Have We Seen The Worst Of The Real Estate Market In San Diego? What To Expect For 2011. -Rina Podolsky Carmel Valley Real Estate-

Have we seen the worst of the Real Estate Market slum or are we still on the way down? That is the main question that analyst are asked. As we begin 2011 there are many factors that will determine the behavior of this market on the year to come. Although there is no clear consensus, the majority of the experts predict that we are either bouncing at the bottom or on our way out of it, there are some that still predict a 5% slide in some areas. The Real Estate Market in some parts of California like Del Mar, and La Jolla are believed to be on their way out however to get a better understanding of what is ahead, here is a look at what experts look are looking at.

The determining factors that will come into play this year are mainly 4

• Unemployment.- Much of the markets bounce back is now hinging on this indicator. It is clear that if people don’t have jobs they will not be able to buy a home but it is also important to understand that even people who have a job need to feel that job is secure to feel they can take on the responsibility of home ownership. If the Job market gets stronger and companies start hiring instead of letting go of personnel that will help the housing market greatly.

• Mortgage Rates.- Home affordability is now at a great level. One of the upsides to the National crisis is that with home prices having dropped an average of 29% nationally and Mortgage rates being at historically low levels, many people who could not afford to buy a home are now able to. Even though credit has been challenging to get and underwriters are being very strict with the loans, there is an important sector that does qualify in today’s market conditions that would not have done so before. Mortgage rates have gone up for five consecutive weeks, yet they still remain at a low level, if they continue to go up, the affordability will be affected and in those cases prices will need to adjust down so that buyers can continue to buy. If the rates remain steady then prices will most likely do the same.

• Home Inventory.- There has been a lot of talk regarding the large inventory of homes that are in some stage of the foreclosure process and of how those homes threaten to hit the market and like a new wave that consequently will bring prices down once again. It is very important that we understand some key differences between the situation of that first wave of foreclosures and the next one. After the market crashed, new construction came practically to a screeching halt. Builders main focus was to get rid of their inventory and they all but stopped planing new projects. Also, banks had no systems in place to deal with loan modifications, short sales and foreclosures. Not that what the banks are doing today can be considered efficient or a well oiled machine, but at least there are more systems in place. Banks also understand very well by now that if the market has a big slide, they, as property owners which they have undoubtedly become, will be very hurt. If instead, they control de speed and amount of foreclosed properties coming into the market, they are being greatly benefitted. Banks are more open to bulk transactions, homes are being sold more often at court steps, lenders are making some efforts to get short sales approved, loan modifications work. I do say some efforts because they are still very far from I would say they are efficiently doing either one of those.

• Government programs.- Last year the government implemented tax credits that were succesful in getting buyers off the fence and getting the Real Estate Market moving. Once those credits expired the market definitely stalled again, it did not stop but it certainly slowed down. The government has said that they will take a detailed look at two of the most important agencies. Fannie Mae and Freddie Mac will be revised and the president has said that in the coming months there will be some serious changes to both. That will very likely have an effect on how the market behaves, specially since in todays market, it is said that 9 out of 10 loans are backed by one of those two agencies. Emile Haddad, chief executive of FivePoint Communities Inc said that due to this key factor he believes the market will remain steady for all of 2011.

One thing I do know is that I agree with Richard Green, director of the USC Lusk Center for Real Estate, the recovery will not happen evenly across the country and talking about California’s Real Estate recovery in particular it will happen in the areas near the coast first and way before the areas like Riverside or San Bernardino. Once again we go back to Real Estate’s cardinal rule, Location, location, location!  As he explains itat there are not enough high earning people in the later areas whereas Del Mar, La Jolla, Newport, San Francisco, Beverly Hills, etc. as he said

” A place like Silicon Valley, or a place like West Los Angeles, there is a critical mass of very high-income people.… That means you have a large number of people who can afford to spend in the neighborhood of $1 million on a house, and these are desirable places.”

So he believes that these areas will se a return to their peak levels within 5 years, where the other areas, will take much longer and will have to change the product they offer to cater to a different income market before they can see a comeback.

The one thing that most if not all experts agreed on is that bottoms are really hard to pinpoint, usually people can only see the bottom when the uptick is already strong. The one thing that is clear is that this a good time to buy, specially because of the combination of low prices and low mortgage rates that will not be seen in many years to come.

If you have any further questions or for information regarding The San Diego Real Estate market you can go to our web site www.SanDiegoExclusiveProperties.com or contact us and we will be happy to help.

How to buy a Short Sale….Succesfully Carmel Valley Real Estate

In past posts we have talked about the different type of sales, covering Foreclosures, Short Sales, Deed in Lieu, and regular Sales. However we have done so from a seller’s perspective mainly.

I very often work with buyers and in this market, most people who initially approach me to help them find and purchase a home, will bring up the idea of snatching a great Short Sale for them to purchase at an amazingly discounted price. Some of them will have already heard some of the horror stories of people waiting months on end for the bank to approve the sale, yet many have no idea what it really implies and all the emotional and labor intensive process that a short sale can be. As an agent, a very important part of my job is to prepare my clients to what lies ahead, so when any new client approaches me, I ask them to give me at least 20 minutes of their time just so we can go over what I consider the ABC’s of buying : 1) A Short Sale  2)Foreclosure  3)Regular Sale. Only after they have heard what each of them entitles will we come up with a specific search plan for them.

So when it comes to the Short Sale portion, there are basically 6 points that I consider crucial for them to understand and be aware:

First, The timeline is what we call a moving target, it is NOT set in stone and will shift as we move along, so if they are in a situation where they have a set date by when they have to be living in their next home, short sales might not a good choice. Banks are taking anywhere from 60 to 130 days average to approve a short sale. Although some lenders like World Savings have set up faster programs where they are able to approve a short sale in as little as 7 days, and then on the other end of the spectrum I have seen others take as long as 9 months to approve a short sale, specially in the higher end loans where the bank will be forgiving a considerably higher amount of  debt.

Second, although it varies greatly in each case, I have seen a trend lately of banks not covering closings cost of a short sale and most of the time they will not pay for money owed to the Home Owners Association So it will be up to you as the buyer to bring some extra cash to the table and cover those extra expenses, this sometimes makes that initial price you offered and got an acceptance on, not such a great deal after all. Be very careful that you ask all the  necessary questions before you open escrow, have the listing agent disclose to you what the bank has agreed to pay for as soon as they know and most of all, ask them if there are any back payments to the HOA, any other liens, back taxes, etc.

Third, Don’t assume that because it is not a foreclosure the home will be left in good shape. Many of the short sales will have delayed maintenance issues, some will come up during the inspection face, and some will come out a little while after living in the home so it is highly advisable to buy a service insurance policy at least for the first year after purchase. Also, you will need some extra cash to fix up the property once you buy it, it is a house that has been lived in and that will need some repairs.

Fourth, Don’t fall in love with this property, an acceptance of your offer does not mean it is yours. Although your chances of buying this home did increase by getting an acceptance, it still has to go thru a long approval process and then there is the pending auction date you have to beat, many people assume that since the bank has approved the short sale, that means that they have cancelled the foreclosure proceedings and that the home is now ready to close. Sadly, one is independent of the other, sometimes the bank will grant you an extension on the auction date just so you can close a sale however more and more lately, banks have started to be less agreeable to grant extensions, they will allow one but no more than that and they WILL sell it in auction two days and even one day prior to the closing escrow date, so be very vigilant of those auction dates and if there was an extension on the auction date, make sure that it has gone into effect.

Fifth, On a typical transaction you have 17 days to complete all of your inspections before you are required to remove your contingencies, in many short sales situations, since ironically you are running against the auction date clock and some times because the bank has requested it so, you only have 5 days to do all your inspections, so make sure you have all your inspections ready to go in a moments notice as soon as you open escrow and know beforehand what you are willing to accept and what will make you pull out of the deal.

Sixth, Expect to be making offers along with people who are looking for investments and are all cash. If a short sale is looking like it is a good deal, there will be some competition so make sure that along with your agent you know how to write an attractive offer that will increase your chances of getting accepted. There are some key points that banks and therefore listing agents are looking at to select the offer that will get the house.

Probably right about now you are ready to give up on short sales altogether, however, the fact is that many of the homes that are for sale in today’s market, are short sales and they will be around for many years to come still, so it is not the best idea to discard any short sales as an option unless you are really pressed for time. Short Sales are a reality so it is wiser to learn how to deal with them and what to expect, it is also smart to have an experienced agent guiding you to the process and even better yet if there is a solid qualified short sale negotiator dealing with the short sale part of the process, one that knows exactly how to deal with the specific bank that holds all of the loans on this property and that has a proven track record of succesful closings. Be aware that sometimes, the agents will have NO information from the bank for a long period of time, so bear with them but stay on top of it.

The one thing that I tell my clients is to keep their emotions in check and to keep looking, hope for the best but don’t close your options just yet. Once you are in escrow and have a clearer picture you can stop actively looking but don’t start mentally placing the furniture just yet…keep a clear head and be realistic that this deal might not happen.

And last, please, whatever you do, DON”T make any big purchases that will disqualify you or affect your income debt ration making your own loan a new issue to deal with, this sometimes only comes up at the eleventh hour when there is not enough time to correct it, so help and don’t hurt your chances when you are trying to close an escrow on a short sale.

You are ready to buy a home, but your offers keep getting rejected?

When you decided it was time to buy a home, if you are like most people, you felt some apprehension and a lot of excitement. So you started going to open houses, along the way you might have gotten a hold of a Real Estate agent to help you along the process, you got pre-approved for a loan, you kept looking at houses, you searched online, probably every other day if not daily,twice a day, maybe three times a day, until one day you finally take the big step…You write up an offer!

You sign it and wait…and wait….and then, the news comes….It was not accepted, someone else’s was chosen. WHAT???? How can that be you ask yourself? The one house that is getting an offer is rejecting mine in this down market? Turns out, that it got three offers on the first week and one was full price so they did not choose yours that was way lower. So…your search continues because you know you are going to find a house.

Weekend of open houses, more appointments during the week, more homes, one that has a funky layout, one that does not have doors in any bedroom, one more that has apparently been lived in by the Adams Family, now you start comparing them all to the one that got away, and you are not liking any of them. You decide to take a break, so you go away for the weekend. During your relaxing get away you think about it and you decide to commit yourself to BUYING a house. So you come back renewed and refreshed and determined to start writing up offers right and left hoping that one sticks, one has to work!!!

Armed with a pen and lower expectations you go out to…see some more houses, many of which you have already seen but are giving them a second chance. And since you mean business you start writing up more offers, however since you feel you are definitely compromising on what you are buying you don’t feel you have to pay close to market price so you start writing lower offers, if one works for the amount that you are offering, you will handle living in that funky layout for a while.

You look, you, sign, you send, you wait…rejected, rejected, rejected, accepted….WHAT???? the funky layout one got accepted??? you open escrow and you are not excited, you are nervous, you don’t even remember the home that well, you have seen so many that even when you saw this one 4 times you can’t remember it now. So you ask to see it one more time.

You walk in this home that is soon to be yours, you start looking at it with different eyes, you had not noticed that the laundry is directly next to the living room, that the ceiling in the master bedroom is 2 feet lower than in the rest of the house, that the kitchen only has two cabinets and no pantry.During the inspections some details come to light and that is just more than you can bear. This, is NOT your house, you cancel escrow.

You take another break, a longer one in this occasion, after a month or so, you realize, your time frame to move is coming up, so you have to get back in the game. This time you are dreading it. How did you get to this point? shouldn’t you be excited? you are buying your home!!! You talk yourself out of your own head drama, and start the process one more time, hoping that this time things will work out because now you have the added factor of working against the clock. Question is, what are you going to do different this time? How will you get your offers accepted? or is that really the key question?

Of course this is an exaggeration, or is it?

Even though it is not a real case in particular, it is very real. Selecting a home to buy and buying it is a major decision in life, I don’t care if it is your first one or fifth one, it is something that will take a big toll on the way you will be living in the near future. So it is understandable that there will be some stress involved, which is why it is very important to have a plan, before you even begin looking at homes. An important part of this plan, should be to  have a team of experts guiding you, that are capable of reading not only the local market, but specific situations on a case by case, and prepare you to what to expect along the process

In your team you need:

1.-A full time real estate agent that knows the area you are looking at but is also willing and able to research other areas that might work for you and that is getting trained and up to date with the constant changes in Today’s real estate market and the different ways that each of the distinct types of listings work, for example, he should know the best way to negotiate with a bank, the best way to write up and submit an offer for a short sale, even how to handle a regular sale, imagine that!.

2.-A full time mortgage broker or lender, that is reputable and up to date with the latest changes in rules and regulations in the lending arena. There have been many changes in the last months and some of this changes are very important and can throw off an entire escrow because there are issues of timelines, the margin for error here have become minimal so it is very important that you not only select the person who brings you the best rate, but the one that will be able to handle the transaction and ultimately close your escrow.

3.- Other professionals: Which might include ,A Financial advisor, CPA, Real Estate Lawyer and even a contractor.  Not everyone needs all of this professionals, however in most cases at one point you will need the advice of one or the other and it is best to have them in place from the start so that when you are ready to move on a home, you can access them and get the answers you need as quickly as possible. Which of these you will need depends on you, everyone does things differently.

Now that you have assembled your team, the next step is to get pre-approved. Notice that you have not started to look at homes yet, it is smarter to know with certainty how much home you can afford, before you start looking. You do not want to look at  homes in the wrong range because if you qualify for less the step down will be hard to swallow, and can hurt your chances of liking the homes you will look at.

In the meantime with your agent, you can start discussing parameters, he will have a lot of questions for you.  Make a list of what you like in a home, what you NEED in a home, what you dislike and put them in order of non-negotiables down to acceptable. Understand that there is no perfect home, not even if you built it yourself. So it will require some compromises on your part.

Now is the time to understand what you are looking for, and make a strategic plan accordingly. What are you looking for? Are you buying a deal or a home? I am not saying that you should pay asking price on the first house you see.That would be plain stupid, but understand that everyone dreams of buying a great home at an amazing price, however you have to be realistic or else you will get caught up in the trap that I presented before. Know that if what you are looking for is a deal, your search will require you to be more able to compromise on other things, you will need to have more time to find it, be realistic and knowledgable about the specific market where you are looking, and be clear. What does a deal look like in this area in this market? understand that in this case you will get rejected many times, however you are going about this as a business, you are looking for a deal.

If you are looking for a home, that again does not mean you have to overpay, but understand that if you want a home, with all the bells and whistles, with privacy and a big yard, it will be more sought after and you will have more competition, those things come at a premium, but remember that those things have value so that when you are ready to sell, you also get a premium for them. If you are willing to compromise on some of the most sought after elements you have a stronger position to negotiate. And yes, you will negotiate, and to negotiate you need to have clarity in the following:

1)What is the motivation behind the sale.

2)How badly do I want this house.

3)What are the properties weaknesses.

4)What can I offer to make myself a stronger candidate.

And as I had said previously you have to understand the market, its prices, etc, Be knowledgeable be smart and be quick. In other words, be prepared.

You can not negotiate with an un-motivated seller. Move on. If someone does not want to sell, or if they don’t need to sell, they will not negotiate in the price they have set as a minimum in their mind.

Now here is the big secret…ready? Listen to your team. I dont mean hear them out, I mean listen carefully and communicate back to them clearly, what your expectations are, give them constant feedback. Be ready to change your point of view as things progress but communicate any changes  to your team so that they can adjust the search and the plan accordingly. Understand that they are on your side and they know what they are doing, they have done it many times before. They will be strong at reading the situation, telling you when something is already a deal at the listed price, when you are looking at properties they have a trained eye, listen to what they say, I can assure you in the story that I used to open this post, the agent must have pointed out to the buyer some of the problems with the funky layout home, but sometimes out of desperation we don’t listen, and later question why we were not told.

Also, there are different and creative things that your team can come up with, but you have to understand each one has implications, be open to them but ask questions.

Now, knowing all of this, the question is are you ready to buy a home? I mean, are you really READY to go out and BUY a home?

If you need any help or advise on buying a new home you can contact the author at info@SDExclusiveproperties.com or if you want to search the San Diego area market you can do so at http://www.SDExclusiveproperties.com