Category: General

Cash

The real estate market is a strange world right now.  It’s plagued by distress sales, foreclosures, a challenging lending environment, and economic uncertainties, and yet there are certain price points where inventory is so low that sellers are receiving multiple offers within days of listing.  If the home is priced right and it’s under $500,000 – it will sell – fast.

Many investors and fence sitters feel like with the steep declines in values, it’s time to jump back into the Orange County real estate market.  And guess what?  They have cash.  This video done by Tyler Wood - my go-to-guy for all Big Bear real estate needs – illustrates a similar dynamic in their market and raises some important questions for cash buyers to consider.

So what is the value of an all cash offer?

Are YOU one of those cash buyers?

There is no question that coming into a multiple offer situation with cash will give you an advantage if the other offers have to secure financing.  But as Wood points out, you may be finding that you aren’t the only cash buyer.

But even if you are the only cash buyer in a multiple offer situation – what advantage does that give you in your negotiation?  Let’s look at the potential benefits that the seller has when they have an interested, all cash buyer:

  1. The question of the buyer’s ability to secure financing goes away.
  2. A possible quick escrow period.
  3. Less contingencies to contend with.  No loan contingency.  No need  to appraise.

So what is the value of those things to a seller?  What monetary value do you place on that?  Clearly, the answer will vary depending on a seller’s circumstances and how important a sure and quick close is for them.

I know in theory that ‘Cash is King’.  But, I think you’ll find that a seller, if given a choice via multiple offers, will go with a buyer that requires a loan at full price rather than a buyer that is offering 10% off asking just because they have cash.

It’s important to note that at the end of a transaction – whether it’s a cash buyer, or a bank that funds a buyer’s loan, – IT’S ALL CASH.  Either way, the money is the same in the final analysis.

In recent years, the National Association of Realtors has stumbled. For too long they touted the ‘It’s a Great Time to Buy’ shtick and found their credibility slightly tarnished. That being said, there is an effort to bring the real estate community, and the consumer, things that are a bit more authentic.

This video is a bit dry – but good news – it’s relatively short. Hang in there with it and there is some good information from Lawrence Yun, NAR’s Chief Economist.

I would like to invite you to take this quick (2 minutes or less) survey about your thoughts on the Orange County housing market. It is entirely anonymous and I will post the results in one week.

Click Here to take survey

I want your thoughts! I also invite you to share any additional things you would like to add in the comments section below.

Thanks so much for participating!

After years in this business, my husband has learned a few realities about my business:

  1. “I just have to return this one phone call.”  Translation: 30 minutes and several phone calls.
  2. “I just have to run down to my office and shoot out a quick email.”  Translation: 20 + minutes in the office.
  3. “I’ll be in my office catching up for just a bit.”  Sadly the translation: I’ll be in bed about an hour after you.

Consequently, he has affectionately referred to my home office as, ‘The Black Hole.’  I have three children so he certainly appreciates the fact that I get things done when I have time and unfortunately, that isn’t always 9 to 5.

This week, something fun came out of ‘The Black Hole’ that I’m excited to launch:  My Las Flores hyperlocal community blog.

my-las-flores-e28094_12357039494331After working in the Orange County community of Las Flores for several years, I began to rethink the methods for marketing.  Since the launch of OC Real EstateVoice, I knew my business was headed in a profoundly new direction.  I knew that consumers were looking for information about a community (listings, trends, values) not just another, ‘Look what I sold!’ marketing piece from an agent.  Hence, the birth of the My Las Flores site.

I’ve got a couple tweeks to make as of yet – the video has to be redone.  It’s excruciatingly long and I made the video on garbage day with garbage cans out on every street.   Bad news, so this will be my project for the coming weekend.  But overall, I like the direction it’s heading in.

Every now and then I emerge from ‘The Black Hole’ and something satisfyingly ‘tangible’ is born.  This is one of those weeks.  :)

Okay – maybe not technically snow but it sure looked like it.  This mornings hail storm was photographed and posted on Twitter by @dawnmiller.  Thanks Dawn for allowing me to share your cool photos.

These were taken in Lake Forest in South Orange County (click on them for the full view):

Hail in South </p> <p>One more:</p> <p><a href=Snow in South OC? on TwitPic

I have to say that I’m not too devastated to see that 2008 has come to an end. There was so much turmoil this year in the housing and financial markets, politics, world events and it’s psycologically comforting to have a fresh start.

A lot has changed for me this year. I launched this blog, OC Real Estate Voice and another blog, Why Didn’t My Home Sell? Both have had a wonderfully warm reception and I thank each of the readers that allow me the privilege of speaking to you. Thank you for your comments and feedback.

I also was recently honored to be invited to write for Agent Genius, which is ‘the first multi-author real estate blog designed by and for real estate agents nationwide’.

Business has been much stronger as demand has increased in 2008. This has definitely not been an easy real estate year but there have been promising things in my personal business and I’m looking forward to a great ‘09.

Thank you for reading and I wish you a wonderful, happy, healthy, and prosperous 2009!

This may not be the most politically correct piece that I’ll write but that’s never been my goal here on OC Voice.  So here goes….

One of my clients sent me a link to an article published online on CNBC about ‘Mortgage Re-Defaults Rising with No Sign of Slowing’.  The article states that, “…after 6 months, nearly 37 percent of mortgage loans modified in the first quarter were 60 or more days delinquent,”  and goes on to say that, “after three months, 19 percent were 60 or more days delinquent or in the process of foreclosure.”

There is no question that watching a family lose their home is beyond heartbreaking.  The article did point out a small piece of good news in this fiasco – 9 out of 10 home loans are current.

The article has me thinking about a few things.  Why does someone default?

The rates on the adjustables are actually lower in recent months than they were a year ago.  In addition to that, some of the Interest Only notes have yet to adjust at all.  Payments in many cases are the same, or even less than they were one year ago.

I’ve seen that in some instances, people frankly are not interested in paying $500,000 for a home that is now worth $375,000 and decide to walk away from the property.  Does a loan modification make sense for those owners?

Lending restrictions were way too lenient up until recently.  Some folks were approved for loans that they never would have qualified for under the strict requirements of today’s lending standards.  Does a loan modification make sense for those owners?

Temporarily reducing the interest rate, tacking on the arrears to the back-end of the loan may provide immediate relief but is it only delaying the inevitable?  Do loan modifications like this make sense?

Maybe it’s time to be honest and say that current levels of home ownership are higher than they’ve ever been, and just maybe, that isn’t a good thing.  It’s not good for the homeowners that aren’t really qualified, and it’s not good for the housing market.

Maybe it’s time to really help those homeowners get out from underneath the homes that they cannot sell for what they owe.  Maybe it’s time to let this market run it’s course without trying to fix it with band-aides and superglue.  Maybe it’s time to get a really efficient and effective short sale process to assist these distressed homeowners.

Bailout plans that focus on loan modifications and saving the homes may not necessarily be the answer.  As I’ve said before, where is a Bailout plan that really deals with the heart of the crisis?  Where is a plan that is effectively dealing with the real issues on Mainstreet?   I’m waiting…and not patiently.

It doesn’t happen often but when it does, it’s breathtaking. Saddleback Mountain is the backdrop for South Orange County. If you live in Mission Viejo or Rancho Santa Margarita, the views can be spectacular. Here is a rare glimpse of Saddleback with snow sent to me this morning from a wonderful past client. The photos were taken from the view in their Mission Viejo backyard.

Snow on Saddleback


Snow on Saddleback Mountain


Snow on Foothills of Saddleback Mountain

I did some research for a client tonight and the findings are important to share with readers here.  If you are a serious buyer or seller, this information is telling.  Please stick with the tedium of the stats because the story it tells is meaningful.

This particular buyer is looking in Mission Viejo between $450,000 and $550,000.  He wants a single family residence.  With that criteria, I hit the MLS looking for a picture of where we really are. 

As many of you know, I’m the last person to jump on the ‘Hurry Buy Now’ band wagon.  However, if you are in this price range in South Orange County – this is speaking to you.  What did I find?

There are 40 Active single family residences currently listed in Mission Viejo between $450,000 and $550,000.  How do those breakdown?

  • 19 are short sales (BTW – refer to my posts on shorts sales to understand the challenges with these sales)
  • 4 Bank Owned
  • 17 are supposedly equity sellers.  Upon further reading of the agent remarks in the listings 2 more of these are actually short sales and 1 is bank owned.

So, what does this leave us?  14 Traditional, Equity Sellers?  I should add 5 of these 14 are 55+ communities.  There are really only 9 equity sellers in my client’s search criteria out of 40.

It then becomes important to analyze the recent resale activity.  I pulled sales from the last 30 days with the same criteria - Mission Viejo, single family residences, $450 to $550.  Here are the stats:

  • 21 Sales
  • 6 Bank Owned
  • 3 Short Sales
  • 13 Traditional Sales (one 55+ community sale)

No rocket scientist needed here.  This is out of balance.

If you are not a numbers person, it’s okay, just try to stick with me here – 52.5% of the Active Inventory are short sales, but last month only 14.3% of the sales were short sales.

12.5% of the Active Inventory is bank owned, but last month 28.6% of the sales were bank owned.

And most telling, 22.5% of the Active Inventory are equity sellers (not to include senior communities), yet the sales from the last 30 days indicate that 51.1% were traditional sellers.

I’m actually not a numbers guru.  I love reading.  I love writing.  But, I also love logic and this should speak volumes to you.  The sellers that don’t have to sell have chosen not to; they’ve heard the message.  Buyers that have been fence sitting or have had affordability problems, have found that it is indeed their time.  Demand does exist.  The inventory may actually be lacking.  Do I hear – supply and demand?

Just to temper my enthusiasm, let’s look the sales prices.  No question – these are some other stats to consider from the last 30 days with that same criteria:

Short Sales – Sold at 98.29% of asking price with an average days on market of 143.  The average price per square foot was $253.09

Bank Owned - Sold at 101.55% of asking price with an average of 16 days on the market.  The average price per square foot was $263.06.

Traditional Sellers -Sold at 97.38% of asking price with an average of 34 days on the market.  The average price per square foot was $323.09.

I will suspect that the knee jerk response is that traditional sellers are overpriced on a per square foot basis – but look at the demand.   There’s a reason these are selling.  They are in superior condition (sometimes by a lot) and you can actually submit an offer to a live body, that has real emotion, and a desire to sell.  What’s the value in that?

So, if you think it’s a buyers’ market, think carefully and ask for the stats.  You need more than a cursory overview.  You need to drill down into the makeup of what it means to get a clear picture of the marketplace.

This is one picture of the OC marketplace, but from what I’m seeing, in certain pricepoints, it’s not isolated.  Thoughts?  I’m open to our interpretation of these numbers.

Every now and then you see a headline touting the increase in sales in Orange County.  Less than a week ago, Orange County Register’s Jon Lanser posted ‘1-in-3 O.C. ZIPs See Homebuying Doubling or Better’.   I love good news but it’s important to drill deep into what these statistics are telling us.

Price point is really one of the big players in this discussion.  The movement that is taking place is great if you are a seller in the below $500,000 market.  With the limitations in lending and lower pool of qualified buyers, sellers in the upper price points have to be prepared for a longer selling cycle.

When we talk about Absorption Rate, we are talking about how many months it would take for the existing buying demand to consume the total inventory if no other homes were to come on the market.  I recently calculated the Absorption Rates for some of South Orange County’s cities, but to get the truest picture of each marketplace, I thought it was critical to break it down by price point.

This is how it looks:

Absorbtion Rates

Absorbtion Rates

Notice, for example, Laguna Niguel.  It will take 14.42 months to exhaust the supply of inventory with current demand in the over $750 price range, yet homes in Laguna Niguel under $500,000 will only take 5.7 months to absorb. It’s important to note that Laguna Niguel has one of the lower rates of distressed property rates in the county and have a much higher median sales price overall.

Steven Thomas of Altera Real Estate, reported in his Orange County Housing Report that 69.4% of all the Lake Forest inventory are distressed sales.  Buyers and investors alike are targeting the distressed part of the market as opportunities.  Part of the reason that Lake Forest is enjoying one of the lowest overall absorption rates in our market is the high percentage of distress inventory and the related demand.

If you are considering buying, or selling your home, and want to know more about what these numbers might mean to you, don’t hesitate to let me know.  No arm twisting here – just happy to answer questions.
*These numbers are from SoCal MLS figures in the first week of November and
the closed sales in the proceeding 30 days.

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