John Occhi, ePRO, Hemet-San Jacinto CA Real Estate, 951-443-6259

Hemet CA has continued to experience a dramatic downturn in the real estate market. This report is based on activity reported by the local MLS, Tempo – SoCalMLS, which is used by the Hemet San Jacinto Association of REALTORS® (HSJAOR). There is additional data that can be found in the MRMLS which is the MLS system that the boards in our surrounding markets use.

The data analogized in the segment if for the period of February 2008 and how it compares to the activity of February, 2007. First, it should be reported a 59.38% decrease in the number of closed escrows – dropping from 64 residential properties reported in February 2007 to only 26 in February. 2008.

Perhaps the most shocking difference between the two periods is how close the AVERAGE LIST PRICE is, with only a 4.3% difference. February 2007 saw an average asking price of $302,742 while February, 2008 saw only a $13,012 drop in asking list price of $289,730.

However, as we know, asking and receiving are two different things, especially when it comes to selling a home in Hemet, CA. The AVERAGE SOLD PRICE in February 2007 was 99% of the LIST PRICE at $300,059 while the same period a year later saw the AVERAGE SOLD PRICE dip 10.4% to $268,842 which was 93% of the AVERAGE LIST PRICE.

In February 2007 the AVERAGE LIST PRICE per SQ FT (LP/SqFt) was $201 per Sq Ft and the AVERAGE SOLD PRICE per SQ FT (SP/SqFt) was close at $200 per Sq Ft. February 2008 saw a 26.87% dip in the LP/SqFt seeking only $147 per sq ft and ending up accepting only $136 SP/SqFt; 93% of the LP/SqFt and 32% less than the same period a year earlier.

It should be noted that more and more newer and larger homes are being added to the mix. Whereas the size of the average home on the market in February 2007 was a 3 bedroom 2 bath home with 1546 square feet of living space the average home reported sold in the MLS in February 2008 grew by an entire quarter of a bathroom and 372 square feet, coming in at 1918 square feet

Finally, I’d like to conclude this segment of Hemet Market Conditions by looking at the Days on Market (DOM). It is very common for any report to show that the minimum DOM is zero – and the data I have looked at confirms this. What this can be interpreted as an agent having a buyer for a property before it reaches the MLS. There are times, when an agent never lists the property until he sells it himself – this is referred to as a “pocket listing”. Although not popular with other agents in Hemet, there is nothing wrong with the practice, so long as the seller is fully aware. In both months – February 2007 and 2008 there were listings that sold with zero DOM.

The story is the AVERAGE DAYS ON MARKET. In February 2007, the 64 listings that closed escrow that month took an average of 84 days to receive an accepted offer – with the longest sitting on the market 240 days. In February, 2008 the average DOM spiked by 17.86% to 99 DOM with a high DOM of 282 – a 17.5% increase over a year earlier.

Conclusion: The market is not what it once was and despite rumors and the occasional exception to the rules, prices are not taking as big a beating as some would like us to believe. Remember, “Figures Don’t Lie…Liars Figure”, so be careful when you are listening to people talk about the doom and gloom of the Hemet Real Estate market. It is true that fewer homes are selling and only the best homes at a price point are selling, but many of the homes that sold in February 2008 sold with multiple offers, once they were priced right.

AFTER THOUGHT: After I originally published these results, I realized a very significant event happened just 10 days after the end of the 2007 period. On March 10, 2007 New Century funded it’s last mortgage – signaling the beginning of the ‘sub-prime meltdown” or the “bursting of the bubble”.

Market Conditions: January 2008 – Hemet, CA

The downturn in the local real estate market has been dramatic in Hemet CA. The good numbers are down and the bad ones are up.

In January, 2007 the SoCalMLS reports 57 closed residential sales with an average price of $307,936. January 2008 saw a report with a sharp decline in both the number of closed real estate transactions as well as the value of the sales.

January 2008 only has 26 residential properties that closed escrow for an average value of $250,073. The Hemet, CA real estate market suffered a 52% drop in close escrows and am 18.79% reduction in value over the past year.

The dollar per square foot of sold listings (SP/SqFt) also suffer a dramatic slice in value from January 2007 until January 2008 where the SP/SqFt dipped on average from $189 per sq ft to only $132 a sq ft or a 30.16% reduction in the SP/SqFt.

It should be no surprise that the correlation between the listing price and sold price has also dramatically changed. Bear in mind that the ‘List Price’ is the amount a Hemet home for sale is listed for when an offer is accepted and an escrow is opened. This number does not take price reductions into account.

In January 2007, the average list price at the time of sale was $312,944; asking $193, on average, per square foot of Hemet CA living space. The difference between the asking price and the Sold Price in January 2007 was 97%, on average.

January, 2008 saw the List Price drop down 16.93% down to $261,202 with an asking price 27.98% less, at only an average of $139 per square foot. January 2008 saw an even deeper cut in the difference of Sold Price to List Price (SP/LP) at 95%.

It is also about a month longer to sell a home in Hemet CA in January 2008 with 105 being the average number of days on market (DOM), compared to the 77 it took just a year earlier – or 36.36% longer.

When a REO property is assigned to The REO Team, in Hemet CA and The REO Team has determined that the REO property is vacant it must be immediately secured to prevent unauthorized entry and trespassing by either the former occupant or anyone else who may want to occupy the property, for any reason.

Step 1: Rekey All Exterior Doors

It is important that all doors are re-keyed. Depending on the Bank or Asset Manager, we may be instructed to use a certain key code. If not, it is best to have your own unique code for all of your assigned REO properties; this will enable easy entrance by authorized personnel without accessing the lockbox for each property.

By all doors, I am referring to the front door, a security door if they have one, the garage door (even if detached) leading to the outside.

If there are sliders, it is imperative to make sure that they are locked and cannot be accessed from the outside. It is always best to leave a stick of some sort that would prevent them from being slid open if there is not any other sort of internal locking mechanism (like a pin).

Step 2: Post No Trespassing Signs and Visitor Log

At the REO Team in Hemet, we have a package our contractor carries with a “No Trespassing” sign that gets taped in the front window. It has a point of emergency contact, if we are needed for any reason.

We will also post an Entry Log that will be taped to the kitchen counter. Anytime our contractor or one of our agents is in the property, for any reason, they are required to sign in. If they note any unreported issues with the property, they will use a “Property Condition Notice” that will be placed in the draw, directly below the log in sheet (which is part of our contractors’ package).

Step 3: Unplug Garage Door Opener

It is important that not only is the garage door opener be unplugged but that the door is secured so that it cannot be opened from the outside. Many newer garage doors will have a latch that can be slid closed. Otherwise, it is important that a stick of some sort be positioned to stop the door mechanism from being opened, without first removing the stick.

Step 4: Install Lock Box

Again, some of our clients will insist that a certain lock-box combo is set so that their own representatives can visit the property at any time (we always have to be prepared for unannounced inspections). For properties that the clients do not have a specific lockbox combo they want on all of their REO properties will be set to a code specific to The REO Team, for easier management.

Lock boxes should always be installed on the front door of an REO property. Never put on the water pipe or elsewhere that would require a buyers agent to search out and find (or not find) the lockbox.

Step 5: Install the Sign

The sale sign with the appropriate custom sign rider (we use both a call capture and text message system) is installed on the property. We also always make sure there is a flyer box on each sign – which will be filled within 24 hours.

Step 6: Assess the Property

This is a critical step. We need an initial assessment of the property. Are there any hazardous conditions that must be dealt with immediately? Are there broken windows that need immediate boarding up?

All urgent situations are promptly called into the Admin staff at The REO team, for authorization to correct, which may or many not be granted by the staff. If need be, our trained Admin staff will make appropriate contact with the Asset Manager for this property and share the urgency for authorization to proceed.

In addition, we want the first eyes on the property to provide The REO Team with an overall assessment of the property. What issues will need to be taken care of before the property can be sold. Our contractor will document everything using our internal assessment form as well as digital photographs.

Step 7: Introduce Ourselves to the Neighborhood

We have just started with a new Community Outreach program that we believe will have a major positive impact on our REO Real Estate business.

We will prepare a special flyer, just for the neighborhood that we will distribute by walking the neighborhood and introducing ourselves. The flyer will have the basic information on the REO property as well as our contact information.

What separates this from everything else they have seen is that it offers neighborhood watch tips and asks for their cooperation. We pledge to take good care of the property and help keep their neighborhood looking good, if they will do their part and report any suspicious activity.

The next step is for us to organize a Neighborhood Watch Meeting, by inviting the local law enforcement to send a representative and invite the neighborhood to an open house at the REO Property. This will give everyone the opportunity to preview the home (never know who knows someone who wants to move into the neighborhood) and interact as a community – on our turf.

Again, this final step is a plan in the planning process but one that I feel will have a significant positive impact for the REO property which will keep our clients happy, for the neighborhood which will keep the neighbors happy, and for the bottom line of The REO Team.

In my next article in this series, I will be talking about the Initial Maintenance that we will be required to do, so that we can get the property ready for sale.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Servicing THE REO Needs of Asset Managers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun Valley, Perris, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California. If you are a buyer, investor, first time home buyer or are just interested in REO real estate, please contact us at the above website or phone number.

Buying an REO home or other real estate in Hemet, CA (or elsewhere) can be a daunting experience, at best.

The process appears to be fairly straight-forward, from the beginning. The banks each have their own proprietary addendums to our California Purchase Agreement which ends up negating many of the key provision of our ‘standard’ contract.

CONTRACT CLAUSES

Probably the most important is that the banks will not (typically) accept the provisions for liquidated damages, arbitration and mediation. Often time, the buyer will initial these clauses – but the bank will not. If the buyer’s agent does not pick up on this, then the buyer would be bound by these terms and the seller would not. I have seen addendums come back after a contract has been ratified by all parties, to exclude these particular clauses.

Other important clauses that are negotiated away when the buyer signs the addendums is that the seller will not perform any repairs – regardless of the outcome of any inspection. The key here is to inspect prior to writing the offer and asking for adjustments in the form of an adjusted asking price. In other words, if you would offer $200,000 for a Hemet REO home for sale but you feel as if there is $10,000 of cosmetic repairs (paint, carpet, etc) then offer $190,000. It is so much cleaner this way and much more likely that your offer will be considered.

PRICING

It has been my experience that the banks will not drop their prices significantly, just because they are an REO property. To determine a price, they have typically ordered at least two recent BPO’s (Broker Price Opinions) and an appraisal. All of the data has been thoroughly analyzed by their in house staff of trained professionals, to establish a price.

Once a month, the REO agent assigned to sell the real estate must submit a MSR (Monthly Status Report) which will show up to date comps and market trends, for further analysis. New BPO’s are ordered every 90 days.

My experience is that a reduction of up to 3% in the first 30 days a property is listed will be given serious consideration – just about anything else will almost be rejected. From 30 to 90 days, after the bank has already reduced the asking list price, they still may consider a reduction from 3% to as much as 8%. Again, there are exceptions, but these are the rules of thumb that I advise my buyer clients of when they want to buy an REO home in Hemet, CA.

Once a home has been on the market 90 to 120 days or more, almost anything can happen. If a client is looking to write extreme low-ball offers, I keep them focused on this segment of the market. There is no point in writing a $100,000 offer on a home that came on the market last week for $200,000. The person who priced that home would just have much too much egg on their face to wipe off.

TIMING of the OFFER

This is where it gets a little bit tricky. Many REO real estate agents will promise a ‘quick response” to all offers in their Agent Comments, as listed in the MLS. The problem is a quick response and an accepted offer is definitely two different things.

You see, nearly every REO property today is managed through an online program that keeps all of the relevant parities connected to one another, so those who need to know, can see exactly what is going on with the property at any given moment.

As a REO REALTOR®, when I submit an offer I am simply completing a simple form that has the terms of the buyers offer. The form is 6 or 7 lines deep and includes 20 to 25 fields that I must complete. It has everything that is relevant to the bank, including, of course, the purchase price, down-payment, financing, escrow time and other relevant terms that make a contract to buy REO homes.

The bank will review this and typically get back to me in just a few business hours – certainly by the next business day at the latest. The response will be in the form of a counteroffer that will include the aforementioned addendums as well as any modifications to the offer. I’ll receive these documents in a PDF document format, which I prefer to email to the buyers agent.

If the buyers agrees to the terms, they are to sign them and fax (or email) me back a copy and then follow very specific instructions to overnight them back to the bank.

THE BIG AND UGLY MIS-UNDERSTANDING

This is where it gets tricky. Most buyers and their agents believe that once they accept a counter offer that they have solidified the transaction. This could not be further from the truth. The transaction is not solidified until the bank actually signs the documents they receive.

The sad truth is it may take the bank a week or more to ratify the contract and make it binding.

In the meantime, as the listing agent for the REO, I still have to keep the property listed in the MLS as an ACTIVE Listing – and let me tell you that makes a lot of buyer agents MAD! Sorry, but I have no choice.

If other offers come in, the bank will negotiate those contracts – if a better one comes along than the one that they have already approved (not accepted) they will ask me to go back to the original buyer and ask for their “best and final” offer. Again, a process that alienates buyers and their agents.

The good news is that the timelines do not start until the offer has been signed by the bank. So, if the bank countered and told the seller they only have 10 days to complete their due diligence and it takes them 2 weeks to accept an offer, they have given the buyer 24 days to perform their due diligence.

ESCROW and OTHER SERVICES

Keep in mind that when the lender accepts an offer, they will immediately open an escrow with an escrow company of their own choice. They have negotiated large contracts with escrow, title and other vendors for deeply discounted services based on volume. No mater how hard you try, the services will be the sellers choice.

The real unfortunate part of this is we are working with clients in different time zones who are assigning escrow work to offices a hundred miles or more away from Hemet. This makes it extremely difficult to work with, as the escrow and title staffs are now overworked and consider themselves underpaid for the amount of work they are doing.

No longer will the buyer have the option of going to escrow to sign paperwork – now it will be sent with a mobile notary – at yet an additional expense to the buyer.

There are of course more nuances to buying REO foreclosure real estate in Hemet from the banks. All in all, if you do it right, it can still be a great opportunity to buy more home than you would otherwise have been able to afford., and one that should lead to a large profit for you when you sell, once the market turns around in the next few years.

In the meantime, just be careful and work with an agent that knows what they are doing when it comes to Placing a Bid to Purchase a Bank Owned Hemet Home.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Servicing THE REO Needs of Asset Managers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun Valley, Perris, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California. If you are a buyer, investor, first time home buyer or are just interested in REO real estate,

The question of whether a particular bank owned REO (Real Estate Owned – Bank foreclosure) home is as good a deal as it first appears can only be answered by the buyer performing their own due diligence…and not stopping until they have the answers they need.

THE HOME INSPECTION

Yes, it is common in Hemet, CA for a homebuyer to hire a home inspection company to perform a routine home inspection. I have recently found a company that will deliver a printed version of the report on demand at the end of the inspection – while everything is fresh in the minds of the prospective new homebuyer.

The inspection should not be about bells and whistles though – it should be on the thoroughness of the report and the knowledge of the inspector. The inspector should not be preoccupied with his own lack of work that he (or she) is turning the conversation to some multi-level marketing plan…which is why I had to find a new inspection team. (After nearly 4 years of good service, I have quit referring business to an inspector that I have faithfully relied on because he actually defended his right to bring up his on-line travel business as he meets new people…well guess what, I’m not making any more of those introductions. I sure hope his travel business pays off for him. But this is a whole different story.)

The inspector should be confident enough in their work to allow you, the new Hemet homebuyer, to follow them through the entire inspection process and engage in questioning the findings, every step of the way and not defer your interest until the end of the process. This does not mean that the inspector should blow off the final presentation either, if there is a second interested party present.

Just for the record, as a REALTOR®, I typically do not stay for the entire inspection. I like to be there to open up and make sure everyone is comfortable with the process. I get the ball rolling and then I move on to the rest of my work for the day. Three will be times when I sense that I am needed for a longer period, and then I will make adjustments to be there. I will also have an assistant show up before I take off, just to hold things together.

The inspection is a critical milestone in the buying process, which is why having the report at the end of the inspection is so important. Other than financing, the inspection is probably the second most critical element to a transaction and based on the results, can either keep a deal together or be the point where it unwinds.

THE HOMEBUYERS RESPONSIBILITY

As a Hemet REALTOR®, my job is to help the homebuyer find the home that meets their needs and structure the offer to maximize every advantage for my buyer clients.

Yet, the homebuyer has responsibilities that must be taken seriously, or they should be prepared to be dissatisfied with the purchase of their new Hemet home as the months turn to years.

First and foremost, you have to be there and you have to participate. Yes, as your REALTOR® I have assembled a trusted team to get you through the process – but none of us can make decisions for you. If there are issues with the home inspection, then you have to ask the questions until you are satisfied with the answers. If you do not feel comfortable talking about maintenance and repairs because you just don’t understand what is being talked about, then please bring a friend or relative with you that will be your eyes and ears – but please be there.

Many times a home inspection will recommend additional professional inspections. For example, there may be something that does not look right with the air conditioner. Well, the home inspector is not a licensed HVAC contractor and cannot make any determination that requires a licensed professional to determine. All an inspector can do is say, “Hey you may have a problem here – If I were in your situation, I’d get it checked out by someone who has the equipment and knowledge to determine just how bad the problem might be”.

WHAT OTHER “DO DILIGENCE” DO I HAVE TO DO?

This is a question I am asked every time I represent a homebuyer. Everyone wants to make sure that they ask all the right questions and get all the right answers – but few are actually willing to put in the extra effort to uncover what might be right before their eyes.

THE NEIGHBORHOOD

First, you need to understand that as a REALTOR® I have legal limitations as to what I can reveal. We all know about Equal Opportunity and Fair Housing. These are not optional issues for me – they are the law that I must adhere to. So, if you have issues with a neighborhood, you had best be checking it out for yourself and not relying on me to tell you who lives where.

Talk to your neighbors. It will be easy to find out who has all the gossip, because they’ll be watching you every time you return. This is one time when it is advisable to listen to gossip – but take it all with a grain of salt, because everyone does have their own agenda.

See if there are any recent improvements to homes in the neighborhood? How many for sale signs are there on this block? In the subdivision? The overall community?

Improvements will tell you that the people who are here are here to stay for the long term. Lack of signs will tell you that you are in a desirable neighborhood – too many signs may mean that the neighborhood is in trouble and may be a ghost town in a few more months.

I strongly recommend that once a home is selected that my homebuyer returns to the neighborhood at several times of the day over the next week. Come back at 6:00 at night to get a feel for the kids playing on the block. Are there excessive cars parked on the street? Anything else trip your trigger that you do not care for? Return again at 10:00 on a Friday or Saturday night to see if there are loud parties taking place. How about a Saturday afternoon? Trust me, if you don’t do this know, you will find out the answers to these questions…but it will be too late to do anything about them if you have already moved in.

There are numerous online resources where you can research crime, schools and even sexual predators in the neighborhood – all important facts to consider. This is another one of those areas that as a REALTOR® if I lead you to a resource and that resource omits something that is relevant that I could then be found liable for providing inadequate information. So, since most of my clients today are internet savvy, I always ask them to do their own research and satisfy their own needs.

You will also want to find out about future developments that are currently being planned. The city should be able to give you some indication of what is in the process of taking place and what is being planned. Ask to see a copy of the “General Plan” and a “Zoning Map”. Will the future plans add value to your new neighborhood or take away from it?

PERMITS

Again, an issue you should resolve for yourself. Here in Hemet I have never had to wait more than a few minutes for service at the permit desk. Let the clerk know that you are in escrow on a particular Hemet home and that you need to know everything there is to know about the property, from their point of view.

You should have been able to determine if there has been work done to the property, such as a room enclosure or addition. In Hemet, patio enclosures are very common… unfortunately unpermitted patio room enclosures are very common.

You want to determine if there were EVER any permits opened and not given the final sign off by a city inspector. If this is the case, it may be impossible for you to pull a new permit until the previous project is signed off on, which may be very expensive, time consuming and could even result in a sub-standard project being ripped out at your expense.

Another factor to consider, especially with an REO property that has been vacant for months, is any fines on the property. If so, make sure they get resolved in escrow. It might be for weed abatement, pool draining or even graffiti or other eye sore problems.

Does the home still have a certificate of occupancy? They all don’t for a variety of reasons – so check it out. Satisfy yourself…remember, this is your due diligence.

UTILITIES

Since Hemet, CA REO bank owned real estate does not have an owner occupy the property, there is very little history available to the new would be buyer of this real estate. This is why due diligence is critical in purchasing a bank owned REO property in Hemet or anywhere else.

It is important to know how expensive it is to cool the home in the summer and how much it will cost to heat the home in the winter. The only way to do this is to directly contact each utility company and ask for a breakdown of the bills over the past two years.

Not only are you looking for actual dollars spent monthly, but more important the consumption of the utility. After all, there have been a lot if increases in energy costs over the last several years.

Where this gets tricky is trying to determine what type of usage the property received. This is where talking to the neighbors is always good. Find out if there was someone home all day, like a stay at home mom with a house full of kids running in and out all day or perhaps it was a young couple that commuted to work 6 days a week, leaving in the early morning and not returning until the early evening, day after day. Can you see where the utility usage might vary?

For a long time, Hemet was a haven for snow birds (retired folks spending their winters in the mild Hemet climate and then returning to their northern homes for the summers they love there). So, maybe the home sat vacant from Easter to October. This could certainly have a major impact on the annual consumption of utilities.

Due Diligence simply means researching and satisfying yourself of your decision and not relying on anyone else for the answer to your question, “Is A Hemet Bank Owned REO Home Going to Be a Good Deal in the Long Run?”


Blessings to all who read,

John Occhi, REALTOR®

Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Servicing THE REO Needs of Asset Managers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun Valley, Perris, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California. If you are a buyer, investor, first time home buyer or are just interested in REO real estate, please contact us at the above website or phone number.