Think it's easy to buy L.A. real estate with $1+ million in cash? Think again.

Not to give you home buyers out there even more reasons to be disappointed, but.  Some former clients of mine returned to town after moving to the San Francisco Bay area some years ago.  They had made cash offers on properties in Berkeley and the Oakland hills but were aced out on price each time.  It's not that they were submitting low-ball offers -- most of their offers were over asking -- but they were repeatedly beaten out by offers over $100,000+ more than asking.  The Bay Area real estate market is too crazy, they said.

It's not that bad here, I said.  I was wrong.

In the course of one week, we made three offers on properties in Studio City, Sherman Oaks, and Glendale.  All of the offers were all cash.  All were over the purchase price -- some significantly -- and all were $1.4 million or thereabouts.  Yes, million.  You'd think sellers would be crawling over themselves to take these wonderful, beaucoup-bucks cash offers, but you'd be as wrong as I was.

The first property went for significantly over the asking price for all cash.  We offered $50k over asking on the second property but seller terms were a little grab-y and it went into multiples anyway.  My buyers offered significantly over the list price, all cash, on the third property.  Plus gave the sellers a free 60-day rent back (unheard of in a normal market).  The sellers dithered.  And dithered.  And finally accepted on a Saturday afternoon.  We buttoned up the deal.  And the sellers changed their minds Sunday morning. Ugh.

My poor clients were very philosophical about all of this, and went on vacation to lick their wounds.  And in the meantime, they've decided the Bay Area is not so bad after all.

As for me, sure; these are not great experiences for a Realtor.  Yes, there's the income issue.  But also, it takes just as much work to not get an accepted offer as it does to get an accepted one. Sigh. Onward!

Ask me anything: do cash offers ALWAYS prevail over financed offers for a house?

No, a home buyer's all cash offer DOES NOT always win out over an offer with a loan.  These days, it seems like many buyers are wonderfully qualified by truly talented direct lenders. (I will be blogging about this when my 848 N. Avon property in Burbank closes next week.)  If you are a property buyer out there in Burbank, Studio City or anywhere else in the east San Fernando Valley or Northern Los Angeles area, and you need a loan in order to purchase a home, here's what you can do:
- Get pre-approved by a direct lender, such as Prospect, Wintrust, or Madison Lending. You can also go to property lenders at Chase or Wells Fargo. And by all means, check with your credit union.  That means, yes, filling out all of the paperwork and turning in all your needed financial documents.
- Please stay away from "middle-men" lenders who just take your paperwork and then push it out to a random lender.
- Do this in advance.  Please don't wait until you've already found the house.  You'll have to get the paperwork together eventually anyway.
- Clean up any credit issues.  Your lender can help you with identifying what these may be.
- Save as much money as possible.  I know this is hard, but perhaps you can defer big purchases for one more year.
- Gifts from family members are good, but please make sure they are indeed gifts and there is no expectation of a payback.
As always, please feel free to contact me with any questions or concerns re home buying!

New interest rates and new r.e. stats

Yes, interest rates went up this week.  Again.  Conforming loan rates are now hovering around 4.2%-4.3%. The lenders that I've spoken with don't expect them to go down much in the near future, if at all.  They are still at historic lows, but that probably doesn't make you feel much better if you're a buyer.

And here are some interesting local stats from California Association of Realtors:

- From 2001 - 2007, all-cash purchases were about 6.2%-8.4% of total sales,

- In April 2013, all cash purchases were 29.3% of total sales,

- 27% of California sales are to non-U.S. citizens,

- 66% of investor buyers are holding for the long term,

- 75% plan to hold for about 6 years,

- 25% are flippers,

- 67% investors are paying cash,

- For those who sell, the return on investment is around 14%,

- 78% of investor purchases were single family homes,

- 14% were multi-family homes.

Will this all change? Of course.  When? I don't know.  But the real estate market has really surprised all of us with its quick turn arounds in the last few years.

San Fernando Valley real estate 2012 year in review - part one

I'm jumping on the end-of-year list bandwagon here.  If you real estate news in Studio City, Burbank, Sherman Oaks, Hollywood Hills or anywhere else in L.A. for that matter, here are the big news stories -- to me, anyway -- for the year.  You'll know most of these already.

1.  Return of the real estate market.  Thanks to the feds and the super-low interest rates, buyers are out in droves.  Unfortunately, housing stock hasn't kept up and everything is going in multiple offers.  I am hoping that we'll have more inventory coming on to the market as rising prices catch up to what would-be sellers owe on their houses.

2.  Cash is king, and there's a lot of it out there.  It's mind-boggling as to how many all-cash transactions are out there now.  Where is all the money coming from? Foreign countries (the U.S. is still looking like a safe bet to stash your cash), investor pools, and boomers who have recently inherited money from their recently deceased parents.

3.  Trusted brands -- can they be?  As we all know, internet-based real estate sites like Zillow and Redfin are the trusted brands in real estate these days.  That's not surprising as their websites are very user-friendly and contain a lot of information on each page.  And people believe what they read, especially from big sites.  But is the info accurate? Be skeptical, friends -- Zillow, especially, can be way off on their zestimates from what a value really is (and they admit it in the small print).  Actually working with Redfin can be a mixed bag but yes, it can be with non-Redfin agents too.

The next post will include my personal favorite and not-so favorite transactions and clients, so stay tuned!

But you already know this: LA Times says home sales in Los Angeles are up

In case you didn't read the Los Angeles Times today, here's an article talking about how home sales and home prices have significantly increased in Los Angeles the past year.  Some quotes from the article:

The median home price for the region was $321,000, up from $315,000 the two prior months and a nearly 17% increase over $275,000 in November 2011.

and

All-cash purchases, many by deep-pocketed investors, also remain unusually high.

Cash offers are the kings of L.A. real estate. Alas, offers with loans are only princes.

Again, cash trumps loans in my world.  A client made an excellent purchase offer with 20% down on a home, only to see the house go to somebody else who is paying cash.  Apparently, that was the only difference between the two offers.  Sigh.  Take heart, buyers -- this will end someday.

Wild and wacky Weslin is closed

4167 Weslin in Sherman Oaks closed last week.  What a wild ride! The house is a fixer on a large lot south of the boulevard, and was owned by Dorothy Townsend, the first female L.A. Times city desk reporter.  It then passed to a trust with 18 (!) beneficiaries.  Here's how it went:

-We listed the house at $640k since it needed work.
-The brokers' open house drew so many people that there was a traffic jam of Realtors all the way down Benedict Canyon.  I received over 100 calls about it the first two days it was listed.  This is the most activity I've ever had on a listing.  Fifteen separate parties asked me to represent them in the transaction and I said no, because concessions would have been expected during the process.
-We received 20 offers within 5 days.  The offers ranged from $555k to $725k, with most being slightly above the asking price.  Half of the offers were all cash.
- We chose the highest cash offer.  They immediately backed out because they didn't like the condition.
- We went with our first backup offer, also all cash.  They backed out because they didn't like the condition.
- By now, we had two inspection reports indicating more fixing was necessary than we had originally known.  This included foundation damage. Uh-oh.
- Flop sweat.
- The trust attorney had a couple of issues to resolve as well, which caused us to put the property on hold for 10 days.
- We went back to the original offerors and furnished the inspection reports to them.  Five of them came back with reduced offers.
- We again went with an all cash offer.  The buyer immediately released $1000 to the seller and removed all contingencies.
- Still, more flop sweat.  And still plenty of phone calls.
- ...But there were no further incidents thanks to buyers' agent Art Oganesyan and stalwart escrow officer Harlene Dunn.  The trustee was a model of patience and graciousness, too. It closed a little over two weeks later for $604k.  Whew!

Upshot on 724 University (pictured below)

See update below!
I listed the house at 724 University, in Burbank, a cosmetic fixer, for $559k.  It received 17 offers within one week.

 

Our seller chose the all cash offer with no contingencies.  That was not the highest purchase price offer, but it was quite a bit over the list price. We have several strong back-up offers, too. Here are some other numbers:

Open house attendees: 130+.  Partner Michele and I couldn't keep track of everybody. 

Offers from extremely financially well-qualified buyers: 16.  I’ve never seen so many high FICO scores (over 775) in my life.

Offers with over 20% down payment: 14.  One was as high as 42% down.

Offers at list price or higher: 14

People disappointed at the outcome: 16.

This process wasn’t fun.  We just really got a sense that the potential buyers had a lot of hopes and dreams riding on this outcome.  Many of the buyers had already put in good offers on other properties and had gotten aced out by other buyers.  Many also have children that they’d like to get into the excellent public school for the neighborhood.  And this gave me the feeling that we were messing up the buyers’ lives who didn’t get the house.  In retrospect, we should have listed it higher, but we believed the asking price was in line with the comps.  Yes, we probably would have still gotten multiple offers, but it wouldn’t quite have been such a carnival of disappointment.  This experience also confirms my belief that underpricing a home for sale isn’t the right thing to do just to draw multiple offers.  My experience lately has been that if a house is priced to sell at or around the asking price, it will sell just as quickly as if it is artificially underpriced.

A couple of other things:  we had virtually no print advertising for the open house.  Our 130+ people came strictly from internet and mls advertising.  I conclude that print advertising really is a thing of the past.

I was surprised when two separate buyer groups showed us proof of funds to close – in other people’s names!  Um, kinda fraudulent, yes?  Did they think we wouldn't actually look at the documentation?
Update April 28, 2010: we're already in escrow with the 1st back up buyers.  What happened: the first buyers were paying all cash and had submitted an offer without any contingencies.  We were dubious about this, but these terms were too good for our seller to pass up. Sure enough, late Monday morning, the buyers' agent called me to say that the buyer wanted $20,000 (!) back based on the physical condition AND wanted to get a loan.  Uh, no.  Here's your deposit back; go in peace.  The buyers in the backup position stepped up (for a higher price, too) and we're now in escrow with them.  (Gossip: the agent who wanted to renegotiate the terms for her buyer the minute we opened escrow is a member of a prominent Glendale real estate family.) Stay tuned!

806 Harvard sold for all cash

This house is 806 Harvard, Burbank. It's a very pretty, nicely maintained two-bedroom that listed last week for $659k. It sold last night for full price, all cash, no contingencies. Wow, where is all this cash coming from?