Dennis Kaiser

This weekend I visited my folks in Orange County, quite a drive from where I now live. After a day of socializing, mom offered for Crystal and me to spend the night there rather than make the long drive home. Wanting to get back to our own bed and our own space, we made the drive.

What struck me is that this was the first time that I considered my "interim" place to be "home". Some of you know that we sold our house of 8 years recently and are currently living in a temporary location, in a place I thought I would never consider as "home". But after only two months, I'm forgetting the old place and the place I live now is the place I long to get back to, my home.

You see, what makes a place "home" is not the house. It's your family, your decorations, your favorite chair, your TV where you know how to work the remote, your fridge with your favorite foods in it, your comfy bed with the pillow that's just right. When you sell your house and move to a different one, the new one soon becomes "home" instead of the old one.

I bring this up because there are some of you who should move for financial, employment or strategic reasons, but you don't want to give up your "home". My point is this: you won't. Moving is just taking your "home" and setting it up in another place. Perhaps a place that doesn't cost you so much each month, or is closer to the grandkids, or a place you rent so that you can be mobile if your job changes.

Your new home might serve you better than your present one, and it's only inertia that's keeping you there. I've learned from personal experience that moving is stressful, but achieving your goals is well worth it. When we moved we thought we were giving up our "home", but we found out that we still have our home, and we gained a lot more besides.

Dennis Kaiser, CRS,CDPE,SRES
Certified Residential Specialist (CRS)
Certified Distressed Property Expert (CDPE)
Seniors Real Estate Specialist (SRES)
RE/MAX Associates, 1967 N. Coast Hwy 101, Encinitas, CA 92024
(800) 469-6391
Email - dkaiser@realestatelibrary.com
Website - http://www.realestatelibrary.com
Blog - http://www.realestatelibrary.com/blog
Broker Liceanse #00897631

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I'll explain the steps involved in buying a short sale property, but first let me define a few terms.

A "short sale" means that if the owner sells the property, there won't be enough money to pay the bank what is owed. The owner is "short".

The "borrower", the "owner", and the "seller" are all the same person.

The "bank", also known as the "lender", does not own the property. Even so, for the owner to be able to sell the property he needs the bank's agreement to discount what is owed.

The "package" is the documentation that must be sent to the bank so they can decide whether or not to accept a short sale and at what price.

The "agent" is the real estate professional that the owner hires to market the property and represent him during the short sale process.

Now here's how it works. The seller and his agent decide to attempt a short sale. There is no guarantee that a short sale will work, since the bank may or may not go along with it. While experience tells us which circumstances have the best chances of success, the rules are constantly changing so no one can predict the outcome with certainty.

The agent's first job is to create the package. This involves, among other things, hardship documentation, a Broker's Price Opinion, photos, and most importantly an OFFER. The bank will misplace (this is code for shred) any incomplete package, so there is no point in submitting a package without an offer.

How does the agent generate an offer quickly? By listing the property at an unreasonably low price. The owner will net zero from the sale, so the price doesn't matter to him. The agent's first priority at this point is only to generate an offer, any offer. In fact, the agent might know some investors who will throw a lowball offer at anything, and in this case you see the listing hit the MLS with an accepted offer on day one. "Accepted offer" means the seller has signed it, but remember the seller is powerless to sell the property unless the bank goes along.

So now the waiting begins. It takes the bank 3 to 4 months to decide if they will allow a short sale, and at what price they will do it. During this time the property is still listed on the MLS as "Active", since the bank has not approved the short sale yet. This is why you see listings at very low prices that have been on the market for 100 days. You're wondering "what's wrong with this property?" Nothing is wrong, it's a crazy low price on a short sale and the seller is waiting on an answer from the bank.

During this waiting time the seller is either allowing showings or not. If the seller allows showings, you can make an offer which will be considered a "backup offer". As you might imagine, in several month's time it's common for many backup offers to come in.

Once the seller has enough backup offers, he may decide that it's nutty to keep having people come through the house, since they have plenty of offers and they aren't even sure that a short sale will work. So why bother? If the seller comes to this conclusion, the listing will still be active in the MLS and yet you can't see it or make an offer on it.

Bear in mind that none of this information is stated in the listing description that you see on the Internet. You might not know that it's a short sale, or where it is in the process, all you see is a house at what looks to be a great price.

When the bank completes their own appraisals and due diligence, they will answer the seller. There might be all kinds of negotiating at this point between bank and seller, as to what the bank will accept as a loan payoff and what responsibilities the seller has. The seller might have to come up with some money or give the bank a promissory note. If the bank and the seller can't come to terms, there will not be a short sale.

But let's assume the bank and the sellers agree on what has to happen for a short sale to take place. The bank at this point will state at what price they will do a short sale. We then call this an "approved short sale" meaning that the bank has approved it. The price is probably NOT what the agent has in the listing, it's usually more and it might even be significantly more.

At this point the person who made the original offer usually walks away. The price is not what he was hoping for. The bank might then ask the agent to see the backup offers and decide to accept or send a counter offer to one of them. They might ask everyone to submit their "highest and best" offer within 24 or 48 hours. At this point the agent might put the new price into the MLS and say the short sale has been approved and generate some new offers. There are no rules to this game; it goes however the bank wants to play it. They call the shots, because without their approval, no sale will take place.

So if you're still interested 3 to 4 months after you made your offer, and if you're willing to up your offer so that it's the highest and best, then congratulations! You succeeded in purchasing a short sale property.

The current economic climate has caused many people to re-think their priorities in life. Or stated more correctly, many people re-thinking their priorities has caused the current economic climate. This dramatic shift in motivation lies at the root of all that we see happening, and the reason stimulus won't work is because people don't want to be stimulated.

In real estate this dramatic sea change in thinking from expansion to contraction is showing up as the desire to have your housing work for you rather than you work for your housing. Some of my clients are re-examining the drive to constantly strive for more and better homes, especially as it gets harder to work longer hours as we age, and we are no longer certain that we'll make more money next year than we did this year. And even if we did manage to make more, we won't get to keep any more as taxes are certain to increase in the future.

So how do we get housing to work for us rather than vice-versa? It starts with an honest assessment of what we need and want in our lives. What if by downsizing to a less expensive but equally comfortable home gets you out of debt so you don't have to work so hard just to maintain? What if you could free up equity and buy some investments that produce "mailbox money", meaning checks that show up in the mail without you having to work for them?

It looks like this - you have a large house that you don't really need anymore because the kids have moved out. You have empty bedrooms that you never use. You're in one of the upper tier price points that have declined in value a bit, but not as much as the entry level market that has been hard hit by foreclosures. You're getting closer to retirement, but you've watched your retirement funds in the stock market drop. You could stay where you are and continue to make the big mortgage payments, but you'd rather not. Why not trade that house for a more affordable one and free up capital for investing in cash flowing assets?

What if you downsized and reduced your monthly expenses? If we're in the eye of the economic storm and there's more to come, you will be better able to stand. And if happy days are returning soon, then you will be making good money while your expenses are lower, and so you'll be able to replenish that retirement account. You win either way.

It seems I'm running into more people who are thinking along these lines, which makes sense in light of the social mood shift. It is exactly this shift which tells me the economy is not ready to return to the go-go days of expansion. We have much more de-leveraging ahead.

So how about you? Are you getting closer to the edge where if things don't turn around soon you'll be in trouble? Or maybe you're doing alright but you're just tired of working so hard? Why not be proactive and make some wise choices while you still have options? That's called living life by design and not by default. You call the shots.

Depending on your situation, you could reduce your debt, eliminate your debt, purchase cash-flowing rental property or some combination. For example, if your home is worth $950K and you owe $300K on it, you could sell it, buy a house for $500K cash, and buy two rental homes in Hemet for $75K each that rent for $850 per month each. So you've eliminated a $2500 a month mortgage payment, reduced your real estate taxes by $500 a month, and increased your income by around $1200 a month. That's $50K a year you don't have to make. That could be the difference between working and retiring, or living well on only one income.

So what's really important to you and what are your priorities? Spending more time with the kids or grandkids? Is there a ministry or worthy cause you'd love to devote more time or money to if only you could? Perhaps you have the means already. Maybe you could free up time and money by restructuring what assets you already have. We can all learn to be better stewards of what God has blessed us with.

Your whole life can change with some strategic moves. If you're stuck in a rut of working to pay the bank and not getting anywhere, you can get unstuck.

Dennis Kaiser, CRS,CSP,SRES
Certified Residential Specialist (CRS)
Certified Short-Sale Professional (CSP)
Seniors Real Estate Specialist (SRES)
RE/MAX Associates, 2792 Gateway Road #100, Carlsbad, CA 92009
(760) 730-1310 or (800) 469-6391
(760) 683-3500 FAX
Email - dkaiser@realestatelibrary.com
Website - http://www.realestatelibrary.com
Blog - http://www.realestatelibrary.com/blog
DRE#00897631

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It's been a heck of a few weeks! Homes in good locations under $400K are getting multiple offers, and most are selling substantially above the asking price. Watch for exciting numbers to start hitting the news when these properties close escrow!

Buyers I meet at open houses are frustrated that they can't seem to buy a house! It's either a short sale (like watching grass grow) or an underpriced bank owned property (start the bidding war). There are darn few real sellers willing to sell into this market! Most are just staying put and waiting out the storm. So the reality is that buyers are having a heck of a time. They are making lots of offers that don't go through, and it's not because they are trying to lowball, it's because they are being outbid.

The investors are coming out, as well as boomers buying homes for their kids who haven't been able to afford anything until now. These savvy buyers are snapping up the best properties, offering all cash and closing in 14 days, music to the bank's ears. Imagine you're the bank - would you rather sell to a buyer like that or to the first time homebuyer using FHA 3% down financing that could take 60 days? What would you do if it were up to you? Right, and so would the bank. So you see why many buyers are frustrated.

And yet the news keeps printing the same old, same old. This morning I saw the big headline that home sales were down 1 percent in April. Keep reading to paragraph 5 to find out that sales were UP 6.4 percent in the West.

This house in Oceanside came on the market this week at $364,900. We offered $380K and were outbid. Sold in 5 days. Darndest buyer's market I've ever seen.

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Sales of single-family, re-sale homes rose 15.4% from February, reaching the highest level since last August. Year-over-year, home sales were off 33.2%.

The median price for single-family, re-sale homes in San Diego County was flat in March at $440,000. Year-over-year, the median price of homes was down 24.1%. The average price for homes rose 5.2% from February, off 15.1% year-over-year.

Condo sales gained 17.5%, month-over-month, down 37.2% compared to last March.

The median price for condos was also flat at $295,000, off 21.3% year-over-year. The average price for condos fell 0.2% month-over-month, down 14.8% compared to last March.

Remember, these are statistical prices. When the market was going up, the large number of million dollar plus sales skewed prices upward. With the large number of bank-owned properties going through the system, prices are being skewed downward.

The sales price to list price for single-family homes fell 1.4 points to 93.1%. The ratio for condos dropped 0.4 of a point to 94.5%.

Days on market for homes fell three days to 81 days. Days on market for condos rose one to 87 days. Take these numbers with a grain of salt. If a property listing is canceled, withdrawn or expired and then re-listed, days on market is re-set to zero.

The real estate market is very hard to generalize. It is a market made up of many micro markets. As Leslie Appleton-Young, chief economist for the California Association of Realtors, recently said, "Knowing the median price is interesting, but it is as indicative of the value of your home as knowing the median temperature in America is to predicting the local weather."

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