Steve Scheckner

For those of you who don't know about Chinese drywall, don't feel bad. For some reason I haven't seen very much publicity on this in San Diego. The only reason I am even familiar with it is from a visit to Florida. In Florida Chinese drywall is as big as asbestos. My Mom who is a real estate agent in Sarasota, Florida had to attend a seminar about it. She started asking me what I knew about the product, and unfortunately I knew nothing. So I thought this might be an area specific problem, since I hadn't heard anything in San Diego. Well I thought wrong.

Chinese drywall was primarily used from 2003-2007 and was installed throughout the US, with concentrations in California, Arizona, and Florida. So why is this currently a bigger "stink" in Florida? One of the biggest complaints is a sulfur emission from the drywall that smells like rotten eggs which is corroding metal pipes, wires, appliances and even faucets. Experts are thinking that because of the combined high heat and humidity in areas of Florida, the sulfur emissions are more readily emitted.

So is San Diego next? We may start hearing about this more as we get into the Summer months, as things start to heat up. Let's hope a majority of San Diego County avoided this dangerous product. There was a lot of construction here in San Diego during the peak of Chinese drywall use. Some of the prominent construction areas from 2003-2007 included Del Mar, Fallbrook, La Jolla, Oceanside, El Cajon, and Carlsbad homes. But we won't know the full extent until the complaints start to surface.

If you are concerned that your home may be victim to Chinese drywall, you may want to set up an appointment with a qualified home inspector

You could be a doctor, a CFO or even a rock legend, but the most important title you may hold may be the title of your home. A lot of buyers and sellers consider title insurance a necessary evil in purchasing property. In addition to your health, auto, life, pet, dental, vision, boat, cell phone and motorcycle insurance, there is another policy that you must have, it's title insurance. A title insurance policy protects a home owner or property owner from any damages that may occur because of problems with the owners title. These may include liens, encumbrances or validity of the related search. It is also required anytime there is a loan on a property. The lender will not fund without the insurance of clear title.

I sat down with Mark Boeh of Fidelity National Title Company to ask him a few questions about the title insurance business. Mark has been working in the title insurance business since 1984, and he has seen a lot of changes recently that are directly correlated with the current state of the market. "This market is a lot more challenging than it has been in the past, mostly due to the amount of distressed property that we are seeing. With distressed property there is an inordinate amount of liens and defaults than we would see from a conventional purchase," said Boeh. Distressed properties like bank owned foreclosures and short sales comprise a significant portion of transactions in this market. Simply put, this presents a larger risk to the home buyer because previous sellers may have been delinquent in paying property taxes, and other bills which may impose liens on the property. He continued by saying," The primary job of your title insurer is not necessarily just putting together an adequate policy for you, it is disclosure. Before you purchase a home a title insurance company will present you with their research from their title search. A title search includes investigating public records from the County Recorder, Federal and State Agencies, and local County and City offices. From this information we derive a Preliminary Report, which is given to you, the home buyer to review before purchase."

Being a Carlsbad real estate agent I've experienced Mark's expertise first hand, he has assisted many of my buyers in reviewing and interpreting these documents. The PR (Preliminary Report) is essential for the home buyer to review, so they know just what they are buying and assurance that they will hold clear title if they move forward with the transaction. If there are any issues they must be remedied before the property closes.

As a home buyer in a transaction you need to be aware of who your title insurance company will be. It is your right as a home buyer to negotiate who will be providing you with this service. I asked Mark what are some of the things to look for when selecting a title insurance company. He stated, "You want to look at the company's track record, and financial strength. Also you want to make sure they have a local presence and have experience working with your type of transaction."

There also have been changes in legislation in title insurance with the implementation of Senate Bill 133 (aka SB 133) which took effect January 1, 2009. Last year, if I was having lunch with Mark like I'm today, he would probably be "footing the bill". Today I will have to pay for my $9 lunch without his assistance. The reason is SB 133 regulates the title insurance business by not allowing representatives to "buy their business", which was intended to create a level playing field in title insurance sales. Mark mentioned that in the past there where no limitations. Insurers where buying the allegiance of real estate agents by offering skyboxes, expensive marketing materials, sponsoring parties and fine dining to win the business of agents that were referring their services. Those days are now over since the title insurance business now requires a license, and is governed by the California department of insurance.

As you can see title insurance is not something that should be looked over. It is probably the most critical aspect of transaction. If you can't have clear title or insurance that you have clear title, what's the point in purchasing real estate? Mark ended our lunch by telling a story about a transaction that he was involved in several years ago. They had discovered that there was break in the chain of title on a transaction, and they requested the borrower to provide documentation so they could validate proper ownership. The borrower failed to provide the necessary documents and they decided not too insure the transaction. The borrower ended up finding another title insurance company that didn't ask as many questions that apparently insured the policy. A few weeks ago the San Diego district attorney cited that borrower for forgery of the deeds, the borrower pled guilty, and the title insurance company has previously gone out of business.

For the past few months I've noticed something a little different. At first it was like the faint smell of ozone that indicates a storm is brewing. Lately it has become something a little more blatant, an oversized pink pachyderm perhaps. As a lot of you may already know by now, the real estate market has dramatically changed in San Diego. Opportunities for home buyers abound and a segment of homebuyers that were previously priced out of the market are in the game, --- and there are no holds barred.

Welcome back to the real estate market first time home buyers and investors! It looks a little different this time around requiring things like money down and credit. But those who play by the new rules will be amply rewarded. Be careful however, it's an aggressive game right now with lots of players. There are several factors that have made this segment of the market very attractive. First off, housing affordability has surpassed the 50% mark for the first time since the mid ‘90s. This is due to historically low interest rates and three years of declining home values. Throw in an $8,000 tax credit from the American Recovery and Reinvestment Act and a moratorium or two on foreclosures and you have a seller's market for available inventory for most first time home buyers. For example, the Carlsbad real estate market currently has 72 available listings in our system for under $500,000 and 62 that are pending and contingent. (As of 7/31/09)

Since cash is king, a lot of these yearning first time home buyers are getting bullied out of the market by investors who are jumping on the opportunity for positive cash flow and a promising outlook on a long term investment. When a bank is looking at ten or more offers on an REO (aka Foreclosure) and nine of them are FHA, VA and conventional financing, the one offer that is all cash usually wins. Banks don't want to take on the additional risk for a loan contingency and FHA/VA appraisals. In general they would rather have a solid cash buyer at a reasonable price than a higher priced financed deal.

So how do you navigate around this challenging yet opportunistic market? Have an experienced professional on your side. What we are seeing in this market is challenging enough for us professionals, so it's probably not in your best interest to buy something without a professional making your interest their interest. Furthermore, don't get too picky. Get in the market! This is going to be the real estate market that in hindsight we wish we all had taken advantage of. I'm not saying to live in a property that you're not comfortable living in, but your first home doesn't have to be your dream home. Regardless of what you buy, if you're a first time home buyer, you'll be able to take advantage of the tax credit (until Dec. 1st 2009), the tax benefits (speak to your accountant), pride of ownership and if you stay in the home long enough, equity. Your success in making a move in this market will be due to your understanding of this market, let your Realtor's help you get there.