Live Lake Forest

With the decline in prices, and scarcity of buyers, it may be tempting for a seller to fall for this scheme, but be careful, it could be one of the mortgage fraud schemes that are going around! 

The basic idea is that after a property has failed to sell, a buyer comes in and offers to pay above asking price, and the seller will rebate the difference back to the buyer.  Read the details of how this works, and be careful that you don’t fall for it!

Behind the scenes.  My daily checking of the MLS “Hot Sheet” has provided me with a lot of insight on how many agents are clueless about the importance of putting their listing in the best light when it is new on the market.  They don’t seem to understand the fact that your listing is only “NEW” for one day, so you need to make the most of it.  Many times after viewing the new listings, I think, “I bet the seller has NO idea what their agent just did, and how much it will probably cost them!”  

To appreciate the negative impact of these errors, you have to understand how the MLS system works. 

1 – Listing agent enters the listing in the MLS.

2 – The buyers who are serious are on “email alert” and get a notification that a new property has just come on in their size and price range.

3 – Buyers look at the email and see no description, no photos, and just the check-the-box details.  Buyers delete email (Seller just lost a chance for a motivated buyer to consider it).

4 – Local agents check the “Hot Sheet” for new listings, see the lack of description, lack of photos, and then go look at the next property listed on the hot sheet. (Seller lost another chance to have the property viewed by agents who might bring the buyer!)

At that point, the listing agent just lost the best opportunity to have the most interest generated in his new listing, and he blew it!

Usually, the photos are the last thing to be done after the sellers have taken care of all the de-cluttering and staging before putting a house on the market, but in the SoCal MLS, the agent can begin entering the data and build up the info over several days while keeping it from showing up in the MLS “before it’s ready for prime time.” 

Step 1 – Listing Agent can set up the basic info into the MLS form, as soon as the listing contract has been signed by the seller.  The basic information includes the address, numbers of rooms, physical size, year built, lot size, current property tax assessment,  (much of it “auto-populated” from the tax data base).  There are also a lot of “check the box” fields such as: Pool, Air Conditioning, Fireplace, # of Garage Door Openers, School District, Separate Dining Room, Homeowner’s Association Dues, HOA recreation facilities, etc.  Other information to be entered originally can be the showing instructions, lockbox location, owner’s phone number, agent’s contact info, etc.  So far, this information is simply facts, not marketing.  (Some agents simply load this raw data without any description or photos and click the button to make it live on the MLS.) 

Step 2 – This begins the marketing task of the MLS property listing input.  It is the least expensive marketing for the agent, but probably the most valuable and critical.  The remarks in the description shows up on all the IDX websites where potential buyers are looking.  The purpose of writing this is to make it sound attractive to the buyers.  Features and benefits need to be emphasized, such as “fabulous sunset view” or “just one block to best elementary school,” in addition to remarks about the condition of the home.  “Hardwood floors, updated appliances, remodeled bathrooms, dual-paned windows, large yard, sparkling pool,” etc.  paint a picture in the mind of the potential buyer reading it. Abbreviations should be avoided, or at least minimized, so that someone outside the real estate industry can understand what you are saying, and not be distracted trying to decode the information.  The motivation of the seller should never be revealed in a description, nor should the phrase “reduced to sell!”  Reducing the price may be necessary, but by declaring that it was “just reduced” translates to “we started out greedy or stupid ….”  

Step 3 – Provide good photos and lots of them!  The SoCal MLS allows up to 20 photos per property, plus a virtual tour.  If you have included remarks in the description section about some fabulous upgrade, feature, or view, don’t forget to include a photo of that!  Some agents prefer to use a photography service or virtual tour service to take the photos of the house.  These photos are usually very good quality, but the number of them may be limited.  The photographer’s schedule may also mean having to wait for 10 days to 2 weeks.  If the weather is overcast or raining, he won’t get those beautiful views, or blue sky backgrounds.  Even if using a professional photographer, the listing agent should take preliminary photos to include with the listing the FIRST DAY it is on the MLS.  If it isn’t ready for photos, then it isn’t ready to be seen by buyers or agents. 

When sellers say that they want to list their home for substantially more than the comps support, I think a good list of reasons for buyers to overpay would help both the listing agent and the buyers.

I realize that some of these are a bit of a stretch, or maybe even sarcastic, but I’m only trying to help the sellers figure out which reason is most likely to produce their special buyer?

Then if the sellers can identify the reason that they think someone will want to overpay, the listing agent will be able to focus all their marketing on finding the buyer with that particular quirk!

I think everyone likes lists of “10 Ways to …” (whatever) but I could only think up 9!  Please help me out, by adding on to this list :

1. The house has unique features that can’t be added to another property that doesn’t have it. (Usually has to do with the location or lot configuration.)
2. The house is next door to the parents/sibling/best friend of the buyer and they will pay anything to live that close.
3. The buyers just missed out in a multiple-offer situation of a very similar home.  (not likely today!)
4. The home offers special financing that’s not readily available on other properties (seller carry back, lease option, etc.)
5. The buyers are sick and tired of looking at homes and told their agent they will “just buy the next one they see.”
6. The buyer’s currency is not the US Dollar, and can’t figure out the conversion factor.
7. The buyer’s agent is too lazy to show enough homes for buyers to get a feel for the value.
8. The buyer has too much money and is feeling charitable.
9. The buyer has more money than sense!

Which reason works for you?  Or please add to my list!

Lake Forest Market Conditions – High End Homes 2007

There are currently 6 homes priced at over $1 million on the active market in Lake Forest.   They range from $1.149 to $1.975  million, and sizes range from about 1700 square feet up to 4300 square feet.  In this price range, the emotional appeal of the view (this price demands a view!) and orientation of the lot are often much more important than the size, or quality of construction, so values based on price per square foot are meaningless.    

So far this year, there have been 8 homes that have sold for over one million dollars, with one setting a new record price of $2.275 million. Of these 8 homes, 6 were located in the “Lake Forest Keys“ neighborhood, on the lake front of Lake II. The other 2 homes were in the “Montbury Estates” neighborhood, where large lots with views are the strongest selling feature.

The record setting home was located on one of the 23 “points” which are the largest lots at the ends of the streets, and have the lake on 2 sides of the property. 

Even though the lake was developed in the early 1970s and all the homes built out by 1976, many of them have been substantially remodeled, or even torn down and re-built from the ground up. Although $2.275 million is a huge price, it is considered “a bargain” compared to ocean or bay front homes in Southern California beach areas, where prices start in the mid-$3 millions for a “tear down.” The record setting lake front home was a one of the custom homes with about 4400 square feet of living space and a 3 car garage, and had been completely rebuilt in 1998.

In comparing to 2006 sales activity, I was actually surprised to find that only 11 had sold all last year for over one million dollars.  Apparently, the rate of about one per month is still holding.  What is different is the number of days on the market, now averaging 105 days to sell, versus last year’s average of 65 days.

Less expensive lake front homes in the Lake Forest Keys can currently be found starting at $849,900  now $789,000*, and homes on the greenbelt, with a view, but without a boat dock are available starting at $635,000 $624,000* today.

*Updated 10/09/07

The current market is very slow now, but it is typical for this time of year. Traditionally, August and September are the months when people’s attention is focused on vacations, returning from vacations, or back-to-school activities, and football, so this is not unusual. Next month the pace should pick up a bit as buyers will try to get moved and settled in before the holidays.

In Lake Forest today, there are 256 single family homes on the market. The lowest end is now priced under $500K, with 3 currently available, and several others that are “value range” priced from $499K to mid-$500s. Last month, one actually closed at under $500,000 which is the first for this year. There have only been 2 others since October 2004! The upper end of the market includes 5 homes that are listed above $1 million. Lake front homes, with boat docks, are now available from a low of $849,900 up to $1,975,000. Out of the 256 houses available, 24 of them are classified on the MLS as either bank-owned “REO”, or pre-foreclosure “short sales,” although I suspect there are more and the listing agents just didn’t know to check the right box on the MLS form. None of them are outstanding bargains, so I’m not expecting them to sell soon.

The condo market today offers a choice of 191 properties. Pricing runs from $215,000 for a 610 square foot one-bedroom without a garage up to $599,900 for a 1900 square foot newer condo near, but not “on” the waterfront of Lake I. At the moment, for the condos listed above $500K, I see very little hope of selling in the foreseeable future.

Market reaction to the Fed meeting tomorrow will probably be a big yawn, as the mortgage market has already “priced in” a 1/4% reduction, and even a 1/2% reduction has been rumored. A rate reduction may help a few buyers at the lowest end of the market, but probably won’t be significant to the “move-up” buyers, unless it means that they can finally sell and get their remaining equity that has been evaporating for the last year. Affordability is still the biggest issue with real estate nationally, but in California it is much worse. With a conforming loan amount of $417,000 at 6.25%, the payment on a 30 year fixed mortgage is $2,567. For a buyer with 5% ($22,000) down, this gives a total payment of over $3450 per month to cover taxes, HOA dues, and mortgage insurance on a purchase price of $439,000. (Since this number is lower than the single family home prices today, I have assumed that this would be a condo with HOA dues of $250 per month that includes the fire insurance.) With 10% ($46,300) down on a $463,000 purchase, the payment on a single family home with no HOA dues comes out to about $3,100 per month, assuming insurance at $75/month and no mortgage insurance. At that price, I would expect the house to be small and also require substantial remodeling.

Over the next few days, I will be adding year-to-date statistics and comparisons to prior years for both the single family home and the condo markets in Lake Forest.

As always, I welcome your comments, questions or suggestions.