Live Lake Forest

For the month of April 2009, the sales volume in Lake Forest was up again compared to the same period last year.  There were a total of 63 closed sales in the MLS, a 12.5% improvement to the 56 in April 2008.  The prices were substantially lower though. 

The 29 sales of single family homes ranged from the low of $305,000 to a high of $702,500 and averaged $432,160 at $235/square foot, a decline of more than 21%. 

The low SFR closing for the month was $305,000 for a 3 bedroom, 2 bath, 1,250 square foot bank owned home.  It was only on the market one day, and sold for $1,000 over list price.  

The prior MLS sale of this house was in the summer of 2005, for a price of $624,900.  It was on the market 17 days that time, but sold for the full asking price.  From the title company records, it appears that the house was sold again in August of 2006, for $730,000!  The loans recorded at that time indicate there was a 10% down payment, and 2 loans that came to $657,000 in financing.  Since that sale occured off the MLS, I can’t determine how close to asking price, or how long it was on the market that time.

Condo sales in April ranged from $100,000 up to $324,900 with a median price of $180,000 and an average of $189,605 ($187/square foot).  The 34 sales were made up of 2 traditional sales, 4 post-foreclosure flips, and the other 28 were either short sales or bank-owned.

Foreclosure properties continue to lead the market in Orange County home sales.  In the last three months, 2,438 out of the 5,907 sales (41%) have been bank-owned properties! 

Sometimes, these homes are agressively priced to immediately attract buyers, which leads to multiple offers and results in selling for over the list price!  The average time on the market for these REOs is only 36 days – almost twice as fast as the average 69 days that non-REOs are taking. 

In order to buy one of these homes from a bank, you need to be pre-approved and non-contingent on the sale of any other property.  They also almost always require that you “pre-qual” with their selected loan officer.

With foreclosed homes making up such a large portion of our active real estate market, I’ve set up a new page on this blog where I will post the REO lists for each city in South Orange County.  If there is an area that I’ve left out, please let me know and I’ll send out exactly what you want!

If you aren’t looking for an REO, take a look at all the other properties available:
 Search ALL the homes for sale in the Southern California MLS  (there must be at least one that you like!)

Don’t miss the next exciting update to this blog – click on the envelope to be notified by email! 

 

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This photo has nothing to do with this post - I just liked it!

If you are planning to buy a condo, or a house in Lake Forest, Mission Viejo, Rancho Santa Margarita, or other South Orange County area, there is a good chance that you will be buying in to a home owners’ association (HOA).  If that is the case, make sure you read over all the HOA documents soon after you receive them.  These are usually provided to you during the escrow process, and you will normally have 5 days after receiving these to either approve them, or cancel the purchase and get your money back.

What should you look at, or what should you look for?

Start with the budget. This will show you the items that are expected to be paid each month by your dues.  Some budget items can be expected to go up almost every year – like costs for electricity, water, utilities, gasoline, insurance, and most labor.  Also, look at the year-to-date actual financial statements to see how they compare to the budget.  Have there been unexpected or substantially over-budget expenses?  Is the income (from dues) under the budgeted amount?  If there have been a lot of foreclosures in the association, the unpaid dues from those homes will have to be written off, and the shortfall will have to be made up by an increase to the next year’s dues budget.  By law, in California, the HOA dues may be increased by the board of directors by up to 20% without a vote of the homeowners.  If a 20% increase is not enough to cover any shortfall, a “special assessment” of up to 5% of the annual budget may be declared by a vote of the board of directors.  Most associations publish their new budgets in November for the following calendar year, and the new dues assessments go into effect in January.

Review the Rules. Most HOAs have rules that address many areas of your life.  Putting a basketball hoop on your garage, or a portable one in the driveway, may be restricted.  Do you have a boat or RV?  Many HOAs require that they not be visible from any other property or from the street, or that you may only park your RV in front of your house for the time it takes to load or unload it after a trip.  Also, if you drive a commercial vehicle, know that there may be restrictions on keeping that in your driveway.  Do you work from home?  Some associations will not allow any kind of manufacturing or retail types of businesses, or will restrict the hours that you can operate.  What kind of pets do you have?  Chickens, ducks and pot-bellied pigs are often outlawed, and some associations put a weight limit on the size of dogs that are allowed.  Read over the rules and make sure there aren’t any that you can’t live with!

Architectural Guidelines. Before you plan that room addition, front porch, patio cover, or major remodel to your new home, find out what is likely to be approved by the architectural committee.  If you want to add a 2nd story, or change the exterior look of the home, find out before you buy that it will be allowed!

Meeting Minutes.  The minutes from the Board of Directors’ meetings will tell you what is going on in the Association.  Much of the time, the minutes are quite routine and boring, but check to see what issues are coming up at board meetings.  Are neighbors fighting about something?  Is the association failing to enforce the rules?  Are they anticipating discontinuing any services, or upgrading any of the commonly owned facilities?  Are there any lawsuits threatening the Association?

Buying a home that is part of an association means that you are buying ownership in that association.  Do your homework – You need to know what you are buying!

In Orange County today, as well as many other places, there are home owners who are going through the difficult decision process of whether to sell their current home, or lease it and wait for a better time to sell.  Some of these people have taken a job out of the area and will not be able to commute from their current home.  Others have reasons to move such as not being able to go up and down stairs any more, or not having the energy or strength to clean and maintain the house anymore. 

While nobody knows exactly what will happen in the future, it is generally expected right now that the current real estate downturn will continue for another year or two at least.  When trying to make this decision, it is a well worth your time to dig in to all the details and possibly consult with a tax expert to fully consider all of your choices. 

These are the steps that I recommend to my “maybe sell, maybe lease” clients:

1. Look at what it really costs to own the house.  Add all of your costs, such as monthly mortgage interest, property taxes, HOA dues, insurance, gardener, pool service, etc. 
2. Find out what amount of rent can reasonably be expected for a house like yours.   Ask a Realtor to run the lease comps for you, call around to apartment leasing offices, check on Craig’s List to see what others are offering at what monthly rate.   (If you are in Orange County, call me and I’ll help!) 
3. Check with your favorite tax expert about depreciation or any capital gains tax issues.  If moving out of a primary residence, you usually have up to 3 years to close a sale and still have the capital gains exclusion of $250K for single, or $500K for married home sellers.  (Who knows if this will stay in place with a new Congress and President?) 
4. Consider the hassle or cost of selling later, either with a tenant in place, or the cost of carrying it with no tenant income while marketing it for a few months until it closes.  There may also be costs to paint or replace carpet prior to being able to market the property after a tenant vacates.
5. Take a look at your current loan for both rate and terms.  If it was set up as a short term fixed rate that will reset to a higher rate later, find out exactly what that rate and payment could be in a “worst case” scenario.  If you are planning to refinance it prior to it resetting, it would be wise to try to do it while still occupying it yourself.  Non-owner occupant rates are always higher than for owner occupied!
6. Consider offering a lease-option.  There are many pros and cons to doing this, but sometimes it can work well for all parties.  

Other posts you may like :
Lease Options ExplainedÂ
Over Pricing Your Home

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After reading Forbes Magazine’s list of “Recession-Proof Home Improvements” I’m not sure I totally agree.  Since I have only seen cork flooring once, and haven’t yet seen any bamboo counters, I wonder what people in South Orange County, California think about these.

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

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