Entries Tagged 'Real Estate Blog' ↓

Riverside, California (Westcoe Realtors)…If you have purchased property in Riverside County in the past 9 months to a year, chances are the Tax Assessor owes you money. Why is that?  Because of a very confusing process called supplemental taxes…which we will attempt to explain here.  However, before we can get to supplemental taxes (and your possible refund), you must first know a few things about how regular property taxes work.

Property taxes are essentially figured at 1% of your sales price.  They can actually be a little higher once the city ads on a few things in your area, but for conversational purposes here, just know that your property taxes on your new purchase will be 1% of what you paid for your property.  These taxes can either be paid in your monthly payment to your lender (called an impound account), or you can pay twice per year to the County Assessor when they are due. 

The Assessor works on a fiscal year, not a calendar year.  Their fiscal year begins July 1, and ends June 30…and the due dates for your property taxes are December 10 and April 10.  The December payment is called the “first half taxes” (only the government could call a payment made in December a ‘first half’ payment), and the April payment is called the “second half taxes.”  The December payment covers the time cycle, or taxes due, from July 1-December 31, and the April payment covers the cycle from January 1-June 30.  It is important to understand that instead of collecting monthly, the Assessor simply collects twice per year.  Thank goodness this is all the tax info you will ever need to know.

So…let’s talk about supplemental taxes…and our conversation begins with the close of escrow on your  new purchase.  When you closed escrow, all existing taxes then currently in place on your home were prorated as of the close of escrow.  This is a fancy way of saying that the seller paid the taxes on the home right up until the day it closed, and then you took over from there. 

HOWEVER (and this is a very key point), THE PRORATED TAXES PAID THROUGH ESCROW WERE BASED UPON THE SELLERS EXISTING TAX BILL…NOT YOUR NEW TAX BILL.  The County hasn’t figured your new amount yet (how can they…you just closed escrow), so escrow can only use the bill that is already in place…and unless you are paying the seller exactly what he paid for the home,  you can bet your taxes will be different…and, until the Assessor issues you a new tax bill for your new amount, you will continue to pay the taxes of record…the old sellers taxes.  So…what happens now?

 What happens is that the County Assessor will eventually “catch up” with their records, and when they do, two things will occur.  First, they will issue a new, accurate tax bill that you will now pay.  If you pay your taxes directly, then it will be sent to you, and you will begin this new payment with the next date tax payments are due (either the December or April date explained above).  If your tax payments are made by a lender from your monthly payments (impound account), then the bill will be sent to your lender, and they will make the new payment when due (and raise your monthly payment accordingly).

The second thing the Assessor will due is issue you a SUPPLEMENTAL TAX BILL, WHICH IS A BILL TO GET THEM CURRENT FROM THE DATE YOU CLOSED ESCROW ON YOUR HOME, TO THE DATE THE NEW PAYMENT WILL NOW BEGIN.  In other words, they not only want you to start paying the new, accurate tax payment with the next payment due, they want to “catch-up” with the accurate tax payment you should have been making the minute you closed escrow.  Let me give you a numerical example that may help.

 Let us assume the old seller paid $240,000 for his home way back when he bought it, and you come along a few years later and pay $480,000 for it now…a situation very, very common in the years 2000-2007.  I use these numbers, because if you apply the 1% property tax rule, the old seller’s taxes were $2,400 per year ($200 per month, if broken-down on a monthly basis), and your new taxes will be $4,800 per year ($400 per month).  Let us also assume that you closed escrow on March 1st. 

Here is how the taxes would work…and remember, everything tax wise is figured on the 6 month cycle I described above.  When you closed escrow, the existing tax bill of record is the annual $2,400 ($200 per month) from the old seller…and the prorations done in escrow would have meant that for the 6 month tax period that was in effect at the close, the seller would owe the 2 months he lived in the home (January and February), and you would owe the remaining 4 months to finish the cycle (March, April, May, and June).  So on your closing statement, it would show payments of $400 for the seller, and $800 for the buyer.  This would get everything paid until the end of the current 6 month tax cycle, at which time, the Assessor may have your new tax bill ready, and you would then begin to pay your new taxes of $4,800 per year ($400 per month, $2,400 every 6 months).

 Now note where the supplemental tax bill comes in.  You can see that for the first 4 months you actually owned the home, YOU UNDERPAID YOUR TAXES BY $200 PER MONTH…OR $800 TOTAL…AND THIS $800 UNDERPAYMENT WILL BE THE AMOUNT OF YOUR SUPPLEMENTAL TAX BILL.  All a supplemental tax bill does is get you caught up to your actual tax bill, which always comes later.  Why does it come later?  Because the Assessor needs to collect all the data on the sales of properties in Riverside County and prepare the new tax bills…and this takes time.

 So, as I noted in the title to this blog, WHERE DOES MY REFUND COME IN?

Well, in my example above, we assumed that the new price you paid for the home was greater than the price the old seller paid, and hence, you had a new higher tax bill.

BUT WHAT IF THE PRICE YOU ARE NOW PAYING IS LOWER THAN WHAT THE OLD  SELLER PAID…THEREBY GENERATING A NEW TAX BILL LOWER THAN THE OLD ONE?  This situation is very possible in the past 9 months, given the changes in our market place.  So what happens now?

 I’ll tell you what happens.  YOU ARE PROBABLY OWED A REFUND FOR WHAT YOU OVERPAID AT THE CLOSE OF ESCROW.  Chances are the old bill is higher than your new bill, so you were probably charged too much at the close of escrow (don’t blame your escrow officer…they MUST prorate on the existing tax bill).   

However, the real kicker here is that you will not necessarily automatically get your refund…you may have to ask the Assessor for it…and you may have to ask for it more than once.  The Assessor system automatically programs for INCREASED SUPPLEMENTAL TAX BILLS…BUT IT DOES NOT AUTOMATICALLY PROGRAM FOR REFUNDS.  Hey, it’s the government…what can I say. 

As a note, when we at Westcoe discovered what this market change had done with supplemental taxes, and that our clients were now owed refunds in many cases, we were told by the Assessors office that they would look into the matter…but currently had no policy for automatic rebates.  Hard to believe, but so be it.  We have called a few times since, but have no new information to report.

In summary, I honestly feel the Assessors Office for Riverside County will ultimately do the correct thing…but getting a government bureaucracy to make a change is like trying to turn an oil tanker…it just won’t happen very fast.  In the meantime, we simply encourage our clients to continue to call the Assessor to inquire about their refunds.  For now, it is all you can do.

I hope this blog today wasn’t too technical, and the bottom line is that if you are unsure if you are owed a refund, simply ask your agent…they should be able to tell you.  And if they cannot, then call us…we will tell you whether we worked with your or not.  We really are here to help.  

Riverside, California…Westcoe Realtors…We recently posted a blog about regular sellers, and the special issues facing them today in a world dominated by bank owned properties (see I’m Not a Bank…Can I Still Sell my Home?).  Today, I want to delve deeper into a certain segment of those “regular” sellers…the High Range Seller.  Specifically, where have their buyers gone, and what can they do to sell in our current real estate climate.

 In order to fully understand the answers to the above question, it is imperative that you totally comprehend the changes that have occured to our local real este market in the past couple of years.  To assist you with this, I have supplied a chart below that compares the 1st quarter of 2006 with the 1st quarter of 2008, broken down by price ranges and unit sales.  Please take a look.

                                                1st QUARTER 2006                             1st QUARTER 2008

Price range                      Units Sold         % of sales                        Units Sold             % of sales

$1-$300,000                         52                      8%                                 387                          53%

$300,000-$400,000            243                     39%                                190                          26%

$400,000-$600,000            255                     40%                                120                          17%

$600,000 plus                     80                       13%                                28                            4%

                                       ____                                                       _____

                                   630 total unit sales                                    725 total units sold

This chart represents the total properties that sold in these quarters in the Riverside area.  Now, what does it all mean, and how does it affect our high end sellers?  Well, let us examine some conclusions to be drawn from the changes this data highlights.

FIRST.  The low range sales for 2006 are totally defined differently than the low range for 2008.  In 2006, THERE WAS NO INVENTORY BELOW $300,000…and now look at it.  It is interesting to note that the two lowest catagories for 2006 show a total of 47% of the market sales…as compared to 79% for 2008.

 SECOND.  Conversely speaking, the two highest price catagories for 2006 represented 53% of the total unit sales, as compared to only 21% for 2008.  Not that tough to see that there are far fewer sales in the higher price ranges today as opposed to 2006.

THIRD.  The lower prices of today are represented by the massive number of unit sales in the lowest price catagory in 2008 as compared to 2006.  In 2006, about the only property you could find under $300,000 was a few condos or some seriously messy single family homes.  Today, it’s like Willy Wonka in his Chocolate Factory..take your pick from a huge selection below the $300,000 level. 

FOURTH.  This lower pricing that now exists is the reason that the total unit sales are up from 630 in 2006 to 725 in 2008…a gain of 15%.  This is why, painful as it is, this real estate market correction we are currently experiencing is beneficial in the long run.  It is allowing first time buyers back into the market at a price and monthly payment they can actually afford.

 So…Let’s go back to our original question.  Where are our high-end buyers?  Well, they are here, but they are hiding for a while, and will take a little time to come out and play.  

 Basically, you must understand the ”food chain” as it applies to real estate.  Low range buyers (first time buyers, etc.) start the process.  Those sellers of the low range houses then become the buyers for the mid-range properties…a simple trade-up process…and those sellers of the mid-range homes become the buyers for your high range home.  However, understand not every low-range seller becomes a mid-range buyer, and not every mid-range seller becomes a high-range buyer.  There is some attrition along the way.  Think of it like a pyramid…lots of buyers along the bottom, but as you climb higher, there are fewer and fewer buyers. This is how the real estate market has always worked, no matter what cycle we are in.  Lows feed the mids and mids feed the highs.  But what about now?

 THE PROBLEM NOW IS THAT A LARGE PERCENTAGE OF YOUR LOW RANGE SELLERS ARE BANKS WHO WILL OBVIOUSLY NOT BE TRADING UP.  Therefore, the feeding chain is broken, and that is the problem with our high end market.  We now have so many fewer buyers trading up, and that problem is passed up the food chain.  In essence, when the plankton are not as available, the whales get a little hungry…and the numbers in the chart above totally verify the “thinning” of this market for the whales.  So what do you do as a high range seller?

 Simple…if you find yourself needing to sell in todays market, you need to be incredibly realistic about what you face.  Look at the chart again.  ONLY 4% OF THE SALES IN THE 1ST QUARTER OF 2008 TOOK PLACE IN THE HIGH PRICE RANGE  CATAGORY.  You have a small number of fish in your pond that are looking for your bait…so you better have the most attractive bait around.  That means the condition and price of your home better be the best of what is for sale, or those miniscule high range buyers (28 for the year so far…the 4%) will buy another home that is.  I know this sounds tough, but such is your market at the moment…and tough love is never easy, but generally needed. 

In time, the market will improve when the banks get out of the home ownership business (a business they would only be too happy to leave), but until then, be realistic.  Sorry, but this is the best advice I can give…and the most practical.  Hang in there, and you can always call Westcoe (here comes my plug) for details on your particular home.

Riverside, California…According to statistics compiled from the local MLS, the March 2008 absorption rate for real estate in the Riverside area has dropped from last months 12.6 to a new low of 8.8.  This new 8.8 rate is the 6th month in a row this figure has declined, and is at a level not seen since October of 2006.

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 it is a good measure of current market activity.

This declining absorption rate indicates the real estate market is returning to a more healthy level by showing that the available inventory of properties for sale is selling at a faster pace.  It is derived from dividing the amount of exsiting properties for sale by the most recent sales activity from the preceeding month.  The table below shows the details.

Month          Active Properties     Pending sales (previous month)     Absorption Rate

Sept. ‘07           3234                                       82                                                39.0

Oct. ‘07             3196                                       88                                                 36.2

Nov. ‘07            3191                                      105                                                28.0

Dec. ‘07            2940                                      105                                                25.8

Jan. ‘08            2706                                      154                                                18.0

Fe. ‘08             2776                                       221                                                12.6

Mar. ‘08         2837                                        317                                                  8.8

While the available inventory supply has declined almost 10% since October of 2007, the real change here has occured in the number of properties selling monthly.  Sales activity during this same 6 month period has increased over 300%, from 82 sales in October to 317 for March.  What does all this mean?

It means that this web site has touted for months that the current real estate market is one of the best times to purchase real estate we have seen in almost 10 years, and that the buying public agrees.  While we take no pleasure in some of the events that have caused this decline in pricing, the simple fact remains that we are swamped in great real estate buys.  It is now possible to purchase positive cash flow rentals with 10-20% down with a fixed 30 year loan.  This was unheard of just 12 months ago.

As we have said before, the prudent investor or first time buyer will hasten to purchase a home in this current market.  It simply doesn’t get much better than this, and this convergence of low prices and low interest rates have created the perfect storm for home buying.  It is an amazing cycle we are in, and will not last.  Once the Fed sees any strength in the real estate market, they will begin to raise rates accordingly. 

So…you can strike while the iron is hot, and 5 years from now wish you had bought all you could….or you can succumb to the media hysteria and remain on the sidelines while those individuals who flew in the face of the media “experts” in 2008 reap the benefits.  The choice is yours, but at least 317 people who purchased in Riverside have figured it out.  Hopefully you will too, as at the moment, there is plenty to go around.  Give us a call here at Westcoe…we will be glad to help. 

Riverside, California…A real, live body, human being seller has got to feel a bit like the red-headed stepchild in this current real estate market…seen, but no one asks them to play in the latest real estate games.  There is so much conversation about bank repos/REO’s that the poor “regular” seller feels like he has been tossed aside like wide ties and green shag carpet…adored once, but now seemingly forgotten.  However, all is not lost.  If Travolta and Brittany Spears can make a comeback, so can you…the normal, regular seller in today’s bizzaro real estate world….but here is what you have to know.

First, I know you are tired of hearing about banks.  So are we, but what can I say?…They are here to stay for a while (like your in-laws, but they may stay even longer), so you might as well get used to them.  They are the enormous elephant that is not only in the room, but is wandering the entire house.  So instead of fighting them, you are going to have to live with them for a while.

What does that mean?  It means that you must take them into account when pricing your home.  Buyers want bargains, so you are going to have to give them one.  Now, before you panic, understand that you WILL BE ABLE TO SELL YOUR HOME FOR MORE THAN THE PIECE OF GARBAGE THE BANK OWNS DOWN THE STREET.  If you have upgrades, pools, spas, nice flooring, etc, and the “money pit” owned by the bank does not, then you will get more for your home…you just need to realize that the “more” you will get must still represent a bargain to the ultimate buyer.

Contrary to popular opinion, there are still “normal” buyers out there…buyers who do not know a hammer from a tire jack.  Not everyone is Mr. Fix-it.  These “normal” buyers simply want a nice home, ready to live-in, and they know that they will  have to pay more for the home than the stereotypical REO…BUT THEY STILL WANT A BARGAIN BASED UPON TODAY’S REAL ESTATE MARKET.  Remember, the average REO is simply that…average.  If your home is well above average, then you can get a well above average price…above average price being defined by 2008 standards, not 2006.  Don’t dispair…your buyer is out there, but you have got to be realistic about what they will pay.

 Secondly, to also be successful with your sale, you MUST UNDERSTAND THE KEY TO SELLING IS FLEXIBILITY.  Here is an example we all know.

 You decide to drive from Riverside to Orange County on the freeway…and no matter when you plan to make this drive, you know there will be traffic and other cars to contend with.  A question?  When you merge on the freeway, do you really think you will be able to drive in one lane at a constant speed for your entire trip…or will you change lanes and speeds as often as it takes to get you to your destination as quickly and safely as possible?  We all know the obvious answer, and the same applies to selling your home.

When a good real estate agent (shameless plug for Westcoe here) lists your home for sale, the price they quote you at the time of the listing is merely a snapshot…a snapshot of the market at the exact time you decide to play the selling game.  This “picture” will show you all your competition…properties for sale, in escrow, and closed escrow…and all this data will paint a picture that will dictate where you fit in.  HOWEVER, LIKE THE DRIVE TO ORANGE COUNTY, YOU MUST REMAIN FLEXIBLE AND BE PREPARED TO CHANGE LANES AS OTHER CARS (houses) ENTER THE PICTURE.

All too often sellers price their home and then think they are done with that issue, when really they have just begun.  Your price is effective and relevant the day you list the property for sale (at least you hope it is), but that price potentially may lose it’s relativity by the addition of new listings, sales, or closings as time passes.  What worked on day one may not be applicable on day 30.  Again, a good real estate agent will advise you of this, and give you all the new data so you can adjust your picture if needed…much like you change lanes and speed on your freeway drive.  You cannot stay stagnant in your car, and you cannot stay stagnant on the real estate freeway either.

 In the end, we know these are difficult times for every homeowner.  Equity is tight, and good news is scarce, as the media tries their best to hide the good news behind the sensational news that is good for ratings.  However, rest assured that a good real estate company (Westcoe, for example) can guide you through these murky waters.  We have done it before, and understand what you need to do.  Just stay calm, stay patient, stay flexible…and leave the driving to us.

Riverside, California…Repo’s, REO’s, Foreclosures…they all mean the same thing, and unless you have been in a real estate time warp, then you know that these terms are the latest buzz in our industry.  Our current economic business cycle includes far too many banks having to take back properties that they really don’t want, and this has led to an explosion of REO (real estate owned) properties now owned by banks that are on the market for sale.  These properties are generating a huge interest in buyers looking to get a deal, and since this segment of the market is here for a while, I thought you might like the REAL INSIDE SCOOP on what is happening with an REO property, and what to expect if you get involved with a purchase.

 A LITTLE BACKGROUND

Let’s first discuss how an REO property gets to an agent to be sold…because the lender doesn’t just grab the yellow pages and pick a Realtor in the town you live.  In fact, banks really don’t want to talk to the Realtors much at all. 

Understand that the bank made the loan on your home with the singular desire not to be where they are right now…in the real estate ownership business.  They would have been delighted to simply collect their monthly check from you, and go merrily on their way…of course, sellers would be happy with that as well.  And while they expect a few “casualities” along the way (they know there will be a few foreclosures), BANKS ARE TOTALLY UNPREPARED TO DEAL WITH THE VOLUME OF REPOSSESSIONS THEY NOW MUST HANDLE.  In fact, many times the noteholder isn’t even a bank, but merely some wall street investment company that wouldn’t know a home from a snowmobile…they just bought the note from your originating bank to collect your monthly payment.  Now this investment company needs to get involved in the seedy side of the mortgage business, and they are ill-prepared to do so.

SO…what does a foreclosing bank do?  Once they have acquired ownership of the property (a very short sentence for a very long process…more on this some other time), the bank essentially has two options, depending on how they are internally set up:  they will either work through their local branches to get the names of good local real estate agents who have the capability to handle this very specialized branch of real estate sales (the person for the bank who does this is called an asset manager), or they will make one call to what is called an “outsourcer.”  The outsourcer has contacts throught the real estate industry, and the lender is spared from having to deal with hundreds of real estate agents…they will now only need to deal with one…the outsourcer.

Why is this important to you, a potential buyer?  Because it will make a difference in the communication process for your purchase, which I will describe in a moment.  Also, understand that both a bank who works directly with their agent, or a bank who works with an outsourcer…both want to minimize the number of agents they have to deal with.  So, once a good relationship has been established, and the bank/outsourcer sees the agent representing them can do the myriad of paperwork and reports that they require, the bank/outsourcer will send as much business as possible to that now trusted agent…and in this market, the amount of property banks now own and must sell is staggering. 

My point here is that you really need to understand the incredible amount of pressure, deadlines, and paperwork a real estate agent who works in this line of business must handle.  I am not asking you to feel sorry for them…just understand the volume of properties they handle because it will make your process of purchasing easier if you know where they are coming from. 

IN OTHERWORDS, THESE AGENTS ARE BURIED, AND YOUR TRANSACTION WILL BE AFFECTED ACCORDINGLY.

Now that you have a little background, here are some specifics you need to understand in order to get the most from your REO purchase…and while we understand that every bank is different and that much of what follows is a generalization, it will be close enough to have some relativity to any REO purchase.  I will also assume, for conversation sake here, that you are represented by your own agent, and that the bank is represented by theirs.

COMMUNICATION/RESPONSE TIME…Due to the situation I have described above, the first thing you must understand in a REO transaction is that the normal communication time frames are thrown out the window.  Not only is the REO agent buried with possibly over 150 properties in some stage of care (listings, evictions, foreclosure process, repairs in some cases, escrows, etc.), but as we outlined above, the person they will deal with for a response (either the outsourcer or the asset manager) is worse.  Therefore, while everyone wants to give you the most prompt service possible, it’s not going to happen like a singular seller with a singular offer.  Think of our grocery store…one patron, one checker and you are in and out.  However, go during the rush hour, and you have one checker and 10 store patrons, and you are going to wait to get your groceries, no matter how tense you get.  In the REO business, it works the same way…SO STAY PATIENT.  You will get an answer, but it will take time, and stewing about it will not help.

MULTIPLE OFFERS…That’s right, even in this market.  Banks may be stupid (maybe that’s how we got here in the first place!), but they are not dumb.  They MUST sell the property, and are willing to take the loss in order to move it off their books in a timely fashion.  When all this mortgage meltdown started, they tried to make a few bucks on their REO’s, but not now.  Taking the financial loss is not personal for them, so most of them take a very aggressive approach to selling this unwanted possession.  Yes, some still have not gotten the message, and are therefore pricing their inventory too high, but most have seen the light, and are being very aggressive…and those are the properties you want to buy anyway.  SO…understand that you are not the only one out there who sees the value of purchasing a property now, and prepare yourself that you will probably be competing with other buyers such as yourself on the purchase of this great deal.

WHICH MEANS NO LARGE PRICE DISCOUNTS ON THE PROPERTIES YOU WANT…Please re-read this twice, because I know it goes against the infommercial you saw last night at 3:00 am from the guy with the lei around his neck and a huge boat in the background.  Trust me, he is wrong.  Generally speaking, these properties are already priced to sell..and while the lender understands they will get “wet” on the sale, the do not want to take a full “bath”.  Trust your agent on this one (may I suggest a Westcoe agent?), because once you get in the multiple offer situation, many banks do not deal with endless counteroffers amongst all the buyers…they do not have the time.  Mostly they just simply accept the best offer and move on.  SO…if your agent tells you the price is already discounted compared to comporable properties, DO NOT ATTEMPT TO DISCOUNT THAT WHICH IS ALREADY DISCOUTED.  The banks and their agents know this game, and will generally not play.

 REPAIRS vs. “AS-IS”…This one is not as universal, because lenders are currently all over the map on this one. 

Some lenders put a price on the home in it’s current condition, and will not fix anything… but their price reflects this.  Your agent will have talked with the listing agent about this (hopefully), and take your cues from your agent…but be careful here.  You should still have a home inspection on this so you are aware of what you are getting into, and you may have a problem with your appraiser…because the appraiser is there to protect the new bank’s interest, not necessarily yours…so simply because you and the seller are willing to close the transaction on this “disaster”, the appraiser may insist on some repairs being made.  After all, the new lender does not want to be in the same boat as the “old” lender.  Every situation is different, so be aware.

 Other lenders have either done all the fix-up work they intend to do, or have allotted a certain amount of money for repairs…repairs that they will only be too happy to have you do while they credit you some money for your efforts through escrow.  If you go this route with the credit for repairs, be careful…your lender may not like you getting any money back at the close of escrow, since you may run off to Vegas with the repair money instead of doing said repairs…so check with your new lender on their policies.

I guess the bottom line here is that most of the time, you will be purchasing the home in its current “as-is” condition, and we would advise you to get a through home inspection simply for your own piece of mind…AND DO NOT EXPECT THE BANK TO DO ANY WORK ON THE HOME AS A RESULT OF YOUR INSPECTION.  In rare cases, they may, but mostly, they will simply cancel your sale and wait for another buyer.  Remember…the price should already reflect the current condition of the home.

 TO SUMMARIZE

 Buying any property is exciting, and if you have read anything on this blog at all, you know we think it is a great idea to buy at this time for many reasons…and since most of the motivated sellers at the moment seem to be banks, chances are you may be dealing with an REO.  It can be a frustrating process if you are not prepared for the differences outlined above, or you can reduce some of your stomach acid if you simply understand a few fundamentals…fundamentals we have outlined above.  We hope this helps you in your purchase as you enter the sometimes bizarre world of REO’s…and if you have any questions, by all means give us a call at Westcoe.

(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.