Archive for August, 2017
Thursday, August 31st, 2017
I’ve seen a lot of changes in the real estate industry over the last 14 years, and one of the biggest has been the increase in the number of “teams.” A team is a group of real estate agents who work under one broker. For example, say John Smith works for Real Estate Company, and he forms a team of 10 agents. They all work for Real Estate Company, but they work together with John Smith as his team members; multiple agents may work together with a client during a home sale or purchase.
Many people wonder how a team can benefit them if they are a buyer or seller, and whether it makes more sense to hire a sole agent or a team. Needs and opinions will vary, but here are the reasons I feel that working with an experienced sole agent, rather than a team, can truly benefit buyers and sellers:
1. Facts and details. As a sole agent, my clients know they are working with ME. They will not have to deal with a slew of other agents, assistants, secretaries or other people. If they have a question, they will be able to reach ME. I always answer my phone and if I am with another client or in a meeting, I call back quickly. My clients love this, because I know what is going on at all times in regards to their sale or home search. In turn, it benefits me because I do not have to check in with someone else to find out what is going on before calling or visiting a client.
2. Relationship. I have ALWAYS said the real estate is not just about selling property – it is about forming a relationship with the person who is entrusted to handle a legal transaction on your behalf. Buying or selling a home or investment property is fraught with legalities – you need to know that the person you select to help you truly has your back. I believe (and my clients confer) that it is easier to form a relationship with one person who is dedicated to serving you.
3. Connections. Team members often claim that they provide superior service because they have a bevvy of “exterior” (not agents) experts – loan officers, escrow officers, title people, contractors, etc. Well, guess what? Sole agents have those too – in fact, I have a list with many kinds of referrals that I have compiled over the years, and my clients reap the benefits.
4. Numbers game. As a sole agent my goal is to be there for my clients. I don’t focus on how many sales I can make, but rather on how I can best serve each individual to the best of my ability. If I cannot then I will not take on new clients. The key is dedicated service, not a numbers game.
People have different opinions on how their needs can best be served when it comes to real estate transactions, and that is great. If you are planning on buying or selling real estate, it is important to figure out what you expect from your relationship with your agent or team, and to make that clear up front. Most importantly, make sure you find an area expert who has experience selling homes. A large percentage of agents have secondary jobs and do not think of real estate as their career – find one who is a professional.
Friday, August 18th, 2017
The real estate market is going CRAZY…well, at least in my local area. After over a year of increased prices and low inventory, multiple offers and crazy shenanigans so that people can get into homes, there are some strange things going on all of a sudden – since the start of August.
Here is what I am seeing in the San Diego market:
Longer market times – Many homes are taking longer to sell compared to those that sold just within the last few months. Even neighborhoods where homes were literally receiving multiple offers on the first day on market are sitting now. Many eventually reduce and on the average I am seeing some homes take around 60 days just to go into escrow.
No more multiple offers in most cases – You would think that the continued lack of inventory would make multiple offers a common occurrence still, but many homes are sitting on the market and reducing prices before they finally go into contract.
Lots of price reductions – I am seeing this all across the board – from condos to single family homes to 2-4 unit income properties. Sellers continue to hit the market with high prices – at comparative sales value or higher – only to have to reduce after 30 days or so due to lack of offers.
Buyers are making low offers – This is for real folks, so if you are a seller be prepared! It is happening all over. I think buyers are tired of rising prices and competition for homes, and they are starting to feel that if a seller won’t take a lower offer, they won’t buy. This is also true with short sales, even though banks no longer accept crazy low offers like they once did years ago.
Escrows are cancelling – I have seen this first hand with my own listings and I have heard from other agents as well – buyers are cancelling escrows at what seems to be a higher rate than we have seen in a long time.
I have reached out to other agents and escrow officers and it seems I am not the only one who feels the market is in such an interesting place. Many agents feel that August has always been a slow month for real estate sales – the end of summer with last vacations prior to kids returning to school, visitors leaving the city, etc. (here in San Diego we have a LOT of summer visitors!)
But there are some who think that this change is indicative of what is to come. Many buyers who were unable to purchase homes due to lack of inventory and multiple offer situations, have decided to rent and wait until the market drops or until there is more inventory available (which really goes hand in hand with prices dropping or at least stabilizing).
I will reiterate my belief, as stated in many blogs, that I do not think we will have a bubble burst or a housing crisis in the near future, but I do think tides are changing. A buyer’s market is starting to blossom and at some point it will flourish. If inventory picks up it will only fuel the change.
Monday, August 14th, 2017
Here we go again…short sales seem to be hitting the market once again, due to rates resetting on adjustable interest rate loans. Back in the heyday of the housing market meltdown these types of properties were often times great buys, so long as a buyer had the patience to wait.
For those not familiar with short sales, they occur when a home is valued for less than what is owed on the mortgage. As a condition of the sale the lender must approve the contract and terms in order for the sale to proceed.
The bad news is that short sales are still anything but “short” in so far as timing is concerned – I still have not figured out why this is the case, but if I were the bank I would try to get through them a lot quicker in order to avoid losing more money. But I digress.
Aside from taking a long time, in most cases, to be approved, short sales are not quite the bargain they once were. Lenders used to accept lowball offers in order to get the short loans off their books, rather than face foreclosure (which typically costs a lender about $20,000). Faced with so many short sales it was easier for the lenders to accept low offers.
Once the supply ran out, the housing market started to recover, and short sales were fewer and farther between, most lenders wised up and refused low offers. Now, although most of them would rather save the money and approve a short sale over a foreclosure, they tend to be tougher when it comes to offers.
Lenders want to see that an offer is close to comparable value. So if the homes in the neighborhood are all selling for $1M and a buyer offers $950k on a short sale, chances are the lender will counter the price as a condition of acceptance. The best way to get a “deal” is to make an offer that is slightly under comparable values in order to avoid a lender counter offer.
If you are a buyer contemplating a short sale purchase, make sure your agent really does his/her homework on comparables and talks to the listing agent. I do believe you can get a decent price on a short sale, but they are not the “deal” they used to be.
Monday, August 7th, 2017
Many of you know that I have written often of the perils of dual agency. Case in point: I received a phone call today from a woman whose sister is working with an agent to purchase property. The agent also represents the seller.
Apparently the buyer and seller executed a contract. The seller, four days later, realized a mistake was made and they should have asked for a higher price. The agent let the buyer know that they were to sign an addendum for the higher price. The buyer did not agree and was fearful that the seller could cancel the contract. Her initial deposit money is already in escrow and escrow is open.
I do not represent this person and have not seen the contract. I did not provide legal advice but rather told the caller what right a buyer has under basic contract law – unless of course there is a clause in the contract giving a party more rights or altering the general rules.
Here is the bottom line: as a buyer in a real estate transaction, where there is a fully executed contract and no party has breached, and where there have been no alterations of contractual obligations pertaining to rights to cancel or amend, as long as a buyer performs his or her duties under the contract on time the seller does not have a right to cancel the contract. Parties of course CAN mutually agree IN WRITING and signed by all, to alter material terms, but if a buyer does not agree to do so it does not generally give the seller the right to cancel if the buyer is not in breach of contract.
Once again this problem is a result of dual agency- how can an agent who has a fiduciary duty to the seller (who wants to change a material term), also fulfill a fiduciary duty to the buyer (who does not agree)? This is a big pitfall of dual agency and a big reason for real estate lawsuits. I advised the caller to contact the agent, contact escrow, and if necessary contact an attorney.
Thursday, August 3rd, 2017
It is usually typical for the real estate market to slow as summer winds down, but many people ask me if I think the market will continue on it’s current path – rising prices and lack of inventory. This subject is discussed on a daily basis in the media by real estate agents, economists and buyers and sellers. I read a lot of it – from those claiming that the market will continue on it’s path, others predicting a bubble, and all sorts or in-between predictions. So how is one to know where the market it really heading?
First of all, no two markets are the same. So while right now in Los Angeles there are still bidding wars going on in some neighborhoods, here in San Diego it really varies as to price, neighborhood and type of property. Investors are still out there trying to pick up good deals, especially in the attached market under $600,000 and with 2-4 unit properties. Many 2-4 unit properties that were sitting for a long time are suddenly entertaining multiple offers.
Attached homes – Townhomes and condos are still “hot” here in San Diego County, especially those in nice areas close to highways, beaches and shopping/dining/transportation. Those priced under $600,000 still seem to be going fast. For example, in Carlsbad (North Coastal San Diego), in the month of July the average market time for sold condos and townhomes was 32 days, with 39 of these properties in escrow now. There are currently 48 active condos/townhomes listed on the market in Carlsbad that are priced under $600,000. 9 condos/townhomes sold in July with an average market time of 32 days. The average sold price was $428,533.
Detached Homes – There are currently 78 detached homes for sale in Carlsbad that are priced under $1 million. 57 homes went pending in July with an average market time of 22 days and an average list price of $842,000. Only 5 homes under $1 million sold in Carlsbad in July, with an average market time of 16 days and an average sales price of $802,000. Of the active listings, average market time so far is 37 days, with 19 of those properties having been on the market less than 10 days. Of course, this “detached homes” field includes all 4 zip codes in Carlsbad and multiple types of detached homes – varying with location, age and upgrades/amenities.
Homes located in certain neighborhoods seem to sell much faster. For example, the Mar Brisa neighborhood of Southwest Carlsbad (with the exception of one listing that has not sold for over 60 days and has dropped price several times) tends to sell very quickly, oftentimes in days or even before hitting the MLS. So location is a big factor, and many buyers are willing to pay over asking price to get into neighborhoods with little to no active listings.
As I always say, if you are in the market to purchase or sell residential or 2-4 unit income property, it is important to contact a skilled area agent who can provide you with a complete, detailed analysis of the specific area on which you are focused.
Crystal Ball Predictions – The question I am asked the most is “what will happen in the real estate market in the next year?” I usually chuckle and say that if I had a crystal ball I would be a very rich person! But I do believe that while prices will not shoot down drastically, that we are entering a “correction” period. I think we will see prices stabilize and the market very slowly start to revert to a buyer’s market. That means that prices will not likely rise much more, but of course there may be some highly desirable areas that do still see rises for a short time.
Many buyers are getting frustrated with the high prices and low inventory and are thus deciding to put property searches on hold, opting to rent until the market changes. While interest rates will likely rise that does not seem to be enough of an incentive for buyers to jump in when facing high prices and multiple offer situations. So in my opinion I believe we will see prices drop slightly, maybe more for properties that are not selling. Higher inventory levels would help keep demand filled and prices a bit more stable, so hopefully we will see that happen as we head into the later part of this year and the year to come.