The Volume of Sales will increase above the level of 2007.  (Wrong!)

• For the period of Jan 1 through June 30 2007 : 11,532 properties closed
• For the period of Jan 1 through June 30 2008 :  9,732 properties closed

Year-to-date volume is down by almost 16%.  Much of this is the result of the lack of financing due to so many major lenders dropping lending programs, or going out of business. 

Lending standards have also continued to tighten even for solid borrowers.  Appraisals are routinely questioned, or the values discounted (even though the appraiser already discounted from the last comp) and borrowers are burdened with much more documentation that we have seen for a long time. 

Prices will decrease – both listing price and sale price (Correct!)

The average price for homes sold fell from $768,931 to $632,638, a decline of 18%.   (Some price ranges are down by 30% and some are off by only 2%.)  I will review the average price declines by price range in another post in the near future  

The mortgage market will settle down.  (Wrong!)

Fannie Mae & Freddie Mac need to be bailed out, IndyMac just tanked this week, BofA took over Countrywide, many other institutions are hanging on by a thread.  Underwriting standards are tightening, or overtightened in some cases, appraisals are being reduced due to “declining market” conditions even though the appraiser already included that fact in his calculations!  Congress has not yet approved the final FHA reform bill, or extended the increased loan limits that are currently set to expire on 12/31/08.  We have a long way to go before the mortgage market will be stable! 

A lot of real estate agents will leave the business.  (True!)

The actual statistics won’t show until next year when annual dues get collected, but there are a lot of agents getting 2nd jobs, or leaving the business altogether now. 

The real estate industry will continue to become more “transparent.”  (True)

(“Transparent” is a current buzz word!  I interpret it to really mean “open and honest”.)  Consumers are more knowledgeable and demanding the answers to lots of the “hard questions.”   There is more information available every day for buyers and sellers to do their own research of listings, including pricing history, past sales, average values, advice about buying, selling, financing, staging and the merits of different marketing programs.  Delivering notepads, refrigerator magnets and calendars is no longer the way for agents to market themselves to consumers.  They need to prove that they have something of value to provide to their clients, instead of pointing to a “I’m #1 Agent of the WeekTrophy”

Conclusion : Ok, so I already said my crystal ball is cracked.  I am an optomist, or I couldn’t stay in this business.  I believe that there are a lot of very cautious people who would really like to buy a home, but they keep getting mixed signals.  We have come a long way in a short time compared to the market declines of the 1990′s.  There is no doubt that prices got totally out-of-control and unreasonables due to the easy financing of recent years, but once we get back to something resembling fundamental values (for California!), we should begin to see pricing stabilize.  It may take some more time to get there, but I believe that it will happen.

If you have any questions, or need any help with real estate decisions, please call me (or choose a button below!)

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I recommend proceeding with caution, and making sure that the home you buy is one that will meet your needs for the foreseeable future.  If there is a high probability of a job transfer in the next few years, (or possibly losing your job) don’t buy now!  It’s too expensive to sell and move when you have real time limits, and a flat or declining real estate market.

Today, the market is flooded with “distress sales”.  Short sales and foreclosures make up about 45% of the homes that are currently offered for sale in South Orange County.  Many of the rest of the homes in South Orange County are either over-priced (unmotivated sellers) for the market, or suffer locational challenges.  There are others that are so difficult to show that many agents avoid them – “call 6 different numbers, leave messages, wait for a call back, no showings from 12 – 4 due to napping children, biting dogs live here” etc.

When well-cared for homes come on the market, and are priced reasonably, if they are available to show, they are getting multiple offers quickly.  The more desireable properties are actually selling above list price in many cases and within the first few weeks on the market!

What homes are on the market?  Search for homes, or get a Free Market Analysis Here.

If you have a minute, please take my simple little survey by answering the 6 multiple choice questions.   Thanks!

What homes are on the market?  Search for homes, or get a Free Market Analysis Here.

You may also add your comments here.

Since most lenders allow a 15-day grace period after the payment due date, they don’t even think about starting the default process until that payment is 30 days late, but it could begin as early as the day after the grace period has ended.  The Notice of Default (“NOD”) is the first step that must be taken.  This must be recorded in order to start the process.  Additionally, the borrower and any junior lienholders who have filed a “request for notice” must be notified by certified or registered mail.  The notice of default must also be published in a newspaper of general circulation once a week for three weeks.

Once the NOD has been recorded, the reinstatement period begins, where the borrower has 90 days to pay all past-due payments, penalties, taxes and interest, along with other costs and fees for the legal and recording expenses.  Up until 5 days prior to the Trustee Sale, the borrower may catch up and reinstate the loan to put it in “good standing.”  Sometimes, due to special circumstances and at the sole discretion of the lender, the borrower may still be allowed to reinstate the loan after this time period is up.

If the lender chooses to proceed with the foreclosure, a Notice of Trustee Sale (“NOT”) must be recorded, and published in a newspaper of general circulation once a week for 21 days, and also posted on the property and in a public place, such as the city hall. 

At the Trustee Sale, anyone may bid on the property, but all bids must be in the form of cash or cashier’s check.  The holder of the 1st trust deed will usually bid the total amount that is outstanding.  If there are no other bidders who are capable of paying more than that amount, the sale is completed and a trustee’s deed will be issued to the new owner.  At that point, the property will now become part of that lender’s REO portfolio, and will be assigned to one of their REO brokers to market it. 

 If you would like to be notified of foreclosed homes in South Orange County, California, please contact me by sending an email to Foreclosures@VickiLloyd.com to be put on the list for the latest updates.

If you have any questions, or want more details about this, please leave a comment below.

The properties that are listed under $300,000 include 1-bedroom and a few 2-bedroom condos, with the lowest prices offered on the foreclosed listings.  The lowest priced 1-bedroom is $204,900 and the lowest priced 2-bedroom is $236,500.

In the $300K – $400K range, there are 4 (completely unrealistic) sellers of 1-bedroom condos, 68 2-bedroom condos, 16 3-bedroom condos (low price again is a foreclosure @ $327,900) and 1 4-bedroom condo @ $399,900 (short sale).

The detached homes (single family residences) begin in the $400K – $500K range, with the current low price leader @ $479,900 for a 3-bedroom 1144 square foot home that backs up to El Toro Road.  There are also 6 other SFRs priced under $500,000, although one of them is listed at “$499,900-$539,900″ and is another short sale.  With an inventory level of somewhere between 7 and 11 months, this is the fastest moving price range at the moment, although nobody would call this fast. 

The largest glut of homes right now is in the $500,000 to $700,000 range, with a combined total of 174 today (updated 10/3).  This includes 5 2-bedroom homes that range from $530K – $585K, 85 3-bedrooms from $505K, 79 4-bedroom homes from $533K (another short sale) and 5 5-bedroom homes that start at $649K. 

The lowest $/square foot values for both the “active” and “closed” properties are in the $700K – $800K range.  The best price per square foot in this range is $240 for a 3200 square foot home with a pool in the woods.  Of the homes currently under contract, I know that 2 will close near the low end of their “value range,” and the price per square foot will be around $300.  The 3rd one under contract is a unique but smaller home with excellent condition, highly desireable location, newer built (1986), long distance view and an oversized lot of 10,000+ square feet.  My guess is that it will probably close at about $420/sq ft, which will bring up the average.  

The $800K – $1,00,000 homes are generally fairly large, in good condition and most have a 3-car garage.  There are currently several in the Montbury Estates neighborhood, on the Lake II lake front, and in the newer “North Lake Forest” area.  (And then there are some additional unrealistic sellers that are only hoping for a buyer!)

The buyers who are looking at the homes that are listed over $1 million in Lake Forest, are generally very picky.  The price per square foot is almost meaningless because they want a special location and customized features or they won’t buy.  These homes sold at a rate of about 1 per month last year, but in the last 90 days, there was only one sale over $1 million.  There are currently 6 homes listed over $1 million; 5 are on the lake front, and the other is a customized home in Normandale Heights.  The current highest list price @ $1.875 million is a large customized lake front “point home” (a unique location on a corner of the lake) which has been on the market and reduced several times in the last 6 months. 

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!

Thanks to Proposition 13, our property taxes are based on the market value (usually, but not necessarily the sale price) at the time you buy your home, and are limited to a 2% increase per year unless there has been a change in ownership, new construction, or there had been a temporary reduction the prior year.   The details are are available at the Tax Assessor’s web site.   

In order to appeal your assessed value, and request a “temporary reduction of assessed value” you may now submit your application online through the Orange County Tax Assessor’s website, but you must do it before September 15th. 

Be aware that this is really only a temporary reduction, and that if you don’t file again the next year, it will go back up to where it was before.  I experienced this back in 1997, when I successfully had my tax assessment reduced by $40,000.  It took a long time to get it approved, but I did receive a $400 refund.  I didn’t realize at the time that it would only apply to that one year (1996) that I had appealed, so the following year, it re-gained the entire $40,000 value plus a 2% increase, and I didn’t know until it was too late to file again!

If you need the comps for your neighborhood as evidence for the Tax Assessor, please call at (949) 457-0281 or send me an email, and I will help you find the best ones.

For details about the new procedure, please see my friend (and fellow real estate blogger) Kelly Kilpatrick’s post at RSMLifestyles.com

I usually discourage giving the buyer possession of a property prior to actually closing the sale, but with the current situation in the lending environment, it may become necessary to do this more regularly.

In California, we have a form called “Interim Occupancy Agreement” that spells out the terms of this arrangement. It is basically a short-term lease that references the purchase agreement, projected close of escrow date, and what to do if the escrow is terminated without closing. There are a lot of check boxes and blanks to fill in, but it has been designed and worded by California Association of Realtors’ (“CAR”) legal department, so it should meet the needs of most buyers and sellers.

Since the seller is essentially doing the buyer a favor by allowing an early move-in, the seller should dictate the terms that would make him comfortable about taking this risk. How much risk is there? Looking at it from a “worst case” scenario : the buyer moves in, trashes the house, doesn’t pay the agreed upon rent, fails to close escrow, and the seller must pay to legally evict him, then clean the place up, and continue to own the property making mortgage payments, taxes, insurance, etc, until it closes with a new buyer. Additionally, in our current soft market, delaying a sale for several months could easily cost the seller several thousands of dollars in lost sales revenue!

When offering early possession, you must hope for the best, but plan for the worst, in order to protect the seller.

Prior to possession the buyer must:

• Sign all escrow instructions and disclosures and have all contingencies removed in writing.
• Conduct a final walk-through inspection and sign the “Final Verification of Property Condition.”
• Provide evidence of insurance.
• Pay a substantial security deposit (3% of sale price) directly to the sellers in a cashiers check. An amendment to escrow signed by all parties will document this for the lender to calculate net proceeds that the buyer must bring to the closing. (This amount should come close to covering legal eviction expenses, replacement of carpet, new paint, and repairs to most damage.)
• Pay a slightly higher-than-market daily rental amount due in advance each week until close of escrow. (This is to encourage them to close sooner, rather than let it drag out.)

Sample Interim Occupancy Form

While I think this is a very one-sided agreement, the seller is taking all the risk and the buyer is benefiting by early possession. If anyone has any additional suggestions or advice, I welcome your comments.

When I show homes to buyers, the most common objection that I hear is “it needs too much work!” The majority of buyers notariously have no imagination – that’s why resale homes get staged, or builders’ models are upgraded, furnished and exquisitely decorated! Too many times, buyers are strongly attracted to (and hyponitized by) the beautiful furniture, hand picked accessories and themed color schemes presented in a house. They end up paying more, because they allow their emotions to influence their judgement.

In my area of mostly “cookie-cutter” tract homes, I have seen many examples of the same floorplan, with equally desireable location, sell for substantially less than it should, just because it is shown with finger-printed walls, stained carpets, busy wall-paper, over-grown landscaping, ugly furniture, bad window coverings, dated light fixtures & faucets, etc. These flaws are relatively CHEAP to fix, but you need to use your imagination to picture how the finished product will look in the end!

Have you ever watched “Sell this House” or “Designed to Sell”? These and many other HGTV-type shows take an ordinary (usually cluttered and dated) home and spend about $2000 to fix it up. They end the show with an “Open House” where everyone coming through raves about how lovely it is, and then one of the “lucky” buyers pays full price (or higher) to become the next owner. And everyone lives happily ever after…..

Buyers – take a lesson from this. If you want to buy right, and have some quick equity buildup, buy the house that fits your needs for size, configuration and neighborhood – then look at the condition. More often than not, a house that needs $10,000 in upgrades and modernization will sell for $25,000 to $35,000 less than one that is fixed up.

Get to know your costs to improve by visiting home improvement stores such as Home Depot, Lowe’s, Great Indoors & Expo. Check out the costs of the appliances, light fixtures, bath fixtures, flooring, granite counters, replacement windows, window blinds, shutters, etc. Most of these stores also offer installation, so don’t forget to inquire about that expense. Once you know what these items really cost, you will feel much more comfortable considering homes that need these features. In addition to knowing you saved money on your purchase, when it is all done, you will have the bonus of living in a home that is decorated to your own personal taste!