What the heck?

It’s pretty scary times for real estate out there, and I don’t just mean because of foreclosures and big drops in value causing people to lose all their equity. It’s scary because on one side you have people who still think like it’s 2005, on the other side you have “real estate gurus” coming out of the woodwork teaching creative financing and doing deals like they did 30 yrs. ago, and then in the middle you have the government relaxing standards and doing the same kind of loans that got us here in the first place.

Then I see a question posted in one of the Real Estate forums from someone wanting to know about hiring a Realtor or a real estate attorney to help with the paperwork on a piece of property she’s buying. One of the answers she got was from someone saying to let the other agent do the paperwork, and the title company handle everything. That’s how they bought theirs and there was never a problem. While I concede that there are many deals between people that didn’t use either a Realtor or an attorney that turned out OK, there are many that turned into nightmares. In a transaction described like the one above, who is looking out for her interest? What recourse is she going to have against the seller if she has the seller’s agent write up the contract? Do you think that agent is going to worry as much about taking care of her as he is the person that actually hired him and is paying him? I don’t think so. While we have a code of ethics that states we have to be “fair and honest” in all our dealings, do you think everyone really is?

Then we have the ads on Craig’s List where investors love to advertise to buy homes. One I read yesterday specifically said “No Realtors or attorneys”. Now why do you think that is? I understand they want to save on costs so they don’t want to pay commissions, or a lawyer a fee for looking over the paper work, but do you think it might be also because all their contracts, etc. may be geared their way with no concern for the seller, or buyer, whichever the case may be?

Remember the old saying “Desperate times call for desperate measures”? Don’t be so desperate you make your situation worse instead of better. If you’re in a situation where you need some help with a contract most Realtors will look it over for you for free (like me. LOL) in the hopes of either getting your business in the future or a recommendation to your friends on what a nice person they were. Take advantage of the service.

I have a buyer that has a friend whose a Realtor, but until I came along no one ever went through the contract with him and his wife to know what they were signing. It’s like hiring a stock broker. No one is going to watch out for your money with the same love and care that you are, and the same is true when it comes to getting involved with buying or selling real estate. It’s your job to make sure you are protected. No one is going to cry with you when you get yourself into a mess. All the courts care about is what you signed your name to. It’s up to you to make sure it’s something you can “live” with.

If I can help with any of your real estate needs, please feel free to contact me by phone, email, or leave a comment below. I’d be honored to help in any way I can. Like I said, it’s pretty scary times in real estate right now.

Investing in Foreclosures

Investing in real estate in Silicon Valley is a real possibility right now but there is not much of a margin for error. As prices have fallen and rates are low, it is possible to buy a “rental” property for specifically that reason, to rent it out. This is an opportunity for investors we haven’t seen for many years and they are coming out of the woodwork like crazy. I must get at least 5 e-mails a week from somebody with a new “system” for buying up property. Unfortunately, they’re not “new” and most of them are totally illegal for a licensed real estate professional here in California.

I’m sure most of you have heard that the FDIC is going broke. That FHA is in trouble. Fannie Mae and Freddie Mac have been in trouble. Besides what’s on the market (the MLS) these institutions are dumping properties as well.  It’s amazing some of the bargains you can pick up, although you do have to be careful and do your own due diligence. Make sure you crunch all the numbers. A condo that looks attractive numbers-wise when you figure the mortgage payment, may not be so attractive if you add in a hefty Homeowner’s Association Fee, along with insurance on the unit itself. Remember, the Homeowner’s Association only insures the outside of the unit, nothing inside the 4 walls.

What is amazing to me is that for as much as everyone is saying credit has dried up, etc. many of the same loans that got us where we are today are still out there. Oh sure, for now your credit score has to be a little higher than it used to be, but I’m not sure how long that’s going to last since now even people with A+ credit are going into foreclosure. FHA has laxed a lot of their standards so that their loans are more usable. Not only that but they have a loan program that will help you buy the property and give you “fix up” costs. It’s almost as if they will pay you to fix up your new property. VA still has a no money down adjustable rate mortgage. Some of the conventional lenders are willing to bend criteria a bit to get properties off their books.

The one thing FHA has tightened up on is “flipping”. They have a “no flipping rule” that says if you buy a property using an FHA loan, you may not sell it for at least 90 days. Now to me, if you move into a property you’ve bought, fix it up while you live in it, which is not at all unusual for investors, and you’re flipping houses every 91 days, you can still do quite well. You have to pay to live somewhere anyway. Why not the property you’re buying to fix up and sell? Not only that, but the lenders look much more kindly on properties that are going to be owner occupied.

I realize it’s pretty much a feeding frenzy out there, but if you’re going to invest, invest smart. The “gurus” of real estate don’t talk about the properties they get stuck with, or the holding costs, or the bad tenants. They talk about the upside without the downside. I’m all for investing in real estate to build your wealth, but be prepared. It’s not all the bed of money it’s cracked up to be. And if you think you can go negative cash flow on a house because it’s only $50 or so, think about how much that turns into per month if you do 10 of them, or 100.

If I can help you with any of your real estate needs, whether looking for a bargain on your first home, looking to invest in a rental property, or selling your home for the best price in a down market, feel free to contact me or leave a comment below.

It never ceases to amaze me how uncommon common sense is and concerning real estate, it doesn’t get any better.

Over the last few months we have looked at about a billion ads on Craig’s list and in the local papers (obvious slight exaggeration. LOL). We have made hundreds of phone calls and probably been told during at least half of those calls either pets, smoking or both were not acceptable. We put an offer in on a mobilehome that has been on the market for almost 2 years, sitting vacant while the owner pays the space rent at $400 per month. I have tracked the houses I have called on or we have driven by. Obviously I didn’t want to keep calling the same places or driving by places we had already seen and weren’t interested in.

Most of the places we looked at to rent want first month’s rent and then at least 1 month’s rent as security deposit. Some are asking first, last and deposit. Say the house is renting for $2200.00 per month and it sits empty for just 2 months. That is $4400.00 in lost rent that could have gone in the landlord’s pocket. Do they really think it will cost them that plus the deposit to clean up after a smoker, or someone who has a couple of cats? Mathematically it just doesn’t make sense to me. Some of these homes have been on the market since we started looking a few months ago and the owners are paying for ads at least every weekend (Fri-Sun). Many of them have lost much more in rent than it would ever cost them to clean up after renters, unless the renters were just enormously bad, which does happen I know. They also stubbornly hold onto some figure they want for rent because they’ve seen that number in the paper or somewhere, and don’t get that it is obviously higher than the market will bare right now or they’d be able to rent it out.

The lady’s son who was helping her sell her mobile would rather pay almost $400 per month for over 2 years than take a little less down. How does it make more sense to pay out almost $400 per month than to take in $1600? I honestly don’t know what some people are thinking. When you play “What is the worst thing that could happen?” I don’t forsee it costing as much as it does to just flush that money down the toilet every month.

If you own a rental does this make sense to you? Maybe even though I’ve had a couple of rentals and had to do extensive repairs, I just am not looking at it correctly. I know the worst renter I had I collected two and a half years of rent from him plus his deposit before I had to fix it.

Yesterday I was watching People’s Court on TV. There were two women, one who sold a house to another. Both women used attorneys vs. Realtors. When the woman who was buying the home did the usual walk-through a couple days before the close of escrow, it was quite aparant the woman who was selling the house was not leaving any time real soon. As should have been done, the lawyers provided for a seller rent back for 2 weeks to allow the seller more time to move. They also tacked on a heavy penalty to the seller if she didn’t move within the 2 weeks, which she didn’t.

They held the money for the 2 weeks rent in escrow, which was correct, but they didn’t have both buyer and seller sign a release of the funds with instructions for the money to either be released to the buyer on the date the 2 weeks were up, or to be pro-rated between buyer and seller according to how many days the seller stayed. That was the first mistake. The poor buyer went through weeks of calling escrow, trying to get a hold of the lawyers to release the money, etc.

The reason they ended up in small claims court is because the seller wouldn’t pay the penalty rent for the extra 10 days she stayed over and above the 2 weeks rent back. When the seller finally did leave, she left a ton of trash and all kinds of stuff in the property that the buyer had to pay to have removed. While this kind of thing can happen to anyone, the attorneys were both done with the transaction once the house closed escrow and the buyer couldn’t get either one of them to help her any longer. They ended up in small claims court.

Now, don’t get me wrong. This transaction could have gone this way even if they had used a Realtor. Many Realtors are in a hurry to collect that commission check and would have closed the deal also. Once you close escrow on a house, if the seller is still occupying the property, you have to go through regular legal channels to evict them just like you would any tenant that refuses to leave a property. What should have been done here to truly protect the buyer was to not close escrow until the seller was out of the property. At the very least it should have been explained to the buyer what all could happen if they close escrow while the seller was still in the property, and let the buyer decide what she wanted to do. In the meantime the buyer is paying on a mortgage to a house she can’t even occupy yet.

When I first got into real estate many moons ago, I was told “You wouldn’t want a Realtor defending you at a trial, and you don’t want a lawyer doing your real estate transactions.” Once you close escrow on a home, you have lost all leverage to have things come out the way they should. If things aren’t right when it’s time to close your transaction, don’t let anyone intimidate you into closing anyway. After it’s all said and done is not the time to get what was promised in the contract.