The First Quarter

A few weeks ago I wrote about how the market seemed to be taking an aggressive jump as the Spring Real Estate took off. We seemed to be getting into a market of multiple offers, and properties once again going into contract well above the list price. It was a surprising change, and early in the season, I was unwilling to say whether it was just the normal Spring up tick, or an actual shift in the market, though my gut told me it was just a seasonal shift.
We are now a little further into the year, and I am willing to take more of a stand. When you look at home values this year compared to last year, they are basically flat with a slight increase of just .9%. That is from Dataquick.
But what is making it seem like such a lively market, so many offers, so many going over list price?
Part of part of the reason is that there are even fewer homes on the market in the relatively hot areas like Albany and Berkeley. We've never had a large inventory of available homes anyway, and now there are even less. You have the same number of cats, buyers, chasing even fewer mice, available homes, so from the outside it looks like a lot of activity. You also have the situation where sellers have really caught on to what is happening in the market. They could hardly miss it with the nightly news filled with stories about the bubble bursting. Home sellers had to figure it out sooner or later, and for the most part, they have. The result is that they are pricing their properties even lower to match the market. That just makes the cats scramble even more.
That is why in a market that is basically flat when compared to this time last year value wise, even though it can often feel like there is a lot going on.
Sellers should still be happy. A flat market is a lot better than what is going on elsewhere in the nation. Buyers should still be happy too. Instead of seeing home values rise out of reach, they are still where they were last year, and so are interest rates.

Its All in the Negotiations

Of all the skills a Realtor must possess the one that should be in the top five for any client, whether a buyer or a seller, is the agents ability to negotiate. This is especially true in today's market with buyers feeling more in control of the process than they ever have been.
Your Realtor will help you negotiate the price, the number of days in escrow, the number days for the contingencies, whether or not to have contingencies, and then the negotiations that revolve around any discoveries made during the inspections.
The Realtors will be looking after your best interests and working with your instructions, but it is the style with which the Realtor approaches the negotiating that differentiate one agent from another, and, ultimately, the successful outcome.
Some see negotiation as a battle with a clear winner, and a clear loser. They want to dominate the other side. I think this is the wrong approach. It merely invites bad feelings, and can ultimately lead to the end of the contract over petty issues. This does not mean I favor a negotiating style that invites the other side to push me around like a rag doll, and that I will ignore the needs of my client.
There is a midle point in which differences can be discussed in a calm and rational matter. This is a business negotiation, not an emotional brawl. Differences should be categorized from most important to the least, so that the discussions do not get held up or even ended by something trivial.
While staying firm, there should be an atmosphere of "let's see how we can move things forward" prevading all discussions. It is not an ego contest between the Realtors. It is a negotion between a buyer who wants to buy a home, and a seller who wants to sell a property. The Realtors are facilitators and advocates in this process.

525 Pomona, Albany

This weekend I will be holding open this 3 bedroom 2 Bathroom home in Albany.
This home is filled with light, hardwood floors throughout, box beam ceilings and a remodeled kitchen. The large master suite in back opens out to a lovely yard. I will be holding this home open from 2pm - 4:30 on Saturday and Sunday.
This is actually the third weekend of open homes for 525 Albany. Why is this home still on the market? Over 300 people came to see the house on the weekends. It seems to be the perfect size for a new family trying to get into the Albany School district. It is a little eccentric, but charming none the less.
Some of the people who were considering writing an offer for the home saw all the people at the open houses, the location and size of the home, and they decided that there was going to be too much competition, and so decided not to make an offer. This news came from their agents. This would sometimes happen in the Real Estate market we had pre-2005. The perception of a highly desirable home can drive potential offers away.
This is a lesson about having your agent keep in close touch with the listing agent regarding offers. Someone could have walked away with a great value purchase. Someone still might. I predict all those people who wanted to make an offer, but chose not to, will see that 525 Pomona is still on the market, and at least 2 offers will come in next week, and they will get the home at a great price.

The Real Estate Rollercoaster

speculativebubble.com took the average US home price from 1890 to the present date, adjusted it for inflation, and then took that graft and made a roller coaster out of it. Keep your eye on the bottom, right hand corner at the dates as the years go by, and enjoy the ride.

It's Important to Show up

I just listened to offers with my clients for their home on Oregon street in Berkeley. I gave the agents bringing offers for their clients the opportunity to present them to the sellers. Half took the opportunity and the other half simply dropped the offers at my office.
That night I saw clearly how having your agent present your offer directly to the sellers can give your offer a clear advantage.
First let me say that when you are in competition for a home, it is the offer itself, both the amount of the offer, and the terms of the contract, that are the most important features in a successful bid.
But, in a situation where two bids or even a series of bids are close in amounts and terms, it is the agent telling your story to the sellers that can really make the ultimate determination.
My clients were clearly touched by the stories they heard from the agents. It swayed how they thought of each offer, and they felt a real connection to the buyers making the offers. Those offers became more than black and white contracts. They could see the buyers behind all those numbers and words.
It is important that given the opportunity, when you are making an offer to buy a house, that your agent go and tell your story.
It could make all the difference.

What you want.

I was having a discussion with one of my clients the other day about the homes we have been looking at for her to purchase. I was telling her that every buyer, from the person looking for a studio condo to the family looking for the grand estate, always wants a little more than they can afford.
My client always seems to fall in love with that place that is just out of her price range. She said that it was just human nature, and that people, including herself, are greedy.
I told her that it was not being greedy, rather it is the natural desire of any buyer looking for property. It is the desire for value. You just want to know that what you are buying is in fact worth more than what you are paying for it, so you want the extra bedroom, or the bigger family room, or the better neighborhood.
It is always important to be a value buyer, because that is being a smart buyer, but it takes time and exposure to the inventory to really understand when you are seeing value, and when you are simply looking at something that is out of your price range.
In this market value often resides in future equity and equity growth often comes from improving conditions, whether it is an improving neighborhood, adding to the features of a property by fixing things or adding things, or simply taking advantage of a change in the market.
In any Real Estate Market, recognizing true value is the best approach to purchasing a property.
There is a lot to be said for the adage, "Buy the worst home in the best area you can afford."

Don't Panic

Yesterday I got the following message from a loan broker I have worked with in the past;

Many of you have heard that there is a contraction going on in the Mortgage business. This is accurate information and not being nearly as overstated as the incomes which were used to underwrite many of the problem loans leading to this so-called “meltdown”.

The following are areas of concern in our mortgage market and subsequently have brought about a violent reaction by the top lenders in our country and aimed directly at reducing their exposure to the riskier loans.

I read this sobering info this morning..

Loan To Value’s(LTV) of 98% or more combined with FICO scores of 680 or less accounted for 12% of home purchases in 2006 and 77% of delinquencies!

100% financing with Lower credit core borrowers(below 660 mid-score) using a stated income or reduced documentation loan structure. This is the single largest place where we have seen a constriction. It used to be pretty easy to get done but no longer.

100% financing below 620 mid-score, regardless of documentation. This is the 2^nd largest sector we have seen constriction.

This is most likely the leading edge of a vast change in the mortgage market. This is not the end for all of you with FICO scores lower than 680, but it does mean that you have to do more work to qualify for a loan. You may have to put things of for a time to correct your credit score, and to save more money to buy a home.

For you sellers, when accepting offers, be very much aware of the type of loan the buyer is coming with. Really investigate the loan officer. You do not want things to fall apart at the last minute.