Entries Tagged 'Real Estate Blog' ↓

(Riverside, California)…A few years ago, one or two of the large franchise real estate companies got the brilliant idea to try and reinvent the real estate wheel, and the result of this collective head knocking was one of the lamest marketing tools ever…Value Range Pricing. 

Value Range Pricing is the setting of a “price range” by a seller when selling, instead of setting the traditional singular ”sales price.”  For example, instead of a seller offering their property for sale at $350,000, value range pricing would have the seller offer the home for sale at a range of “$340,000-360,000″…and to keep the seller from having to accept the lower price in the range, the official wording is “the seller will entertain offers in this price range.” 

The party line for proponents of this type of price structure goes something like this:  by setting a range, they are hoping to induce a dialog between the potential buyer and seller, whereby they hope to have a meeting of the minds somewhere in the range.  In essence, by advertising the home for sale at a price lower than the seller will really accept, they hope to attract potential buyers, who once involved with the home, will pay the higher price in the range.  At the time this was introduced to the real estate community as a whole, it was touted as the next great improvement to real estate marketing.  Those of us who had been in the business for while simply shook our heads and laughed.  Let me explain why.

First of all, I’ll tell you the dialog you will start.  It will be like the one you hear from your kids. 

“You said you’d take it at this price.”

 ”No I didn’t.”

“Yes you did.”

“No I didn’t.”

Anyone with children will instantly recognize this endless loop…a loop with no end until both children are sent to their respective rooms.  Is this really the way you want to present your property to the buying public…BECAUSE WHAT BUYER IN THEIR RIGHT MIND IS EVER GOING TO OFFER YOU A PRICE IN YOUR RANGE, MUCH LESS AT THE HIGHER PRICE OF THE RANGE?

Think about it.  I’m big on grocery store examples (hey, we all shop somewhere!), so try this on.  What would you do if you walked to your meat department, and saw a price for the chicken at $2.99-3.50 per pound?  One, I think there would be a little confusion in your mind as to the actual price of the chicken…and two, when you got to the checkout counter, what price are you going to offer for this Foster Farms Beauty?  I’ll bet it’s not $3.50 per pound!

The bottom line here is that putting a ”range” on the price of a home is just plain silly.  While everyone understands that sellers always want the most for their homes and buyers generally want to pay the least…thereby making a certain amount of negotiation inevitable…the beauty of the real estate market is that there is no hidden data on the subject.  ALL SELLERS, BUYERS, REAL ESTATE AGENTS, AND APPRAISORS LOOK AT THE SAME DATA TO ARRIVE AT THE ACTUAL MARKET VALUE OF A  HOME.  It’s just that simple.  Many of us in the business view value range pricing as the marginal work of a lazy agent…an agent who did not want to take the time to properly explain all the available data to a seller to arrive at a fair price for the home…so instead, they just throw out a range that may or may not be in the ballpark, and hope for the best. 

Hope for the buyers agent to do the listing agents job…hope for buyer not to get angry when the price they expected (the low one in the range…remember the chicken) is really not available, and then hope that if this transaction ever gets into escrow, the appraisor can arrive at a definitive price since they won’t take a range.  I don’t know about you, but there is a lot of hope there, and not enough straight-forward marketing for me. 

I mean, this “pricing strategy” is so lame, that even our local MLS won’t deal with it.  Did you know that when a value range price is submitted, it will automatically be entered at the higher price?   So much for the range idea, eh?  I mean, the listing agent can explain in the remarks that the seller will consider a lower price as part of the value range pricing, but that kind of defeats the point, don’t you think?  I’ll bet the seller isn’t aware of this either.

In the end, good real estate companies and agents (Westcoe, for a biased example)  understand one thing…if the list price is fair based upon whatever forces are currently acting upon the market,  the property will sell.  If the price is not, then it won’t.  In the real estate market of 2003, that list price was probably higher than the most recent sale…and in the real estate market of 2008, that list price is probably lower than the most recent sale.  Markets come, and markets go…but no matter what the market, work with a professional that at least has the fortitude to give you a straight ahead price, and not hide behind the facade of a “price range.”  Don’t fall for a strategy long on hype and short on delivery.

(Riverside, California)…We’ve spent a lot of time in this space talking about real estate, repo’s, short sales, foreclosures, etc…and while that is all well and good, today I really wish to address all those people in “Real Estate Land” who are thinking solely about buying a home because it is a good thing for their family.  Whether you are a first time buyer or simply someone who hasn’t done this much, it is a scary experience…and maybe we can help with the mental side of your housing equation.

These days, it can be hard to know what to do.  The media would have you offer blood sacrifices to appease the real estate gods so you will get a sign on when to buy, and if you have read anything on this blog at all (which I assume you have or why would you be reading this?), we are very committed that now is one of the greatest times to purchase a home in recent history.  Who is telling the truth?  When is the right time to buy?

WELL, IT DOESN’T MATTER…and that is the point of todays lesson.  Let the class begin.

Our society in general (philosophical rant here) has made far too big an issue about maximizing your real estate investment on your home.  I am not talking about investing in rental properties here…that is a completely different animal.  Today, I am talking to the young (or old for that matter) couple who is contemplating taking that huge first step by purchasing their first home…or that single college grad with a solid job, who is also scared about what to do…or whomever else is nervous and anxious about real estate because the media tells you that is how you should feel.  Well, the heck with the media…BECAUSE IT DOESN’T MATTER.

I am all for making money on real estate.  Hey, the desire to prosper financially is a basic drive that is posessed by us all…but far too much noise has been made about money, real estate, and your home.  Buy now, don’t buy now; leverage your cash or put a lot of money down;  pay off your mortgage or refinance and owe a ton; whatever.  Unfortunately, while all this is important on a small picture scale, it is meaningless on the big picture plan.  Why?  

BECAUSE MOST PEOPLE HAVE FORGOTTEN WHAT THE DIFFERENCE IS BETWEEN A HOME AND A HOUSE…and it is here where the media (and some Realtors as well) have grossly missed the point.

You can call owning a home the American Dream, but I have a feeling it is far more universal than that.  I don’t want to get all soppy here and sound like a really bad country western song, but all the pragmatic talk I mentioned above misses the only real point…which is that a home is far more than the mortgage, price, and payments.

A home is where you mow your own grass, not the landlords.  A home is where you raise your kids, light your own fire, paint the walls any color you want without checking with someone else first, and play your music as loud as your speakers will allow.  It is where your daughter has her first prom, your son sprains his ankle because he saw Spiderman jump from the fence and thought it looked cool, and you can have a dog…because no matter how absolutely crappy your day is, your dog only knows he is glad to see you when you hit the door.

Your home is where you plant your new tree…a tree that has the potential to be there long after you may have left for a bigger home.  That tree has roots…and a home represents roots for you as well.  No longer are you subject to the whimsical rent raises of a jerky landlord, or a forced move because the real owner decides to sell the house out from underneath you.  This is your home now, and you can move or stay at your choice, not someone else’s.  A home is what we fight wars for, and the reason our original forefathers founded this country.  You now own land…they couldn’t…and you have a permanence that transcends everything else.  Possession is yours, and you decide who gets to come and play on your land, in your home.  Can there be anything more validating than that?  I don’t think so.  It’s called pride…and it feels good.

AND THAT IS WHY ALL THE “STUFF” MENTIONED EARLIER SIMPLY DOESN’T MATTER.

As Realtors, we want you to make money on your home…and we want you to enjoy all the tax advantages that come with home ownership.  These are great perks.  But sometimes we too have lost sight that while these things are important, they pale in comparison to  what really matters. 

This is your home…and when you really understand that, then all the minutia droned daily in the media will simply fade away as inconsequential noise….because you own a home, and really are the King of your Castle.  What a great country we live in that we all have that opportunity.

So…does price matter?  Or when to buy?  Or how much to spend per month?  Yes…and No.  In the small picture, of course they do…but in the grand big picture…the picture your parents and grand parents saw more easily than we….No.  What matters is your dream.  Buy a home…play the music loud…and dance like a fool.  It’s your home…enjoy it. 

(Riverside, California)…In this blog, I try to give you real estate advice and insight into the occasionally bizarre world of professional real estate…and generally this advice takes the form of either philosophical or educational content.  Today, you get both regarding short sales. 

First, the philosophical.  YOU ARE NUTS IF YOU TRY TO BUY A SHORT SALE PROPERTY.

Second, the educational.  YOU ARE NUTS IF YOU TRY TO BUY A SHORT SALE PROPERTY.

Third, a caveat.  YOU MAY NOT REALLY BE NUTS IF YOU TRY TO PURCHASE A SHORT SALE, BUT YOU REALLY NEED TO BE PREPARED FOR WHAT LIES AHEAD.

Now for the explanation.  I wrote on this subject in my February 21 blog (scroll back on recent posts to read), but this such a current, yet pain-in-the-neck subject, I need to add to my earlier comments. 

As a refresher, just remember or understand that a short sale is far different from a bank repo/foreclosure.  In the former, the bank is not the owner, but will have the major say in whether they decide to lose money by selling for less than is currently owed on the property.  In the latter, the bank already owns the property, and must come to grips with their loss, as they now have no choice and MUST sell the property.

OK…so why are buyers nuts to get involved with a short sale?  Well, lets tell a little story first.

You wake up one morning and see that you are out of milk.  Being interested in saving money like anyone else, you scan the paper for a store who may be having a sale on milk….and low and behold, while you know that generally a gallon of milk runs about $4.00, here is a market that is advertising that gallon for $.99 cents!  Wow!  Sounds too good to be true, but you want to save the money, so you drive across town to this store to grab your great milk bargain.

Upon arriving at your destination and making a bee-line for the dairy department, you see a sign that says “See the manager regarding the .99 cent milk.”  You go to the checker to find out where the manager is, but first you wait for them to be finished with their current customer.  Then the checker tells you the manager is in the meat department…and when you get there, they say no, the manager is in the produce department…and then produce sends you to the bread department, etc.  By now you are getting tense, so you insist that they page the manager.  They finally agree to do so, and ask you to wait over by the managers office.  And you wait, and you wait, and you wait some more, when finally the Assistant Manager comes over.  You explain your quest for the .99 cent milk, and the Assistant Manager, who admits to knowing nothing about the .99 cent milk, excuses themselves to call corporate headquarters to get to the bottom of our milk dilemma. 

Well, guess what?  You wait some more, since a call to the store HQ takes some time.  After all, a discount like this is not taken lightly, so many calls must be made.   Finally, just about the point you are ready to swear-off milk and change to soy, the Assistant Manager returns, and apologizes profusely…BECAUSE THE MILK WAS NEVER AVAILABLE FOR .99 CENTS.  IT WAS A MISQUOTE BY THE STORE TO THE PAPER!  The fake-smiling Assistant Manager asks if you would like to shop at their store for anything else, but with pulse pounding and head throbbing, you decline and head dejectedly home.

And guess what?  The next day, you pick up the paper, and see yet a different store advertising milk for .99 cents.  And wanting to save money like we all do, you head down to that store, only to have roughly the same scenario repeated again.  Yet, here is the real question…WHAT ARE YOU GOING TO DO WHEN YOU WAKE UP FOR THE THIRD DAY AND SEE THE SAME AD?

When you can sanely answer that question, you will now know what to do with your real estate short sale…because the scenario is the same.

Our business is rife with real estate agents who have no qualms about advertising a property for sale that can never be had at the advertised price.  No way, not gonna happen.  The seller doesn’t care about the listed price, since they are receiving zero from the sale…and the existing lender hasn’t approved the price because they are generally so stupid, they will not talk with anyone until it is too late.  SO…the unscrupulous agent puts a price on the home that will make everyone pant (.99 cent milk, for example), and then waits for the buyers to pour in…buyers who have no idea that the only reason they are there is so the agent can “switch” them to another property when they realize this home is really not available at that price.  Even if the buyer writes an offer on the home, by the time the lender eventually gets around to deciding what they will really take for the property (and trust me, it is way higher than the .99 cent advertised price!), you are tired of waiting and it may be too late to make the sale at the higher price anyway since the lender will generally not stop the foreclosure procedure.   In the end, you are left with a really bad taste in your mouth, and a decision to make:

WHAT ARE YOU GOING TO DO WHEN YOU SEE AN AD THE NEXT DAY FOR ANOTHER PROPERTY AT A PRICE TOO GOOD TO BE TRUE (.99 cent milk)?

All real estate agents understand the above, and that is why they generally avoid short sale listings like the plague.  The last thing a professional Realtor wants to do is get you, the buyer, involved in a property that not only will you never get, but will taint your mind as to the real prices that make sense in this market.  However, the problem at times is that you, the buyer, cannot resist the .99 cent milk…and at some point you must come to the conclusion that the milk (and property) simply cannot be had at that price.

So, as a buyer, what do you do?  Easy…work with a professional (like Westcoe, but of course, I am biased) and get a grip on pricing reality.  If the listing agent is a real professional, then they will have already had some dialog with the existing lender(s), and can give you a reasonable guideline on timing and pricing.  Avoid the “come-on” pricing of most short sales, and let your agent guide you to the well priced homes.  Contrary to the agent who created the bogus price on the short sale property, a true professional has your best interests at heart.  Let them do their job…WHICH WILL GENERALLY MEAN STEERING YOU AWAY FROM THE “COME-ON” PRICED SHORT SALES TO THE ONES THAT ARE REALISTIC…ONES THAT HAVE A REALISTIC CHANCE OF CLOSING AT, OR NEAR, THE PRICE QUOTED.

Or, you can fall again for the .99 cent milk ad…in which case, bless you…you deserve what you get.  At some point, you need to see the real picture…and we at Westcoe would be happy to help you avoid any more “bad ads.” The decision is yours.

(Riverside, California)…SO…with one of the leading investment banks getting taken out behind the woodshed this weekend and being put to a quick death, the news media (there I go, picking on the media again) would have us all thinking that the financial boogie man is definitely here and that there is no reason to even get out of bed tomorrow.  I mean really, woe-is-me, and who could blame us for simply pulling the covers up over our head and getting a few extra Z’s while the world tumbles.  BUT…for those of us who take a bit more active role in our lives, and who would like to know just what this whole Bear Stearns mess means to us as buyers and sellers of real estate here in good old Riverside, California, then please read on.

First of all, while there is great empathy for anyone who is adversely affected by any financial misfortune, please understand that in the jungle oriented world of high finance, BEAR STEARNS GOT WHAT THEY HAD COMING BECAUSE THEY GOT GREEDY.  Of course, by greedy, we mean the higher-ups that made all the bonehead decisions that got them in such a mess…because make no mistake, greed is at the central core of how they bit-the-big one.  Naturally, as is usually the case, the little people who work for them will be hugely adversly affected, but it is the decision makers that played loose and fast thatsed the problem.  How did they do this?

Bear Stearns plummet from grace came about pretty much because they bought so many mortgages (which, as we all know by now, were funny-money loans themselves) that when the Vigoro hit the mixmaster, they were so heavy in bad loans, they left themselves no room to move.  There is such a thing a balance in your portfolio, and this is exactly what happens when your balance is out of whack.  Think about playing teeter-totter with you on one end, and a 500 pound gorilla on the other.  Not a pretty picture…for you or the bank.  In the end, when people began to panic at the thought that they may lose their money with Bear Stearns, they all wanted it back, a “run” on the bank ensued, and voila, Bear Stearns had lots of investments ( some good, some horrible) but no cash, and the rest is history. 

But that is not the point of his blog.  The point today is…HOW WILL THIS AFFECT US IN REAL ESTATE IN RIVERSIDE.  And the answer is….it depends on which news report you listen too, and whether you wish your glass to be half full, or half empty…because you control what happens next.

If you want to join in the immediate panic, run in circles, assume that wall street is on the brink of collapse (it is not…it did just fine today), and generally give into the malise that the network news would have you believe, then fine…but you get what you deserve too…because the bottom line is that nothing happened here but a long time company getting overextended due to some really bad thinking on behalf of their now defunct leadership. 

For those of us who choose to look at the big picture, life will go on, J.P. Morgan Chase gets the benefit of Bear Stearns stupidity, and you and I will see no change in our lives.  Remember, as I have said many times before on these pages, some people will make money in this market, and some people will not.  I do not wish to sound unsympathetic to the plight of many, because nothing could be further from the truth.  However, once you get past the human element, what I am saying is true.  Just as we have preached that 5 years from now, everyone will wish they had purchased as many homes as they possibly could, so will J.P. Morgan Chase feel the same way.  They did not create this market, they simply were able to make a sound investment (some analysts say the purchase of Bear Stearns will be the steal of the century) at the right time…AND SO CAN YOU.

SO…how will we be affected by the Wall Street “stuff?”  It’s up to you…but the smart money understands the deal that J.P.Morgan Chase made is no different than the buys you can now make on bank owned properties…and while the financial media may not tout your purchases as the “deals of the century”, you can rest assured that 5 years from now, you and J.P. Mogan Chase will have something in common…you will both be glad at the acquistions you made in the turbulent times of 2008. 

(Riverside, California)…As you may know if you read this blog with any sort of regularity, I make no bones about generally bashing the media.  Why?  Because they make it so easy.  Facts and the real story generally give way to whatever scintillating, ratings inducing sound bite can be produced and then repeated over and over until, when repeated enough, the general public actually begins to believe in it’s validity.  How many times have we been told something is bad for us (or good, for that matter), only to have the “experts” reverse themselves at a later date?  Food, drugs, tobacco, wine, tax codes, seatbelts, etc. are but a few of the many things that have, at one time, been good for us, bad for us, or somewhere in between.  And why am I delving into this subject now?  Because the media is at it again with real estate…but the good news is that some people have wised-up to the ways of the majority, and by thinking and seeing for themselves, are reaping the benefits.  Read on.

While the media will have you think the sky is actually falling (well, I guess it really is since we had to shoot down one of our own satellites a couple of weeks ago)…at least with regards to real estate, every expert the media can create will tell anyone who wants to listen that real estate is mess, and to be avoided at any cost until the experts tell you otherwise.  But….like the stockmarket, someone is going to make money in this real estate market…you just need to know where to look.

Right now, March 12, 2008, there are certain aspects of our Riverside area real estate that are amazingly good.  Busy, active, energetic, frenzied even.  Yes…real estate prices have dropped drastically, and this is not good for sellers…but only half the market is selling…THE OTHER HALF IS BUYING…AND THAT IS WHERE THE SMART INVESTORS AND FIRST TIME BUYERS ARE HANGING OUT. 

I always joke with my stockbroker (ex college roomate) that for once, could we try the old addage “buy low, sell high.”  This same philosophy can and does apply to real estate as well.  As I have mentioned before, the difference between housing and stocks as an investment is the length of time they need to be held, and the volitility of each market.  Stocks can be bought and sold in a much shorter time period (yes, some should be held longer, I know) because as a general rule, that market is more volitle.  Housing on the other hand, unless you are a very savy investor who is flipping houses for profit (and they do not really exist in todays market), should be held for a planned period of at least 5 years. SO…since buyers are 50% of the equation, and at the moment, there is no shortage of sellers (ie:bank repos) willing to sell for amazingly low prices compared to a few years ago, smart buyers are purchasing now and will reap the huge rewards in the not-so-distant future….AND THAT IS WHAT THE MEDIA IS FAILING TO REPORT.

Westcoe represents a lot of banks in their foreclosed properties, not to mention really motiviated sellers who realize they must also compete with the banks…and on those properties that stand out as a good value, we are receiving multiple offers daily.  Yes…in this “sky-is-falling” market, we are seeing numerous mulitple offers on many of our listings.  Why?  Because smart people are realizing that 5 or so years from now, they will wish they had purchased every piece of real estate they could get their hands on at today’s prices.  Will the prices go lower?  Maybe, but again, THE SMART PEOPLE DON’T CARE…because they know is doesn’t matter.  Again, 5 or so years from now, it really won’t matter if they could have waited and bought real estate for a few thousand dollars less.  Do you really think anyone who could sell Google stock right now for $440 per share (yesterday’s closing price) really cares if they bought it at $200 or $220 or even $250 per share?  Of course not, and 5 years from now you will feel the same way about real estate.

Another factor in all this is the current interest rate market combined with the government’s desire to get people spending money.  The Feds are so scared of a recession that they are practically making it possible for banks to give the money away.  Oh yeah, you might need to show that you can acually make the payments on what you borrow, but that doesn’t seem too out of line…AND THIS MENTALITY OF AVAILABLE MONEY AND REDICULOUSLY LOW INTEREST RATES WILL NOT LAST.  At the first sign of a recovering economy, the Feds will begin to raise rates and tighten things up a bit, because these low rates are killing our dollar compared to other countries currencies (which is why you may be vacationing locally this year as opposed to Europe, etc.). 

In conclusion, you are now seeing the perfect storm for real estate investing…sellers willing to sell at really attractive pricing, very low interest rates to help you purchase, and not a lot of buyers who have put these two together.  I am telling you, 5 years from now you are going to shake your head and wonder how you missed this opportunity.  In the meantime, those who can see what is right before their eyes are frenzied in their desire to get going, and we are delighted to help…because once the media begins to tell everyone it is the right time to buy, ALL THOSE PEOPLE WHO ARE BUYING NOW ARE JUST GOING TO SIT BACK AND SMILE….because the media will be wrong on that one too!

Call us…we will show you how to make lemonade from our current crop of lemons.

(Riverside, California)…One of the latest sales vehicles in a real estate market such as ours is the Real Estate Auction process.  There are many different auction companies, and while Westcoe Realtors has represented many of our clients at these auctions, our clients always attend with a complete understanding of what they are getting into.  We say this because unless you totally understand what is happening (and equally importantly, what is not happening), this entire process can be everything from wonderful, to a waste of time, to very expensive.  Allow us to explain.

First, the general modus operandi of these auctions is to advertise in the paper, internet, etc, what a wonderful savings they can offer the lucky bidder.  These ads usually take the form of showing you the existing listing price as the home appears for sale today, quickly followed by the incredible low price offered at auction.  The difference, in many cases, is really quite staggering…and this huge “savings” you can obtain starts you down the path as a savy investor/buyer who is ready to make a killing on your real estate purchase.

However, as we have mentioned many times before, if it looks too good to be true, it probably is.  SO….where is the catch?  Read on….and understand that not all of the following is true in all cases…but it is true in enough cases to warrant this information being passed on to you.

Understand, most auctions get their inventory from banks who have foreclosed upon these properties…and many times, these properties have already been listed for sale with a real estate broker.  However, when the property does not sell (and trust me, the only reason it does not sell with the broker is that it is overpriced), then the lender will pull the property and place it with an auction house.  The auction house will then run the above mentioned ad, where they show the previous price and the starting bid price at their auction.  However, what is seldom mentioned is that THE PRICE SHOWN IN THE ADVERTISEMENT IS WELL BELOW THE RESERVE PRICE THE BANK HAS TOLD THE AUCTION HOUSE THEY WILL ACCEPT ON THE PROPERTY.

In essence, the advertised starting bid price is simply a number picked out of the air to generate excitement…and not necessarily approved by the lender as a price they will take.  The reason the auction house does this is twofold:  the price descrepancy looks great in the ad, and they want to encourage people to enter the bidding process and bid the price up.

At the auction itself, once the bidding has started, ultimately someone will bid the highest price, and the property will be “sold”…and maybe it will be.  If the ultimate bid price exceeds the reserve price of the lender, then congratulations…you are a homeowner.  However, in an alarming number of cases, the winning bidder will be told the bid price will be submitted to the lender for “final approval”…a final approval that may never come.  The auctioneer knows full well your price is lower than what the lender has said they will take, but they submit your bid price anyway.  Why?  Because the auction house hopes either the lender will be persuaded to take your lower price, or you will be so excited you will pay the lenders higher price, or a combonation of the two.  This process can take a few days to a few weeks, until the buyer and lender either agree on a price, or the home goes back on the market with either another broker or auction house.

Please don’t misunderstand us.  Westcoe is not anti-auction.  On the contrary, we have worked with many auction houses and clients to successfully bring about a purchase.  The system is OK for what it is, but our concern is with all the unrepresented buyers we see at these auctions who do not understand the ground rules.

Another thing to be aware of is the buyers premium that is placed on every sale.  This is a percentage added to the bid price THAT THE BUYER AGREES TO PAY to complete the sale.  Sometimes our agents have seen these unrepresented buyers gushing at their “great bargain” only to discover that the buyers premium is anywhere from 5-8% of the sales price.  That’s a big number if you are not prepared for it, or did not take it into account when you entered the frenzied bidding process.

And while we are at it, please be aware that the auction and bidding process is exciting…and fast paced…and energetic…AND DESIGNED TO MAKE IT EASY FOR YOU TO GET CAUGHT UP IN THE PROCESS.  When we attend an auction with our clients, we have done our homework, compared the home to other repo’s for sale, know the faults with the home and perhaps, depending on time, gotten a bid for all the necessary repairs, and in the end, established a maximum price that our client should pay for the home…a price that we know beforehand we will not exceed…no matter how exciting the process becomes.  Sometimes we are astounded the prices some people will pay for a home, and the only rational we can come up with is that they got caught up in the excitement.  Well, excitement is fine, but too much of it can really put a strain on your pocketbook!  That amongst other things is why y0u should be represented by a real estate company when you attend an auction.  It doesn’t cost you anything (the bank pays our commission, not you), and by bringing a little homework and level-headedness to the equation, we can save you money and still get you what you want.

In the end, I will repeat again…Westcoe Realtors is not anti-auction.  We simply want you to understand all the ramifications of your participation, and would really encourage you to get represented by an agent before attending.  We really feel you will fare best in the long run……and if you choose to go it alone, then perhaps the above will help you from getting in too fast.  Either way, good luck, and good bidding!

(Riverside, California)…As part of the governments economic stimulus package, it was announced yesterday that the new maximum loan limits for real estate purchased in Riverside County would be increased for 1 year to a new amount of $500,000.  While this is a good thing, it is not the end-all, be-all answer for what ails the real estate market.

These new loan limits will be great for anyone who is interested in buying a home at this time.  The real plus to an FHA loan is that with good credit, income, etc., a buyer can obtain a loan and only need 3% of the purchase price as a down payment.  Almost anyone is eligible for this loan, and it will definitely fill the void left by lenders who now prefer to only make real estate loans to buyers with a larger down payment.  With an FHA loan, the loan is actually made by a “regular” lender, and then that lender is insured by the Federal government against any losses on the loan.

HOWEVER…these new loan limits will not help you if you want to refinance and you are behind in payments, or owe more on your existing loan than your home is currently worth.  No matter who the new lender is, and no matter what the government says, neither entity is in the market to lose additional money on making these loans.  They will not lend to you if your credit is poor (ie: you are not currently making your payments, or have numerous late pays), nor will they simply “swap” loan amounts if your current loan is more than your home is valued.  In other words, this is not the universal life-line for those who are experiencing difficulty with their existing mortgages.  Some of the public is confused by this…at least from what we are experiencing from the phone calls we have received the past two days.  Sorry, but we do not make the rules…only explain them to you as they are given to us.

We hope this clears some confusion, and if you have any additional questions, or need any information, please don’t hesitate to call us.  We know for some of you, this market sucks, but we will help in any way we can. 

(Riverside, California)…Somewhere in the far reaches of my dulling gray matter, there is the semblance of a memory about our own American history…a provision of the founding fathers that called for the separation of church and state.  It’s too bad that same wisdom displayed over 200 years ago does not reach into todays real estate market…for in my humble opinion, few things cause as many problems for a real estate professional and a buyer as when an agent in a transaction is also acting as a lender.  However, motiviated by generally nothing more than greed and the quest for additional income, some lenders and real estate agents are merging these two very separate occupations.

Let me be clear here that I am speaking only of the situations where a singular individual is wearing (unprofessionally, I might add) two hats.  Some real estate companies have a separate lending division, where the loan is handled by a lending professional under the same corporate umbrella, or visa versa…and that situation is not the subject of today’s message.  Here, in this writing, I am addressing those real estate transactions where the buyer’s individual agent is also the individual loan represenative….in which case, heaven help us all.

First, let us talk about the real estate agent acting as a lender.  This would be an individual who is basically an agent first, but then also has the ability to be the lender for the buyer as well.  In this case, while the “agent” will talk of all the wonderful benefits to his/her client by being able to handle both assignments (no second person, one-stop shopping, ease of transaction, etc.) , the simple truth is that all of the above is generally a smoke screen for the agents greed at wanting to collect both a commission due the real estate agent, and the commission payed on the loan.  In reality, a Realtor representing a seller usually knows they are in for a nightmare when the buyers agent is also the lender.  In fact, if there are multiple offers, the listing agent, all things being equal, will take the offer of the buyer who has a separate lender and agent…and avoid the combined agent/lender if they can.

Why?  The main reason is that the lending business is very complicated, and we in the real estate business know that it is close to impossible to do both well.  The agent/lender is usually simply a small mortgage broker who will only do the initial paperwork, and then ship the loan to a larger bank for ultimate approval and funding…which is added middlemen, not less.  Also, our experience is that since the agent/lender is a small blip on the ultimate lenders radar (as opposed to a large mortgage broker who is in the business of making many loans per month), we have found the communication in these transactions to be poor, bordering on awful.

Also, on a personal note, since the “lender” in these transactions is so small, the loan and pricing the buyer generally pays can be far greater than if the buyer had a lender affiliated with a larger bank or mortgage broker who could really shop the loan.  Almost all real estate agents learn early on in their career that they need 2-3 lenders for their buyers to call for loan pricing.  Why 2-3?  Because money is a commodity just like bread, milk, and gas….and as you know from your own personal shopping, some stores have sales, and some do not.  Some may have milk on sale this week, and bread the next…and no store carries everything you want.  That’s why we have everything from Costco, Trader Joe’s, Vons, etc.  Each store serves a different purpose, depending on what you want.  Lending is the same way.

Some lenders may have lower rates or fees at the time a buyer is ready for a loan, and if you are only using the agent/lender, then you will not be able to take advantage of some significant savings.  You will only get what they offer.  Also, the smaller the lender, the greater potential for higher fees for the buyer.  It is hard for a small lender to compete with the Countrywides, Bank of Americas, Provident Savings, etc, of the world.

But in the end, the real reason we simply feel this is a bad mix is communication.  As a listing agent, we are only as good as the lender in the transaction….and when the lender is also the agent for the buyer, we never know if what we are hearing about how well the loan is progressing is really the truth.  There is an enormous potential for conflict of interest here, and we hate it.  That is why Westcoe Realtors has never had an “in-house” lending arm, branch, or division.  We simply do not feel it is in the best interest of our clients.  Let lenders lend, and real estate agents handle the real estate.

OK, how about lenders who are real estate agents?  This would be when an individual is primarily a lender, but will also act as an agent…and in our opinion, this is the worst case of professional greed we have in our industry.  That is a huge statement to make, and not one made lightly.  And here is why I make it.

For a professional real estate agent to properly represent a buyer, that agent has to preview countless homes to truely understand what the buyer wants.  They search data bases, call other agents, and then physically get in their car and drive and visit every home for sale that meets the buyers criteria for price, size, location, etc.  Once that is done, then they meet with the buyer, and show the best of the best to the buyer…only to perhaps repeat this process a few more times as they both work together to narrow the field of available houses for that buyer….and once the buyer has found his/her new dream home, then the real work begins. 

Now enters the “lender/agent.”…who will offer to represent the buyer in spite of the fact that the “lender/agent” has not seen the home, has not seen the other homes to justify any pricing, and simply wants to walk in on the agent’s time and efforts in order to make additional money.  Worse yet, this “lender/agent” generally has no clue about the paperwork involved…paperwork that is designed to protect the buyer provided the buyer as an agent who understands it’s importance.  Disclosures, inspections, contracts…all things a professional agent does daily…things the “lender/agent” cannot simply do from the comfort of his or her lenders chair.  Heck…most of the time, these “lender/agents” do not even have a lockbox key to get the buyer back in the home for a second look.  Why should they?  They got some Realtor to do all the work.  What a mess.

“Greed is Good”…a great line by Michael Douglas from the movie Wall Street…but what works in the movies, does not always translate to real life.  Westcoe has been in business for over 23 years in Riverside…and we have had offers from almost every lender possible to form some type of lending alliance, and each time we have said a resounding NO.  Why?  For all the reasons outlined above.  It is better for all our clients that we have the freedom to shop for the best loan, and we honestly believe that a good lender cannot be a real estate agent, and a good real estate agent cannot be a lender…because in our view of the real estate world…GREED IS NOT GOOD.   Separation of lender and real estate agent may not be best for the double-dipping lender/agent, but guess what…it’s not about them….it is about the buyer or the seller…and that is whom Westcoe is in business to represent.

(Riverside, California)…For the 5th consecutive month, according to statistics drawn from the local Riverside area MLS, the absorption rate of homes for sale in the Riverside area has dropped to it’s lowest point since March, 2007.  The absorption rate is calculated to show the length of time it would take for all available properties to sell given the most current sales rate, and is a good measure of current market activity.

As an example, for the month of February, 2008, there were 221 properties that entered escrow, and as of the end of the month, there were 2,837 properties for sale.  Dividing this available inventory by the number of sales, our absorption rate for February is 12.6…which means at the rate of 221 sales per month, it would take 12.6 months to sell all the existing housing inventory available for sale.  This absorption rate number will change monthly, depending upon the amount of properties for sale, and the rate of sales for that month.  The previous months data is shown below.

Month                    Available inventory                  Sales                     Absorption Rate

August 2007                   3058                                  105                           30.8

Sept. 2007                       3234                                  82                              39.0

Oct. 2007                         3196                                  88                              36.2

Nov. 2007                        3191                                 105                             28.0

Dec. 2007                         2940                                105                             25.8

Jan. 2008                         2706                                154                             18.0

Feb. 2008                        2837                                 221                             12.6

What does all this mean? 

The main change in our market place has taken place with buyers.  The available inventory has not dipped too much, but the number of sales has increased almost 40% since September of last year.  September was the lowest point in recent history for sales activity due to the mortgage meltdown, but it is obvious buyers have figured out there are a number of incredible buying opportunities currently available.  This significant lowering of prices, combined with the current favorable interest rates has led many buyers back into the market.

While we would be loathe to predict the future (we are not any better at it than anyone else), what we can say is that it appears the real estate buying public has figured out the folly of waiting on the sidelines.  Prices are great, interest rates are extremely low, and the best buys are to be had now…not when the media tells everyone it’s OK.  Now, the buyer is in charge…wait for everyone else to figure it out, and who knows.  As we have said many times before, the smart money is getting in the market now.

(Riverside, California)…The majority of writings you will find in this blog are a sincere effort on our part to inform you of real estate information that will be useful or of interest.  However, today is total commentary and, as stated in the title, a shameless plug for Westcoe Realtors.  Don’t worry, I will keep it short.

This week, one of our agents was cleaning out some old stuff, and found a sales chart from 1990.  This sales chart ranked the top 18 companies in the Riverside area according to closed sales through our local MLS system.  It was fun to take a short trip down real estate memory lane, but two things stood out immediately.

The first was that of the 18 companies listed, only 5 were still in existence today…and of those 5, only 2 of us are still independent real estate companies who are not affiliated with a large franchise organization.  Seems like a pretty strong attrition rate, although in our business, maybe not.

The second item that jumped from the page, (and here comes the shameless promotion part) Westcoe Realtors was the number one selling company by 33% over the next ranked company.  Like wine, 1990 was a good year.  However, more importantly, Westcoe has continually been the top 1 or 2 sales company every year since our inception in 1986, and if you measure total production and closed sales since 1986, NO OTHER COMPANY EVEN COMES CLOSE.  Some get hot for a year or two, but no other company can match our success levels for a sustained 23 year period.   That longevity bodes very well for all our clients.  It shows that not only are we financially viable and have weathered every economic storm that has occured since 1986 (including this one we are in now), but that our clients know that when they do business with us today, we will be here and accountable tomorrow.  In an industry known for rampant turnover and agent change, Westcoe is one of the beacons of stability and longevity.  We are locally owned, and will never associate ourselves with any national franchise…because we simply cannot fathom any situation that would make us want to relinquish control to any entity that was corporate and not local.  Corporate control would not allow us the local flexibility we need to properly service our clients.

SO…I said I would keep this short and I will.  Just remember…we understand you have a choice in real estate companies, and our success coupled with our committment to service and our community cannot be matched by any other real estate company in Riverside.  Like the commercial says…”Try us…You’ll like us”.