like I have even seen a home that I would prefer, sometimes I think we just need to change up our interactions. Don't get me wrong, I have great neighbors, it is just amazing to me that this "selling cycle", so critical in my business life, is driven by the emotions of our personal lives. Stay tuned, I will let you know if we decide to actually act on this crazy phenomenon. If you have ever experienced anything like this, I would love to hear from you. As always, I am keeping it real!

To buy a fixer or not to buy a fixer?

With so many "distressed" properties on the market, there are many that look enticing to buyers but are not great investments. The reason, you may get it for a steal but if you have to put thousands into the place before you even move in, how good is that investment? Here are some of my favorites lately from the house tour circuit:

1) no kitchen in the house, not just no stove, no flippin' kitchen, that is actually becoming more common

2) Warning signs indicating that the foundation is compromised, "enter at your own risk"...my advice, don't even enter the building, just move on...better yet...RUN

3) Water damage...this is a big deal because to fix it usually involves extensive demolition which has a big price tag. Water damage has a tell tale smell to it, even if you can see the mold you will be able to smell it the minute you enter a property

Best bet for buyers, if fixer means paint and carpet maybe some light fixtures, go for it! If it involves immediate remodeling jobs, unless you have the cash to spare, avoid these properties. If you do decide to go for it, run the numbers. If you buy the house for 250K but have to put 200K into in after closing and the neighborhood is selling around 350K...bad investment. Your Realtor should be able to provide those kind of analysis numbers for any given area.

Happy Hunting!

It's a New Year, what does that mean to you?

First things first...Happy New Year! I am a big believer in having a positive attitude to achieve positive results. 2009 was full of challenges but also with a great deal of forward motion.

With pressure from the Federal Government, banks are being forced to modify some loans. Granted the parameters for modification are tough in the bay area as many homeowners have loans exceeding 729K. But this pressure speaks to a trend to help homeowners keep their homes. Banks have already proven that they are not good at actually owning property and the state of California fines lenders for properties that become a blight on a neighborhood. This law was actually in place by the end of 2008 but was only beginning to be enforced by Summer 2009.

The 1st time buyer credit was extended through April of 2010, a six month extension. I would expect we will see that extended as needed in six month intervals. That will probably go away when we start to see job growth. The credit was also enhanced to benefit existing homeowners for purchasing again. These credits are applied with your income taxes, so if you have purchased a 1st home or another home this past year, have a conversation with your tax professional so that you don't leave any credits on the table.

Rates are still low historically! On average by the end of 2009 most of my buyers, whether first time buyers or otherwise were enjoying rates in the mid to high 5% range. Not too shabby. I also found that most of my buyers were leaning towards more traditional 30 year mortgages. It seems that the interest only programs, while still available and attractively priced, have fallen out of favor with the home buying public. Neg Am loans are virtually non existent and that is something that should have happened a long time ago. Neg Am, negative!!!

Short sales are definitely getting approved but they are taking easily 6 months, with most banks receiving 100,000 short sale applications every month. I expect this number to increase or at the very least hold steady for 2010. Again, for buyers, don't ignore short sales, just be patient and get educated, it makes the wait less painful. For sellers, your agent, must, must, must have experience working with short sales. Far too many Realtors tried to stay away from short sales, virtually ignoring 60% of the market place. There is nothing wrong with purchasing or selling short as long as you have accurate expectations for the process.

Looking into 2010, the flood of bank owned homes has not hit, in fact, it is sunny skies with low inventory throughout the bay area. Though I hear many banks saying there is a wave coming, we have been anticipating that for over a year now and thus far not even a minor storm of new bank owned inventory has hit the market. I will say, buyers are looking for smart deals, so if we do see a jump in inventory, it probably won't last long. I also expect the trend of multiple offers over list price continuing for homes priced aggressively. For homes that are priced below the market, well, let's just say that's a Real Estate version of a "tease". Market value is market value and that is what homes are selling for these days. The best way to get an accurate picture of the market...when you find a home you are interested in buying, have your agent complete a market analysis. That way you know what the home will appraise for, which is fair market value and you won't be underpaying and will be less likely to be outbid.

I look forward to bringing you more updates on the market as the new year gets into full swing.

Should you rush to buy a home before the end of the year?

As a rule, I don't like to advise anyone to move quicker than they are comfortable with. I am hearing from a lot of buyers now that they want to find a home and close it by November 30th, because that is when the $8000 1st time buyer credit expires. True, time is of the essence. I would not be surprised if the fed extends the credit as it could have a slow down affect on the current pace of home sales, if the credit goes away. We are in a quickly moving market, homes priced in the South Bay area under 600K are literally flying off the market and typically with multiple offers. However, they are not selling for 200K over the list price, that was the madness we endured in 2005.

If you are thinking of buying, get your financial ducks in a row right now and go shopping. Short sale properties are likely to go beyond the November 30th deadline at this point but bank owned homes and regular sales (civilian sales) can close as fast as your lender can close them, typically 30 days. I would caution buyers not to ignore a great short sale property because of $8000. If it is what you want and priced where you are comfortable, remember it is going to be your home! Make an offer, be patient and get the deal done. Who knows, the fed may extend the credit and if you have walked away from a great house because of the credit expiration date, you will have bruises from kicking yourself.

So I guess, I am sticking with my opening thoughts, this is a home purchase, be patient and find the right home. If you rush into it to take advantage of the credit and then find it is not a good fit, you will likely not be very happy. Speaking for myself, I don't sell disappointment, I want my clients to not only remember me in 5 years, I want them to think highly of me.

What, was that positive news on the housing market I just heard?

Local media recently reported that home sales were up 5% last month, the first increase in a long time. Let's interpret: Typically before we see any increase in housing prices we see an increase in the number of sales or volume of the market. Prices have now decreased to a level where more buyers can participate and enjoy the benefits of home ownership. We are likely to see another change in the market in the coming months. Areas where prices have stabilized are likely to see home prices increase. That's right, I said it, I am on record, we will see home prices increase. Because of regulations now in place, it is doubtful that we will see prices increase to double the list price of a home (like we did in 2004), but we are quickly heading back into a market that favors the smart seller with an effectively priced home. If a home is priced too far above what the market will bear, then it is not likely that it will sell quickly or even at all.

There is currently a moratorium on foreclosures which also begs the question "Will we see more bank owned homes coming on the market causing a dip in prices?" At this point, the banks are required to hold their toxic assets off the market while the government figures out how to mitigate the potential damage to the housing market, a benchmark for a healthy economy. However at some point, the banks will need to purge these assets, some of them vacant and vandalized. We will see some more bank owned homes becoming available in the coming months, but they are likely to sell quickly and with multiple offers. Key for buyers, be prepared, get pre-approved and make sure you and your Realtor are tuned into all new listings. You will likely have to be decisive and present a very strong offer on upcoming bank owned listings, especially if they are in livable condition and in a decent location.

From my perspective, Real Estate is never boring. It is ever changing and presents opportunity for both buyers and sellers regardless of the climate of the market place.

Out of state listing brokers...why are they here and how do we work with them?

With the increase in REO (Real Estate Owned) listings here in the Bay Area, many of the listing brokers are not even based in this state. What does that mean for you the consumer? It means you need to be prepared to take decisive action fairly quickly and it means that your Realtor needs to make you aware of your rights as a consumer in Northern California. Escrow is different from state to state and even from county to county. Therefore, your Realtor needs to know what to negotiate on your behalf and also how to set your expectations.

I can tell you as a Realtor, I am surprised to find offer forms or web forms that make the terms of your offer visible to every other buyer and agent. Agents in California have a fiduciary duty of confidentiality to their clients. The way some of the out of state brokers go through the offer process, it makes it impossible to fulfill that duty. Hopefully the California Department of Real Estate (DRE) will address that at some point but for now it is a process of expect the unexpected.

As a buyer, if you are ever uncomfortable with any part of the process (I didn't say stressed, buying a home can definitely be stressful/emotional), then you need to communicate that with your Realtor and take a step back. Do not let the process dictate your actions, just go into it with your eyes wide open.

First time buyers are awake and hungry!

1st time buyers have awakened only to find themselves in a world of multiple offers. But there are some checks and balances in place to ensure that buyers are not back in frenzied buying cycle.

It's been a busy time for buyers these days. The 1st time buyer segment of the market is HOT, HOT, HOT! Short sales and bank owned properties are selling in days with multiple offers provided they are remotely habitable...and I mean remotely! What does this mean for buyers?

Well, you can still be aggressive but now a little bit of reality needs to get mixed in because you are competing with investors who are cash heavy.

For buyers a house is still worth what you are willing to pay as long as it appraises. Good news is, there are some regulations in place that will prevent frivolous appraisals that indicate an inflated value of a home. As of May 1st, a lender may no longer call the appraiser, whom he has been working with forever, to order the appraisal. It is a more systematic cue of appraisers and a processor will make the order and then the appraisal is done without any conversation with the actual loan broker. While I do admit that I appreciate my appraisal relationships, I am a fan of some of the regulation because it will prevent that crazy market when homes were selling 100's of thousands of dollars above list price. Sometimes rules are good! Even if a buyer who was pre-approved wanted to offer above market value, the appraisal would not support that decision. A buyer working with all cash however, can spend it as they choose as they do not require an appraisal to complete the purchase. There is a great phrase that is true for many crossroads but I find it to be especially pertinent in regards to the emotional process of buying a home: "The definition of failure is giving up what we want for what we want NOW!" Now that some balance has been restored in our market, buyers can get what they truly want and enjoy the long term benefits of home ownership.