Observations and universal truths of the week

I saw a lot of homes this week and, as usual, I experienced several surprises.

Most unpleasant surprise of the week: A home on Fremont in South Pasadena. This $900k house seemed under-priced, but it’s on a busy street. Nope. Although no indication was given that the house wasn’t just perfect, we arrived to find poor maintenance, rotting windows and a green, algae-filled pool. Yes, it had a gorgeous kitchen (see below) but it also had a teenage boy problem (see below). All in all, just plain gross and I don’t know why anybody would pay almost a million for it.

Trend observation of the week: almost every house I saw had a nice, recently-redone kitchen. Unfortunately, that’s as far as the sellers’ efforts went. Sellers, if you want that all-singing, all-dancing great kitchen, fine. But please spare some money and effort maintaining the rest of the house. Like maybe fix the roof. Or paint. Or replace old windows. Or clean the place.

Little house of teenage boy horrors: Teenage boys are the scourge of the earth where real estate is concerned. What did we see in these boys when we were teenage girls? Their rooms are invariably not just messy, they can be scary and disgusting. They leave them for showings under duress, if they leave them at all. And if the teenage boy has his own bathroom, DON’T GO IN THERE. If you must, wear a hazmat suit and blinders. Sellers, please ship your teenage sons off to military school while the house is listed. You’ll be glad you did.

Why is it so hard to show homes? Alas, lockboxes seem to be disappearing. Instead, to preview homes, I had to make at least three calls per house to the listing agent, listing office, seller, what have you, and then come at a narrowly-appointed time. Okay, I can deal with that. But then I got to a house on Zelzah in Encino at my appointed time and the seller wouldn’t let me in. She said nobody had called her. And the three calls made to a listing agent for a house on Miranda in Valley Village went unreturned for about 36 hours. When she finally called me back, she upbraided me for not coming to the six previous open houses or caravans. Whatever. But if I can’t show it, my buyer clients can't buy it.

Nicest surprise of the week: the Sparr Heights neighborhood in Montrose. Still lovely, still well-maintained, and very few homes have been bigified beyond all reason. Not inexpensive, though.

$8000 1st-time buyer tax credit can now be used for a downpayment

As we all know, The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Now, according to this HUD press release, first-time buyers can now use their $8000 tax credit towards their down payment or closing costs. While I don't quite get the mechanics of how this will work, it's good news.

Here's a quote: "Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate." Here's what that means. Often, a buyer's interest rate is a little higher for a government-backed loan, like FHA. This will enable a buyer to "buy down" their interest rate and therefore have a lower monthly payment.

Interest rates went up today

I don't think there will be any more loans under 5% for the time being. Some buyers may decide to wait awhile longer before purchasing. Stay tuned...

If you think there's nothing to buy out there...you're right

Yesterday, I searched the mls for all "active" single family homes in North Hollywood under $300,000. I found 34 homes. Virtually every one, every single one, was a short sale, foreclosure or probate -- and they all had offers on them already.

The way it works is this: for a short sale, the property can't be listed as "pending" until the bank signs off on an offer. But before that happens, the seller has to sign off -- and the seller may have several acceptable offers that they've already sent to the bank. They may not actually look at other offers if they've already done that, even if the property is still listed as active. The bank may just be taking their sweet time -- it usually takes them two months or more to approve a short sale. To recap, even though the property is listed as active, it's really "pending."

For foreclosures, the process is similar but faster. And recall that if the property is listed by a mega-lister foreclosure agent, they've been putting feelers out to investors -- and maybe even getting offers -- before the property even comes on the market.

Questions from a recent transaction

Question 1: should non-profit, city government-funded housing entities sell houses that are unsafe?
Question 2: should non-profit, city government-funded housing entities sell houses to investor groups?

These questions have to do with a recent client transaction. Some names have been changed to protect the innocent (and me!).

My clients, Mr. and Mrs. Buyer, are approved for an FHA loan. We have been looking for a home for them since February. They found a home in Glendale that seemed to perfectly fit their needs.

The house was owned by Verdugo Housing Corporation, a non-profit organization that, I’m told, is chartered by the City of Glendale. I understand that Verdugo Housing was formed as a non-profit city partnership to increase affordable home ownership in Glendale.

Verdugo Housing had recently purchased the property for somewhere in the $200,000’s and had done a cosmetic rehab (carpet and paint). The home was for sale in the very high $400,000s and Mr. and Mrs. Buyer made a full-price offer just before it went on the market. Escrow was opened in April.

We repeatedly asked for legally-required physical inspection disclosures, but VHC never furnished them to us. And the house inspection did not go well. At all. (Recall that FHA will not fund loans on substandard houses.) The roof was crumbling. A couple of rooms that were added on were not attached to the foundation. The a/c and the stove didn’t work. The electrical work was substandard in places. Those were the major issues; there were many minor issues as well.
The buyers asked the sellers to fix the major issues; after all, a non-profit housing corporation would not want to sell substandard homes, right? To our surprise, the VHC declined to do so. My broken-hearted clients cancelled the escrow. We heard through the grapevine that the day after escrow was cancelled, Verdugo Housing Corporation sold the house on an all-cash deal to a group of local investors, who intend to rent it out.

Wednesday morning reading from LAT and Burbank Leader

The Burbank Leader reports today that several big condo projects have reduced their prices significantly. These include the Burbank Lofts and the Excelsior project at Glendale's Americana. Well, good. It's high time the prices on these came down. I think they're running at about $400k+ now -- which, in the case of the Excelsior units, is down from $800k! Remember, though, that many banks will not fund loans unless a condo project is at least 50% sold and the builder/developer has turned over to the actual home owner association funds to the actual home owners association.

Next is an article from today's LA Times about home prices and activity in the Southland. Just as I bin sayin' "But Los Angeles County's median home price actually held steady in April for the fourth month in a row..."[emphasis mine]. Is that not a sign that the bottom is here, and has been here for awhile? But here's another significant quote: "The worst may be yet to come for wealthier areas because "we still face two big threats to price stability: layoffs, which can cause foreclosures across the home price spectrum, and possibly a new round of foreclosures triggered by defaults on 'option ARM' and 'stated income' loans used in mid- to high-end markets," DataQuick President John Walsh said."

Remember flippers? They're baaack...only now they're called investors

Remember house flippers? Those folks who would buy beaten-up houses, fix them up sorta (or try), and put them back on the market? That didn't work out too well for everybody that did it. Yes, some people made money, but some overestimated their ability -- and the cost -- to fix homes up, and some people lost their shirts.

Well, flippers are back. Now they're called investors. And all of a sudden, I've seen several investor-owned properties on the local market. These investors have bought foreclosed homes at an auction for a couple dollars more than the mortgage, then hired a cleaning lady and a gardener, and then put the houses back on the market. For, oh, about $100k to $150k more than they bought them for last week. Okay, it's not that easy -- the investors usually have to pay all cash.

Good thing or bad thing? Right now, I'm happy for any real estate inventory to show. However, I'm worried about price escalation. And also, buyers obtaining FHA loans can only obtain loans on investor-owned properties if the last sale is at least 90 days old. Which cuts most FHA buyers out, at least for now.

Picture of a pet-friendly home for lease in Burbank

Is this cute or what? It's located at 841 N. Screenland in Burbank and will be available for lease mid-June. More details are on my 5/8 post.

Easier loan modifications and short sales. Are you listening, banks?

Regardless of what the banks would like you to believe, loan modifications and short sales should be getting easier to accomplish, thanks to the U.S. government. Here's a link to an article from today's L.A. Times.

A Burbank foreclosure for only $294,030!?

1913 Niagra (also spelled Niagara) has just listed in Burbank. It's a 3+2, 1150+ sf and is a foreclosure. It needs to sell all-cash, as one bathroom's fixtures have been removed and that makes it extra-hard, if not impossible, to get a loan. It is listed for $294,030, which must be the lowest per-square-foot price in Burbank. The listing agent's assistant tells me that there is already one offer in, and clients of mine want to make an offer early next week. Do I think that it will sell for $294,030? Nope. I predict it will sell in the mid-$300's.

Burbank Leader on bidding wars

Today, the Burbank Leader picked up the story about artificially-low listing prices and the bidding wars they generate. Here's a quote from the article: "Markets are most tight with moderate- to low-priced homes, or about $500,000, with some agents luring multiple shoppers with artificially low postings and forcing bidding wars that can drive up totals by tens of thousands of dollars, Realtors said." See my previous posts on this subject.

Prediction: While I think we've hit the bottom for most San Fernando Valley real estate, I don't see that we'll have a real acceleration in prices. I do think we may have more inventory, or at least properties staying on the market longer, in July and August.

Opting out of a Zestimate

Correction to the following: Spencer from Zillow has commented below, and here's what he has said: What you're referring to is the DoJ ruling with respect to Virtual Office Websites. The settlement allows sellers (via their listing agents) to opt out of having their listings on websites with valuations. But VOWs are password protected broker websites. Zillow is not a VOW and is not affected by this policy at all. If the seller or the listing agent puts a listing onto Zillow -- either manually, or through their broker sending Zillow a feed, or in some cases through their MLS sending a feed to Zillow -- it will have a Zestimate. In fact, all homes on Zillow have a Zestimate, whether it's listed for sale or not. If you ever see a for sale home on Zillow without a Zestimate, that's because for some reason we couldn't match the address for that listing, not because we removed the Zestimate.Here's a great video for real estate professionals about the Zestimate: http://www.youtube.com/watch?v=Vuloq6S6MLM

Original post: If your home is listed for sale on a multiple listing service, you can now opt out of having a Zestimate (Zillow's estimate of value) on Zillow.com, or on any other site such as Redfin or Trulia that has home value estimates and allows comments. This is accomplished through a simple key stroke when your Realtor adds your listing to the multiple listing service.

This is a good thing as we've never known just how these sites' algorythms calculate value data. Their dollar values for specific properties are often quite different -- lower -- from comparable sales data, and of course, Zillow hasn't actually seen the house nor driven through the neighborhood. And who needs somebody's snide comments about your house (unless they're Judy Graff's snide comments) when you're trying to sell it?

*@!#% 116 N. Valley, Toluca Lake is already in escrow

116 N. Valley in Toluca Lake listed on the MLS Sunday night for $521,730. It's a 3+3 with 1900+ square feet. As you can see from the picture, it's a "completer" and it's a foreclosure. Somebody obviously ran out of money in the middle of re-doing this.

It's already in escrow. How can that be after it has only been on the market one day? I'm not sure, but I'll bet the listing agent, another REO mega-lister, has been courting offers on their own and just listed it to appease the bank/seller. It seemed too good to be true, and it was...

Another pass at Westlake Village

I showed property in Westlake Village again today. Lovely homes there cost the same as unlovely homes in the SFV and L.A.. And the community is green and hilly. But. It took me an hour and 45 minutes to drive home.

Need a pet-friendly lease in Burbank?

A fabulous home will be available for one-year lease in Burbank starting mid-to-late June. The hacienda-style Spanish has 3 bedrooms, 2 baths, and is a little over 1700 square feet. The house was built new from the ground up in 1998 and has a gas-burning fireplace, carpet, tile, a/c, attached garage, and open floor plan, plus a charming covered patio and lots of lovely landscaping. It's so nice, I'd buy it if it were for sale (it belongs to my BFF). It's in the Roosevelt elementary school district and pets (with certain restrictions) are welcome. The price is $2800 a month plus security deposit. Please contact me if you'd like to see it.

Buzz of the week: low inventory and price-to-entice marketing strategies

My colleagues and I have been discussing two main issues this week. The first is the shortage of homes for sale, in every area, in the $700k and under price range. The only stuff out there is either geographically undesireable, a fixer or ridiculously overpriced. Sounds like my dating life when I was single.

The other issue is the deliberate underpricing by some Realtors in order to create bidding wars. Here's how it works: a Realtor lists a home $50k or more below the comparable sold properties, does no marketing, and quickly gathers multiple offers which bid each other up for the "great" deal. The properties always go over the (under) listed price. Who benefits? Primarily, the Realtors, who spend no money marketing the property. Who loses? The seller, who gets a fast sale but no real marketing. Who knows what kind of great deal the sellers would get if a house is truly exposed to the market? And future sellers lose, too, because now there is an artificially manipulated future market, based on these new listing comparables. But the biggest losers are most buyers, who couldn't afford a market-priced house to begin with and have no hope of getting the seemingly-great deal. Buyers tend to lose heart after trying to buy and not succeeding. So if you're a buyer, if the deal seems too good to be true, it probably is.

A colleague tells me he thinks there may be a Burbank Leader story about this strategy soon, which has been frequently employed by a local team lately. Update 5/8/09: This strategy is now being applied to some not-yet-approved short sales, with the following language in the MLS: "We will accept best offer after (usually 13 days), open escrow. You inspect then we submit for bank approval." Whoa! This will get a lot of people exited about and spending their energy on about a property that may not even be able to "go" short sale! Once again, if the deal seems too good to be true, it is.

Award from Relocation.com

Relocation.com just notified me that they've chosen this blog as one of the best in L.A.! Check it out here.

This blog is at the top of the page, and they say,

"Judy Graff’s San Fernando Valley Real Estate Blog is really good. A nice mix of humorous pieces about real estate life, tidbits about the communities she serves, and analysis of the current housing market. She even gets a bit snarky. This post rips overpriced homes near freeway off-ramps, and this one recounts a nightmare home showing (hint: naked guy!). Judy’s blog gives me a very good idea of what kind of agent she is: open, honest, knowledgeable and funny. Not a bad combination for someone who’s trying to find me a home — and look out for my interests when buying it."

Finally! An LA Times article about what's REALLY happening in our r.e. market

Today's L.A. Times has a great article that says -- finally -- what we've been saying: that it's not a buyers' market everywhere, prices on nice homes in nice neighborhoods haven't come down that much, and yes, there are still bidding wars for desireable properties. Here's the link to "Not that Cheap."

Quotes from the article: "...The supposedly wondrous buyers' market seems more consumer myth than easy pickings...," "...Just because an abandoned house in a troubled part of San Bernardino County might be going for $200,000, it doesn't mean you can get a nice place in Sherman Oaks for that amount -- or even twice that amount," "...[buyers] don't know where to vent their anger: lenders demanding higher down payments and less-favorable terms, talking heads distorting the market...or listing agents itching for bidding wars [we've seen a lot of that in Burbank]."

There's also a great sidebar entitled "Want that House? Follow these tips." The last item talks about financial institutions who prefer conventional loans over loans requiring longer closing times, e.g., FHA loans. Unfortunately, most of the buyers out there are getting FHA loans.