Thursday, March 13, 2014

No Inventory, High Prices, Can You Still Get A "Deal" In Real Estate?

This week has been an interesting one.  Normally I don't "house shop" with buyers, and rarely am I out reviewing properties in person I haven't done a major research on first.  As an investor buyer, I am very comfortable buying properties I have never seen, or have just driven buy.

In this case the buyers are friends who are working with an agent at another office.  They have been house shopping for some time, and it is making everyone crazy including each other.

At the end of the day, major progress was made, and they are down to their last trade off decision.

Buying real estate is always a major tradeoff decision.  You can be one block from water with no view and get a great house with a three car garage, or be up the hill with a two car garage, smaller house and a great view.  So which is it access or view and how much are each worth.

The most difficult part about being a buyers agent is to get those decisions made first.  If you know what you want before you even start looking, you are much more likely to get a deal, and not get emotionally locked to something you might grow tired of quickly.

Many deals fall apart and buyers get cold feet because they "loved the view" and over the course of the next few weeks realize the house won't meet their needs and they aren't willing to adjust.

The app isn't finished yet, but I am working on it.  The app is a way for one or two people to sit down and build a perfect house by "score".  For instance, would you give up a larger bathroom for a gas kitchen?  If you make those decisions up front, the emotion of buying the home is whittled to the core where it needs to be.  That core emotion is what you are going to be living with while you are in that house.

This is how investors buy homes, and believe it or not, it does work for people buying homes. The key for the buyers agent is to understand the buyer first.  Better yet, if you the buyer will admit up front where you are having difficulty making a decision, your agent can be a lot more helpful.

You might think view is important, and find out that being next to a park for your kids really is the winner for you.  When you sit down and make those decisions up front, you will know a deal the minute you see it.


Monday, March 3, 2014

Can You Buy With Zero Down?

Zero down homes are something of a mystery to most people, even most Real Estate Agents.  So you are probably asking, "Are they real?".

The answer is YES.  Homes can be bought with zero down several ways.  The easiest is a VA loan.  VA loans are available to just about anyone who ever served in the US military and was honorably discharged.  Here in California there is an obscure little program called Cal-Vet that can help too.

These days, less than 2.5% of Americans are serving in the US military.  So how does 97.5% of the country get a home with zero down?

There are a couple of ways, one is the Homepath program.  Zero down homes in the Homepath program are rare and will require some digging and patience on your part.

Another option is the way all property used to be sold, owner or seller financing.  The seller of the house gives you a loan to cover the down payment.  These are tougher to do and require some legwork by your Real Estate Agent and loan broker.

Now that home values are starting to creep back up, you have a chance to find a home where the owner might just have enough equity to "carry paper" and get you into that house with little or no money down.

If you aren't sure, always make the offer, the only think that can happen is they say "no", or they say "yes".

Friday, February 21, 2014

Are 1% Commissions Still Around?

Lately I have heard about a lot of people asking for 1% commissions.  They think the market is "hot" and the listing agent isn't doing any work to move the house.

With all of the new laws since the 2006 bust, agents work harder than ever.  What surprises me though is how sellers think the system works.

If you want to get the most for your property, the first thing to do is clean it up and stage it.  If I do this as your agent, that costs money.  Real money, and I don't get it back unless your house sells.

There are two basic methods for getting the highest price for your property.  Right now the method I see is slap a high price on it and hope you find a sucker or the market catches up.  When you see a home that has been on the market for 180 days, 360 days or even longer, you know what is going on as a buyer.  Buyers agents skip those homes.

The second model is to use the auction format.  Price it low or at $0, and then accept bids for a very short period.  Many auction houses charge as much as 10% and tack on another 10% buyers fee!  That is a 20% commission for an auction.  Why are they so expensive?  The marketing costs for running a proper auction are astronomical.  Hiring bands and catering are not unheard of.

The idea is to build a frenzy among qualified buyers.  You did only want offers from qualified buyers didn't you?  Another service the agent has to perform.

My approach is simple.  If you are willing to sell your house at a low enough price, I'll sell it for a low commission and either buy it myself or quickly find an investor to do it.  The below market price means less work for me, quicker sale for you, so I can get buy with a lower commission.  If you want at market pricing, and I need to spend money on four color flyers, and direct mail cards, and spend hours on the phone spreading the word about your house, I am going to ask for a market priced commission.

Finally if you are asking an above market price, then my commission will go up accordingly.  This is where people get is wrong and end up advertising for their agent.

Real Estate is a simple game of numbers.  If your house is priced on market, there will be many qualified buyers, so finding one or two isn't that hard.  If you price above market, there may only be a few qualified buyers willing to pay your price in the world.  Right now most buyers are still "deal shopping".  The economy isn't strong enough for them to just go out and buy at any price.

Finding that magic buyer who has the ability and desire to pay above market pricing takes a lot of work on the agents part.  That is why the auction houses charge the fees that they do, and prefer to only feature unique high end properties which are difficult to compare on a market basis.  The price is simply opinion and willingness of the buyer.

When you meet with an agent about listing your property for sale, make sure you understand where you home is priced on the market and make sure the agent has the resources and skills to sell your house, not just use your front yard as a billboard.

What you pay for commission is your choice.  Choose wisely.

Wednesday, February 19, 2014

Are You Advertising For Your Agent?

How long has that sign been in your yard?  Are you advertising for your agent or are you selling your home?  The January sales figures are out and they are not good if you look at them for raw numbers.  If you dig a little deeper you see three different stories developing.

The first story line is aggressive agents promising low commissions and high prices to get signs up.  This makes them look busy and makes them look like they "own" part of an area.  At the end of the day though, most of those "sellers" are simply advertising for the agent whether they realize it or not.

During a recent meeting with a potential seller, he asked "How come {Agent X} has so many more listings than your whole office?".  My answer was simple.  "How many days have those signs been up and when was the last time you saw one of our signs go over a couple of months?"  We sell homes, the other agent lists homes.  The more agents I talk to around the country, the more we are seeing this phenomenon.  It might be partially the sellers fault though.

The second story line is about the sellers.  The average listing price per square foot took a big leap at the end of the year, and the number of new listings dropped.  Some sellers saw a market rise last year and simply said "Hey if I can get $XXX for my home, I'll sell it." so some agent slapped up a sign and there it sits.  Other sellers decided that it was a good time to sit and wait a bit longer while prices keep rising.  Fewer listings and fewer sales equals a stalled market.

The third story line is about the buyers and their banks.  New rules limit how much a house can go up in value when an investor buys it to sell it in less than six months.  The quick clean and flip is essentially gone.  Also the FHA changed the minimum down payment to 5% but does allow a "gift".  Some banks are using seller points to offer some similar programs that help with closing costs and down payments.

The real problem here is a combination of cash and credit.  Even with rates hovering in the 4% range, banks are still quite cautious about a buyers real income, and many buyers simply don't qualify.   More simply don't have the spare cash for closing fees and a downpayment making it an excellent investment market for those who do.  Rents in many areas are very close to PITI payments on the day of closing.  Normally it takes 5 years or more to get positive cash flow out of a rental.  Now If you buy right you can have positive cash flow day one.

If you want to sell your house, the NAR statistics show a couple of interesting trends.  The homes that are priced right sell within 10 days or 10 showings.  If they don't, they are overpriced.  If you want a top of the market price, you are likely going to pay top of the market commissions for a very aggressive marketing campaign by your agent or you are going to end up being a billboard for them.

Another option is to price low and take the high offer.  The risk here is not paying enough commission for great marketing to get the best price.  The MLS alone won't do it.

At the end of the day as a seller, it is your choice.

For more information about buying or selling a home feel free to call, email or post a question on my Facebook page.


Tuesday, February 4, 2014

Interest Rates Fall A Bit But.....

This past week interest rates dropped a little bit. Also several banks have changed the rules on 10% down loans. So the big question I heard is "Do I buy now or wait?"

I have been saying for over two years "Buy Now". Why? In simple terms straight line 3% inflation tells us that homes are still slightly underpriced in many areas. Across the country with 20% down you can buy a home and rent it for more than the mortgage payment.

If you are thinking of selling and moving, now is a great time so you can lock in lower tax rates. If you wait for your house to sell for a higher price, You will be buying at a higher price and locking in higher taxes for as long as you live in your new house. Higher taxes are never good.

Looking at the buying situation you see a few things. One aspect is that most people can't save enough money to buy a home. Our National practice of "keeping up with the Joneses" has made it difficult to save. This is creating an opportunity for those you have the money and credit to grab some real estate bargains.

So how can I keep saying this for two years straight? Simply put the prices still haven't caught up and even though two years ago was a better time to buy, this is still a great time to buy real estate. Am I biased because I am a real estate agent? No, I am also buying myself. There are just too many deals for me to grab so I'm trying to help as many of my friends as I can.

Even if you can't afford to buy investment properties in Southern California, I have programs available to pick up turnkey investment properties with 20% down and positive cash flow at the close of escrow across the country. These properties have already been cleaned up, rented out and property management placed. We are trying to make it as easy as buying stock. Just like people want Coca-Cola they want a clean safe house to live in and as an investor you can provide that.

If you want to buy or sell in Southern California give me a call and I'll be glad to help or find someone in your area who can. If you want to invest and have positive cash flow today give me a call.



Scott Bourquin
BRE# 01911988
714-594-SELL (7355)


Wednesday, January 1, 2014

Can You Get A Deal On A Short Sale Now?

Welcome to 2014, and a recovering Real Estate Market.   So what is an investor or buyer to do to make sure they get a deal?

When markets go up, speculators jump in making the markets go up faster.  Phoenix and Las Vegas are seeing a huge surge in volume of homes being sold, and yet they both still offer great deals if you do your homework.  And yes investors that have no business being in real estate, and speculators are buying homes.

My advice now is still buy and hold.  Leave the flipping to the people who do it for a living.

The key to success in the Real Estate game just like any other area you want to achieve success, is doing your homework.  It doesn't matter if you are buying your first home or buying your 15th investment property.  Doing your homework and buying right is where you make your money.

As a homebuyer looking for your own home, schools, location, commute and other factors are added to the equation.  As an investor, it is strictly a money question.  I know several investors who will buy property site unseen if they get the right numbers on paper.

Short sales are still happening although banks are more reluctant to approve them in recovering areas.  The banks are also taking a closer look at the sellers finances to make sure they really can't afford to be there.  If they can, you aren't getting the house.  If you need help with a short sale, there are a lot of resources out there, but the key is an aggressive agent who will make the banks nuts so they'll make a deal.

Short sales are where listing agents really make their money.  Otherwise it is the buyers agent that is doing the work to sell the house.  If you are selling a property and have it priced right in this market, the listing agent won't have a lot of work to do unless the property is over the FHA loan limits.

So how do you buy a short sale and get a deal?  The key here is to do your homework and know the property up front.  Ideally if you have an aggressive buyers agent, you won't have much work to do.  Most of the time when I talk with frustrated buyers, I find their agent telling them "It already has offers".  That is just a lazy agent.

Patience and Persistence Pay

I bought my own house after I lost out on the bidding war when the winner backed out the same day the bank approved the sale.  I watched the house for nearly a year while the other buyer tried to work with the bank and gave up.  I kept in contact with the listing agent and less than two hours after it was back as an active listing, he had my offer agreeing to all of the banks terms in his hands.  By the end of the day, the offer was accepted and the deal in escrow.

Short sales are funny, if they are an "approved short" that means that the bank has already agreed to the price.  Most of the time, these are at market value, and not a deal to an investor.  You can spot these because they are listed for more than about 14 days.

Aggressive Short Sale agents will price the house slightly low, and get a bidding war started.  Using the top 5 bids and solid market data, the sellers agent will approach the bank and explain why they should take the deal.  Sometimes it is very difficult to get to the person at the bank that has any authority.  When agents do this they can get a dozen or more bids on the very first day, and may not accept any other offers.

This is where having your own agent can hurt you.  Short sale agents might have to give up part of their commission in order to get the deal done.  If you walk in the door with your own agent, the selling agent may not be inclined to work hard on your offer for half the commission.  This isn't always ethical, but it is the reality.

If you are after any kind of standard sale, having your own agent is normally the smart way to go.  Some listing agents will push the limits to try and bring in their own buyer, most of the time this isn't the case.  If it is, you don't want to work with that agent anyway.

A good buyers agent will ask to present your offer to the seller directly, and explain to them how you came up with their price.  This face to face negotiation is invaluable in a standard sale, and pretty worthless in a Short or Foreclosure situation.

More than once at these face to face negotiations, I was able to learn something the sellers agent didn't know that I could use to get the deal done.  Money isn't the only motivator in the real estate game.  Kids changing schools, move date flexibility and other financial stresses are just some of the aspects of a deal that you can use to help the seller out.

If you don't get a short sale offer accepted the day it goes up, keep in touch with the listing agent.  Let them know that you are interested in the property, that you know they have other offers and remind them things change as you leave your card.  Use property watch alerts on Realtor.com or your favorite real estate site to see when the house closes or doesn't.  If the sale doesn't close in 45 days, remind the agent you are still interested, and then every 30 days after that until the house closes or pops back on the market.

For my personal investing and buying, I am still focused on shorts, and foreclosures.  I think this is still where the best deals are for right now.   I am starting to look more at standard sales for friends and clients.  The recent market changes have motivated several investors and second home owners to be very flexible when it comes to selling terms.

The difference in costs of being an agent/contractor and getting the work done in house to fix up a foreclosure and what my clients pay is closing the gap, making standard sales more cost effective at the end of the day.

If you are looking for a deal, watch your target area, and the minute a short sale pops up, jump on it.  If you miss out, keep a watchful eye out, you still might just get it.  The deals are out there, you just might need to work a bit harder to get them.

Monday, November 11, 2013

Is Now The Right Time To Buy Your First Home?

#BuyFirstHome

As a Realtor I will tell you that just about any time is the right time to buy your first home.  As an investor, I am happy to collect your rent.  What is most important though is how you buy it.  So is now the right time to buy your first home?

Before you tune out and say any time can't be the right time to buy a first home, let me give a little background.  In 2004 I genuinely believed the California Real Estate Market was about to burst.  I missed the call by two years because the big banks got together and figured out how to make it look like loaning people money that didn't have the income wasn't really that risky.

From 2004-2006 I would have told you that it is very hard to "buy right", and probably wouldn't have sold you anything.  I sold my personal home and my investment properties at a substantial profit.  The reality was none of my properties value went below what I originally paid for them, so I would have been petter off sticking to my original plan and holding the properties.

In that little nugget is the truth.  Buying right is everything.  So how do you know if you are buying right.  First of all, you need to be able to afford the payments.  Even if values drop and you can afford to stay, you will be alright.  The mortgage crisis was fueled by people who over bought, banks that extended loans to people who where already over extended, and then it was accelerated by people who just wanted out of their loans because they could.

If the government said "tough luck, if you can afford it, it is yours" the dip might not have been as bad.  At the same time though, they couldn't let people stay in their homes if they couldn't afford it.  A very small percentage who were able to renegotiate the loans to a much lower value or interest rate were the only real winners.  Everyone else got the shaft because the government wouldn't hold people accountable for buying homes they couldn't afford, nor did they really hold the banks accountable for the loans they should have never made.

So here you are today, pondering the question, "Is now the right time to buy your first home?"

And the answer of course is "Yes, if you buy right".  Buying right isn't just buying a house you can afford, it means buying in a place you want to live.  Buying right means buying in a place where you would be willing to spend the time and energy to make the house your home.

If you can get a deal, then you are even better off.  Normally I favor older homes that need work in good areas.  You might not want to do a lot of work though.  If this is the case, then negotiating with a builder can be tough.  Watch the options and compare prices from other contractors.  Don't let the builder overprice your new home with upgrades.

Don't just listen to me, here is a very nice chart from my friend Michael Wright at United American:

Rent vs. Own Comparison
JOE RENTER
 
 
 
DON'T THROW YOUR HARD EARNED $$$ DOWN THE DRAIN
Joe Renter vs. Joe OwnerCalculation Assumptions
Monthly Rent $2500.00
Estimated Yearly Rent Increase - 3%
Estimated Yearly Appreciation-3%
Estimated Tax Bracket 20%

Where would you want to be in 10 years?
 Image
 
 
YearAnnual RentAnnual PaymentFederal Tax SavingsEstimated ValueLoan BalanceEstimated Equity
1$30,000$37,377$6,166$463,500$433,033$30,467
2$30,900$37,377$6,079$477,405$424,573$52,832
3$31,827$37,377$5,989$491,727$415,789$75,938
4$32,782$37,377$5,895$506,479$406,670$99,809
5$33,765$37,377$5,797$521,673$397,203$124,470
6$34,778$37,377$5,696$537,324$387,375$149,948
7$35,822$37,377$5,591$553,443$377,172$176,271
8$36,896$37,377$5,482$570,047$366,580$203,466
9$38,003$37,377$5,369$587,148$355,584$231,564
10$39,143$37,377$5,252$604,762$344,168$260,594
Total$343,916$373,774$57,315$604,762$344,168$260,594
Loan Type
FHA Reg
Sales PriceTerm
$450,00030 Years
RateAPR
3.750%5.168%
Dwn PmtClosing Costs
$15,750$1,475